Morning News: July 3, 2015
Posted by Eddy Elfenbein on July 3rd, 2015 at 5:17 am

Greeks Split Down Middle Before Bailout Referendum

Why A Troubled Greece Is A Boon For Germany and Euro

Euro-Area Economy Shakes Off Greek Shackles on Draghi Stimulus

China Tells Investors: Go Ahead, Bet the House on Stocks

U.S. Economy Adds 223,000 Jobs; Unemployment at 5.3%

Oil Oversupply Meets Rising Demand in Quietest Market Since 2013

BP’s $18.7 Billion Oil-Spill Deal Still Leaves Lesser Messes

Obamacare Cash Drives Healthcare Merger Mania

Aetna Agrees to Buy Humana for $37 Billion in Cash, Stock

Biogen to Pay Applied Genetic $124 Million to Develop Eye-Disease Treatments

Dollar Tree and Family Dollar Will Sell 330 Stores to Seal Merger Deal

Warren Buffett Will Celebrate July 4th With A New Stock: The Kraft Heinz Company

Employers Have Greater Leeway on Unpaid Internships, Court Rules

Roger Nusbaum: All That Crap About Not Panicking?

Cullen Roche: Should Money Earn Interest? (Very Nerdy)

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Cognizant Down on Health Net Acquisition
Posted by Eddy Elfenbein on July 2nd, 2015 at 9:58 am

Shares of Cognizant Technology (CTSH) are down about 5% after Centene said it’s going to buy Health Net for $6.3 billion. Health Net has been a key partner for Cognizant.

Cognizant released a statement:

Health Net Relationship

“Today’s announcement by Health Net and Centene is yet another example of how the healthcare landscape is rapidly changing, with increasing focus on medical costs, consumerization and a changing regulatory environment driving consolidation as well as an ongoing search for solutions that fundamentally change the business model and economics of healthcare management,” said Gordon Coburn, President, Cognizant. “As we congratulate Health Net and Centene today, we look forward to continuing to partner with them to support their technology and operations requirements.”

Key updates on the relationship include:

Cognizant remains a key strategic technology and operations partner to Health Net, with the existing relationship being extended through the end of 2020 with a total contract value of approximately $520 million. This will provide ongoing support of critical Health Net applications and processes.

The planned implementation of a seven-year master services agreement for end-to-end administrative services between Cognizant and Health Net, first announced in August 2014 and scheduled to begin in mid-2015, is being deferred while Health Net and Centene complete the merger review and approval process. Cognizant expects that if the merger of Health Net and Centene is completed, the existing master services agreement will not be implemented as there will likely be overlaps in services and capabilities planned to be provided by Cognizant.

Cognizant has negotiated the right to license certain Health Net intellectual property for incorporation into its healthcare management solutions and as-a-service platforms.

Coburn, added, “With our extensive healthcare expertise and 2014 acquisition of healthcare software leader TriZetto, Cognizant is well positioned to capitalize on the dynamic healthcare market and offer solutions that help payers and providers evolve as a digital enterprise and change their cost structures to address customer needs and meet regulatory requirements.”

Cognizant also reiterated their full-year guidance of revenue of at least $12.34 billion and adjusted EPS of at least $2.93.

“Despite the anticipated loss of approximately $100 million in incremental revenues during the second half of 2015, we are pleased to reaffirm our guidance for the year due to continued strong demand and projected over-performance in other parts of our business. Today’s announcement by Health Net will not impact our ability to achieve our goals for the year,” said Karen McLoughlin, Chief Financial Officer, Cognizant.

June NFP +223K
Posted by Eddy Elfenbein on July 2nd, 2015 at 9:00 am

Last month, the U.S. economy created 223,000 net new jobs. The unemployment rate dropped to 5.3%. That’s the lowest since April 2008.

The reports for April and May were revised lower by 60,000.

The labor force participation rate fell to 62.6%. That’s the lowest in nearly 40 years.

Morning News: July 2, 2015
Posted by Eddy Elfenbein on July 2nd, 2015 at 7:18 am

Battle for Greek Votes Under Way as Cash Shortages Bite

Defiant Varoufakis Says He’ll Quit If Greeks Endorse Austerity

China Relaxes Margin Rules as Share Prices Fall

R.B.S. to Reduce Cash Management Operations Outside Britain and Ireland

ADP Reports 237,000 Jobs Added by Businesses in June

Export-Import Bank’s Expiration a Victory For Billionaire Koch Brothers

Centene to Buy Health Net for $6.8 Billion in Shares, Cash

Spanish Language Network Univision Files For U.S. IPO

Tesla Beats Delivery Forecast With 52% Quarterly Surge

Can Xiaomi Reach Its Bold 2015 Sales Target?

SunEdison and Gamesa Sign a Memorandum of Understanding to Develop up to 1 Gigawatt of Wind Power Plants

Whole Foods Co-CEOs Admit To Overcharging Customers

Gerson Lehrman Seeks New Image as Investor Cashes Out

Credit Writedowns: Greek Default

Joshua Brown: Grantham: “People Respond To The Incentives They’re Given”

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June ISM = 53.5
Posted by Eddy Elfenbein on July 1st, 2015 at 11:17 am

Welcome to the back half of the year. The S&P 500 rose just 0.2% during the first six months of the year. That’s the worst start since 2010. Let’s hope the rest of the year is better. Today’s ISM Manufacturing report came in at 53.5. That’s still well within the safe zone.

ADP said that the economy created 237,000 new private sector jobs last month. Not bad. The big June jobs report comes out tomorrow.

The Commerce Department said that construction spending rose 0.8% in May. It’s now at a 6-1/2 year high.

The S&P 500 bounced off Monday and Tuesday’s low, and is nicely higher today. The index bottomed out at 2,056.64 on Monday and 2,056.32 on Tuesday.

Morning News: July 1, 2015
Posted by Eddy Elfenbein on July 1st, 2015 at 7:08 am

Greece Compromise Bid Faces Resistance as Trust Fades

Tsipras Signals Greece May Accept Bailout Terms

Sterling Dips After UK Manufacturing PMI Survey Misses Forecasts

Chinese Markets Fall Again, Ignoring Beijing’s Efforts to Soothe Them

Hedge Funds Fight to Save Puerto Rico Investments

Leon Black’s Sell-Everything Call Has Been Heard by His Rivals

Deutsche Bank’s Cryan Signals Cuts to Jain’s Trading Empire

ACE Agrees to Buy Chubb for $28.3 Billion

Apple Rule of Unreason

General Mills’s Revenue Growth Weaker Than Expected

MasterCard Stops Processing Purchases of Ads on Backpage.com

JPMorgan Builds Up Apartment-Loan Leader From WaMu Rubble

Jailed American Executive Resigns From Toyota

Jeff Carter: Greece: How Did We Get Here?

Cullen Roche: The USA Is Not Turning Into Greece

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The Halfway Point
Posted by Eddy Elfenbein on June 30th, 2015 at 5:02 pm

The first half of 2015 is officially on the books.

For the first six months of this year, our Buy List has crushed the S&P 500 by a ratio of 15 to 1!!

Well, technically.

Our Buy List is up 3.02% YTD while the S&P 500 has gained a meager 0.20%.

Including dividends, our Buy List was up 3.59% while the S&P 500 with dividends gained 1.22%.

Here’s how each of our stocks has performed. I’ve included the price gain and the dividend-adjusted gain.

Why Signature Bank Can’t Be Beat
Posted by Eddy Elfenbein on June 30th, 2015 at 11:20 am

Why Signature Bank Can’t Be Beat

by Alyssa Oursler

The financial sector has been slightly outperforming the market over the last 12 months and has been regaining strength dramatically since the financial crisis hit in 2008. Many of the biggest banks have bounced back from near death, posting improvements in earnings and asset quality recently. But some small banks have been regaining strength as well — and one small bank in particular barely took a beating even during the crisis, which sheds light on just how strong it is. Signature Bank (SBNY) is on the Crossing Wall Street buy list and has been blowing away rivals since going public in 2004.

For background, Signature is a full-service commercial bank with 27 private client offices located throughout the New York metropolitan area. That might not sound that impressive, but that niche has bred success for Signature, The key that sets the bank apart is the fact that it’s built on people, not on buzz.

As a Crain’s New York feature showcased, “Signature has secured a reputation in its field as a place where seasoned bankers want to work … Signature’s success stems from management recruiting groups of experienced business bankers, from rivals like Citibank and HSBC, who bring clients with them.” In fact, Signature’s CEO told Aaron Elstein at Crain’s: “It’s true we aren’t in the headlines much. I don’t mind.” He prefers to focus on hiring the best people as opposed to grabbing media attention.

That might sound fluffy as an investment thesis, but it trickles down to the tangible. See, the bank also offers these top-notch employees a large amount of freedom in how they work with clients, which has been a recipe for success. Of its $14 billion in loans, only 0.25% are more than 90 days delinquent. That’s 10% of the industry average. Signature also spends a mere 36 cents to generate each dollar in revenue — overhead that is 40% below the industry average. For the cherry on top, it boasts a 14% return on equity, which is 4 percentage points above the industry average.

Put another way, SNL Financial recently ran some numbers on the 100 largest banks in the U.S., looking at asset quality, capital adequacy and profitability to gauge the best and worst banks. And you guessed it — SBNY was top of the charts thanks to strong fundamentals on top of impressive growth potential for the NYC market. As Kurt Badenhausen noted for Forbes, “There are $1.4 trillion in deposits in New York banks, almost three times the next biggest metro of Philadelphia.”

Those qualities also make Signature Banks a textbook example of the Crossing Wall Street investing philosophy of buying and holding shares of outstanding companies. During the past decade, Signature Bank has posted 15 consecutive quarters of record diluted earnings per share, while shares of SBNY are up 17% year-to-date and 284% over the last five years. Since going public, Signature is the top-performing bank stock. Their return has more than lapped the second-best performing bank.

Of course, with such head-turning outperformance, it’s fair to be concerned about buying at a top. While the question remains whether Signature Bank can maintain this sizzling upwards trend, the analyst community is bullish, to say the least. Zack’s Investment Research just upgraded SBNY assigning it a $166 price target — good for 12% upside. Earlier this month, Guggenheim raised its price target from $155 to $165 and gave Signature a buy rating.

Plus, estimates for the current quarter and full year’s earnings have been moving in the right direction. Three months ago, analysts were expecting $1.65 per share for the current quarter, while they’ve tacked four pennies onto that number recently — good for double-digit year-over-year growth. Things are even sweeter for the full year; analysts have upped estimates from $6.80 to $6.95 per share, good for year-over-year growth of nearly 17%.

That growth is the reason why, despite the consistent upwards trend, Signature Bank shares aren’t extremely overpriced. The bank is slated for consistent earnings improvements, too, including 13% annual earning growth over the next five years. That’s better than the industry and nearly twice the expected growth for the broader market … which is especially impressive considering the growth it’s building upon.

Meanwhile, the stock just hit a new lifetime high yet is still trading for just 18 times forward earnings. While that’s a slight premium to the 13% growth on tap, it’s worth it considering the track record. Investors are shelling out a slight premium for a company that’s fundamentally sound and has proven itself as a long-term hold … but that also has impressive momentum. Put another way, SBNY is appealing to a wide variety of investors, which should provide further fuel to keep the stock moving higher.

All in all, Signature Bank is a signature buy. Between rock-solid fundamentals, a mouthwatering track record and a strong outlook, there’s no reason to think SBNY won’t continue to blow away both the financial sector and the broader market in years to come.

Alyssa Oursler is based in San Francisco and writes about technology, investing, gender and entrepreneurship. Her work has appeared on Business Insider, MSN Money, InvestorPlace and more. You can follow her on Twitter here or check out her personal site here. As of this writing, she did not hold a position in any of the aforementioned securities.

The Must Follow Podcast
Posted by Eddy Elfenbein on June 30th, 2015 at 10:28 am

I recently sat down with Sean McLaughlin of StockTwits’s “Must Follow” podcast to talk about our “less is more” investing philosophy at Crossing Wall Street. Here’s what Sean had to say.

In 2015, the idea of a four-year average holding period per stock position might be a completely foreign idea to you. In April, the Wall Street Journal reported the average holding period for U.S. Stocks is just 17 weeks! So, we understand if four years sounds crazy.

But to today’s podcast guest Eddy Elfenbein, four years is the sweet spot.

“A four-year holding period is a reasonable time period to know if your investment is working out” — @EddyElfenbein

Eddy Elfenbein is now in the 10th year of publishing an annual “Buy List” which consists of twenty stocks vetted to be worthy of investment by a host of fundamental qualifications. Each year, the Buy List is reviewed and five new stocks are chosen to replace five stocks Eddy deems to have less opportunity for appreciation ahead. Once January 1st hits, this list — these 20 stocks — are the only stocks Eddy will allow himself to buy for the remainder of the year.

During this run, the slowly-morphing list (equally balanced each Jan 1) has outperformed the S&P 500 by 50% while clocking in with slightly less volatility than the index. What’s not to like about that?

One might guess that to maintain a stoic indifference to the daily and weekly fluctuations of stocks in your portfolio, you must detach yourself fully from the Financial Media Entertainment Complex. But in Eddy’s case, you’ll find fewer people more attuned to the constantly changing global financial news landscape and with a deeper fascination in how the global economy works than him. How does he do it?

We get into this and much much more in this stimulating conversation for anyone who hasn’t yet internalized a less-is-more philosophy to managing your investments:

Morning News: June 30, 2015
Posted by Eddy Elfenbein on June 30th, 2015 at 5:00 am

Greece Staggers Into Economic Unknown With Bailout Set to Expire

Puerto Rico Wants Bondholders to Postpone Debt Payments

Loads of Debt: A Global Ailment With Few Cures

China Stock Rout Threatens Returns on $322 Billion of IPO Funds

Obama Making Millions More Americans Eligible For Overtime

KKR to Pay $30 Million to Settle U.S. SEC Charges Over Misallocating Expenses

Sysco Ends Plans to Merge With US Foods

Celgene to Pay Juno $1 Billion as Part of 10-Year Collaboration

Sony to Raise $3.6 Billion Selling Stock, Convertible Bonds

Uber Bonds Term Sheet Reveals $470 Million in Operating Losses

AOL in Deal With Microsoft to Take Over Display Ad Business

AT&T, DirecTv Extend ‘Termination Date’ For Second Time

Alstom Chief Confident GE Deal Will Get EU Approval

Roger Nusbaum: Puerto Rico, Too?

Francis Coppola: Morality in the Greek Crisis

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