• Medtronic Earns 88 Cents Per Share
    Posted by on August 20th, 2013 at 1:56 pm

    This morning, Medtronic ($MDT) reported fiscal Q1 earnings of 88 cents per share which matched estimates. They reiterated their full-year forecast of $3.80 to $3.85 per share.

    Medtronic Inc. (MDT), the world’s biggest maker of heart-rhythm devices, said first-quarter profit rose 10 percent on increasing demand for the company’s stents, pacemakers and other products used during surgery.

    Net income in the three months ended July 26 increased to $953 million, or 93 cents a share, from $864 million, or 83 cents, a year earlier, the Minneapolis-based company said today in a statement. Profit excluding one-time items matched the average of 88 cents of 20 analysts’ estimates compiled by Bloomberg. Revenue increased to $4.08 billion from $4.01 billion a year earlier.

    Sales of stents, used to prop open heart arteries, were bolstered by demand in Japan where the company’s Resolute device is still in its first year of introduction. Demand for spinal products and implanted devices such as defibrillators to regulate the heart’s electrical activity, two of the company’s biggest units, continued to show signs of stability after several years of decline.

    “Medtronic is poised to deliver a sixth consecutive quarter of solid mid-single-digit organic sales growth despite still soft – but largely as expected – MedTech market dynamics more broadly this earnings season,” Danielle Antalffy, an analyst with Leerink Swann Research in New York, wrote in an Aug. 14 note to investors.

    No surprises here. The stock is down about 2% today.

  • Morning News: August 20, 2013
    Posted by on August 20th, 2013 at 5:01 am

    Ross Sees Cargo Rebound on China Shipbuilding Limits

    Indonesia Stocks Drop as Index Falls as Much as 20% From Peak

    Leftist Leader Wants to Repair, Not Privatize Mexico’s Oil Industry

    Obama Presses for Action on Bank Rules

    Fed Finds 18 Large Banks Weak in at Least One Capital Area

    Falcone Agrees to Five-Year Ban in Stiffer Deal With SEC

    JPMorgan Says Buy Indian Options as Stock Swings Widen

    Oversight Board Faults Broker-Dealer Audits

    Judge Endorses Use Of Fraud Law Against Bank of America

    Statoil: USD 2.65 Billion Transaction to Capture Value and Focus the Portfolio

    Fast-food Workers Call for Nationwide Walkout Aug. 29

    Saks Incorporated Announces Results for the Second Quarter and Six Months Ended August 3, 2013

    Re/Max Files for I.P.O. as Housing Market Continues Upswing

    Credit Writedowns: China: The Urbanization Fallacy

    Phil Pearlman: Talking with Jay Zalowitz About The Amazon & Google Outages

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  • Thales aka Olive Finger
    Posted by on August 19th, 2013 at 11:13 pm

    From Aristotle’s Politics, Book I, Chapter 11, sections 5-10:

    There is, for example, the story which is told of Thales of Miletus. It is a story about a scheme for making money, which is fathered on Thales owing to his reputation for wisdom; but it involves a principle of general application. He was reproached for his poverty which was supposed to show the usefulness of philosophy; but observing from his knowledge of meteorology (so the story goes) that there was likely to be a heavy crop of olives [next summer], and having a small sum at his command, he paid down earnest-money, early in the year, for the hire of all the olive-presses in Miletus and Chios; and he managed, in the absence of any higher offer, to secure them at a low rate. When the season came, and there was a sudden and simultaneous demand for a number of presses, he let out the stock he had collected at any rate he chose to fix; and making a considerable fortune he succeeded in proving that it is easy for philosophers to become rich if they so desire, though it is not the business which they are really about.

  • The Doomsday Trade
    Posted by on August 19th, 2013 at 10:03 pm

    My pal Josh Brown pointed out this article at Fortune. It turns out that the Doomsday Trade isn’t working out for the end-of-the-world crowd. One of the biggest flaws in investing is people investing by their ideology. Investing is the ultimate in practicality beating ideology.

    For one small group of investors, this return to normal places them in a new, confounding position. While a worried mainstream saw gold as a hedge against short-term instability, the past five years have seen huge exposure, particularly in America, for a set of ideas that sees gold as a protection against the total collapse of the financial system as we know it. Probably the most well-known proponent of this viewpoint is former Fox News personality Glenn Beck, who has persistently warned of the inevitability of hyperinflation, lawlessness, and bread riots in the wake of QE and other Fed initiatives to inject liquidity and expand the money supply.

    Starting in 2008 and with little respite since, Beck has kept up a drumbeat of parallels between American monetary policy and disaster scenarios such as Weimar Germany. Whether by correlation or causation, Beck also happens to be heavily sponsored (both in his Fox News days and now in his internet enterprise) by Goldline, a company selling gold coins. Alex Jones, a goldbug and conspiracy theorist only slightly less influential than Beck, is sponsored by Midas Resources Inc., which … well, guess.

    Though Glenn Beck and Alex Jones are in many ways fringe figures, they have significant followings, and their goldbug ideas are part of an even larger pattern of thought that encompasses genuinely influential groups including Ron Paul’s Libertarian wing of the U.S. Republican Party, and the even more powerful Tea Party faction. “Anyone who is not looking at a financial collapse of the United States right now is not looking at our debt and the inability of our government to rein in costs. It’s no longer a case of if, but a case of when,” says Norman Cillo, a member of the Tampa Bay Tea Party. With that scenario in mind, gold looks like a pretty good bet, no matter what the market is doing.

    Gold’s longtime nickname, “God’s Money,” captures some of the faith these goldbugs put in the yellow stuff as a life raft for the most extreme, yet imaginable, scenarios. For most of the last five years, this has been an easy enough proposition — doomsayers could have their apocalypse and profit from it too, watching gold prices rise in dollar terms while also being confident in the commodity’s value in the lawless, feral world they think Ben Bernanke’s monetary policy is laying the groundwork for.

    So their Doomsday forecasts were wrong. Oh well, it’s not the end of the world.

  • The Typical Trend of Earnings Estimates
    Posted by on August 19th, 2013 at 12:14 pm

    Earlier this year, Thomson Reuters had an interesting research piece of how earnings estimates usually trend during the year. Here are the key bullet points:

    Analysts tend to overestimate earnings initially, but subsequent downward revisions bring estimates closer to actual earnings.

    During the calendar quarter, estimates typically continue to decline, driven in part by company issued guidance that is typically more negative than positive.

    Positive surprises during earnings season tend to bring the blended earnings growth estimate back up to its actual value.

    Read the whole thing.

  • Why P/E Ratios Can Be Misleading
    Posted by on August 19th, 2013 at 11:31 am

    I write a lot about stock valuation metrics. One thing to get across is that it’s important to look at everything but worship nothing. Every financial stat can be misleading.

    In the Wall Street Journal, Mark Hulbert look at the famous Price/Earnings Ratio:

    Consider the S&P 500’s current P/E based on trailing earnings. For the four quarters through June 30, the index’s earnings per share amounted to $91.13, according to S&P Dow Jones Indices. That translates into a P/E ratio of 18.2, which is higher than 79% of comparable readings since 1871, according to a database maintained by Yale University professor Robert Shiller.

    Many bulls try to wriggle out from this bearish sign by focusing on estimated earnings.

    According to FactSet Data Systems, the consensus forecast from Wall Street analysts is that earnings from companies in the S&P 500 will be $122.01 a share next year, which translates into a P/E ratio of 13.6. That is 6% less than the 14.5 median of historical P/Es in Mr. Shiller’s database.

    There is a catch: Forward-looking P/Es are almost always lower than those based on trailing earnings—often much lower. There are at least three reasons why, says Anne Casscells, a managing partner at Aetos Capital, which runs several hedge funds. First, corporate earnings usually rise from one year to the next. In addition, analysts’ estimates focus on what’s known as “operating earnings,” a looser category than the actual reported earnings used to calculate the average of past P/Es.

    And last but not least: Wall Street analysts’ predictions tend to be way too optimistic.

    A few years ago, I touched on another problem inherent in the P/E Ratio:

    We have to remember that the P/E Ratio is an unusual statistic because it looks at the relationship between two different kinds of the numbers. A stock’s price is a fixed-point number, which means you know exactly what a price is at any given time, but earnings is a rate, meaning it must be defined at something that only exists between two certain points in time.

    There’s nothing inherently wrong about combining two different kinds of numbers though we should be bear in mind its limitations and this is one such time.

  • Google’s Stock Turns Nine
    Posted by on August 19th, 2013 at 11:07 am

    It was nine years today ago that Google ($GOOG) had its IPO. The underwriting price was $85 per share, and the stock opened and closed trading at $100. The New York Times opined: “At its closing price of just above $100 yesterday, Google is valued at a bubbly $27 billion.”

    Bubbly? It turns out that that was only the beginning. GOOG, which has never split, raced to $747 by November 2007.

    Then came the recession and GOOG lost two-thirds of its value in a year. By November 2008, the stock dipped below $250. It then rallied to $600 before the end of 2009. After that, Google was pretty flat until about a year ago. The shares took out their 2007 high in September, and last month Google touched its all-time high of $928.

    big.chart08192013

    Consider that Google’s underwriting price was $85, and Wall Street expects the company to earn $51.34 per share next year.

  • Morning News: August 19, 2013
    Posted by on August 19th, 2013 at 6:40 am

    A Summer of Troubles Saps India’s Confidence

    Sensex Falls 10% From High as Banks Extend Drop

    Thailand GDP Highlights Policy Dilemma

    Spanish Banks’ Bad Loan Ratio Rises to Record in June

    Key Euribor Rate Steady as ECB Rate Cut Hopes Dim

    Biggest Shipping Line Says Emerging Market Warnings Misplaced

    Dylan Grice Articulates How Gold Is Money Even Though It’s Not Legally Money

    Statoil Funds Growth, OMV Seals Output With $2.65 Billion North Sea Deal

    Atlas Copco to Acquire Edwards, Expanding into Process Vacuum Solutions

    Regulatory Headaches Worsen for J.P. Morgan

    To Cover New York, Zillow Buys a Rival Site

    If Bill Ackman Were A Stock, I’d Be Buying Right Now

    Trader Joe’s Suing Man Who Resells its Products in Canada

    Pragmatic Capitalism: The Case for Dow 20,000 – One Year Later

    Jeff Miller: Weighing The Week Ahead: Will Rising Interest Rates Kill The Stock Rally?

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  • Israel’s Hi-Tech Boom Is Thanks to Its Military Intelligence
    Posted by on August 16th, 2013 at 10:15 pm

    Unit 8200, Israel’s ‘GCHQ’, has spawned more technology millionaires than many business schools:

    Until a decade ago, Unit 8200 was a secret. Then it starred in the book Start-Up Nation, which chronicled Israel’s emergence as a hi-tech powerhouse with more venture capital investment per person than anywhere in the world and the largest number of Nasdaq-listed companies after the US and China. Three years ago, 8200 alumni decided to emerge from the shadows and offer their expertise to other young Israeli entrepreneurs.

    The result was the 8200 entrepreneurship and innovation support program (EISP), a five-month hi-tech incubator in which unit alumni volunteer to mentor early-stage startups. So far, 22 of them have received funding totalling $21m (£13.5m) and employ 200 people, joining the 230,000 employees of Israel’s 5,000 tech companies that earn $25bn a year – a quarter of Israel’s total exports.

    Nir Lempert, a reserve colonel, former deputy commander of Unit 8200 and chairman of its alumni association, says the unit handpicks the brightest teenagers in the country then trains them to solve problems in multidisciplinary teams using methods usually associated with business, not battles. They are encouraged to think differently. “The central mission of the unit is to save lives, to prevent terror and other attacks,” says Lempert. “We teach our people that the mission is so important that there is no possibility of failure.”

    The 8200 legend attracts increasing numbers of young Israelis into IDF tech units. Mamram, the main IT support unit of the IDF, now offers a six-month pre-army course at its headquarters base in a suburban street on the outskirts of Tel Aviv. From dawn into the night, recruits study programming skills, teamwork, project management and – most important – how to be creative. It’s the ultimate startup boot camp.

    Read the whole thing.

  • Larry Ellison on Charlie Rose
    Posted by on August 16th, 2013 at 7:27 pm