Archive for September, 2006

• Market At 5-1/2 Year High
  Eddy Elfenbein, September 20th, 2006 at 11:09 am

  Thanks to Oracle (ORCL) and $61 oil, the S&P 500 has climbed above 1327 for the first time since February 2001. The Dow broke 11600. But will it hold?
  The 10-year yield is now down to 4.72%, it’s lowest point since March. The yield on the 30-year bond got down to 4.835%. Our Buy List is now up over 5% for the year. Expeditors (EXPD) is doing well today. Fiserv (FISV) and Sysco (SYY) also hit new highs earlier today.

• Dept. of the Obvious
  Eddy Elfenbein, September 20th, 2006 at 10:42 am

  Two researchers looked to see if stock spamming works.
  *Drumroll*
  It does!

  Based on a large sample of touted stocks listed on the Pink Sheets quotation system, we find that stocks experience a significantly positive return on days when they are heavily touted via spam, and on the day preceding such touting. Volume of trading also responds positively and significantly to heavy touting. Indeed, on a day when no tout has been detected in our database, the likelihood of a touted stock being the most actively traded stock that day is only 6%. On the other hand, on days when there is touting activity, the probability of a touted stock being the single most actively traded stock is 81%. Returns in the days following touting are significantly negative.

• Biomet’s Earnings
  Eddy Elfenbein, September 20th, 2006 at 8:52 am

  Biomet (BMET) reported earnings of 42 cents a share this morning. That’s a penny below analysts’ consensus so the stock will probably be under pressure today. Sales were up just 5% to $508 million. The company said that sales at its trauma and spine unit (ick) were $12 million below management’s expectations. Over 330 jobs have been cut from that department. Biomet also said that its “comfortable” with second-quarter estimates of 44 cents to 46 cents a share, and sales of $519 million to $540 million.

• Oil Plunges Below $62 A Barrel
  Eddy Elfenbein, September 19th, 2006 at 2:56 pm

  The fall in oil continues. In fact, it’s accelerating. Here’s a chart of October light sweet crude:
  
  From AP:

  “We’ll see sub-$2.25 a gallon retail (prices) by October,” said Tom Kloza, director of the Oil Price Information Service, adding that prices below $2 can already be found in Kansas, Missouri, South Carolina and other states.

  At one point, oil got down to $61.58 a barrel from $63.80 yesterday. Ticker Sense notes the correlation between the price of oil and President Bush’s approval numbers.

• The Flat Yield Curve
  Eddy Elfenbein, September 19th, 2006 at 11:31 am

  
  Actually, the yield isn’t even flat anymore, it’s a bowl. The yield on the five-year note is lower than both the 90-day bill and the 10-year bond.
  The Federal Reserve came close to flattening out the yield curve earlier this year at about 4.5%. Then the long-end run away from the central bank. But over the summer, long-term yields started to head back down and they crossed the short-term yields on the way.
  I still wouldn’t mind seeing another 25 or 50 basis points from the Fed. I think we’ve forgotten how high inflation-adjusted short-term rates can go. I think the basic rule should be to keep interest rates about 3% above the core rate of inflation during an expansion. And during a recession, real rates should be close to zero as possible without going negative.

• Our Remarkable Growth
  Eddy Elfenbein, September 19th, 2006 at 10:45 am

  
  Investors these days hear a lot about “the rise of China” or the “rise of India.” In today’s Wall Street Journal, Michael Milken points out:

  China and India combined to produce nearly half the world’s economic output in 1820 compared to just 1.8% for the U.S. Our remarkable growth since 1820 has benefited from democratic institutions, a belief in capitalism, private property rights, an entrepreneurial culture, abundant resources, openness to foreign investment, the best universities, immigration and relatively transparent markets. (Hat tip: Prof. Mankiw).

  On a related note, Investor’s Business Daily comments on Sweden’s economy:

  And it’s wrong to praise Sweden’s current economic performance. Sweden ranks 14th worldwide in per capita income now, but in 1970 it ranked fourth. That’s a big drop.
  The average Swede earns $29,800 a year. Not bad, you say? That’s less than the average person in Mississippi. Some model.

• FactSet Beat the Street
  Eddy Elfenbein, September 19th, 2006 at 9:55 am

  FactSet did it again! This company just keeps delivering the earnings.
  This morning, FactSet Research Systems (FDS) reported earnings of 46 cents a share for its fourth quarter (ending in August). Excluding charges for stock compensation, FDS earned 48 cents a share, six cents more than Street estimates.
  The shares are up 7% this morning to a new all-time high. Last year, the company made 37 cents a share for the fourth quarter. Sales were up 27% to $105 million.
  Not only does the company have strong growth, it has consistent growth. Here are the sales and EPS numbers for the past few years:
  Year………………….Sales (mil)…………..EPS
  1996…………………$44.35……………….$0.13
  1997…………………$58.36……………….$0.18
  1998…………………$78.91……………….$0.26
  1999…………………$103.83……………..$0.37
  2000…………………$134.18……………..$0.49
  2001…………………$167.56……………..$0.64
  2002…………………$198.29……………..$0.78
  2003…………………$222.30……………..$0.98
  2004…………………$251.91……………..$1.15
  2005…………………$312.64……………..$1.43
  2006…………………$387.35……………..$1.64
  

• The Future for Facebook
  Eddy Elfenbein, September 18th, 2006 at 3:14 pm

  Last year, Facebook was worth $100 million. This year, it received a $1 billion buyout offer from Yahoo (YHOO). Well…that is until Yahoo’s stock got head-butted in the chest this summer.
  MarketWatch’s Bambi Francisco has more on the social networking site:

  Facebook CEO and founder Mark Zuckerberg told me last week that the decision is aligned with his long-held mission statement at Facebook. “We’re a company trying to help people understand their world,” he said, suggesting that the word “people” is broad, comprising more than just those who are in colleges, high school and at work (except for those under 13 years of age, for now).
  Such a decision to open up, however, may have unintended negative consequences, much like last week’s community uprising over a new service that cast personal information as essentially news bulletins.
  If Facebook eases this new service across its 9-million member society without a glitch, it will mark a right of passage into the big leagues, to some extent.
  You see, Facebook — though only two years old — is on the fast track to being perceived and valued as a grown up. As such, every major decision is a test of its will to fit into such mature billion-dollar shoes.

  Here’s an unintentionally funny interview Bambi did with the Zuckerberg, the company’s 22-year-old CEO. Let’s just say that he doesn’t lack in self-confidence. Also, he seems completely baffled by the presence of his own hands.

• Northern Empire Soars on Buyout
  Eddy Elfenbein, September 18th, 2006 at 9:43 am

  Last November I wrote about stocks flying below Wall Street’s radar, meaning teeny micro-cap stocks that aren’t followed by any Wall Street analysts. Investors are often surprised to learn that some of the best publicly traded companies are completely ignored by Wall Street.
  In my original post, I mentioned three small banks. Today, the second one got bought out. Northern Empire Bancshares (NREB) is going to be acquired by Sterling Financial (STSA) for $335 million in cash and stock.

  Under the deal, approved by both companies’ boards, Sterling will pay 0.805 common shares and $2.71 in cash for each share of Northern Empire. Based on Sterling’s closing price of $33.04 on Friday, the offer values Northern Empire shares at $29.31 a piece, a 22 percent premium to its closing price of $23.98 the same day.

  Northern Empire is puny, just 150 employees, 11 branches and zero analysts covering it. But look at NREB’s earnings-per-share results for the last few years:
  1999 $0.55
  2000 $0.68
  2001 $0.77
  2002 $0.81
  2003 $0.97
  2004 $1.18
  2005 $1.51
  That stands up to any mega-cap bank. For the first half of 2006, NREB earned 82 cents share compared with 73 cents last year.
  The first bank that was bought out was a thrift, NewMil Bancorp (NMIL), in April. The only one left standing is also an S&L, Coastal Financial (CFCP).

• Spreading Financial Literacy
  Eddy Elfenbein, September 18th, 2006 at 7:39 am

  
  Kudos to Russell Simmons. The hip-hop mogul is working to spread financial literacy through his non-profit Hip-Hop Summit Action Network.
  Far too many Americans are financially illiterate, especially young people. The subject simply isn’t taught in many schools. Thirty percent of black households are “unbanked.” That’s disgraceful, and it needs to change.
  Here’s video of Simmons ringing the opening bell on the Nasdaq.