• The New Buy List
    Posted by 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 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 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 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 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

    Be sure to follow me on Twitter.

  • Highest Close Since Mid-November
    Posted by on December 5th, 2011 at 6:24 pm

    Although we gave back some of our gains in the afternoon, this was still a pretty good day for the market. The S&P 500 gained 1.03% to reach its highest close since November 15th. Our Buy List added 1.33% to extend its lead over the overall market. The S&P 500 is still below its 200-day moving average.

    Nicholas Financial ($NICK) briefly touched $12 per share. We also saw decent gains from Stryker ($SYK) and Medtronic ($MDT). Some of the medical supply companies were hit hard late last week. On the Buy List, every stock but Johnson & Johnson ($JNJ) and Fiserv ($FISV) was up today.

    Leucadia ($LUK) just announced its annual dividend of 25 cents per share. I’m not sure why they even bother. The dividend amounts to just over 1%.

  • “Essentially Identical”
    Posted by on December 5th, 2011 at 4:14 pm

    From Scott Sumner:

    Consider the following:

    Banks pour huge amounts of money into one particular asset class. They are encouraged to do this by public policymakers, although there is some dispute about whether that was the main reason for their decisions. These assets have a long tradition of doing well, although a close look at the evidence would have raised red flags. The asset market in question suddenly takes a big dive as default risk increases sharply. This drags down many large banks, forcing policymakers to provide assistance.

    What have I just described? The sub-prime fiasco or the PIGS sovereign debt fiasco? I’d say both. I’d say these two crises are essentially identical. (I should clarify that by “essentially identical” I mean in essence, not in every detail.)

  • The S&P 500 Is Up to 1,265
    Posted by on December 5th, 2011 at 10:40 am

    The market is rallying again today. The S&P 500 has been as high as 1,265 this morning. That’s a gain of 9.1% since the Friday after Thanksgiving which was only six trading days ago.

    Keep a close eye on 1,264.56. That’s the average of the last 199 days so if we close above that, we’ll be above the 200-DMA.

    The market now has a real shot of making a four-month high soon. The current high close of the last four months was 1,285.09 from October.

    The financials and Energy sectors are leading the charge. On our Buy List, the standouts are Ford ($F), JPMorgan Chase ($JPM) and Medtronic ($MDT). AFLAC ($AFL) is about to poke its head above $45 per share. Ten weeks ago, AFL was trading near $31.

    The next earnings report for the Buy List will be from Oracle ($ORCL) and that should come some time next week, though I don’t know which day. Wall Street expects earnings of 57 cents per share compared with 51 cents per share one year ago. I think that’s a little low. My numbers say that Oracle should earn 60 cents per share. I think this company is doing very well right now.

  • Morning News: December 5, 2011
    Posted by on December 5th, 2011 at 6:01 am

    Merkel Heads to Paris as EU Leaders Seek Debt Strategy

    Monti’s Austerity Debut Risks Italian Wrath

    U.K. Service-Sector Job Losses Gather Pace

    Indian Retailers Slump as Singh May Suspend FDI Decision

    China Signals Reluctance to Rescue E.U.

    China’s Stocks Decline, Extending Fourth Weekly Loss, on Property Concerns

    Faulty Forecasts Roil Corn Market

    Zynga Lets Bing Gordon Turn $35 Million Into $650 Million

    British Airways Bid for BMI to Plug Asia Gaps

    SAP Sheds M&A Shyness as Oracle Rivalry Moves to the Cloud

    SAP to Buy SuccessFactors for $3.4 Billion

    Commercial Metals Rejects Icahn’s $1.7 Billion Bid

    Commerzbank to Boost Capital

    Troubled Bank Dexia Gets New Financing Lifeline

    Rich-Poor Divide Is Widening, OECD Says

    Howard Lindzon: Bring on 2012…The Abundance Showdown!

    Stone Street: (O’)Taylor Rules!

    Be sure to follow me on Twitter.

  • November Unemployment Drops to 8.6%
    Posted by on December 2nd, 2011 at 8:48 am

    Non-farm payrolls rose by 120,000 in November, and 140,000 private sector jobs were created. Since the labor participation rate dropped, the unemployment number dropped down to 8.6% which is a big move considering the economy didn’t create that many jobs. I looked at the details and the jobless number actually comes out to 8.645%. I’m not exaggerating when I say that if November had been 12 hours shorter, the figure could have rounded up to 8.7%.

    The October NFP was revised to a gain of 100,000 while the September number was revised to a gain of 218,000.

    Over the last four years, the civilian non-institutional population has grown by 7.5 million. The labor force has grown by 38,000. Since the recession ended 29 months ago (officially), NFP has increased by 0.93%

    Stock futures look pretty strong this morning.