Archive for October, 2010
-
Morning News: October 26, 2010
Eddy Elfenbein, October 26th, 2010 at 7:37 am15 Inviolable Rules for Dealing with Wall Street
Stock Futures Dip; Home Price, Confidence Data Eyed
Bernanke Asset Purchases Risk Unleashing 1970s Inflation Genie
5 Reasons Why Warren Buffet Is Wrong About Hedge Funds
DuPont Net Falls 10%, Raises View
Shrinking Bank Revenue Signals Dawn of `Worst’ Growth Decade
China Telecom Giant Makes Push for U.S. Market
Bank of England Chief: Basel III Incomplete Answer
-
My Earnings Forecast for Nicholas Financial
Eddy Elfenbein, October 25th, 2010 at 4:27 pmThis Thursday, little Nicholas Financial (NICK) will report earnings for their fiscal second quarter. It’s hard to say what Wall Street’s consensus is because, well…no one follows NICK. As far as I know, I’m the only one.
Here’s my take: The good news is that the story is still the same. NICK’s business has improved dramatically since the credit crisis. The company continues to make money and the quality of their portfolio is a lot better.
Here’s my estimate for this earnings report:
Receivables: $245 million
Gross yield: 25%
Interest Expense: 2.5%
Provision for Credit Losses: 2.8%
Pre-Tax Yield: 10%
EPS: 30 cents or moreThose are just guesses but I doubt I’m too far off. Even if I’m off by a bit, the fundamental story is the same. The portfolio is growing slowly. The quality of the portfolio is improving. The yield spread between what they borrow and what they lend is gigantic.
Last quarter they made 29 cents per share and the quarter before that, they made 28 cents per share. For this calendar year (which is not the same as NICK’s fiscal year), they should make about $1.20 per share, maybe $1.25 per share.
Even at the current higher stock price of $10, NICK is still very inexpensive. If they earn $1.20 per share for 2010, that’s basically like a 12% bond. By comparison, 30-year Treasuries are going for less than 4%.
Of course, I don’t know how the market will react to earnings. It seems like the stock woke up all of a sudden about one month ago. Who knows why? As I said before, the story is still the same. Fundamentally, nothing has changed. My view is that NICK is a great buy under $12 per share.
-
Apple Vs. Google
Eddy Elfenbein, October 25th, 2010 at 11:27 amRuss Roberts spoke to Thomas Hazlett of George Mason in a podcast about the rivalry between Apple and Google:
It is commonly argued that Apple with its closed platform and tight control from the top via Steve Jobs is making the same mistake it made in its earlier competition with Microsoft. Google on the other hand is lauded for its open platform and leveraging of a large number of suppliers for its Android phone, for example. Hazlett, drawing on his recent article in the Financial Times, argues that these arguments fail to recognize the different competitive advantages of Apple and Google and the implications of those advantages for the companies’ respective strategies. The conversation concludes with a discussion of the move to application-based web browsing such as Facebook, Twitter, and the implications for Google.
The podcast is 68 minutes long.
-
Buy List +11.5 YTD
Eddy Elfenbein, October 25th, 2010 at 10:21 amOur Buy List is having a very nice day so far but I should remind you (and me) to never judge a market day until the closing bell.
All 20 stocks are trading higher. AFLAC (AFL) broke $56 per share and is very close to a new 52-week high. Intel (INTC) is inches away from $20 per share. Both Nicholas Financial (NICK) and Reynolds American (RAI) are at fresh 52-week highs.
The Buy List is currently up 1.20% for the day and 11.50% for the year.
-
Fiserv and AFLAC’s Earnings Due this Week
Eddy Elfenbein, October 25th, 2010 at 8:53 amThis will be another busy week for earnings. I’m especially looking forward to Friday’s GDP report. This will be our first look out how well the economy did during the third quarter.
So far, the much-talked-about Double Dip has been in the second derivative. The rate of growth has slowed down, but we haven’t actually seen negative growth. I don’t expect much from this report, perhaps around 2%.
On our Buy List, Fiserv (FISV) and AFLAC (AFL) both will report on Tuesday. Fiserv rarely deviates much from Wall Street’s earnings forecast.
The Street currently expects $1.00 per share for Q3 earnings. In July, they gave full-year guidance of $3.96 to $4.07 per share. I wouldn’t be surprised if they lifted the low end of that forecast.
AFLAC said it expects Q3 earnings of $1.35 to $1.38 per share. Of course, since much of AFLAC’s business is in Japan, much of the fine-tuning depends on the yen/dollar rate. For all of 2010, AFLAC sees earnings of $5.34 per share.
-
Morning News: October 25, 2010
Eddy Elfenbein, October 25th, 2010 at 7:16 amDollar Sell-off Resumes Post G20, Fed Policy Key
BP Sells Gulf of Mexico Fields to Pay for Oil Spill
Singapore’s Offer for ASX Misses Mark
G-20 to Avoid `Competitive Devaluation,’ Prod China
Markets Smell Recovery as Consumers Drive Retail Sales
Short Sales Resisted as Foreclosures Are Revived
Existing Home Sales in U.S. Probably Rose for a Second Month
App Makers Take Interest in Android
-
Viva la Revolucion — Or Maybe Not
Eddy Elfenbein, October 22nd, 2010 at 11:07 amJust one day after a socialist island country announced plans to shed 500,000 government jobs, another one plans to do the same.
Cuba has laid out details of a sweeping tax system for the newly self-employed — a crucial step in the socialist state’s plan to convert hundreds of thousands of state workers into self-employed businesspeople.
The tax code described in a two-page spread in the Communist Party newspaper Granma will have many Cubans paying more than a third of their income to the state, while those who create businesses and hire their own employees will pay more.
Cuba announced last month that it was laying off half a million state workers — nearly 10 percent of the island’s work force — while opening up more avenues for self employment.
At times, the article reads like a children’s lesson for a population with little experience at entrepreneurship — and almost none with the concept of taxes. It also offers a detailed peek at a mix of levies that would be complicated even for an accountant.
Throughout, there is an attempt to soften the blow by explaining that no government can provide services without revenue.
“Perhaps because Cubans are used to receiving medical care without taking a penny out of our pocket, or studying for free at any educational center we want, few stop to ask where the money the state uses for this comes from,” the article reads.
Those selling goods and services will pay a 10 percent income tax monthly, as well as another 25 percent into a social security account, from which they will eventually draw a pension.
Those who hire employees also will also have to pay a 25 percent payroll tax. The article says taxes will rise for successful businesses with many employees, but does not give details.
“The tax has a regulatory character in order to avoid a concentration of wealth or the indiscriminate use of the labor force,” the article says. “The more people hired, the higher the tax burden.”
Anyone making more than 50,000 Cuban pesos ($2,400) a year will have to open a bank account and keep detailed books — perhaps creating a market for the private accountants who will be allowed under the economic reforms. Those who earn less need only maintain a list of income and costs. Most Cuban state workers make about $20 a month.
The article says people in some forms of self-employment will be exempt from the 10 percent tax and instead will pay a fixed amount each month, regardless of what they make. It does not say which jobs will be eligible for this approach, however, nor say how much tax workers will pay. These workers will also be obligated to pay the social security tax.
The reforms are an effort to breathe life into a dormant socialist economy that can no longer afford to provide free or nearly free health care, education and basic food to its population. They are the most significant adopted by the communist government since at least the early 1990s.
The new system borrows many aspects of capitalism, while keeping in place Cuba’s state-dominated control of the economy. Citizens will be allowed to apply for licenses to work for themselves in just 178 areas, from car maintenance to rabbit farming, accounting to circus clown.
-
Time for Lilly to Go Shopping
Eddy Elfenbein, October 22nd, 2010 at 10:53 amThere’s no question that Eli Lilly (LLY) is a cheap stock based on its earnings. The problem, however, isn’t past earnings but future earnings. The company is running out of new drugs and they need to get on the stick very soon.
Lilly has repeatedly said that they have a lot of products in development. But everyone, including me, expects them to open their wallet to make an acquisition.
The bad news is that Lilly just got slammed by Byetta (though not as badly as Amylin was hurt). The good news is that this may further spur them to make an acquisition. The talk now is that Lilly will buy either Cephalon (CEPH) or Endo Pharmaceuticals (ENDP).
By 2013, Lilly loses patents on medicines responsible for almost half its revenue. The Bydureon rejection, which stalled a new revenue source for at least two years, was compounded Oct. 20 when the company halted tests on a second experimental diabetes medicine because it wasn’t effective. Lilly Chief Executive Officer John Lechleiter yesterday ruled out “large- scale combinations” while expressing interest in smaller deals.
“An outright acquisition of Amylin certainly could make sense” if Lilly thinks Bydureon will be approved, Fernandez said in a telephone interview from Boston. Amylin, based in San Diego, lost half its market value on Oct. 20 after the Food and Drug Administration requested a study of Bydureon’s effect on heart rhythm.
Eli Lilly currently has over $5 billion cash on hand — and it ain’t earning much interest in the bank.
“Our fundamental strategy remains intact,” Lechleiter (that’s LLY’s CEO – Eddy) said during a conference call yesterday. “We’re not interested in large-scale combinations (yeah, right). I think there are many other opportunities that I think we could consider along the lines of several that we have done this year.”
Lechleiter’s plan to stick to small purchases or licensing deals won’t give investors much confidence, said Barbara Ryan, an analyst with Deutsche Bank in New York, in a telephone interview.
“A lot of those companies will just be adding to the pipeline and they’re not going to be something that the market will accrue much value to on Lilly,” Ryan said.
United Therapeutics Corp. may also be a good fit because Lilly has an 11 percent stake and the two companies are partnered on Adcirca, a lung treatment made from the ingredient in Lilly’s impotence pill Cialis, according to Fernandez. Forest Laboratories Inc. (no, gag!) would be another option to complement Lilly’s research in antidepressants and arthritis medicines, he said.
-
Morning News: October 22, 2010
Eddy Elfenbein, October 22nd, 2010 at 7:21 amStock Index Futures Signal Falls as G20 and Earnings Eyed
Geithner Push for Current Account Targets Splits G-20 Nations
AIG Raises $17.8 Billion in Record AIA Hong Kong IPO
Fannie and Freddie May Need Infusion
UK Debt Cost Falls to Lowest Since 1980s
Boeing Sales Beat `New Normal’ Pessimism as Fed May Act
Caterpillar to Acquire MWM Holding for $806 Million
Schlumberger’s Profit More Than Doubles
UPS Profit Tops Analysts’ Estimates on Global Economic Pickup
-
$10
Eddy Elfenbein, October 21st, 2010 at 1:31 pmNICK printed $10 moments ago.
It happened. It really happened.
- Tweets by @EddyElfenbein
-
Archives
- December 2024
- November 2024
- October 2024
- September 2024
- August 2024
- July 2024
- June 2024
- May 2024
- April 2024
- March 2024
- February 2024
- January 2024
- December 2023
- November 2023
- October 2023
- September 2023
- August 2023
- July 2023
- June 2023
- May 2023
- April 2023
- March 2023
- February 2023
- January 2023
- December 2022
- November 2022
- October 2022
- September 2022
- August 2022
- July 2022
- June 2022
- May 2022
- April 2022
- March 2022
- February 2022
- January 2022
- December 2021
- November 2021
- October 2021
- September 2021
- August 2021
- July 2021
- June 2021
- May 2021
- April 2021
- March 2021
- February 2021
- January 2021
- December 2020
- November 2020
- October 2020
- September 2020
- August 2020
- July 2020
- June 2020
- May 2020
- April 2020
- March 2020
- February 2020
- January 2020
- December 2019
- November 2019
- October 2019
- September 2019
- August 2019
- July 2019
- June 2019
- May 2019
- April 2019
- March 2019
- February 2019
- January 2019
- December 2018
- November 2018
- October 2018
- September 2018
- August 2018
- July 2018
- June 2018
- May 2018
- April 2018
- March 2018
- February 2018
- January 2018
- December 2017
- November 2017
- October 2017
- September 2017
- August 2017
- July 2017
- June 2017
- May 2017
- April 2017
- March 2017
- February 2017
- January 2017
- December 2016
- November 2016
- October 2016
- September 2016
- August 2016
- July 2016
- June 2016
- May 2016
- April 2016
- March 2016
- February 2016
- January 2016
- December 2015
- November 2015
- October 2015
- September 2015
- August 2015
- July 2015
- June 2015
- May 2015
- April 2015
- March 2015
- February 2015
- January 2015
- December 2014
- November 2014
- October 2014
- September 2014
- August 2014
- July 2014
- June 2014
- May 2014
- April 2014
- March 2014
- February 2014
- January 2014
- December 2013
- November 2013
- October 2013
- September 2013
- August 2013
- July 2013
- June 2013
- May 2013
- April 2013
- March 2013
- February 2013
- January 2013
- December 2012
- November 2012
- October 2012
- September 2012
- August 2012
- July 2012
- June 2012
- May 2012
- April 2012
- March 2012
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010
- November 2010
- October 2010
- September 2010
- August 2010
- July 2010
- June 2010
- May 2010
- April 2010
- March 2010
- February 2010
- January 2010
- December 2009
- November 2009
- October 2009
- September 2009
- August 2009
- July 2009
- June 2009
- May 2009
- April 2009
- March 2009
- February 2009
- January 2009
- December 2008
- November 2008
- October 2008
- September 2008
- August 2008
- July 2008
- June 2008
- May 2008
- April 2008
- March 2008
- February 2008
- January 2008
- December 2007
- November 2007
- October 2007
- September 2007
- August 2007
- July 2007
- June 2007
- May 2007
- April 2007
- March 2007
- February 2007
- January 2007
- December 2006
- November 2006
- October 2006
- September 2006
- August 2006
- July 2006
- June 2006
- May 2006
- April 2006
- March 2006
- February 2006
- January 2006
- December 2005
- November 2005
- October 2005
- September 2005
- August 2005
- July 2005