Archive for March, 2011

• More on the Best Company You’ve Never Heard Of
  Eddy Elfenbein, March 22nd, 2011 at 10:25 am

  Two weeks ago, I highlighted Raven Industries (RAVN) and its remarkable long-term track record (up 210-fold in 30 years).

  In that post, I noted that Raven has raised its dividend every year for the past 24 years and said to expect raise #25 very soon.

  Well…#25 came yesterday:

  Raven Industries, Inc. announced today that its board of directors approved a 12.5 percent increase in the company’s regular quarterly cash dividend to 18 cents per share. The dividend is payable April 15, 2011 to shareholders of record on March 31, 2011. This is the company’s 25th consecutive annual cash dividend increase.

  “Raven recently reported record sales and earnings,” said Daniel A. Rykhus, President and Chief Executive Officer. “We are pleased to follow this with the 25th consecutive increase in our annual dividend rate. Raven shareholders understand that, along with investing in our core businesses, one of our cash management priorities is increasing the dividend.”

  Raven will have paid a cash dividend for 39 consecutive years.

  Raven reported very strong earnings earlier this month and the stock is at another all-time high today.

• Dan Amos on CNBC
  Eddy Elfenbein, March 22nd, 2011 at 9:04 am

  More reassurance from AFLAC’s CEO:

• The Meltdown Caused by the Meltdown is Melting Down
  Eddy Elfenbein, March 22nd, 2011 at 8:35 am

  Yesterday was a very good day for the stock market. The S&P 500 gained 1.50% to close at 1,298.38. The index is now only about 5 points from closing back above its 50-day moving average.

  It appears that the partial market meltdown caused by the partial nuclear meltdown has partially melted away. But who knows what traders will choose to freak out about next?

  I was happy to see AFLAC (AFL) jump up to $52.23 yesterday. The stock is roughly back to where it was in late December. Bed Bath & Beyond (BBBY) also got a nice lift thanks to an upgrade from FBR Capital. Leucadia National (LUK) closed at a new 52-week high, and remarkably, it’s our top-performing stock on the Buy List.

  I was surprised to the see the VIX, the Volatility Index, come down so quickly from its recent spike. The VIX had mostly bounced around the upper-teens until the earthquake. Last Wednesday, it reached an intra-day peak of 31.28. Since then, it’s cooled off and yesterday the VIX closed at 20.61.

• Morning News: March 22, 2011
  Eddy Elfenbein, March 22nd, 2011 at 4:46 am

  Japan Finance Minister: BOJ Prohibited By Law From Underwriting JGBs

  All Clear Sounded as Markets Shrug Off Multiple Black Swans

  Euro at 10-Month High Versus Dollar on Rate Outlook; Pound Rises

  Hong Kong Monetary Authority Declines to Comment on PBOC Raise of Yuan Clearing Rate

  China Profitable as Business Climate Worsens, Amcham Says

  Crude Oil Lower, But Supported By Middle East Supply Worries

  Sales of U.S. Existing Houses Fall, Prices Reach Nine-Year Low

  Rate Futures Report: Yields Seen Up After Treasury MBS Move

  Shell Wins Approval for Deep-Water Exploration Plan in Gulf of Mexico

  Merck, Sanofi Abandon Plan to Combine Animal Health Units

  Honda To Extend Auto Production Halt Until March 27 In Japan

  China’s Panic-buying of Salt: A Sign Economy is at Breaking Point?

  For Consumers, Little to Cheer in AT&T Deal

  Joshua Brown: Happy 5th Birthday, Twitter!

  James Altucher: Was Greece Just Nuked?

  You can also follow me on Twitter.

• Cartoon: How the Stock Market Works
  Eddy Elfenbein, March 21st, 2011 at 8:32 am

• Citigroup Announces 1-for-10 Reverse Split
  Eddy Elfenbein, March 21st, 2011 at 7:30 am

  Good news! Citigroup‘s (C) stock will soon be over $40 per share.

  Bad news: It’s happening the wrong way. Citigroup has announced that it’s doing a reverse stock split. That means that for every ten stocks you own now, you’ll have just one after. The company will also start paying a dividend of ONE PENNY per share!

  There’s an odd belief that quality stocks need to have higher share price. I think Wall Street deems it’s a bit gauche when your stock can’t break $5. Citigroup closed on Friday at $4.50. The stock has mostly bounced between $3.50 and $5 for the past 18 months.

  I’m always amazed at the attention investors pay to the actual share price — not the value — but the nominal price. I often hear investors say that they don’t like stocks over $50 or $60. Why? It makes no sense.

  People automatically think a $12 stock is somehow a better buy. It’s not. The nominal price makes zero difference at all to how it will perform in the future. It’s not like a reverse stock split somehow fools investors. The only thing I could say about the share price is that a very low-priced stock will probably be a lot more volatile.

  Two years ago, a certain insurance stock had a 1-for-20 reverse stock split. That raised the nominal share price, but it hasn’t magically transformed it into a better performer.

  Two years ago, Citi was kicked out of the Dow. I’m curious what a 1-for-10 reverse split would do to the Dow’s divisor. This is the number that the company has kept for over 100 years to calculate the number for the index. You add up all 30 stocks and divide by it to get the index figure.

  Also, due to Citigroup’s low share price and large outstanding share base, the stock is a favorite among the High-Frequence Trading crowd.

  Citi often trades an average of 20,000 shares per second during the trading day. On December 9, 2009, Citi traded more than 3.7 billion shares. That’s about 13% of the number of shares outstanding. It also averages about 161,000 shares per second for the entire trading day.

  I imagine a 1-for-10 reverse split will cause a fall-off in volume of much more than 1/10th.

• The Triumph of Data-Mining
  Eddy Elfenbein, March 21st, 2011 at 7:17 am

  What drives the price of Berkshire Hathaway (BRKA)? Some say it might have something to do with cash flow and earnings. Well, that’s one school of thought.

  Dan Mirvish suggests it’s news on…Anne Hathaway:

  On the Friday before the Oscars, Berkshire shares rose a whopping 2.02%. And on the Monday just after the Academy Awards, they rose again, this time 2.94%. But it’s not just an Oscar bounce, or something Warren Buffett may have said in the newspaper, or even necessarily something the company itself is doing (i.e. rumors afoot to buy Costco). Just look back at some other landmark dates in Anne Hathaway’s still young career:

  Oct. 3, 2008 – Rachel Getting Married opens: BRK.A up .44%
  Jan. 5, 2009 – Bride Wars opens: BRK.A up 2.61%
  Feb. 8, 2010 – Valentine’s Day opens: BRK.A up 1.01%
  March 5, 2010 – Alice in Wonderland opens: BRK.A up .74%
  Nov. 24, 2010 – Love and Other Drugs opens: BRK.A up 1.62%
  Nov. 29, 2010 – Anne announced as co-host of the Oscars: BRK.A up .25%

  Hmmm. Could be. I’ve read worse ideas.

• Our Massive Sinking Hole
  Eddy Elfenbein, March 21st, 2011 at 6:28 am

  How bad is the nation’s financial situation? Consider these facts: Last week, Congress passed yet another continuing resolution to keep the government going. Congress cut $6 billion from the budget.

  CNS put that cut into context:

  If Congress were to cut $6 billion every three weeks for the next 36 weeks, it would manage to save between now and late November as much money as the Treasury added to the nation’s net debt during just the business hours of Tuesday, March 15.

  Just during the business hours? Wow. These numbers are simply staggering. At some point, we need to address our massive debt and deficit. If we don’t take action, the markets will.

• Morning News: March 21, 2011
  Eddy Elfenbein, March 21st, 2011 at 4:38 am

  TOP Oil Market News: Crude Rises; Hedge Funds Slash Oil Bets

  Libya Strikes Raise Risks of Oilfield Shutdowns, Reprisals

  Risk Currencies Move Higher While Yen Held In Check

  Japan’s ‘BP Moment’ Troubles Global Economy

  US Energy Policy: Two Very Different Disasters Will Have Profound Effects

  VIX Rises Most Since May Driving S&P 500 to 1% Average Loss

  Wheat Rebounding 11% as Global Stockpiles Drop Most Since 2007

  Japanese Factories Take Steps to Resume Production

  Deutsche Telekom Surges on $39 Billion U.S. Sale to AT&T

  T-Mobile Deal Leaves Sprint’s Future Unclear

  Times’s Online Pay Model Was Years in the Making

  Buffett Remains Wary of Apple, Electronics Makers Compared With Coca-Cola

  Howard Lindzon: The Internet ‘Black Swan’…

  Joshua Brown: My Japanese Small Cap Trade

  Paul Kedrosky: Adventures in Falsifiying Economics

• JPMorgan Chase Raises Dividend to 25 Cents
  Eddy Elfenbein, March 18th, 2011 at 10:59 am

  It finally happened. JPMorgan Chase (JPM) just announced that they’re raising their quarterly dividend from 5 cents to 25 cents per share.

  Before the financial crisis, JPM paid a dividend of 38 cents per share. In 2009, they cut it to five cents and held it there for the last eight quarters. The Fed just gave some banks approval for dividend increases. Earlier, Jamie Dimon had said that he wanted the dividend to be to between 75 cents and $1 per share, so he seems to have gotten his wish.

  The board also authorized a new $15 billion repurchase program of which up to $8 billion is approved for 2011.

  Remarking on the dividend action and repurchase authorization, Jamie Dimon, Chairman and CEO, said, “We are pleased to be in a position to increase our dividend and to establish a new share repurchase program. Our current expectation is to return to a payout ratio of approximately 30% of normalized earnings over time. We will operate the business with the objectives of maintaining a Basel I Tier 1 Common ratio of at least 9.0% and meeting the Basel III requirements substantially ahead of time. Our earnings power will allow us to generate significant capital in excess of our objectives allowing us to aggressively invest in our future.”

  Dimon added, “JPMorgan Chase has substantial organic growth opportunities – building branches, adding bankers, and expanding product and service capabilities globally. Quality organic growth is our top priority and our best use of capital. We expect, though at a minimum, essentially to repurchase the same amount of shares that we issue for employee stock-based incentive awards. Beyond this, we intend to repurchase stock only when we are generating capital in excess of what we need to fund our organic growth and when we think it provides excellent value to our existing shareholders.”

  In October, I looked at the dividend potential of some major banks.