Archive for March, 2011

  • AFLAC CEO Dan Amos on Bloomberg
    , March 16th, 2011 at 10:05 am

    Here’s a good interview with Dan Amos, CEO of AFLAC.

  • Japan and Medical Device Makers
    , March 16th, 2011 at 8:54 am

    Reuters notes that Japan is the second-largest market for medical devices. Some of our Buy List stocks will be impacted.

    Other device makers with large sales in Japan include Boston Scientific Corp (BSX), with 12 percent of total sales in Japan, St Jude Medical Inc (STJ) and Wright Medical Group Inc (WMGI) at 11 percent each, Stryker Corp (SYK) at 10 percent and Zimmer Holdings Inc (ZMH) at 9 percent.

    Diversified companies Medtronic Inc (MDT), Johnson & Johnson (JNJ) and Abbott Laboratories (ABT) are less exposed with 5 percent to 6 percent of sales coming from Japan.

  • Morning News: March 16, 2011
    , March 16th, 2011 at 6:29 am

    Tokyo Shares End Up 5.7%, Partially Repairing Prior Day’s Losses

    China Mobile Unexpectedly Boosts 2011 Capital Spending to $20.1 Billion

    Do Women Need to Act Like Men on Wall Street? (Given the evidence, shouldn’t we be asking the opposite?)

    U.K. Jobless Claimants Decline Unexpectedly

    Stock Futures Fall Amid Japan, Mideast Fears

    Oil Price Falls as Investors Dump Commodities

    Oil Rises as Bahrain Violence Spurs Concern Middle East Supplies at Risk

    Gold Rebounds on Drop to One-Month Low, Bahrain, Japan Concerns

    Treasuries Fluctuate as Japan Struggles to Avert Meltdown

    Fed Signals Further Stimulus Unlikely as Recovery Strengthens

    Watchdog Says TARP Helps Perpetuate “Too Big to Fail”

    Worker Confidence on Having Enough Money for Retirement Hits 20-Year Low

    Nasdaq Is Nearing Rival Bid for NYSE

    Freddie Mac’s Former Chief May Face S.E.C. Action

    Joshua Brown: Super-Contrarian: Fukushima is a Triumph for Nuclear Industry

    Paul Kedrosky: China Passes U.S. in Manufacturing Value-Added

  • Three Cheers for Diversification
    , March 15th, 2011 at 3:35 pm

    Despite holding AFLAC (AFL), which dropped 5.58% today, our Buy List narrowly out-performed the S&P 500. Our Buy List dropped 0.96% while the S&P 500 lost 1.12%.

    Naturally, I don’t like it when out-performance means that our day was less awful than everyone else’s. But it does indicate what a well-diversified portfolio can do. Just like a good sports team, when one player is having an off night, his teammates are ready to pick up the slack.

  • AFLAC’s Press Releases
    , March 15th, 2011 at 2:09 pm

    Since the Japanese earthquake, AFLAC has released exactly three press releases. Here they are:

    Aflac Pledges 100 Million Yen to Red Cross Disaster Relief for Japan

    Aflac Severs Ties with Gilbert Gottfried

    Aflac Japan Corporate Offices Fully Operational, Employees Sustained No Injuries, Expected Impact on Japan Sales Minimal; Aflac Incorporated Affirms 2011 Operating EPS Target

    This is the full text of the last one:

    COLUMBUS, Ga., March 14, 2011 /PRNewswire via COMTEX/ — Aflac Incorporated today announced that its operations in Japan are up and running and ready to assist policyholders following the recent earthquake in the Tohoku area, which includes the cities of Sendai and Minami Sanriku. Aflac Japan’s main offices, including the corporate offices in Tokyo and operational centers in both Tokyo and Osaka, are undamaged and fully functional.

    Aflac Japan’s employees are safe, and the company continues to reach out to their independent sales force to assess their needs. The Aflac leadership teams from both the U.S. and Japan remain in close contact.

    While the hardest-hit areas were Iwate, Miyagi and Fukushima prefectures, less than 5% of Aflac Japan’s new sales and in-force premiums are derived from these prefectures. Only two of Aflac Japan’s 82 sales offices have been negatively impacted; these two offices, located in a single building in Sendai, have minimal damage, but will be closed temporarily due to power outages.

    About this natural disaster, Aflac Japan President and Chief Operating Officer Tohru Tonoike commented: “First and foremost, our thoughts go out to all those affected here in Japan. We are very grateful none of our employees were injured. We are working with our sales force to ensure that we provide them with assistance and help them take care of our customers. We remain ready to respond to the needs of our policyholders by paying claims swiftly, and will prioritize our response to those in the affected areas. We successfully executed our disaster preparedness plan and as a result, our operations stand ready to serve our policyholders and claimants.”

    Aflac Incorporated Chairman and CEO Daniel P. Amos added: “In addition to sending our thoughts and prayers to each and every Japanese citizen, we want all of our Aflac Japan employees, sales agents and policyholders to know that your Aflac family here in the U.S. sends our support in every way possible. On Friday, we made an initial donation of 100 million yen to the International Red Cross to help with the start of the relief effort. Additionally, funds have been established by both our U.S. and Japanese employees and sales forces for our friends in Japan, including fellow employees and sales associates that have been most impacted by the disaster. Most importantly, we want our policyholders to know that we are here to deliver on our promise – we will be there when they need us most. Having operated in Japan for almost four decades, we know Japanese citizens are incredibly resilient and we want to help in any way possible as they work through this difficult time.

    “As we look to the remainder of 2011, we expect Aflac Japan sales will only be minimally impacted by these events. Our earnings guidance for the year remains unchanged: we will likely be at the low end of the 8% to 12% range for operating earnings per diluted share growth in 2011, excluding the impact of currency.”

    Leslie Scism of the WSJ reports:

    Aflac Inc., a life and health insurer that gets up to 75% of its earnings from Japan, took another hit Tuesday amid investors’ concerns about life insurers’ shares.

    The Columbus, Ga., company continues to stand by its view, since the disaster began unfolding last Friday, that it doesn’t expect a meaningful impact on its earnings and it isn’t changing its earnings guidance for the year, Chief Executive Daniel Amos said in an interview.

    “We may see a spike in claims for the short-term due to the tsunami and the earthquake. However, it will not make a significant difference to our overall claims cost,” Mr. Amos said.

    “In regards to the nuclear issues, it is too early to tell. But based on our actuarial assumptions with the worst-case scenario being a Chernobyl, we still don’t believe it will create a significant change in our claims costs.”

    He said that the three prefectures hardest hit by the earthquake, tsunami and resulting nuclear-reactor problems represent less than 5% of the company’s sales in Japan. If the company got hit with thousands of sudden claims, he said, those would be a tiny slice of the company’s 20 million outstanding life and supplemental-medical policies.

    “I think the tendency is that you look at the worst case, so I think that’s what is going on” in the selloff, he said.

  • Corporate Profit Margins to Hit 18-Year High
    , March 15th, 2011 at 10:35 am

    From Bloomberg:

    Record earnings fueled by the highest profit margins since 1993 are giving executives more leeway than ever to boost dividends as the bull market enters its third year.

    Margins will climb to 8.9 percent in 2011, the highest level in at least 18 years, according to data compiled by Bloomberg on non-financial companies in the Standard & Poor’s 500 Index through March 11. Greater profitability combined with dividend cuts during the credit crisis have pushed earnings to 6.53 percent of the gauge’s price, or 3.5 times more than its payout rate, close to the record 3.6 multiple in January.

    A total of 95 companies led by Aetna Inc. (AET) and Carnival Corp. have raised dividends as the fastest economic expansion in six years and five straight quarters of earnings growth increased confidence among chief executive officers. Of the 380 that pay dividends, 378 are forecast to maintain or increase them, according to data compiled by Bloomberg using options prices, profits, management statements and peer comparisons.

    The article notes that there have been 95 dividend increases in the S&P 500 and zero decreases this year.

  • What To Do Now?
    , March 15th, 2011 at 10:14 am

    The stock market is down sharply today. The world is beginning to learn of the extent of the damage in Japan combined with the explosions at the nuclear plants.

    The market’s initial response to the news from Japan was rather restrained. The S&P 500 dropped 0.60% yesterday, which is far from alarming; plus the market rallied in the afternoon.

    As I write this, the market is down 1.81% and we’ve been down as much as 2.72% this morning. The Nikkei dropped over 1,000 points today which is a loss of 10.55%. Since Friday, the Japanese market has lost 16.1%.

    The stock jitters have clearly spread to the U.S. market. The Volatility Index (^VIX) is up 2.66 this morning to 23.79. Both oil and gold are down sharply.

    Barry Ritholtz makes a good point this morning: When people ask, “how should I be investing now?” the answer is that your contingency plan should already be in place.

    I’m happy say that I wouldn’t make any changes to my Buy List. They’re all good companies and it’s very, very likely that they will remain being good companies.

    Investing isn’t about predicting the future. No one can do that. In fact, being a good investor means beginning with the assumption that you can’t predict the future, so what can you do? It’s always good to start with good first principles and that means investing in solid businesses.

    At times like this, traders madly scramble for “plays.” Solar stocks, for example, are doing well today. I strongly advise against chasing any of these “Japan plays.” I remember that on the first day of trading after 9/11, shares of Sturm Ruger (RGR) jumped more than 10%. Why? Were we all going to buy guns to shoot the terrorists? As you might expect, it didn’t take long for RGR to give back all of its gains.

    The one alarming stock we have is AFLAC (AFL) and that stock is currently down close to 10% today. So far, the company has made it clear that they haven’t suffered much damage. Until I hear more, I’ll continue to trust the company more than nervous traders.

    The other news from AFLAC is that they fired comedian Gilbert Gottfried, who was the voice of the AFLAC duck, for making tasteless comments on his Twitter feed. I should add that he’s not the voice of the duck in the ads that run in Japan. Bear in mind that this is one of the best marketing campaigns in recent history. AFLAC’s name recognition has risen from 2% before the duck to 90% today.

    My advice on what to do now is just sit and wait. We don’t know all the facts yet, and more importantly, we don’t know what the long-term implications will be. I know it’s painful to watch your stocks go down, but you’re just as likely to make things worse by joining the panic.

  • Morning News: March 15, 2011
    , March 15th, 2011 at 6:18 am

    Stocks Slide as Japan Plummets on Nuclear Concern; Oil Falls, Bonds Surge

    Futures Tumble After Nikkei Plunges

    EU Debt-Relief Pact Puts Pressure on Nations to Cut Deficits: Euro Credit

    German Investor Confidence Unexpectedly Declined in March

    Crude Oil Drops as Loss of Demand in Japan Outweighs Middle East Tension

    Earthquake Dents Japan’s Chances in China’s Luxury Car Market

    Gold Declines as Investors Sell to Cover Drop in Other Assets

    Disaster in Japan Batters Suppliers

    U.S. Seizes Two Banks; Year’s Total at 25

    How Long Can the Fed Continue to Downplay Inflation?

    Carlyle Forms $5 Billion Shipping Joint Venture

    Buffett Still Gets Lubrizol at Lehman-Bust Price After 183% Gain: Real M&A

    HP’s Apotheker Accelerates Move Into Cloud Computing, Increases Dividend

    Joshua Brown: Uranium Sector Trashed

    Paul Kedrosky: Long-Term Growth in U.S. GDP Per Capita: Graph

  • The Japanese Market Tanks
    , March 14th, 2011 at 12:32 pm

    The Japanese Nikkei 225 (^N225), the Japanese counterpart of the Dow, dropped 6.18% today to close at 9,620.49. The index is actually lower than it was on the final day of 1983 when it closed at 9,893.82. At the same time, the U.S. Dow closed at 1,258.64.

    This means that in 27 years, we’ve gone up by more than 10-fold while the Japanese market is down slightly. The Nikkei used to be 14 times the Dow. Now it’s 20% less.

  • The Onion: Hidden Bank Fees
    , March 14th, 2011 at 11:09 am

    The Onion has the news:

    As a result of recent regulations prohibiting certain types of account fees, banks are finding new ways to make money from their customers. Here are some of the hidden charges now being applied:

    * Wells Fargo—$10 to speak to a human teller, $20 to speak to a cute one

    * Chase—$2 fee if Chase Rewards debit card is placed next to a debit card from a competing bank

    * Citibank—Customers who think Citibank has a ‘y’ in its name are penalized, monthly, on an increasing scale

    * Bank of America—Safe deposit boxes now on coin-operated timers

    * HSBC Bank USA—HSBC gets 10 percent cut of all birthday money

    * TD Bank—$1 for stopping in any TD branch location to warm up while out walking on a cold day

    * Regions Bank—$10 Felix-the-Cat-opt-out charge will be administered to anyone choosing a check design not featuring silent-film-era cartoon character Felix the Cat

    * SunTrust—$1.75 High Roller fee applied when card is used at locations other than CVS