Archive for January, 2010

• J&J’s Earnings Beat the Street
  Eddy Elfenbein, January 26th, 2010 at 11:31 am

  Johnson & Johnson (JNJ) reported fourth-quarter earnings of $1.02 a share which was five cents higher than Street forecasts.

  Fourth-quarter sales rose 9% to $16.55 billion, also exceeding Wall Street expectations. Favorable currency-exchange comparisons contributed 4.5 percentage points of the growth, reversing the currency headwinds that J&J and other multinational drug companies had faced in previous quarters.
  J&J’s biggest unit, medical devices and diagnostics, had sales of $6.31 billion, up 11.8%. Pharmaceutical sales rose 5.4% to $5.99 billion, while consumer-product sales rose 10.2% to $4.25 billion.
  For the full year, J&J said it earned $4.63 a share excluding items, which exceeded the forecast range J&J had provided in October, of earnings between $4.54 and $4.59 a share. Full-year sales were $61.9 billion, in line with the forecast range of $61 billion and $62 billion.
  J&J said it expects 2010 earnings of $4.85 to $4.95 a share, excluding certain items.

  That means that JNJ is going for about 12.8 times this year’s earnings estimates which is about 13% less than the S&P 500.

• Odd Lots
  Eddy Elfenbein, January 25th, 2010 at 3:38 pm

  SEC mulled national security status for AIG details
  Abnormal Returns & Stocktwits!!
  Home sales tumble as tax credit lift wanes
  Feinstein throws her support behind Fed chairman Bernanke
  The President’s Bank Reforms Don’t Add Up
  Reviews of Crossing Wall Street at Investimonials
  Clearwater woman called 911 saying she was tired of her husband

• About That Plunging Dollar
  Eddy Elfenbein, January 25th, 2010 at 2:52 pm

  I hear all the time about the plunging dollar, but if it has plunged, I’m afraid I missed it. You’d never know this by listening to the rhetoric, but the dollar lost only -2.9% against euro last year. The year before that, the dollar gained 4.9% against the euro. Doesn’t sound like a plunge to me.
  
  (The chart above is dollars-per-euro, so a downward line means a strengthening dollar.)

• AXA to Delist from NYSE
  Eddy Elfenbein, January 25th, 2010 at 10:55 am

  The French insurance company, AXA (AXA) has announced that it will delist from the NYSE due to lacking of trading volume. This strikes me as very bad news for New York and the American market. I would think that at least some American investors would be interested in trading a $45 billion insurance company. Based on revenue, this is one of the largest companies in the world.
  Is this solely about trading volume, or are the French concerned about our regulatory climate?

• Should You Listen to Your Broker?
  Eddy Elfenbein, January 25th, 2010 at 10:34 am

  New research shows that you should pay careful attention to what your stock broker says.
  Then do the exact opposite.

  It turns out, there is information in analyst forecasts, specifically, shorting your broker. In Long-Term Earnings Growth Forecasts, Limited Attention, and Return Predictability by Da and Warachka, they find that if you take the long-run earnings growth and divide by the recent earnings growth, you get a straightforward metric of optimism: higher is more optimistic. It turns out, the highest decile has a 4% annualized lower risk-adjusted return than the lowest decile; more optimistic stocks have lower returns.
  A simple explanation (see here) is that mutual funds “herd” (trade together) into stocks with consensus analyst upgrades and (especially) herd out of stocks with consensus downgrades. Stronger fund herding occurs when analyst recommendation revisions are more unanimous.
  However, there is some information that analyst recommendations are more useful at the industry level. Portfolios long in industries about which analysts are optimistic and short in industries about which analysts are pessimistic generate significant abnormal returns (see here).
  So, listen to your broker’s advice on sectors and stocks, just remember to short the stock picks.

• Four More Years
  Eddy Elfenbein, January 25th, 2010 at 10:28 am

  The stock market is rebounding this morning and the news that it appears that Ben Bernanke will be confirmed for another term as Fed chair, though of course, it’s hard to tie any one-day rally to a specific news item.
  I think the anger at Bernanke closely resembles the Two-Minute Hate Sessions in George Orwell’s 1984. Americans are rightfully angry, but they don’t know exactly who to be angry. They were angry at George Bush and he’s not around. Alan Greenspan? He’s also gone. That leaves Ben Bernanke.
  If having him reconfirmed by a whisker placates enough folks, I’m fine with that. But rejecting Bernanke would be an awful, awful move. Consider the take of one Nebraska-based investor:

  CNBC:….Should he be confirmed?
  Buffett: If I could vote twice I would. He should be. He did a magnificent job over this period… We can’t sit here and armchair quarterback him. But when we look back at September and October 2008, he took some extraordinary actions….we talked about it being an economic pearl harbor. He did what he should have done in response.
  Q: What happens if he’s not recommended?
  Buffett: Well, just tell me a day ahead of time so I can sell some stocks.

  There seems to be a view that deep with the offices of the Federal Reserve is a large machine called a Bubble Popper. At anytime, the Fed can wheel it out, aim and fire. Then magically, whatever bubble formed will be popped without damaging anything.
  My guess is that Bernanke will be passed with just a few votes over 60, but there was no real danger to his reconfirmation.

• What’s Down the Most?
  Eddy Elfenbein, January 23rd, 2010 at 10:16 pm

  The S&P 100 is down -5.25% since Tuesday. Here’s a look at how the 100 stocks have performed.

  (more…)

• S&P 500 to Close Below 50-Day Moving Average
  Eddy Elfenbein, January 22nd, 2010 at 3:38 pm

  For the first time since November, the S&P 500 will close below its 50-day moving average.
  
  This ends a 79-day run of closing over the 50DMA. From July to October there was a 106-day run.
  The VIX is up 5.04 points to 27.31.

• The Withdrawl Countdown
  Eddy Elfenbein, January 22nd, 2010 at 1:16 pm

  My guess is that Ben Bernanke would withdraw and spare the president of losing a confirmation vote. That is, if it looks like he’d lose a confirmation vote.

• Bernanke Reconfirmation in Doubt
  Eddy Elfenbein, January 21st, 2010 at 11:20 pm

  This is not what the market needs to hear:

  Amidst the voter anger at Wall Street and Washington, D.C., ABC News has learned that the Senate Democratic leadership isn’t sure there are enough votes to re-confirm Ben Bernanke for another term as chairman of the Federal Reserve.
  Bernanke’s term expires on Jan. 31.
  The White House did not respond to many requests for comment.
  “The American people are disgusted with the greed and recklessness of Wall Street,” Sen. Bernie Sanders, I-Vt., said in an interview with The Associated Press last month. “People are asking, ‘Why didn’t the Fed intervene at the appropriate time to stop the casino-type activities of large financial companies?'”
  Sanders, Sen. Jim Bunning, R-Ky., Sen. Jim DeMint, R-S.C., and Sen. David Vitter, R-La., have all put holds on Bernanke’s nomination, requiring 60 votes to proceed to a vote.
  Voter anger is of heightened concern to members of Congress given the surprise victory of Sen.-elect Scott Brown, R-Mass., who rode a tide of voter discontent and economic anxiety to an upset victory in a special election earlier this week.
  Last month, the Senate Banking Committee voted in favor of Bernanke’s nomination by a vote of 16-7, not exactly a reflection of overwhelming positive feelings towards the Fed chair given the fact that he was first appointed in 2006 by President George W. Bush and nominated by President Obama for a second term last August.
  Senate Majority Leader Harry Reid, D-Nev., at one point was planning on scheduling a vote on Bernanke for Friday, but the Senate is currently in the midst of a debate over raising the debt limit and the vote has been pushed.