• Morning News: December 23, 2011
    Posted by on December 23rd, 2011 at 7:15 am

    Italy to Kick the Cash Habit as Monti Cracks Down

    In Europe, Juggling Image and Capital

    IMF Urges Members to Boost Funding Under 2010 Plan

    China’s CIC to Get $50 Billion Boost

    Bank Of Russia Unexpectedly Cuts Refinancing Rate

    Egypt Misses Bills Sale Target as Yields Rise After Moody’s Cut

    The GOP’s Payroll Tax Fiasco

    Fed’s Once-Secret Data Released to Public

    Jobless Claims Drop, but 3rd-Quarter Growth Is Revised Down

    U.S. Consumer Spending Probably Increased on Autos

    Retailers Are Slashing Prices Ahead of Holiday

    Petronas in Talks With Oil Majors for Petchem Tie-up

    Netflix CEO Hastings’ Yearly Stock Option Allowance Cut 50%

    Akamai To Buy Network-Software Maker Cotendo For $268 Million

    Jeff Carter: Investors Do Create Jobs-Millions of Them

    Phil Pearlman: Quick Take on Yahoo Here: Rumors and Tumors

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  • The Dow Adjusted for Inflation
    Posted by on December 22nd, 2011 at 3:51 pm

    Here’s the Dow divided by the Consumer Price Index over the last century. Of course, this doesn’t include dividends. Still, it’s interesting to see that in real terms, the market’s capital gain hasn’t been terribly much.

    While the Dow is still well below its inflation-adjusted high from 12 years ago, that’s not unprecedented. There have been other times when the Dow has wallowed for decades at a real loss.

    Of course we don’t know this yet, but it will be interesting to see if that March 2009 low turns out to be a generational low.

  • Peter Schiff’s 2011
    Posted by on December 22nd, 2011 at 12:19 pm

    Literally, every prediction was wrong.

    I don’t say this to be mean. After all, I just missed big time on Oracle’s earnings. Instead, I encourage investors to be wary of broad market forecasts.

    The sad fact is that extreme bearish forecasts are rarely held to account. You can make a big splash by calling for the end of the world.

    And hey, if it doesn’t happen, you can always push back the date.

  • Q3 GDP Revised Down to 1.8%
    Posted by on December 22nd, 2011 at 11:03 am

    The Commerce Department lowered its third-quarter estimate of real GDP growth from 2% to 1.8%.

    The numbers are sobering. Over the last 15 quarters, the U.S. economy has grown by a total of 0.04%. The economy has grown less over the last 11 years than in the four years before that.

    ZeroHedge adds: “And yet it added only $395 billion in debt over those four years, and $9.5 trillion over the 11.”

  • Morning News: December 22, 2011
    Posted by on December 22nd, 2011 at 7:06 am

    Greece’s Creditors Resist Push From IMF for More Losses

    European Bank in Strong Move to Loosen Credit

    S&P Downgrades Hungary to Junk

    Trieste Threatens Hamburg as Port Exploits Rail

    Carbon Emission Fees for Flights Upheld

    Oil Rises for Fourth Day as U.S. Supplies Drop Most in a Decade

    Signs Point to Economy’s Rise, but Experts See a False Dawn

    U.S. Faces Fitch AAA Downgrade By End of 2013 Unless Deficit Cuts Made

    After a Year of Disasters, Toyota Sees Record Sales

    Yahoo to Consider Sale of Asian Assets

    Countrywide Will Settle a Bias Suit

    BA Bags Lufthansa’s BMI, Heathrow Slots, With $271 Million Deal

    Finding Success in a Lifelong Passion for Fighting Monopolies

    Roger Nusbaum: Small Trade

    Edward Harrison: On The ECB’s Long-Term Refinancing Operation and 2012 Macro Ideas For Investors

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  • Target Price for Ford = $18
    Posted by on December 22nd, 2011 at 12:02 am

    Barron’s carries a buy rating on Ford ($F) by Sterne, Agee & Leach.

    In 2010, Ford was the fifth-largest vehicle manufacturer in the world, producing 5.0 million units globally and generating $119 billion in revenue. Through its 100% owned subsidiary, Ford Motor Credit, the company generated an additional $8 billion in revenue from vehicle financing.

    In 2006, the company initiated a corporate restructuring aimed at operating profitably at lower demand levels. The plan included capacity and headcount reductions, the elimination of noncore divisions, and the acceleration of new products. Ford issued $20 billion of secured debt to fund the actions and was able to work through the industry recession without turning to the courts for protection.

    As the industry started to recover in 2009 and into 2010, financial performance improved. Pretax income totaled $8.3 billion in 2010 compared with a loss of $6.8 billion in 2008, and in 2011, the company repaid the remaining portion of the financing needed for the restructuring.

    We believe Ford’s cost- and revenue-restructuring actions since 2007 have positioned the company to be a prime beneficiary from improving industry demand on a global basis, producing record financial results over the next few years.

    In the near term, concerns in Europe, in our view, continue to weigh on the stock but North American Auto has been operating at near-record levels despite below-trend demand totals. In addition, Ford’s balance-sheet restructuring has been completed, the board reinstated the dividend for common shareholders in December, and expectations for additional cash generation should provide flexibility in the coming years.

    We expect earnings per share of $1.60 in 2011, $1.80 in 2012, and $2.20 in 2013. The low end of our targeted multiple ranges applied to 2013 estimated EPS supports our $18 target price.

    In our view, the market will more fully value Ford’s financial performance with signs of stability or a pending solution in Europe.

  • Bed Bath & Beyond Earns 95 Cents Per Share
    Posted by on December 21st, 2011 at 5:05 pm

    After the bell, Bed Bath & Beyond ($BBBY) reported outstanding fiscal Q3 earnings of 95 cents per share. This is a 28% increase over last year’s Q3 result of 74 cents per share. Wall Street had been expecting 89 cents per share. Three months ago, the company told us to expect earnings between 82 and 87 cents per share.

    The only weakness is that net sales rose 6.8% to $2.344 billion which was just shy of Wall Street’s forecast of $3.5 billion. Comparable store sales rose by 4.1%.

    The best news is that BBBY said that it now sees earnings for 2012 coming in between $3.86 and $3.92 per share. The earlier range was $3.74 to $3.84 per share. This the third time BBBY has raised its full-year forecast.

    For the first three quarters, the company has netted $2.60 per share so the full-year forecast implies a Q4 result of $1.26 to $1.32 per share. Wall Street had been expecting $1.30 per share.

    Here’s a look at BBBY’s quarterly numbers for the past few years:

    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

  • Oracle’s Q3 Guidance
    Posted by on December 21st, 2011 at 1:52 pm

    From Seeking Alpha:

    We remain committed to returning value to our shareholders through technical innovation, strategic acquisitions, stock repurchases and prudent use of debt and dividends. This quarter, we repurchased 33 million — 33.1 million shares for a total of $1 billion. We have received an additional $5 billion in authorization for our stock buyback program, and the board again declared a dividend of $0.06 per share.

    Now to guidance. As you remember, we had an absolutely stunning third quarter last year, with new license up 29% and non-GAAP EPS up 40% and GAAP EPS up 75%. Regardless, the fundamentals of the business remained strong, with pipelines growing significantly.

    Now I do read the daily financial news, so I’m going to take that into account for this quarter’s guidance. With currency bouncing around, I’m going to give you constant currency guidance, and as a convenience for you, I’ll give what our U.S. dollar rates from the past few days. That currently amounts to about a negative 2% currency effect on license growth rates and on total revenue growth rates, but rates remained very volatile.

    Our guidance for Q3 is as follows: new software license revenue growth is expected to range from 2% to plus 12%, so that’s from positive 2% to positive 12% in constant currency and 0% to 10% in U.S. dollars. Hardware product revenue growth rate — growth is expected to range from negative 4% to negative 14% in constant currency or negative 5% to negative 15% in U.S. dollars, and that does not include the hardware support revenue.

    Total revenue growth on a non-GAAP basis is expected to range from 3% to 7% in constant currency and 1% to 5% in U.S. dollars. On a GAAP basis, we expect total revenue growth from 4% to 7% in constant currency and 2% to 5% in U.S. dollars.

    Non-GAAP EPS is expected to be $0.56 to $0.59 in constant currency and $0.55 to $0.58 in U.S. dollars, up from $0.54 last year. GAAP EPS is expected to be $0.44 to $0.47 in constant currency and $0.43 to $0.46 in U.S. dollars, up from $0.41 last year. This guidance assumes a GAAP tax rate of 26% and a non-GAAP tax rate of 26.5%. Of course, it may end up being different.

  • Breaking Down Oracle’s Earnings
    Posted by on December 21st, 2011 at 1:40 pm

  • Why I Love the Stock Market
    Posted by on December 21st, 2011 at 1:39 pm

    Do yourself a favor and go to Google Finance and check out the long-term stock chart for RLI Corp. ($RLI). I’d embed the chart if I knew how.

    Ever heard of RLI? Don’t worry, you’re not alone. It’s a property and casualty insurer based in Illinois. RLI has 670 employees. Now check out how often the stock is discussed at the Yahoo Finance message boards or at StockTwits. It might as well not exist.

    RLI has been an outstanding stock for three decades yet it’s still nearly unknown. I may have to apologize to some readers when I say that insurance has been known to be one of the less-sexy businesses. Yet investors should know that the best insurance companies have often been some of the best investments. RLI is certainly in that category.

    This is why I love the stock market. You can find overlooked gems that have richly rewarded investors and yet no one knows about them. So much of the financial media focuses on the superstar stocks like Google ($GOOG) and Apple ($AAPL). I almost feel guilty telling people that Google has performed about as well as the market over the last four years.

    RLI has done so well recently that the company announced a special $5 per share dividend in addition to the regular 30-cent quarterly dividend. When they announced this, the stock was at $70 per share, so that was a nice gift for shareholders.