Archive for August, 2007

• Hilary Kramer on Danaher
  Eddy Elfenbein, August 7th, 2007 at 9:10 am

  (Via Altucher). I’m often surprised that Danaher (DHR) isn’t better known. Here’s Hilary Kramer’s view:

  A leader in the industrial sector, Danaher Corp. (NYSE:DHR) designs, makes and markets brand name products, services and tech across three categories: Professional Instrumentation (electronic testing, environmental, and medical technologies); Industrial Technologies (motion and product Identification; aerospace and defense, power quality, and sensors and controls); and Tools & Components (which include mechanics’ tools and general tools under brand names such as Craftsman.)
  It is a leader in many of its classes, with names like Fluke (handheld electronic and network test equipment), Gilbarco Veeder-Root (retail petroleum dispenser market), and Hach/Lange (water analytics). A huge company in the industrial sector can sometimes seem overwhelming (what ARE all of these things, after all? you might ask…), but the thing to know first is that Danaher is solid as they get, with great margins, good management, and is well positioned for continuing growth, particularly through acquisitions.
  On July 19, after DHR’s excellent second quarter earnings report, Goldman Sachs wrote that Danaher was “well-positioned” for the 2H2007 upside. Time to get in now, its report suggested, and I agree. It set a nice price target of $90. With low operating risk, and consistent growth of revenue, Danaher is a safer pick. Plus, as the Goldman report points out, it is “a leader in defensive growth markets like water, electronic test, and medical,” making its price less susceptible to the recent jitters in the market.
  Type of Stock: An industrial designer, manufacturer, and marketer, Danaher is a leader in its class in many areas, and has demonstrated solid growth in areas less likely to suffer by market instability.
  Price Target: Trading now at $75.80, I agree with the Goldman target of $90 and feel Danaher is well positioned to even exceed this.

• “He Has No Idea How Bad It Is Out There”
  Eddy Elfenbein, August 6th, 2007 at 9:09 am

  Via B-Riz: Jim Cramer pleads for a Fed rate cut.
  
  Barry’s site has more complete with remix.

• Financial Stocks Sink
  Eddy Elfenbein, August 3rd, 2007 at 11:27 am

  Here’s an interesting chart. This shows the performance of the S&P 500 Spyders (black line, left scale) compared with the Financial Spyders (blue line, right scale). These include dividends.
  
  This is an interesting chart because it shows two things. First, you can see how closely the financial sector tracked the overall market for the last five years. It never really overperformed or underperformed.
  The second part is that you can see how much that relationship has broken down in the past few weeks. Financial stocks have been getting clobbered far worse than the market.

• The Global Economy
  Eddy Elfenbein, August 3rd, 2007 at 9:53 am

  Here’s one way of looking at it:

  At the start of July, Tunisia hired Daiwa Securities SMBC Co. and Nikko Citigroup Ltd. to help its central bank sell yen- denominated bonds. By the time the fund raising finished this week, Tunisia’s borrowing costs had risen by almost a quarter of a percentage point.
  So the taxpayers of an African nation suffer because Joe Blow in Detroit can’t pay his mortgage.

• Today’s Jobs Report
  Eddy Elfenbein, August 3rd, 2007 at 9:07 am

  The government reported that the economy created 92,000 jobs last month. The unemployment rate rose to 4.6%.
  I went to the raw numbers and found out that the unemployment rate is 4.647%, just inches from rounding up to 4.7%.
  

• Recent Earnings Reports
  Eddy Elfenbein, August 2nd, 2007 at 11:03 pm

  I need to catch up on some of our earnings reports from last week. There was a bunch, so here’s a quick rundown:
  W.R. Berkley (BER) reported earnings of 92 cents a share, inline with estimates. This was a nice improvement over last year, but the stock is right at its 52-week low.
  AFLAC’s (AFL) operating earnings came in at 82 cents per share compared with 75 cents a year ago. Analysts were looking for 81 cents per share. The stock soared more than 8% last Wednesday but has since pulled back. Even though they’re both insurance stocks, AFL and BER have been radically different performers this year. AFL is up 13% while BER is down 15%.
  Graco (GGG) had a rotten first quarter but it made up for it last quarter. The company earned 66 cents a share, five cents more than estimates. The stock got a nice bump last Thursday and has, so far, held on to it.
  Fiserv (FISV) has been a good stock for us, but not lately. The shares got taken down after the company missed earnings by three cents a share (68 vs. 71). FISV lowered its full-year guidance to $2.74 to $2.82 per share, down from $2.86 to $2.94 per share.
  Respironics (RESP) had a very good earnings report. This stock is finally getting back on track and is now our top-performer this year. RESP earned 50 cents a share, two cents more than estimates and ten cents more than last year.
  SEI Investments (SEIC) was our top-performer last year, rising 61%, but the shares haven’t done well this year. Earnings, however, ain’t so bad. First-quarter earnings were inline, but Q2 came in at 35 cents a share, three cents more than Wall Street’s estimate. Last year, FISV made 29 cents a share.
  Varian Medical (VAR) earned 44 cents a share, which was two cents less than last year, but two cents more than expectations. The stock has pulled back some more and it’s turning into one of our big losers for the year. Varian also said that earnings will come in at the low end of expectations. Ugh.
  Fair Isaac (FIC) beat consensus, but I’m getting very frustrated with this stock. The previous two earnings reports were terrible.
  Nicholas Financial (NICK), our micro-cap car-loan stock, is starting to plunge in a serious way. I think it’s getting caught up in the subprime mess. Revenues were up, but EPS came in at 29 cents, two pennies below last year. The stock has dipped below $9 a share. Delinquencies are up, but the stock still seems very inexpensive to me.
  Donaldson (DCI) won’t report for another month, but the company raised its dividend 11% from nine to 10 cents a share.

• Fiserv Agrees to Acquire CheckFree for $4.4 Billion
  Eddy Elfenbein, August 2nd, 2007 at 2:22 pm

  Big news from Fiserv (FISV), one of our Buy List stocks.

  Fiserv Inc., the manager of check- processing and cash machines for 17,000 companies, agreed to buy CheckFree Corp. for about $4.4 billion, adding software that runs Internet-banking services.
  CheckFree shareholders will receive $48 a share, 30 percent more than yesterday’s close, Brookfield, Wisconsin-based Fiserv said today in a statement.
  Fiserv’s biggest acquisition gives it CheckFree’s electronic systems for online bill-paying and technology that processes more than 1 billion transactions a year. Fiserv was outbid by Fidelity National Information Services Inc. earlier this year when it tried to buy rival EFunds Corp. for $1.5 billion.
  “Electronic banking is increasing at a significant pace,” said Benton Gup, a professor of finance at the University of Alabama. “More financial-services companies are going to offer online banking if they don’t already.”
  Shares of Norcross, Georgia-based CheckFree rose $8.73, or 24 percent, to $45.56 at 12:17 p.m. in Nasdaq Stock Market composite trading. Shares of Fiserv gained 7 cents to $49.26.
  The combination will allow the company to eliminate about $100 million a year in expenses, Fiserv said in the statement. The sale, which the companies expect to close by the end of the year, will add more than $125 million to revenue. The purchase should add to earnings per share in 2008, Fiserv said.

• We’re Back Up
  Eddy Elfenbein, August 2nd, 2007 at 11:19 am

  Sorry, we had some technical difficulties earlier today. I’d explain it to you, but you probably wouldn’t understand. Let’s just say it’s related to the subprime fallout.
  

• Buy List Since 2006
  Eddy Elfenbein, August 1st, 2007 at 2:05 pm

  Here’s a look at how our Buy List has done going back to the beginning of last year:
  
  We were fairly even with the market until this spring, but we missed the big surge in cyclical stocks. However, we’ve held up a lot better during the recent sell-off. We were over 10% behind the S&P, now we’re 7% behind.
  Our relative volatility has plunged in the past few months. Since February, the Buy List is about 12% less volatile than the S&P 500.

• Crimson in the Red
  Eddy Elfenbein, August 1st, 2007 at 10:59 am

  From the WSJ:

  Harvard University’s endowment fund has graduated some of the most sought-after money managers in the hedge-fund world.
  Now one of those stars is teaching Harvard a lesson of its own.
  In the past month, the university lost about $350 million through an investment in Sowood Capital Management, a hedge-fund firm founded by Jeffrey Larson. Mr. Larson managed Harvard’s foreign-stock holdings until 2004, when he left to set up Sowood, which recently lost more than 50% of its value amid bad bond investments.
  Mr. Larson isn’t the only high-profile former Harvard-endowment manager with a mixed record since leaving the ivory tower. Jack Meyer, Harvard’s former top investment manager, last year raised a $6 billion hedge fund, Convexity Capital, including an initial $500 million investment from Harvard. While Convexity’s returns were subpar early on, its performance has improved lately, according to people familiar with the figures.

  (Via Joe DealBreaker)