TJX Companies
Posted by Eddy Elfenbein on January 26th, 2012 at 11:48 am

TJX ($TJX) is trading at a new all-time high this morning. Check out the stock’s long-term track record. Even before looking at dividends, that stock has averaged more than 20% per year for 20 years.

The stock soared nearly tenfold in the mid-1990s. Since then, the growth rate has moderated but the stock has averaged 12% to 15% per year. That’s a remarkable track record.

Morning News: January 26, 2012
Posted by Eddy Elfenbein on January 26th, 2012 at 9:28 am

Banks Hoarding ECB Cash May Double Company Defaults

Italy Sells Maximum Target Amount at Bond Sale

Greek Debt Talks to Resume as Policy Makers Squabble

Bernanke Moves Fed On With 2% Inflation Goal

New Housing Task Force Will Zero In on Wall St.

Foreclosure-Related Properties Decline to 20% of Home Purchases in U.S.

Higher Oil Prices Boost Conoco’s Profit by 66%

Hyundai’s Net Profit Rises 38%

Netflix Returns To Growth Even As Earnings Fall

Logitech Shares and Profit Plunge

Nintendo Sees First Annual Loss, Cuts 3DS Forecast

As I.P.O. Looms, Facebook Halts Clearing of Trades

Container Lines Steam Slower to Restore Profit

Airline ‘Teaser Fares’ Vanish as U.S. Rule Spurs Tax Disclosures

Joshua Brown: Whither the Wirehouse?

Jeff Miller: The Fed Role in the Economy: Now Bigger. Now Better?

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Today By the Numbers
Posted by Eddy Elfenbein on January 25th, 2012 at 5:51 pm

Here’s a breakdown of how the Buy List did today:

Good Day for Us!
Posted by Eddy Elfenbein on January 25th, 2012 at 2:16 pm

The S&P 500 just broke 1,322 which is another six-month high.

Thanks to big moves from Stryker ($SYK) and Hudson City ($HCBK), this is a huge day for our Buy List. Of course, the best gain of all comes from CA Technologies ($CA) which has been up as much as 14.76% today. Hudson City got as high as $7.46 and Stryker got up to $55.17.

As of 2 pm, the S&P 500 is up 0.51% and our Buy List is up 1.21%.

For the year, we’re up 7.59% while the S&P 500 is up 5.00%.

The Five-Year Treasury Is Back Below 0.8%
Posted by Eddy Elfenbein on January 25th, 2012 at 1:05 pm

Thanks to today’s news from the Fed, the yield on the 5-year Treasury is back near an all-time low.

Fed Votes 9-1 to Keep Rates the Same
Posted by Eddy Elfenbein on January 25th, 2012 at 12:29 pm

The Fed expects rates to stay low until at least late-2014. Here’s today’s Fed statement:

Information received since the Federal Open Market Committee met in December suggests that the economy has been expanding moderately, notwithstanding some slowing in global growth. While indicators point to some further improvement in overall labor market conditions, the unemployment rate remains elevated. Household spending has continued to advance, but growth in business fixed investment has slowed, and the housing sector remains depressed. Inflation has been subdued in recent months, 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 over coming quarters to be modest and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee also anticipates that over coming quarters, inflation will run at levels at or below those consistent with the Committee’s dual mandate.

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the 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 its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery 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; Sarah Bloom Raskin; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting against the action was Jeffrey M. Lacker, who preferred to omit the description of the time period over which economic conditions are likely to warrant exceptionally low levels of the federal funds rate.

Stryker Rallies on Earnings
Posted by Eddy Elfenbein on January 25th, 2012 at 12:25 pm

There’s one more earnings report to mention. After the bell yesterday, Stryker ($SYK) reported fourth-quarter earnings of $1.02 per share which was inline with Wall Street’s forecast. For the year, Stryker earned $3.72 per share. Previously, Stryker told us to expect full-year earnings between $3.72 and $3.74 per share.

Changes in product mix and volume increases helped drive revenue. Stryker said sales in its MedSurg segment climbed 11 percent to $857 million due to higher shipments of emergency medical and surgical equipment and surgical navigation systems, among other items.

The Kalamazoo, Mich., company earned $401 million, or $1.05 per share, in the three months that ended Dec. 31. That compares with net income of $295 million, or 74 cents per share, in the 2010 quarter. Adjusted earnings, which exclude one-time items, totaled $1.02 per share in the latest period.

Stryker reiterated its forecast for 2012 of “double digit” earnings growth. That implies earnings of $4.09 per share for 2012 so Stryker is currently going for about 13.3 times this year’s earnings. The stock has been up as much as 3.97% today.

Earnings Season So Far
Posted by Eddy Elfenbein on January 25th, 2012 at 11:41 am

Wendy Soong at Bloomberg has some stats on earnings season so far.

Of the 134 companies in the S&P 500 that have reported so far, 78 have beaten estimates, 16 have reported inline and 40 have missed estimates. That’s a “beat rate” of 58.2% which is fairly low.

Earnings are tracking at a 4.7% growth rate. Excluding financials, earnings are growing at 14.3%.

CA Technologies Outlines its Strategy
Posted by Eddy Elfenbein on January 25th, 2012 at 9:32 am

This is from the earnings call (transcript courtesy of Seeking Alpha):

Today, we are focused on 3 priorities to build long-term value for CA Technologies customers, employees and shareholders. First, to continue to execute our strategy and improve our operating performance. Second, to provide for a greater return of cash to shareholders through increased dividends and share repurchases. And third, to effectively use the balance sheet to return additional cash in the near term through an accelerated buyback.

In summary, we are targeting to return to shareholders approximately $2.5 billion through fiscal year 2014, or about 80% of our expected cumulative free cash flow over that period.

Key elements of the program include: One, an increase in the dividend from an annualized rate of $0.20 per share to $1 per share. That is a yield of approximately 4.5% based on yesterday’s closing market price and currently puts our dividend yield at the top of comparable technology companies. The board and management view returning cash to shareholders through dividends as an important component of our overall approach to enhancing shareholder value.

Two, a new $1.5 billion share repurchase authorization through fiscal 2014, including an accelerated repurchase of approximately $500 million under an agreement to be executed in the fourth quarter of fiscal 2012. Including the accelerated share repurchase and shares repurchased year-to-date, we expect we will have spent approximately $1 billion to buy back shares during fiscal year 2012. The $1.5 billion authorization replaces the approximately $230 million remaining under our current authorization. We are confident we have the balance sheet capacity to get this done and the program is expected to be funded by available U.S. cash.

Three, our strategic plan anticipates that we will continue our investment in the business consistent with that of previous years, or approximately $1 billion annually. This includes acquisition activity in the range of $300 million to $500 million per year, on average, through fiscal 2014 and the approximately $600 million we invest on average each year in organic research and development.

Hudson City Loses 73 Cents Per Share
Posted by Eddy Elfenbein on January 25th, 2012 at 9:04 am

Hudson City Bancorp ($HCBK) reported a big loss today for its fourth quarter of 73 cents per share. But this big loss was expected because the bank has elected to pay off huge amounts of debt. Excluding that item, Hudson’s operating earnings were 12 cents per share. Although this move caused some short-term pain, it greatly helps the bank’s balance sheet.

Ronald E. Hermance, Jr., Hudson’s CEO said:

Our net loss for the quarter was a result of the previously announced extinguishment of structured borrowings. During the past year, the low interest rate environment resulted in elevated levels of liquidity as borrowers prepaid or refinanced their mortgage loans and we experienced a significant increase in the calls of our investment securities. Our options for reinvesting this excess liquidity were limited since the yields available on mortgage-related assets remained at or near historical low levels and we did not believe it would be prudent to put such long-term assets on our balance sheet. As we considered our options for this excess liquidity, we decided that the best long-term solution would be to reduce the amount of borrowings on our balance sheet and therefore we repaid $4.3 billion of structured borrowings. This reduced our total assets to $45.36 billion and reduced the amount of interest rate risk inherent in our balance sheet while having no significant effect on our regulatory capital ratios. The considerable difference in the interest rates we previously earned on the loans and securities that were prepaid compared to Federal funds and other overnight deposits that we held during the quarter and that were used to extinguish the borrowings in December 2011, also contributed to the decline in our operating earnings.

This extinguishment of debt in the fourth quarter and the restructuring transaction in the first quarter of 2011 were designed to strengthen our balance sheet for the future and improve our net interest margin. To that end, we made great strides in 2011 to meet the future head-on by shrinking our balance sheet, reducing our levels of interest rate risk, increasing our Tier 1 leverage capital ratio and increasing staffing levels in critical areas. We believe it is now critical for Hudson City to focus on the longer-term opportunities that will be available when economic conditions normalize. Patience will be rewarded. Our focus will remain on positioning our balance sheet and adjusting our business model for future growth. In the short term, the announced increase in government-sponsored enterprise (“GSE”) fees in the second quarter of 2012 should make portfolio lenders more competitive in the marketplace. Longer term, an improved economy and a sensible resolution of the GSEs will provide Hudson City with significant opportunities to grow our residential business.