Archive for September, 2010

  • Oracle Hits Nine-Year High
    , September 17th, 2010 at 2:21 pm

    Wow, Mark Hurd hasn’t been on the job very long and Oracle (ORCL) is already doing well. The company just reported very strong results. The stock is now over $27 which is a nine-year high.

    Oracle reported a net income of $1.35 billion, or 27 cents a share, compared with a profit of $1.12 billion, or 22 cents a share, for the year-earlier period. Revenue rose 48% to 7.5 billion. Adjusted income was 42 cents a share.
    Analysts had expected the company to report adjusted earnings of 36 cents a share on revenue of $7.3 billion, according to a consensus survey by FactSet Research.
    Oracle has been widely expected to benefit from rising corporate spending on information technology. But Oracle Co-President Safra Catz said in a call with analysts that “what’s really going on is we have a lot of company-specific momentum in each line of business.”

    The stock is up 11% since Hurd came on board 11 days ago.

  • Morning News: September 17, 2010
    , September 17th, 2010 at 9:02 am

    London Hotel Revenue Returns to 2008 Level on Business Travel
    US STOCKS-Futures Rise After Strong Tech Earnings
    Cheapest Stocks Fail to Lure Investors as Bullish Signs Mount
    U.S. to Sell G.M. Stake Over Time
    Johnson & Johnson Aims to Buy Vaccine Maker Crucell
    Senate Approves Small Business Bill
    Apple Said to Negotiate With Publishers Over Digital Newsstand
    FedEx Delivers Int’l Profits but Cuts US Jobs

  • Department of No Duh!
    , September 16th, 2010 at 2:06 pm

    Academic study:

    Young, male, testosterone-fuelled CEOs more likely to start or drop deals: UBC study
    Too much testosterone can be a deal breaker, according to Sauder School of Business researchers at the University of British Columbia. Their paper, to be published in the INFORMS journal Management Science on September 10, shows that young CEOs with more of the steroidal hormone in their system are more likely to initiate, scrap or resist mergers and acquisitions.
    The study by Sauder Finance Professors Maurice Levi and Kai Li, and PhD student Feng Zhang, titled “Deal or No Deal: Hormones and the Mergers and Acquisitions Game,” shows that testosterone – a hormone associated with male dominance-seeking in competitive situations – can be a negative factor in high-stakes decision-making.
    “We find a strong association between male CEOs being young and their withdrawal rate of initiated mergers and acquisition,” says Prof. Levi, whose research relies on the established correlation between relative youth and increased levels of testosterone.

    (HT: Dealbreaker)

  • S&P 500 Breaks 200DMA
    , September 16th, 2010 at 1:45 pm

    The S&P 500 recently broke above its 200DMA. Here’s a look:
    big.chart091610.gif
    Last year I looked at the evidence of how well the indicator has worked:

    So does the 200DMA work? The evidence suggests that it’s a pretty good indicator of future price performance. When the S&P 500 has been below the 200DMA, it’s dropped a total of about 20% over the equivalent of 27 years. In other words, the S&P 500 has been below its 200DMA about one-third of the time.
    Historically, the best time to invest has been when the S&P is less than 1.7% below the 200DMA.
    When the index is above the 200DMA, well, then everything looks much brighter. All of the market’s gain (and then some) have happened when we’re above the 200DMA which occurs about two-thirds of the time.

    Although we’re above the 200DMA, the S&P 500 runs into a brick wall around 1227. I’ve mentioned the 1020/1130 trading range before, but it’s really making a strong stand.
    big.chart091610a.gif

  • Phil Maymin On the Nature of Genius
    , September 16th, 2010 at 12:44 pm

  • 11 Stocks to Short from Tim Sykes
    , September 16th, 2010 at 12:26 pm

    Timothy Sykes is an investor who follows questionable stocks that pump up their share prices with a blizzard of press releases. When the time is right, Timmy goes in and shorts them for fun and profit.
    Here’s his latest list of short candidates:

    Go Solar USA (GSLO)
    RXi Pharmaceuticals (RXII)
    RadNet (RDNT)
    Liquidmetal Technologies (LQMT)
    Texas Pacific Land Trust (TPL)
    Vringo (VRNG)
    Revolutions Medical (RMCP)
    CrowdGather (CRWG)
    Kraig Biocraft Laboratories (KBLB)
    China Sun Group High Tech (CSGH)
    Sunvalley Solar (SSOL)

    Tim titled the post “10 Good Small Cap Stocks To Buy & Short Sell” although I counted 11. Be sure to read his comments because he doesn’t suggest shorting them all immediately.

  • Stock Pickers Aren’t Dead Just Yet
    , September 16th, 2010 at 11:57 am

    Herb Greenberg has a great column on the last of a dying breed, the stock-picker — a group that includes yours truly. I admit that the machines are much faster than us, but we humans still have many advantages, namely the irrationality of our fellow humans.
    Despite the hand-wringing, this has been a very good time to be a stock-picker. Let’s look at the Rydex S&P 500 Equal Weighted ETF (RSP) compared with the S&P 500 Spyders (SPY):
    image985.png
    In other words, the average stock has beaten the index by a good margin.
    Will this divergence continue? It’s hard to say. I think one factor that will help is the persistence of low inflation, if not deflation.
    When the pricing environment is so hostile to price increases, this may place a greater premium on companies that are more efficient or that offer something unique. The more diversity there is in rewards, the more opportunity there is for stock-pickers to find above-average profit opportunities.
    When anybody can make a buck, anybody will and then you’re much better off going with the indexes.
    What’s also going on right now is that many equity classes are correlating with one another. This means that if the drugs stocks go up, say, 1% one day, then the tech stocks are also going up by about that amount.
    When the stock groups behave too similarly, it gets hard for money managers to set themselves apart — and that’s how they make their money. They want to see lots of divergences.

    “That’s not a healthy market. The mathematical benefits of diversification require assets that exhibit low-to-no correlation amongst themselves. When everything moves in synch, asset allocators have to pull in their horns,” Colas writes. “Wonder why investors are shunning risk and buying bonds? Part of the reason is clearly that the historically proven benefits of diversification just are not working as well as they once did.”
    Within the stock market, the Sector SPDR family of ETFs that carve up the S&P 500 offers a striking example of the herd behavior.
    “U.S. equity correlations among the 10 industrial sectors of the S&P 500 remain near historical highs, as 7 out of the 10 sector ETFs show correlations with the S&P 500 in excess of 90%,” according to the strategist. “Only Healthcare (XLV), Utilities (XLU) and Consumer Staples (XLP) are lower, and they’re stuck in the 80% range, which is still very high.”

    I disagree that this is “dangerous.” It just means that alpha isn’t so easy to come by.

  • Interview With Bill Miller
    , September 16th, 2010 at 9:34 am

    Here are some interesting insights from an interview with Bill Miller:

    But here is a topical example: Hewlett Packard has $15bn of cash on its balance sheet. It will generate $10bn of free cash this year and is probably overpaying this $3bn for 3PAR and ArcSight for $1.5. But even so, it will not make much of a dent in its free cashflow for this year alone.
    So HP could take 100% of its free cashflow and pay it out as dividends. While they would never do that, if they did the stock would have a 10% yield on it. Can you think of any companies out there with a 10% yield and can grow? So where would it trade? It might trade to a 5% yield.
    It would probably go up 50% immediately and many people would be wondering whether what was going on was secure. But eventually it would be capitalised at a rate higher than a utility or a Reit because it can grow faster. That is the opportunity we currently have in the market.

  • Morning News: September 16, 2010
    , September 16th, 2010 at 9:02 am

    Yields inch up, Yen moves Watched
    Futures Dip Ahead of Jobless Data, FedEx Results
    China Yuan Rises To New High Before Geithner Testimony
    Obama Reportedly to Name Warren Special Adviser
    Pimco Makes $8.1 Billion Bet Against `Lost Decade’ of Deflation
    Goldman Sachs Fund of Ex-Prop Traders Said to Return 3% in 2010
    India Hikes Interest Rate More Than Expected
    E.U. to Ratify First Free Trade Deal With Asian Partner
    Wright Express Completes Australian Buyout

    Buffett Buys More Shares Of Becton
    Baby Bonobos!

  • One National Capital, Two Cities
    , September 15th, 2010 at 9:58 pm

    Who’s up for some DC primary statistical analysis blogging?
    I thought so! (I admit, I’m a pale imitation of Nate Silver, but here goes.)
    Yesterday was the Democratic primary for mayor of Washington, DC. Vincent Gray beat the incumbent mayor Adrian Fenty 54% to 45%.
    The vote trend was incredibly split with the black-majority precincts going heavily for Gray while the affluent SWPL precincts went strongly for Fenty.
    The split wasn’t just big; it was massive. I think the pronounced racial/geographic divide is the major under-reported story of this election.
    There were precious few “swing” precincts. Consider this: Of the 143 precincts, the standard deviation of Fenty’s vote was over 25%.
    Check out the distribution of Fenty’s vote:

    Lower Bound Upper Bound # of Precincts
    Over 85% 1
    80% 85% 14
    75% 80% 16
    70% 75% 8
    65% 70% 2
    60% 65% 2
    55% 60% 5
    50% 55% 5
    45% 50% 4
    40% 45% 10
    35% 40% 7
    30% 35% 7
    25% 30% 9
    20% 25% 10
    15% 20% 26
    10% 15% 17

    A majority of DC voters live in a precinct that went 75% or more for one candidate. In just 12 of the 143 precincts did both candidates come within 5% of their city-wide total. The results also suggest that votes were more polarized than polling indicated — perhaps an odd double Bradley Effect.
    (Note: These numbers are based on the unofficial returns that were listed on the DC Board of Election’s website earlier today. Here’s a spreadsheet of the results.)