Archive for May, 2009

  • FactSet Raises Dividend
    , May 13th, 2009 at 11:45 am

    I have to add one quick post on the news that FactSet Research Systems (FDS) raised its dividend from 18 cents to 20 cents a share. It’s not a gigantic increase—last year FDS raised the dividend by 50% and the year before, they doubled it—but it’s very nice to see.
    The dividend increase is 11% and FactSet is probably on its way toward growing its earnings by 15% this year. That’s very good considering the rotten environment. You really don’t buy FactSet for the dividend yield (currently 1.5%), but it’s a nice reminder from the company that they’re continuing to prosper.

  • Outrageous Executive Perks
    , May 13th, 2009 at 9:58 am

    MarketWatch lists 10 of the most egregious executive perks. I liked #3 in particular, a “stay” bonus even if you die:

    Some companies are so keen to hold on to executives that they promise big pay and benefits even if the talent dies — in contracts known as golden coffins.
    Life insurance policies worth millions of dollars are the least controversial part of these packages — even though buying such coverage without company help shouldn’t be too difficult for executives pulling in six or seven figures a year.
    A peek under the lid of several golden coffins also reveals big severance payments, pensions and continued salaries if executives pass away.
    Abercrombie & Fitch agreed to pay Chief Executive Michael Jefferies a $6 million “stay bonus” to keep him running the successful fashion clothing retailer, according to its 2007 proxy statement.
    If Jefferies dies, the bonus stays and is paid out, along with $10 million from a company-purchased life insurance policy, to his estate. The retailer would also pay some of his incentive compensation, bringing the golden coffin’s value to more than $17 million, assuming he died on Feb. 2, 2008, according to the proxy.

  • The Wonderful Dullness of Small Banks
    , May 12th, 2009 at 1:31 pm

    David Segal writes about a topic that’s near and dear to our hearts—the boring stability of small banks. There are tons of little banks across the country that have barely noticed that credit crisis. Their businesses are boring and predictable, plus many of them are publicly traded.
    Segal quotes a small-town banker:

    “I was on vacation in California and this guy I had just met said, ‘So, traveling on that bailout money, huh?’ ” said Blake Heid, of First Option Bank in Paola, Kan., which didn’t take any bailout money. “I didn’t find that very amusing.”
    Though they greatly outnumber the national and regional banks, community banks have barely registered in any of the fallout from the credit crisis, in part because they hold less than 10 percent of the $13.8 trillion in bank assets nationwide.

    A few years ago, I wrote about three high-quality small-town banks. Not a single analyst followed them. Not long after I highlighted them, all three were bought out.

  • Obama Beats Buffett In Market Timing
    , May 12th, 2009 at 1:00 pm

    Bloomberg reports:

    President Barack Obama is proving to be a better judge of the stock market than Warren Buffett, the world’s second-richest person.
    The CHART OF THE DAY shows the Standard & Poor’s 500 Index began its biggest rally since the 1930s after Obama said on March 3 that equities offered bargains for investors with a “long-term perspective.” While the measure fell 3.5 percent over the next week, reaching a 12-year low on March 9, it went on to surge as much as 37 percent.
    Buffett, the chairman of Berkshire Hathaway Inc., wrote a column titled “Buy American. I Am.” for the New York Times in October, saying he may put all of his personal investments into U.S. stocks. The S&P 500 then plunged 29 percent through March 9 and is still down 3.9 percent. Berkshire, based in Omaha, Nebraska, posted its largest loss in at least two decades on May 8, in part because of Buffett’s “major mistake” of buying ConocoPhillips shares before oil retreated from a record.

    obama051209.png
    Congratulations Mr. President! We’ve gained back everything we lost during you administration.

  • The Diamond Market Is a Scam
    , May 12th, 2009 at 11:11 am

    The New York Times has an article today on the diamond market and how Russia is loading up on supply and waiting for the economy to recover.
    I find the world diamond market fascinating because it’s almost completely rigged. If the free market had its way, diamonds would be insanely cheap.
    The diamond market used to be controlled by De Beers. They’re the ones who run those “diamonds are forever” ads. (Sure they’re forever, all carbon is.) I believe that diamond rings are a wedding staple only in the United States. Lately, De Beers has fallen on hard times and Russia is taking over the market.

    The recession also coincided with a settlement with European Union antitrust authorities that ended a longtime De Beers policy of stockpiling diamonds, in cooperation with Alrosa, to keep prices up.
    Though it is a major commodity producer, Russia has traditionally not embraced policies that artificially keep prices up. In oil, for example, Russia benefits from the oil cartel’s cuts in production, but does not participate in them.
    Diamonds are an exception. “If you don’t support the price,” Andrei V. Polyakov, a spokesman for Alrosa, said, “a diamond becomes a mere piece of carbon.”

    You know the song, “carbon is a girl’s best friend.”

  • General Motors Drops to Lowest Price Since 1933
    , May 12th, 2009 at 10:29 am

    Shares of Government Motors (GM) got down to $1.09 today which is the lowest price since 1933. It’s so bad at GM that even the execs have dumped their shares:

    General Motors Corp. reported that six executives sold shares in the company, as the largest U.S. automaker said it’s more probable than previously thought that it will need to file for bankruptcy.
    Vice Chairman Bob Lutz and North America President Troy Clarke sold all their holdings in the Detroit-based company, according to regulatory filings today.

    The upshot is that this was the first smart move by GM execs in decades. (Ooohh, burn!)

  • Nicholas Financial Hits $5.25
    , May 11th, 2009 at 3:15 pm

    More great news from Nicholas Financial (NICK) today. The stock got up to $5.25 a share today.
    We’ve certainly waited a long time for this one to move. The story of NICK underscores an important point about investing. The market can simply be wrong, and you have to wait for a bit for it to be right again. The facts haven’t changed much with NICK. The value was visible in plain sight. We just had to sit and wait it out.
    Also, when it came, the adjustment back to reality was very quick. Not too long ago, NICK was going for half this price. That’s the story of investing—lots of boredom and frustration, and then very quick and exciting moves.
    Let me hear from you if you’re a NICK owner. I’m curious how many stop by here.

  • Who’s Watching the Fed?
    , May 11th, 2009 at 2:59 pm

    Joe Weisenthal points out this hysterical SNL skit about the person who’s in charging of monitoring the Federal Reserve, but the official is totally clueless. OMG, those guys at 30 Rock kill me!

    Update: Several readers have said that this isn’t an SNL skit but it’s real reality.

  • For the First Time Ever, Microsoft Turns to the Bond Market
    , May 11th, 2009 at 2:53 pm

    Microsoft (MSFT) said that it’s going to raise money from the bond market for the first time in its history. The company is going to sell $3.75 billion worth of debt in order to buyback shares and fund technology investments.
    Frankly, I’ve become very skeptical of share buybacks. On paper, what Microsoft is doing makes a lot of sense. Implicitly, the company is saying the stock is too low and bonds are too high. That’s probably right.
    However, I’d rather not have a company try to fatten its profits by making guesses in the financial markets—even if they’re good guesses. According to their latest statements, Microsoft has a cool $25 billion in cash and short-term investments. Why not draw from that? By just sitting there, it’s probably drawing a microscopic yield. Better, why not return a lot of that to shareholders. That might even get the stock up.
    Ideally, a company should focus on its business and their financial strategy should merely serve what the business needs. Also, the government’s tax policy should be neutral in this regard so there’s no advantage in ignoring dividends.
    Over the last eight years, Cisco Systems (CSCO) has spent over $46 billion on buying back shares of Cisco. The company has simply traded valuable cash for overpriced stock.

  • SNL Looks at the Stress Test
    , May 11th, 2009 at 1:11 pm