Benzinga’s PreMarket Prep
Posted by Eddy Elfenbein on June 17th, 2014 at 12:06 pm

Yesterday, I was on Benzinga’s PreMarket Prep show. I think my audio was a bit low, which isn’t what I’m like in real life. Thanks to everyone at Benzinga for inviting me!

Inflation Continues to Rise
Posted by Eddy Elfenbein on June 17th, 2014 at 11:32 am

The government reported that inflation rose again last month. Consumer prices edged up 0.4% in May which was the largest increase in more than a year. The “core rate,” which excludes food and energy, rose by 0.3% which was the largest increase since 2009.

I want to be careful not to overstate the case. No, there’s no danger of hyperinflation. Rather, the trend of disinflation, lower price increases, seems to have come to an end. In the last year, headline inflation is up 2.1% and core inflation is up 2.0%. Overall, I think this is a good thing as inflation moves closer to the Fed’s target zone.

Middleby to Split 3-for-1
Posted by Eddy Elfenbein on June 17th, 2014 at 10:52 am

Apple ($AAPL) recently split 7-for-1 but there’s another high-priced stock that’s due to split. Next week, Middleby ($MIDD) will split its shares 3-for-1.

Middleby is not very well known but it’s been an amazing performer. The shares are currently at $246. Shortly after 9/11, they hit $2. That’s a 123-fold gain in less than 13 years.

So you’d think Middleby would be a highly popular stock, right? Not at all. Only a few analysts follow it. I think the high nominal share price may scare some traders away. Miidleby usually trades about 150,000 shares each day. That may sound like a lot but consider the action at Bank of America which often trades more than 70 million shares per day.

Here’s how Middleby describes itself:

The Middleby Corporation is a global leader in the foodservice equipment industry. The company develops, manufactures, markets and services a broad line of equipment used for commercial food cooking, preparation and processing.

Sexy, I know.

Too many investors think that a great company has to be someone inventing the 12th dimension. That’s simply not the case. It can often be a boring company in a dull industry that does its job very, very well.

Side note: I’m glad to see the decline and fall of stock splits. In the 90s, companies split their shares by small amounts all the time. In my opinion, splits should be at least 2-for-1, and more often 3-for-1 or 4-for-1. Splits should happen once every 15 years or so. The airliner JetBlue split 3-for-2 three times in three years despite the stock not really doing much.

Morning News: June 17, 2014
Posted by Eddy Elfenbein on June 17th, 2014 at 6:45 am

IMF Cuts Growth Outlook, Says Full Employment Years Off

Aussie Declines as Central Bank Says Recovery Uncertain

UK House Prices ‘Rise 9.9% in a Year’

Argentina Vows to Service Debt Despite New Legal Blow

Economists: Take Fed ‘Dot Plots’ With a Big Grain Of Salt

Moody’s Raises New York State’s GO Bond Rating to Aa1

Siemens, Mitsubishi Value Alstom Unit at $19.2 Billion

GM Safety Crisis Grows With Recall of 3 Million More Cars for Ignition Issues

Hillshire Takes Tyson Deal, Drops Its Own Bid for Pinnacle Foods

Australia’s Woodside Petroleum In Play As A Takeover Target After Shell Makes Its Exit

The Fusion of Solid State Storage

S.E.C. Fines Hedge Fund in Demotion of Whistle-Blowing Employee

Stephen Colbert’s In-House Tech Startup Wants to Fix TV Scripts

Cullen Roche: The Bankrupt Economics of David Brat

Jeff Carter: To Innovate Don’t Ask, “What Else Can Be Ubered?”

Be sure to follow me on Twitter.

Industrial Production Rises 0.6%
Posted by Eddy Elfenbein on June 16th, 2014 at 10:21 am

On the economic news front this morning, the Federal Reserve reported that Capacity Utilization rose last month to 79.1%. That’s close to a six-year high. In theory, that’s supposed to be an early warning sign of inflation, but I don’t think it’s a very good barometer. During much of the 1980s and 90s, Capacity Utilization was much higher than where we are now, and inflation wasn’t much of an issue.

The Fed also reported that U.S. Industrial Production jumped 0.6% last month. Economists had been expecting an increase of 0.5%. The rise for May is especially good to see after the drop of 0.3% we had in April. In the past year, Industrial Production is up 4.3%.

The Fed meets tomorrow and on Wednesday. Expect to see another tapering announcement. The FOMC will also update their economic projections.

Medtronic Raises Dividend by 9%
Posted by Eddy Elfenbein on June 16th, 2014 at 9:53 am

I was very curious to see how Medtronic ($MDT) would open today, and the shares have opened higher. As a very general rule, stocks of acquiring companies usually fall on the news of a buyout, while the company being bought soars. Covidian (COV), not surprisingly, is much higher today, but it’s interesting that Medtronic is up as well. I suspect the market likes this deal and is particularly fond of the tax issue.

As if there’s not enough Medtronic news this morning, the company also announced a 9% increase to its dividend. The quarterly dividend will rise from 28 cents per share to 30.5 cents per share. For the year, that’s $1.22 per share. This is the 37th year in a row that Medtronic has increased its dividend.

The stock is currently at $63.35 which is a gain of 4.37%.

Morning News: June 16, 2014
Posted by Eddy Elfenbein on June 16th, 2014 at 6:44 am

Russia Cuts Gas Supply to Ukraine

Draghi Unites Euro Bulls With Bears Watching $1.35

ECB Seen Buying Assets Within a Year as Draghi Rate Cuts End

China Capital Flows Slow Sharply

China Surpasses U.S. as Largest Corporate Debt Issuer

BNP Keeps Investors Guessing About U.S. Sanctions Penalty

Metronic to Buy Covidien for $42.9 Billion, Rebase in Ireland

Vodafone Expands Into Car Electronics with Italian Deal

With An Amazon Smartphone, the Retailer Seeks a Tether to Consumers

Airbus, Safran Create Space Launch Joint Venture

Siemens and Mitsubishi Heavy Industries Nearing an Offer for Alstom

Bank Account Screening Tool Is Scrutinized as Excessive

‘Bitcoin Jesus’ Calls Rich to Tax-Free Tropical Paradise

Roger Nusbaum: The Fascination With Tiny Houses

Jeff Miller: Weighing the Week Ahead: What Does The Iraq Conflict mean For Markets?

Be sure to follow me on Twitter.

It’s Official: Medtronic is Buying Covidien for $43 Billion
Posted by Eddy Elfenbein on June 15th, 2014 at 8:01 pm

The deal is done. Medtronic ($MDT) is buying Covidien ($COV) for $42.9 billion. The deal is an “inversion” which means that Medtronic will move its HQ from Minneapolis to Ireland where corporate taxes are much lower.

Medtronic will pay $93.22 per share for Covidien. That’s a 29% premium to Friday’s close. The deal is in cash and stock.

Medtronic and Covidien in Talks to Merge
Posted by Eddy Elfenbein on June 14th, 2014 at 3:27 pm

Here’s a biggie. The Wall Street Journal is reporting today that Medtronic and Covidien are in advanced talks about merging. The deal could be worth $40 billion.

The deal, which could be announced Monday, would be structured as a so-called tax inversion, according to one of the people. In such deals, acquirers buy companies domiciled in countries with lower corporate tax rates than their own as a means of reducing their overall rate. Covidien is based in Ireland, which is known for having a relatively low tax rate: its main corporate tax rate is 12.5%. In the U.S., home to Medtronic, the 35% rate is one of the world’s highest.

Remember that these are just talks, and anything can fall apart.

Priceline Buys Open Table
Posted by Eddy Elfenbein on June 13th, 2014 at 12:21 pm

The stock market is up cautiously at midday. One laggard is Bed Bath & Beyond ($BBBY) which dropped to another 52-week low today. The home furnishings store will report earnings later this month, and I don’t think investors expect much.

One of the stocks on My Watch List, Open Table ($OPEN), is up 47% today on the news that it’s going to be bought out by Priceline ($PCLN) for $2.6 billion.

A former Buy List stock, Intel ($INTC), is up 6.9% today after the company raised its revenue guidance. This surprised a lot of tech watchers. The stock is at a 10-year high today.

Not much in the way of economic reports today. Consumer confidence slipped to 81.2 from 81.9 last month. The Street was expecting 83.0. One surprise is that wholesale prices dropped 0.2% last month. Wall Street had been expecting a gain on 0.1%. Core PPI fell 0.1%. The CPI report is next week.