Archive for 2006

  • Cisco’s Stock Buybacks
    , November 16th, 2006 at 10:09 am

    Seriously, it’s time we had an intervention for Cisco (CSCO). This company needs to STOP buying back its stock. It’s getting out of control. They just announced another $7 billion buyback. For the love of god, someone make them stop.
    This company is sitting on a mountain of cash (nearly $20 billion) and it’s getting thrown away. What’s wrong with a nice little dividend? Too much cash is not a good thing for a company. This is what I like to call the Bladder Theory of Corporate Finance. Cisco has wasted billions of dollars on buying back a stock that has gone nowhere.
    We need to plan it for the evening when Cisco gets back from the office. He’ll open the door, and all of us will be standing there. Then someone needs to say, “Dude, we need to talk.” At first, he’ll be all nervous, “Hey, what’s everyone doing here.” But deep down, he knows exactly why we’re there.
    I’m sorry but it needs to happen.

  • Dell Delays Earnings Report
    , November 16th, 2006 at 9:52 am

    Ugh.

    Dell Inc. on Wednesday delayed its earnings report as the U.S. Securities and Exchange Commission stepped up a probe into the computer maker’s accounting, and its shares fell nearly 3 percent.
    Dell said the delay of the earnings report, originally scheduled for Thursday, was not related to the SEC’s decision to elevate its investigation to formal from informal status.
    But the postponement reflects “the level of complexity the company is facing in the preparation of its preliminary results,” related to the SEC investigation and its own inquiry into accounting and financial reporting matters, Dell said.
    Dell plans to announce preliminary fiscal third-quarter results in a news release “by the end of this month,” but will not hold a conference call for analysts as it has in the past.

  • Cognizant Technology Solutions
    , November 15th, 2006 at 1:51 pm

    One of the more fascinating companies in the world today is Cognizant Technology Solutions (CTSH). The company, along with Wipro and Inforsys, is one of the foremost names associated with IT outsourcing, particularly to India.
    While Cognizant is officially based in lovely Teaneck, NJ, its heart truly lies in the subcontinent. The company currently has over two dozen development centers in India. The growth in this business is simply astounding. The IT/outsourcing sector of the Indian economy is expected to grow from $17.2 billion in 2004, to $50 billion by 2009.
    For any company looking to cut costs and have someone else handle their IT problems, Cognizant is great place to go. Half of their business is clients in the financial services sector. In fact, JP MorganChase, one of the scions of Wall Street, is a major client. Another 20% of Cognizant’s business comes from health care companies like UnitedHealth.
    Cognizant was spun off from Dun & Bradstreet a few years ago and it hasn’t looked back since. As someone who pores over lots of financial statements, I can tell you that Cognizant’s results are extremely impressive. The company has consistently been able to grow its earnings over 50% a year. That’s no easy trick. Also, the company has a solid balance sheet and its operating margins are often around 20%.
    The shares have soared from $12 four years ago to $80 today. In fact, the stock just made a new all-time high. The big news recently is that it was added to the S&P 500. Two weeks ago, Cognizant reported third-quarter earnings of 40 cents a share, two cents more than Wall Street was expecting.
    For the current quarter, Cognizant expects earnings of 42 cents a share, and that will bring 2006’s total to $1.51 a share (the results are a bit skewed due to the FASB 123R jazz).
    What about next year? The Street is all over the place. The consensus is currently looking for $2.04 a share, which means that Cognizant is going for about 40 times forward earnings. That’s even pricier than Google.
    Here’s a spreadsheet with all of Cognizant’s stats from its income statement going back a few years. If you’re new to investing, this might be worth looking over. I know it might appear as a jumble of numbers, but as far as income statements go, it doesn’t get much better.
    Here’s a stock chart of CTSH with its earnings in the gold line (right scale). When the lines cross, that means the trailing p/e ratio is 50.
    CTSH.bmp
    In early 2002, Cognizant’s p/e ratio was roughly the same as the S&P 500. Today. it’s over three times the S&P 500.
    image290.bmp

  • Field of Dreams
    , November 15th, 2006 at 10:37 am

    First, we learned that the Mets are going to play at Citi Field. Then we heard that the A’s are leaving Oakland for Fremont’s Cisco Field.
    Doesn’t anyone have respect for the purity of the game?
    Fine, we might as well join in. Ladies and gentleman, I give you Crossing Wall Street Stadium.*
    * Deal not finalized.

  • The VIX Hits a Low for the Year
    , November 15th, 2006 at 6:52 am

    The CBOE Volatility Index, or the VIX, closed at 10.5 yesterday, the lowest point of the year. The VIX measures the volatility implied in index options contracts. The VIX is also very close to its lowest point in 13 years.
    What does it mean? That’s hard to say. Volatility is a hotly debated topic among technical analysts. Personally, I haven’t found much predicitve power in the VIX.
    Here’s a scatterplot of the VIX and how the S&P 500 has done for the following six months. The VIX is the horizontal axis, while the market’s return is the verical.
    image289.bmp
    This looks pretty random to me. The closest I can come up with is that high points in the VIX signal major turning points in the market, while lower points signal a continuation of the trend. For example, when the VIX is below 14.7, the market has never (since 1990) lost more than 6% six months later.

  • Six-Year High
    , November 14th, 2006 at 4:54 pm

    anth02nov02.jpg
    The S&P 500 hit a six-year high today. Our Buy List is now up over 10% for the year. Today was kind of a strange day. The market was just boucing along until about 3 p.m. Then suddenly, the indexes surged higher. Barry Ritholtz says it was covering of e-mini contracts.
    Home Depot (HD) was particularly weird today. The company had blah earnings, but the stock rallied slowly as the day wore on. Eventually, shares of HD closed at a five-month high.

  • Health Care Stocks
    , November 14th, 2006 at 2:20 pm

    I remember when health care stocks use to go up. Not anymore. Here’s a chart of the Health Care ETF (XLV) versus the S&P 500:
    Health%20Care%20Stocks.bmp
    This doesn’t look overheated to me.

  • USA! USA!
    , November 14th, 2006 at 2:08 pm

    U.S. Still World Economic Leader
    Hey Canada: STFU!

  • Two Percent Down Days
    , November 14th, 2006 at 1:14 pm

    The S&P 500 hasn’t had a down day of 2% or more since May 19, 2003. That’s the longest streak ever according to my data which goes back to 1950. Here are the other streaks, when they ended and how many days.
    11/14/06 1275 (current)
    10/31/78 1168
    1/8/86 1080
    5/14/73 1056
    7/28/69 1029
    8/26/66 1008

  • What’s Dennis Up to These Days?
    , November 14th, 2006 at 10:27 am

    Remember Dennis Kozlowski? Me neither. Apparently, he used to be somewhat important. In any event, Bloomberg visits Denny in the Greybar Hotel:

    Kozlowski now plays baseball and softball behind the barbed wire and steel doors of the state prison. He’s passes time reading biographies of U.S. presidents and Che Guevara, the revolutionary leader. His latest book, given to him by a former Tyco employee, details the life of Madame Chiang Kai-shek.
    “I probably read over 100 books,” he said.
    His wife Karen filed for divorce last summer. The birthday party Kozlowski threw for her on Sardinia in 2001 was among many Tyco-financed extravagances presented to the jury that convicted him. He declined to talk about Karen.
    Kozlowski is one of 12 men housed in the protective custody unit at Mid-State, Foglia said. He’s allowed to spend 16 hours a day outside his cell and works as a dining room attendant and a teacher’s aide.
    “He’s not making anything more than $1.05 a day,” Foglia said.

    LOL