A Turnaround for Financials
Posted by Eddy Elfenbein on December 8th, 2011 at 10:48 am

I’ve been pretty down on financials for the past several months, but I think the sector is finally a good buy. Two months ago, I said that the Financial Sector ETF ($XLF) would be a good speculative buy if it fell below $12 per share. Eventually it did. On October 3, the XLF got as low as $10.95. I think it has a reasonable shot of hitting $16 within the next 12 months. In early 2007, the ETF came close to $37.

Morning News: December 8, 2011
Posted by Eddy Elfenbein on December 8th, 2011 at 5:21 am

European Stocks Tentatively Higher

ECB May Dig Deeper Into Crisis Toolbox

Franco-British Alarm of 1989 Comes True as Merkel Prevails

Draghi Courts Bundesbank in Bid to Avoid Trichet Fate

Asian Central Banks Hold Rates on Euro Uncertainty

Entrepreneur’s Rival in China: The State

New China Life Said to Raise $1.9 Billion in Stock Offering

India Suspends Plan to Let in Foreign Retailers

Japan “Mulls $13-19 Billion Bailout” of Nuclear Operator

China’s “Best Buys” Scramble to Tap E-commerce Boom

Crude Oil Rises From One-Week Low Before European Debt Meetings

First Solar Rises on Sale of Topaz Project to Buffett

The Wild West of Finance

Matthew Winkler: Why We Should Welcome Bernanke’s Complaints

James Altucher: Stop Listening!

Phil Pearlman: The Relative Negativity of a Flattish Open

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Stryker Raises Dividend By 18%
Posted by Eddy Elfenbein on December 7th, 2011 at 2:13 pm

The market is down so far today but it’s not too bad. The S&P 500 is currently at 1,255 though we’re up about 10 points from today’s low. The defensive sectors are doing the best today while the cyclicals are pulling up the rear.

There’s not much action today on the Buy List though I want to highlight a few items.

The best news is that Stryker ($SYK) is raising its quarterly dividend from 18 cents per share to 21.25 cents per share. That’s an 18% increase. The new 85-cent annual dividend translates to a yield of 1.75%.

My advice to investors is to not overlook moves like this. We want to look at the overall trends of a business. Bear in mind that Stryker raised its dividend by 20% last year. These things add up.

The other news is that Moody’s may downgrade Leucadia ($LUK), and Gilead ($GILD) just priced $3.7 billion in unsecured notes. That just reminds me of how much I hate the Pharmasset deal.

70 Years Ago Today
Posted by Eddy Elfenbein on December 7th, 2011 at 7:48 am

On Google Earth:

21° 21′ 53″ N 157° 57′ 00″ W
The USS Arizona

You can see the whole ship underwater. You can even see the oil slick coming from the boat. I used the “Measure” function under “Tools.” It’s 590 feet long. That’s the “Lady Mo” to the southwest, and the sunken USS Utah is about 0.8 miles to the northwest, on the other side of Ford Island.

Morning News: December 7, 2011
Posted by Eddy Elfenbein on December 7th, 2011 at 5:21 am

Merkel’s Path: Brinkmanship for Debt Crisis

New European Bank Chief Takes a Bold Approach

‘Buy French’ Becomes Crisis Battle Cry in France

China Growth Calls Ease as Export Outlook Darkens

India Suspends Foreign Retail Plan on Protests

Geithner Backs French-German Plan for Tighter EU

Geithner: Europe ‘Will Succeed’

Separating Fact From Fiction on the Fed’s Loans

Fed Lashes Out at ‘Errors’ in Reporting

The Robin Hood Tax

Prudential Sells Real Estate Brokerage, Relocation Business to Brookfield

Daimler Losing to BMW as Pure Luxury Wins

ING Takes U.S. Annuities Hit

Limited Choices for Yahoo, Each One With Its Own Risks

Olympus Report Seeks Purge of ‘Yes Men’ Who Failed to Act

Joshua Brown: Should You Follow Tom DeMark?

Jeff Miller: Weighing the (rest of the) Week Ahead: The Eurozone Summit

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The New Buy List
Posted by Eddy Elfenbein on December 6th, 2011 at 3:21 pm

I’m going to unveil the 2012 Buy List on Thursday, December 15th.

Although the Buy List won’t take effect until January 1st (the first day of trading in 2012 will be Tuesday, January 3rd), I like to pre-announce the new list so no one can claim that I’m trying to “front-run” my picks.

As usual, the Buy List will have 20 names. Once the list is chosen, the names are locked and sealed, and I can’t make any change for the entire year. Also, as per usual, I’m only going to add and delete five names to the Buy List.

My goal is to show investors that by being disciplined, investors can beat the market.

For tracking purposes, I assume the Buy List is a portfolio of $1 million that’s equally weighted among the 20 stocks based on the price at the start of the year.

Packers Sell $400,000 in Stock in 11 Minutes
Posted by Eddy Elfenbein on December 6th, 2011 at 1:23 pm

The Green Bay Packers just sold $400,000 worth of stock in 11 minutes today.

There is, however, some downside to owning the Packers. For example, the stock doesn’t pay any dividends and can never be sold. It will never appreciate.

Come to think of it, it’s only downside.

The team is riding their success on the field this year by raising money in this offering. The Packers are trying to sell 250,000 shares at $250 each for a total of $62.5 million. Let’s see how it goes. If you’re interested, you can buy the shares at PackersOwner.com.

Some explanation is needed. This is from a post I wrote on the Packers five years ago:

CNBC’s Darren Rovell has a good story on the business of the Green Bay Packers. Rovell only briefly touches on this, but the Packers are one of the more interesting businesses in America today. The team is organized as a non-profit, community-owned corporation.

There are about 4.7 million shares, but they don’t pay a dividend and they can’t be traded. Think about that. You just buy them and watch. If you want, you can sell the shares back to the team for a teeny amount of money.

The Packer fans are so loyal that they’ve bought shares, and financially rescued the team more than once over the past 80 years.

The team was organized as a community-owned company in 1923. To add some context, this was at the high tide as progressive movement, which found its epicenter in Wisconsin (i.e., the Wisconsin Idea).

In 1924, Senator Robert “Fighting Bob” La Follette, Sr. of Wisconsin ran for president as a third party candidate. He won 17% of the vote and carried his home state.

The senior La Follette died in 1925, but was succeeded by his son, Robert La Follette, Jr., who held the seat until 1946 when he was upset by Joseph McCarthy (with the help of the Communist Party).

Milwaukee was the country’s only large city to have a socialist mayor, or at least, an admitted socialist mayor. In fact, the city had three socialist mayors over 38 years between 1910 and 1960 (would they have nationalized Arnold’s?). The last one died a few weeks ago at the age of 93.

The Fed Strikes Back
Posted by Eddy Elfenbein on December 6th, 2011 at 1:04 pm

Last week, Bloomberg had an article claiming that the Federal Reserve gave $13 billion to banks without telling Congress. Today, Bernanke shot back and sent this letter to the Senate Banking Committee. The language in the letter is surprisingly strong.

Breaking Down Oracle
Posted by Eddy Elfenbein on December 6th, 2011 at 11:03 am

Sometime next week Oracle ($ORCL) will probably release its fiscal Q2 earnings report. Wall Street expects the company to report earnings of 57 cents per share. I think it will be closer to 60 cents per share.

Even if I’m wrong, Oracle is still a fairly inexpensive stock. Below is a chart of Oracle’s stock along with its earnings-per-share. The stock follows the left scale and the earnings follow the right. The two are scaled at a ratio of 15-to-1 which means that the P/E Ratio is exactly 15 whenever the lines cross. The red line is Wall Street’s estimate.

I use 15 not as a projection of what I think the earnings multiple ought to be but simply because that’s been a close enough valuation for the last several quarters. More recently, however, Oracle has fallen to a cheaper valuation.

Using some rough interpolation, Wall Street thinks Oracle can earn $2.52 per share for the entire 2012 calendar year. (Note this is just an estimate, Oracle’s quarters don’t follow the March/June/September/December cycle.) At 15 times that, Oracle’s stock could reach $37.95 by the end of next year which is a 19% rise from here.

This also doesn’t take into account the fact that Oracle has a decent track record of exceeding analysts expectations. You can even see how the red line’s trajectory seems a bit subdued from recent history. Understandably, we want our projections to be somewhat conservative.

A few years ago, Oracle started paying a modest dividend. I wouldn’t call this a major factor in the share price but it’s very possible that the company will bump up the dividend in the next few months. If Oracle raises the quarterly dividend from six cents per share to eight cents per share, the stock will then have a yield of 1%. Not much, but it’s better than nothing.

If Oracle’s earnings trend continues, then I think it’s very possible the share price will hit $40 sometime next year.

Morning News: December 6, 2011
Posted by Eddy Elfenbein on December 6th, 2011 at 5:32 am

Merkel, Sarkozy Unite as S&P Issues Warning

Wal-Mart Debate Rages in India

BNP, Credit Agricole Knocked Off Top Equity Spot

Telecom Italia Sees Tech Lag Hampering Cloud Growth

In Ireland, Austerity Is Praised but Painful

Power in Numbers: China Aims for High-Tech Primacy

S.&P. Warns Euro Zone of Ratings Downgrades

Oil Snaps Two-Day Gain as S&P Threatens European Credit Rating Downgrades

Gold Ends Lower as European Progress Dulls Demand

Geithner to Add U.S. Weight to Euro Zone Talks

It’s Tone, Not Taxes, a Tycoon Tells the President

Afghanistan Taps Aussie Miners

Birinyi Says Buy Iconic Brands to Beat Market

Olympus Remains Delisting Risk After Report, Exchange Says

Jeff Carter: CFTC Might Perpetuate Fraud

Roger Nusbaum: The Slog Continues

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