Archive for April, 2006

• Fiserv Shares Up Despite Analysts’ Worries
  Eddy Elfenbein, April 26th, 2006 at 11:29 am

  Fiserv (FISV) is doing well today, but the AP notes that some analysts are worried:

  Analysts said the company, which caters to the financial services and health benefits industry, benefited from a surge in flood claims, and a larger-than-expected stock buyback program.
  Although Jefferies & Co. analyst Craig Peckham said the company had a “great” quarter, he remains concerned about underlying gross margin trends in the company’s core financial services business.
  “With Fiserv’s portfolio consisting largely of relatively mature businesses, we remain on the sidelines for now, believing that mid-single digit internal growth will persist for the foreseeable future and near-term margin declines will restrict multiple expansion from current levels,” Peckham wrote in a note.
  Similarly, Merrill Lynch analyst Gregory Smith, who holds a “Neutral” rating on the company, said Fiserv’s pretty upside could be deceiving.
  “Fiserv reported first-quarter upside to both revenue and earnings driven by strong flood processing volumes following last year’s hurricanes. However, this does not translate into upside to the company’s full-year revenue and earnings per share guidance, which had assumed this level of flood revenue,” Smith wrote in a note.
  “While first-quarter upside versus Street expectations may push shares higher today, excitement should be tempered by the fact that guidance for the full year remains intact and that within the context of management guidance, higher flood revenues actually indicate a lower level for core operations,” he added.
  For the full year, the company said it expected to earn $2.46 to $2.53 per share, while analysts expect the company to earn $2.49 per share.

  AFLAC (AFL) is aslo higher today, and SEI Investments (SEIC) is at a new high. Fair Isaac (FIC) reports after the close.

• Other Enron Scams
  Eddy Elfenbein, April 25th, 2006 at 7:31 pm

  From The Onion:
  

• Today Never Happened
  Eddy Elfenbein, April 25th, 2006 at 5:40 pm

  Yuck. Not a good day for our Buy List. Let’s just pretend today didn’t happen. What I love about Wall Street is that a new opening bell is never too far away.
  On days like this, I try not to get discouraged. Everything, it seems, is working against us. Still, I’m determined to stick with our strategy of buying great companies at great prices.
  First, let’s look at the bad news. Brown & Brown (BRO) got creamed in today’s session. The stock lost 7.7%. Frankly, I thought the stock was getting a bit ahead if itself, but still, today’s selling surprised me. The company reported earnings that were inline with estimates, but the market is concerned that too much of BRO’s growth came from acquisitions. (That’s what Brown & Brown always does!) I could see the stock pulling back some more before we’re done.
  But there is good news! After the bell, we had some decent earnings reports.
  First up is Fiserv (FISV). The company reported earnings of 64 cents a share, five cents ahead of estimates. Not bad at all! Plus, this stock continues to look cheap. Over the past few years, Fiserv’s P/E ratio has collapsed even though its earnings continue to grow.
  AFLAC (AFL) reported earnings of 72 cents a share, two pennies more than estimates. Few stocks are more reliable than AFLAC. The company also reiterated its growth forecast for this year and next. I always like to see my stocks do that.
  And finally, Varian Medical Systems (VAR) reported earnings of 46 cents a share, which was inline with forecasts. Varian doesn’t tend to surprise too much so I don’t expect a lot of fallout from the stock.
  The bond market got hammered today. The five-year note (^FVX) came very close to 5% today.

• UnitedHealth Under Fire
  Eddy Elfenbein, April 25th, 2006 at 9:46 am

  Today is a big day for earnings. AFLAC (AFL), Varian Medical (VAR) and Fiserv (FISV) all report today.
  The Wall Street Journal reported that the Attorney General of Minnesota is turning up the heat on the company. The stock has been under attack ever since the news of CEO William McGuire’s $1.6 billion in options became know. Plus, it appears that many of these options were “back-priced” to be more favorable for UNH execs.
  Here’s what the WSJ reported:

  Minnesota Attorney General Mike Hatch, stepping up his campaign against UnitedHealth Group Inc., urged around 135 public and private pension funds to withhold votes for four directors seeking re-election to the health insurer’s board next month.
  In a letter sent yesterday to the big investors, Mr. Hatch accused the board of failing to provide proper oversight in the awarding of stock options “in the billions to top executives” while having “awarded themselves millions of dollars in stock option opportunities.” Mr. Hatch, who is running for governor, acknowledges his letter-writing campaign is primarily “symbolic.”
  The letter was sent to a group that includes the American Federation of Teachers retirement plan and the California Public Employees’ Retirement System, or Calpers.
  Mr. Hatch’s letter comes amid scrutiny of the circumstances under which UnitedHealth Chief Executive William McGuire obtained some of the $1.6 billion in unrealized gains he holds in UnitedHealth stock options. He, and in some years at least 10 other top executives, frequently received options just before big run-ups in the company’s share price, which had the effect of making the options more profitable than they otherwise would have been.
  Last week, Mr. Hatch intervened in a federal civil suit that names as defendants Dr. McGuire, Chief Operating Officer Stephen J. Hemsley and several board members and alleges that shareholders were harmed by backdated option grants. UnitedHealth’s board also has launched a probe of its past option-granting practices, and the company has said it received a call from the Securities and Exchange Commission.

  The stock has slid from over $64 in December to $50.16 for yesterday’s close.

• Brown & Brown’s Earnings
  Eddy Elfenbein, April 24th, 2006 at 9:12 pm

  BRO earned 36 cents a share for the first quarter, inline with forecasts.

  Net income per share for the quarter ended March 31, 2006 was $0.36, an increase of 16.1% over the $0.31 in net income per share reported for the quarter ended March 31, 2005. Net income rose to $50,026,000 for the first quarter of 2006, versus net income of $43,018,000 for the quarter ended March 31, 2005, an increase of 16.3%.
  Total revenue for the quarter ended March 31, 2006 was up 13.9%, to $230,582,000, compared with $202,374,000 recorded in the corresponding quarter in 2005.
  J. Hyatt Brown, Chairman and Chief Executive Officer, noted, “The wind storm capacity crunch, in coastal areas from Texas to Virginia, is the most severe that I have seen in my 47-year insurance career. This tumultuous market place, combined with softening property and casualty pricing, outside of wind-prone areas, presents challenges for our customers and our professionals. We are responding positively and aggressively in finding solutions to those needs. That being said, all-in-all we are pleased with the quarter’s results.”

• Could a computer be the next Buffett?
  Eddy Elfenbein, April 24th, 2006 at 4:00 pm

  Money Magazine asks the question:

  A recent study by Goldman Sachs Asset Management concluded that while over 15 years a human manager can beat a quant fund in absolute terms, once you adjust for the extra risk the human manager had to take to get that result, the quant fund comes out ahead.
  “Quant funds are a well-established strategy for institutional investors,” says Coral Gables, Fla. financial planner Harold Evensky. “They are becoming a story for individual investors, and for most people they probably make good sense.”

  I’m a little skeptical. Computers are only as smart as the people doing the programming. My guess is that computers do well because they don’t have emotions. Vulcans, I’m sure, would make kick-ass money managers. Still, I’ll go with us humans, imperfections and all.

• The Penny Bull Market
  Eddy Elfenbein, April 24th, 2006 at 11:55 am

  Thanks to the bull market in copper, the penny is about to worth more than one cent. Wow! Our money will be worth something. This is actually a serious problem for the government.
  Seigniorage—printing money for profit—is a nice little business our government has all for itself. In fact, it’s a felony if you or I try it. This is one the few purely socialized industries in the United States. You know those new “state series” of quarters? They’ve been a huge moneymaker for the Feds.
  But it was not always so. From the 1830s to the 1860s, the U.S. practiced “free banking.” Most of the currency in circulation came from privately issued bank notes. The amount of Federal currency wasn’t very significant.
  The old idea was that free banking was a disaster because the economy was dominated by lousy currency. But new research has shown that free banking was more effective than previously believed.

• Get Ready for the Largest IPO in History
  Eddy Elfenbein, April 22nd, 2006 at 10:48 pm

  Coming this summer, the largest IPO in history, and it’s not a tech stock. It’s not even American.
  Rosneft, the Russian oil company, is set to go public in July. The company bought Yukos after the Kremlin forced Yukos into bankruptcy. Rosneft now has more crude oil in the ground than ExxonMobil.

• Dell Is Below $27
  Eddy Elfenbein, April 21st, 2006 at 1:36 pm

  The bears have it out for Dell (DELL). The stock is down to $26.91 a share. I think this is a good time to remind everyone that Dell beat earnings last quarter. You don’t often find stocks this good going for 16 times earnings.

• Yankees 1st Team to Top $1 Billion in Value
  Eddy Elfenbein, April 21st, 2006 at 9:17 am

  According to Forbes, the New York Yankees are the first baseball team to be worth over $1 billion. Forbes estimated the Yankees had $50 million operating loss.

  The Boston Red Sox were pegged with the second-highest value at $617 million, followed by the New York Mets ($604 million), Los Angeles Dodgers ($482 million), Chicago Cubs ($448 million) and Washington Nationals ($440 million).
  Tampa Bay was last among the 30 teams at $209 million.

  The Yankees are 7-7, tied for last with Tampa Bay.