Archive for February, 2006

  • Oshkosh Truck
    , February 2nd, 2006 at 11:28 am

    Oshkosh Truck (OSK) is one of those stocks that no one follows, few have even heard of, and it seems to do nothing but rise. While today is a sluggish day on Wall Street, Oshkosh is rallying on another great earnings report.

    Net income at Oshkosh rose to $53.1 million, or 72 cents a share, compared with $40.6 million, or 56 cents a share in the same quarter a year ago.
    Oshkosh had forecast earnings of 50 to 55 cents a share. Analysts polled by Thomson First Call expected, on average, 54 cents a share.
    Sales in the three months ended Dec. 31 rose about 22% to $790.3 million from $644.9 million.
    The stock gained 5% early Thursday to $51.15.
    Defense segment sales rose 68.5% to $363.1 million for the quarter, compared to the prior year, as truck, parts and service sales grew primarily as a result of the Iraq war. Oshkosh said an increase in sales of new heavy-payload and remanufactured trucks for the U.S. Department of Defense and of wheeled tankers for the United Kingdom Ministry of Defence “significantly offset” lower Medium Tactical Vehicle Replacement truck sales.
    The company said its 2006 earnings would be $2.55 to $2.65 a share. Wall Street’s consensus is $2.70 a share. Its board also declared a quarterly dividend of 10 cents a share, up about 48%, payable Feb. 23 to shareholders of record as of Feb. 16.

    Here’s a chart from the past several years. Notice how the P/E ratio has never gotten very high, but the earnings keep pushing along.
    OSK.bmp

  • Relative Valuation
    , February 1st, 2006 at 9:39 pm

    The Stalwart makes a good point: Google didn’t miss—Wall Street missed. Their earnings were just fine, but the analysts weren’t in the ballpark.
    Now we have a perfect example of the fallacy of “relative valuations.” Google’s stock still isn’t cheap. It is, however, cheaper. That ain’t the same, and I’m sure many investors will jump in thinking they see value.
    Not only will investors compare Google to where it was, they’ll also compare it other overpriced stocks like Yahoo (YHOO). Relative valuation was one of the methods analysts used during the Internet Bubble. They compared greatly overpriced stocks to each other, and learned nothing in the process.
    In today’s trading, Google fell $30.88, or 7.1%, to $401.78. This level was an all-time high just two-and-a-half months ago. I think there will probably be a counter-reaction to today’s sell-off and Google may rise again. But still, Google is easily $100 overpriced.
    Today was a flat day for the Buy List. We gained a whopping 0.08%, while the S&P’s gained 0.19%. SEI Investments (SEIC) led the way with a 2.5% increase.
    Here’s some news: Two of our Buy List stocks are suing each other. I guess that balances out, but I’d prefer not to see it that way. Medtronic (MDT) is suing Biomet (BMET) for patent infringement.

    Medtronic claims that a cervical plate marketed by Warsaw, Ind.-based Biomet infringes three patents it acquired from Gary Michelson last year. The other patents involve surgical implantation methods commonly used in spinal surgeries.

  • SEI Investments’ Earnings
    , February 1st, 2006 at 1:27 pm

    The earnings season continues to be very good for our Buy List stocks, if not for Google (GOOG). This morning, SEI Investments (SEIC) reported earnings of 50 cents a share, three cents better than estimates. Sales came in at $203.5 million which also topped forecasts.
    For 2006, Wall Street expects earnings of $2.05 a share, although I expect that that will be raised over the next few days. Consider that in 2005, SEIC’s earnings-per-share grew 14.4% (from $1.60 to $1.83). Assuming that same growth rate for 2006, the company would earn $2.09 a share. The stock is already up 13% this year.
    January was a good month for our Buy List. We were up 2.49%, just below the S&P 500’s 2.54% (not including dividends).
    Our next earnings report will be Brown & Brown (BRO) on February 13 and Expeditors (EXPD) on February 14.

  • From Wall Street to the Super Bowl
    , February 1st, 2006 at 7:47 am

    The WSJ has a neat story about Grant Bowman. At the start of the football season, he was cut by the Pittsburgh Steelers. Bowman was able to get a job on Wall Street with Lehman Brothers.

    Then, a week ago Monday, his cellphone buzzed with messages from his mother, his agent and the Pittsburgh Steelers. They all wanted to tell him the same thing: Pack your bags for the Super Bowl.
    Mr. Bowman, 25 years old, was tapped at the last minute for a slot on the Steelers’ practice squad. At scrimmages this week leading up to the game, he is playing the role of opposing Seattle Seahawks players to help Pittsburgh’s first-stringers get ready. Though he isn’t likely to play in the big game itself, he will earn a Super Bowl ring for himself if the Steelers win Sunday.

    FYI: Cowher hasn’t called me yet. I’ll keep you posted.

  • Expeditors 8-K Report
    , February 1st, 2006 at 7:16 am

    Expeditors International (EXPD) just released its latest 8-K report. The company uses these reports to answer questions from analysts and investors. They’ve also become popular on Wall Street due to their sarcastic and irreverent tone.
    I’m afraid that this most recent 8-K is somewhat subdued. Perhaps it’s a new image. Anyway, Expeditor’s management provides a good deal of information. Here’s a sample:

    Can you provide an update on year-over-year airfreight and ocean freight volume growth as well as gross yield trends during December 2005 and into the seasonally slow beginning of the new year?
    On a year-over-year basis, ocean freight container counts were up nearly 15% in December 2005 while airfreight tonnages were up 21% over the amount recorded in December 2004.
    The very beginning of a year is not axiomatically slow and to automatically assume that this will be true, and to make statements to that effect in asking about January 2006 perpetuates a great solecism.

    A great solecism? You can read the entire report here.

  • Is the Nasdaq Overpriced?
    , February 1st, 2006 at 6:28 am

    I often hear people say that the tech bubble never went away, it was simply displaced to the housing market. Please! The housing market is nowhere near as crazy as the tech bubble was. In fact, it’s almost hard to explain how unusual the Nasdaq was in the late-90’s.
    Here’s a quick rule-of-thumb I use. Over the last 20 years, the level of the Nasdaq has usually been about one-fifth that of the Dow (in other words, five Dow points for each Nasdaq point). Sometimes it goes higher, sometimes lower, but it usually hasn’t strayed far from that ratio.
    To be more specific, the Nasdaq-to-Dow ratio has averaged 18.8% since 1986. The standard deviation has been 1.8%. For 82% of the time, the ratio has been bounded by 17% and 22%. Looking at the graph below, you can see that it’s been a fairly consistent relationship:
    image05.bmp
    You may have noticed that something seems to be missing from the graph. No, you’re eyes aren’t playing tricks on you. I excluded a 27-month period from December 1998 through February 2001. OK, get ready for this. Here’s what the full graph looks like.
    Now do you how out-of-whack the Nasdaq got? It didn’t just get to the edge of the range. It demolished the range. The Naz peaked at 50.8% of the Dow. That’s 18 freakin’ standard deviations above the mean. That occurrence is so extreme, one has to ponder the cosmos to put it in any kind of context. We’re talking one over a number with 70 digits. That’s pretty damn small.
    Many people think that the tech bubble happened throughout the 1990’s. Not really. The episode was very brief. What’s interesting about the chart above is that if you gaze at it for a bit and see the 27-month hole, your mind’s eye begins to bridge the gap. But of course, that wasn’t what happened. If you had taken a 27-month nap, you would have assumed not much happened.
    So where does the Nasdaq stand now? A few days ago, the Nasdaq finally burst through 21% of the Dow, for the first time in five years. If I were a market-timer, this would lead me to think that the market is getting pricey. Since I’m not, it leads me to think that the Nasdaq is getting pricey.
    In the larger view, the Nasdaq is high, but it’s still well within the normal range.