• Morning News: June 22, 2012
    Posted by on June 22nd, 2012 at 4:52 am

    Euro Chiefs Spar On Greek, Spanish Aid

    Spain’s Banks Need Up To $78 Billion, Report Shows

    Manufacturing Shrinks In China & Eurozone, Slows In US

    U.S. and Switzerland Reach Deal on Sharing of Financial Account Data

    IMF Sees Euro Crisis At Critical Stage, Sees Bank Stress

    Mongolia’s Uneven Boom

    Bank Investors Dismiss Moody’s Cuts As Years Too Late

    Home Resales Decline While Fewer File Claims for Jobless Benefits

    US Factory, Jobs Data Highlight Struggling Recovery

    Bed Bath & Beyond: Slowed Growth, But Avoid Cleaning House Entirely

    Rosneft In Talks To Join Exxon In Iraq

    What To Expect From A Sinopec-Chesapeake Deal

    As Facebook Seeks Answers, S.E.C. Investigates Exchanges

    Joshua Brown: Involuntary Bankslaughter

    Stone Street: How I Legally Caused BAC To Lose $4,000 On My Mortgage

    Be sure to follow me on Twitter.

  • Higgs Boson on Intrade
    Posted by on June 21st, 2012 at 2:17 pm

    Intrade, the futures market for real world events, has a contract on whether a Higgs Boson Particle will be observed before the end of the year. The trade in this contract spiked up dramatically recently. (See Physics Community Afire With Rumors of Higgs Boson Discovery at Wired.)

    Ironically, even though the contract is gapping up on heavy volume, it still has no mass. (BWAHAHAHA!)

  • Good Time in the Election Cycle
    Posted by on June 21st, 2012 at 1:01 pm

    The market adage “sell in May and go away,” worked well this year for about one month. However, the end of May during an election year has often been a good time to buy stocks.

    A few years ago, I took all the data and calculated the average market during a Presidential Election Cycle. Historically, a low point has come on May 29th of the election year.

    From there until August 3rd of the post-election year, the Dow has gained an average of 23.2%. That’s very impressive for just 14 months.

    Let me add that I don’t make investment decisions based on these calendar effects. After all, this is an average of 115 years’ worth of data. I just think it’s fascinating how the market has behaved historically.

  • Bloodbath & Beyond
    Posted by on June 21st, 2012 at 10:04 am

    Shares of Bed Bath & Beyond ($BBBY) are getting crushed today. The stock has been as low as $62.23 this morning.

    I think this is an absurd overreaction. Combined with yesterday’s drop, the shares are down 16.72% since Tuesday’s close.

    Just to be clear, the midpoint of BBBY’s guidance was eight cents below Wall Street’s consensus. The market is translating that into a loss of over $12.

  • Staring Down the Bear Market
    Posted by on June 21st, 2012 at 9:10 am

  • Morning News: June 21, 2012
    Posted by on June 21st, 2012 at 8:07 am

    Greece Faces Downgrade To Emerging Market Status By MSCI

    Manufacturing Slump Deepens From Euro Area To China

    Spain Borrowing Costs Peak As EU Ponders Bank Aid

    Spanish Bond Sale Reveals Fragility of Economy

    Oil Drops Below $80 To 8-Month Low On U.S. Supply, Europe

    Bernanke Signals More Easing Likely If Job Growth Wanes

    Bosses Rein In Banker Who Golfs With Obama

    Facebook Stock’s Bad Start Reins In Short Sellers

    Key Euribor Rate Eases As Coeure Says ECB To Discuss Cut

    Cabot To Buy Dutch Company Norit For $1.1 Billion

    China Iran Oil Imports Recover, Recoup Earlier Fall

    BlueMountain Said To Help Unwind JPMorgan’s Whale Trades

    Peugeot Examining Impact Of GM On BMW Hybrid Alliance

    Cullen Roche: Money Supply Update – Still No Inflation Here Either…

    Roger Nusbaum: Beware Overconfidence!

    Be sure to follow me on Twitter.

  • Bed Bath & Beyond’s Earnings Call
    Posted by on June 20th, 2012 at 11:45 pm

    From Seeking Alpha, here are some highlights from Bed Bath & Beyond’s ($BBBY) earnings call:

    Based on these and other planning assumptions, we are modeling net earnings per diluted share to be approximately $0.97 to $1.03 for the fiscal second quarter of 2012. For all of fiscal 2012, including the benefit of the 53rd week and the incremental operating cost from the previously discussed major initiatives, we continue to model net earnings per diluted share to increase by a high single-digit to a low double-digit percentage range over fiscal 2011.

    (…)

    Our balance sheet and cash flows remains strong. We ended the fiscal first quarter with cash and cash equivalents and investment securities of approximately $1.8 billion. Assuming the completion of the Cost Plus transaction in our fiscal second quarter, we would expect the cash used in our fiscal second quarter for both the Linen Holdings and Cost Plus acquisitions to be approximately $650 million.

    As of May 26, 2012, inventories at cost were approximately $2.2 billion or $60.63 per square foot, an increase of approximately 2.4% on a per square foot basis over the end of last year’s first quarter. Inventories continue to be tailored by store to meet the anticipated demands of our customers and are in good condition.

    Consolidated shareholders equity at May 26, 2012, was approximately $3.9 billion, which is net of share repurchases, including the approximately $306 million, representing approximately 4.6 million shares repurchased during the fiscal first quarter of 2012. As of May 26, 2012, the remaining balance of the share — of the current share repurchase program authorized in December 2010 was approximately $613 million.

    The company repurchased 2% of its outstanding stock last quarter.

  • The Buy List So Far
    Posted by on June 20th, 2012 at 10:50 pm

    Our Buy List has beaten the S&P 500 for the last five years in a row. But this year so far, we’re trailing the market just slightly.

    Through June 20th, our Buy List is up 7.74% while the S&P 500 is up 7.80%. That’s a gap of only 0.06%.

    Including dividends, our Buy List is up 8.83% for the year while the S&P 500 is up 8.90%. The margin is so close that 18 more cents in Nicholas Financial’s share price would put us ahead of the market.

    As usual, I’m in for the long haul so I’m confident that we’ll be ahead of the market once again at the end of the year.

    Name Symbol Gain
    AFLAC AFL -2.01%
    Bed Bath & Beyond BBBY 27.08%
    CA Technologies CA 31.50%
    CR Bard BCR 22.51%
    DIRECTV DTV 10.62%
    Fiserv FISV 20.74%
    Ford Motor F -1.02%
    Harris Corp. HRS 17.20%
    Hudson City Bancorp HCBK 2.08%
    Johnson & Johnson JNJ 2.17%
    Jos. A Bank Clothiers JOSB -15.03%
    JPMorgan Chase JPM 9.62%
    Medtronic MDT 0.39%
    Moog MOG-A -10.88%
    Nicholas Financial NICK -0.08%
    Oracle ORCL 11.07%
    Reynolds American RAI 4.80%
    Stryker SYK 10.44%
    Sysco SYY -0.31%
    Wright Express WXS 14.31%

  • Bed Bath & Beyond Plunges After Hours
    Posted by on June 20th, 2012 at 5:40 pm

    In last week’s CWS Market Review, I made a bold prediction: I said that I thought Bed & Bath & Beyond ($BBBY) could report earnings of 88 cents per share for its May quarter. This was well above what most others thought. The company had given guidance of 79 to 83 cents per share. Wall Street’s consensus was for 84 cents per share.

    As it turns out, I wasn’t optimistic enough. For its fiscal first quarter, Bed Bath & Beyond earned 89 cents per share.

    This was a big improvement over the May quarter from last year when BBBY earned 72 cents per share. For the May quarter, gross margins slightly contracted from 40.6% to 40.0%. Sales rose by 5.1% to $2.218 billion, and same-store sales rose by 3%.

    But the big news was BBBY’s weak guidance for the fiscal second quarter which ends in August. BBBY said to expect earnings to range between 97 cents and $1.03 per share. Wall Street had been expecting $1.08. The shares dropped 11% in after-hours trading.

    For this year, the company sees earnings growth in the high single digits to low double digits. Let’s say that’s 8% to 12%. For the last fiscal year, BBBY earned $4.06 per share. The guidance translates to earnings between $4.38 and $4.55 per share. The Street had been expecting $4.63 which represents growth of 14%. In other words, looking past next quarter, this was below Wall Street’s view but not by much. Certainly not worth an 11% haircut.

    Let’s see what happens tomorrow, but I suspect BBBY won’t be down by so much once trading starts.

    Here are the sales and earnings for the past few quarters:

    Quarter Sales Gross Profit Operating Profit Net Profit EPS
    May-99 $356,633 $146,214 $28,015 $17,883 $0.06
    Aug-99 $451,715 $185,570 $53,580 $33,247 $0.12
    Nov-00 $480,145 $196,784 $50,607 $31,707 $0.11
    Feb-00 $569,012 $238,233 $77,138 $48,392 $0.17
    May-00 $459,163 $187,293 $36,339 $23,364 $0.08
    Aug-00 $589,381 $241,284 $70,009 $43,578 $0.15
    Nov-01 $602,004 $246,080 $64,592 $40,665 $0.14
    Feb-01 $746,107 $311,802 $101,898 $64,315 $0.22
    May-01 $575,833 $234,959 $45,602 $30,007 $0.10
    Aug-01 $713,636 $291,342 $84,672 $53,954 $0.18
    Nov-02 $759,438 $311,030 $83,749 $52,964 $0.18
    Feb-02 $879,055 $370,235 $132,077 $82,674 $0.28
    May-02 $776,798 $318,362 $72,701 $46,299 $0.15
    Aug-02 $903,044 $370,335 $119,687 $75,459 $0.25
    Nov-03 $936,030 $386,224 $119,228 $75,112 $0.25
    Feb-03 $1,049,292 $443,626 $168,441 $105,309 $0.35
    May-03 $893,868 $367,180 $90,450 $57,508 $0.19
    Aug-03 $1,111,445 $459,145 $155,867 $97,208 $0.32
    Nov-04 $1,174,740 $486,987 $161,459 $100,506 $0.33
    Feb-04 $1,297,928 $563,352 $231,567 $144,248 $0.47
    May-04 $1,100,917 $456,774 $128,707 $82,049 $0.27
    Aug-04 $1,273,960 $530,829 $189,108 $120,008 $0.39
    Nov-05 $1,305,155 $548,152 $190,978 $121,927 $0.40
    Feb-05 $1,467,646 $650,546 $283,621 $180,980 $0.59
    May-05 $1,244,421 $520,781 $150,884 $98,903 $0.33
    Aug-05 $1,431,182 $601,784 $217,877 $141,402 $0.47
    Nov-06 $1,448,680 $615,363 $205,493 $134,620 $0.45
    Feb-06 $1,685,279 $747,820 $304,917 $197,922 $0.67
    May-06 $1,395,963 $590,098 $148,750 $100,431 $0.35
    Aug-06 $1,607,239 $678,249 $219,622 $145,535 $0.51
    Nov-07 $1,619,240 $704,073 $211,134 $142,436 $0.50
    Feb-07 $1,994,987 $862,982 $309,895 $205,842 $0.72
    May-07 $1,553,293 $646,109 $154,391 $104,647 $0.38
    Aug-07 $1,767,716 $732,158 $211,037 $147,008 $0.55
    Nov-08 $1,794,747 $747,866 $203,152 $138,232 $0.52
    Feb-08 $1,933,186 $799,098 $259,442 $172,921 $0.66
    May-08 $1,648,491 $656,000 $118,819 $76,777 $0.30
    Aug-08 $1,853,892 $739,321 $187,421 $119,268 $0.46
    Nov-08 $1,782,683 $692,857 $136,374 $87,700 $0.34
    Feb-09 $1,923,274 $785,058 $231,282 $141,378 $0.55
    May-09 $1,694,340 $666,818 $142,304 $87,172 $0.34
    Aug-09 $1,914,909 $773,393 $222,031 $135,531 $0.52
    Nov-09 $1,975,465 $812,412 $245,611 $151,288 $0.58
    Feb-10 $2,244,079 $955,496 $370,741 $226,042 $0.86
    May-10 $1,923,051 $775,036 $225,394 $137,553 $0.52
    Aug-10 $2,136,730 $874,918 $296,902 $181,755 $0.70
    Nov-10 $2,193,755 $896,508 $305,110 $188,574 $0.74
    Feb-11 $2,504,967 $1,076,467 $461,052 $283,451 $1.12
    May-11 $2,109,951 $857,572 $288,948 $180,578 $0.72
    Aug-11 $2,314,064 $950,999 $371,636 $229,372 $0.93
    Nov-11 $2,343,561 $958,693 $357,020 $228,544 $0.95
    Feb-12 $2,732,314 $1,163,669 $550,765 $351,043 $1.48
    May-12 $2,218,292 $887,199 $313,398 $206,836 $0.89

  • Today’s Fed Statement
    Posted by on June 20th, 2012 at 12:36 pm

    Come on, let’s twist again like we did last summer.

    Information received since the Federal Open Market Committee met in April suggests that the economy has been expanding moderately this year. However, growth in employment has slowed in recent months, and the unemployment rate remains elevated. Business fixed investment has continued to advance. Household spending appears to be rising at a somewhat slower pace than earlier in the year. Despite some signs of improvement, the housing sector remains depressed. Inflation has declined, mainly reflecting lower prices of crude oil and gasoline, and longer-term inflation expectations have remained stable.

    Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects economic growth to remain moderate over coming quarters and then to pick up very gradually. Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee anticipates that inflation over the medium term will run at or below the rate that it judges most consistent with its dual mandate.

    To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

    The Committee also decided to continue through the end of the year its program to extend the average maturity of its holdings of securities. Specifically, the Committee intends to purchase Treasury securities with remaining maturities of 6 years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately 3 years or less. This continuation of the maturity extension program should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. The Committee is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.

    Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who opposed continuation of the maturity extension program.