Archive for 2011

  • Morning News: December 2, 2011
    , December 2nd, 2011 at 5:20 am

    EU Push for Budget Policing Meets Resistance

    Germany’s Merkel Says Euro Crisis Is Like a ‘Marathon’

    French President Warns of Dire Consequences if Euro Crisis Goes Unsolved

    Banks Vie With Nations to Sate $2 Trillion Funding Need

    Analysis: Japan’s Silent Majority May Find Voice Over Olympus

    For Jobless, Little Hope of Restoring Better Days

    Regulators Pledge New Rules After MF Global’s Demise

    For Wall Street Watchdog, All Grunt Work, Little Glory

    G.M. Offers to Buy Back Hybrid Volts From Owners

    Netflix is ‘Broken’ With No Fix in Sight, Analyst Says

    Cullen Roche: Swap Lines – Not a Panacea

    Howard Lindzon: Financial Wisdoms Daily from Stocktwits

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  • Disney Raises Its Dividend By 50%
    , December 1st, 2011 at 11:27 am

    With all the good news about yesterday’s rally, I wanted to highlight another optimistic news item: Disney raised its dividend by 50% to 60 cents per share. I’m not sure why, but Disney only pays an annual dividend.

    This is actually a very small dividend compared with the company’s total profit. Disney is expected to earn $2.90 per share for the fiscal year ending next September. Sixty cents works out to a payout ratio of just over 20%. The stock’s dividend yield is only 1.67% which is still well below the overall market’s yield.

    Disney’s last two earnings reports have been pretty good. The stock looks to be a pretty solid value.

    “The Walt Disney Company had a great creative, strategic and financial year,” Robert A. Iger, president and chief executive officer, said in the statement. “We are pleased to be able to raise our shareholder dividend by 50 percent while continuing to invest for future growth.”

    On November 10th the company reported a 21 percent increase in fiscal 2011 profit to $4.81 billion, or $2.52 per share, on revenue that gained 7.4 percent to $40.9 billion.

    Disney was expected to raise its dividend by 5 cents to 45 cents, according to data compiled by Bloomberg. An increase to 65 cents is forecast for next year, according to the data.

  • November ISM = 52.7
    , December 1st, 2011 at 10:54 am

    This morning, the Institute for Supply Management’s manufacturing index for November came in at 52.7. That was above expectations of 51.0 and it was an increase from October’s number of 50.8. This was also the highest reading in five months.

    Any number above 50 means the economy is growing. November was the 28th-straight +50 ISM. Today’s ISM report is more bad news for the Double Dippers. Since 1948, the ISM had landed between 50.0 and 55.0 a total of 225 times yet only nine of those months have been official recessions.

  • Morning News: December 1, 2011
    , December 1st, 2011 at 5:31 am

    Spain, France Bond Sales Take On EU Crisis

    Draghi Says ECB Bond Purchases ‘Limited’

    6 Central Banks Act to Buy Time in Europe Crisis

    China Factory Sector Shrinks First Time in Nearly 3 Years

    Euro-Zone Manufacturing Downturn Deepens

    Majority of Economists Still See Deflation Gloom

    Crude Oil Trades Near Two-Week High Amid Supply Risks, Euro Debt Concern

    Beige Book Survey Finds Slow to Moderate Gains

    Fed Dollar-Funding Cut Shows Limits of Action

    Ranbaxy’s Lipitor Copy in U.S. Stores Threatens Pfizer Sales

    Senators Question Deals to Block Generic Lipitor

    Yahoo Board Said to Lean Toward Sale of Minority Stake

    Zynga Expected to Seek $10 Billion Valuation in I.P.O.

    American Won’t Be the Last Airline Bankruptcy

    Joshua Brown: Build-a-Bull Workshop

    Randall Wray: Time to Demand Transparency and Accountability of Our Public Stewards

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  • Today’s Monster Day
    , November 30th, 2011 at 5:06 pm

    We had a spectacular rally today. By my numbers, this was the eighth-best day following an up day for the S&P 500 in the last 70 years. There have been other strong days, but they often came after big down days. Yesterday, we were up slightly.

    The Dow gained 490 points today which was its best day since March 2009. What impressed me was that we continued to rally into the close which means that investors aren’t so afraid to hold stocks overnight.

    While the S&P 500 gained 4.33%, which is about 470 billion in market cap, our Buy List trailed the market gaining 3.91%. The shortfall was due to Jos. A. Bank ($JOSB) which was our only losing stock today. Shares of JOSB dropped by 3.7% due to today’s warning although they had been much lower.

    Seven of our stocks were up more than 6%, three were up by more than 7% and JPMorgan Chase ($JPM) added 8.4% for the day. As I suspected this morning, today was a huge day for cyclical stocks. The Morgan Stanley Cyclical Index ($CYC) jumped 5.92% today to close at 900.46. The $VIX plunged 9.3% to 27.80.

  • Is Microsoft a Value Stock?
    , November 30th, 2011 at 2:44 pm

    Check out the plunge in Microsoft‘s ($MSFT) P/E Ratio:

    Even though Microsoft’s earnings have risen steadily, the stock has basically ranged between $25 and $30 for the last eight years. Add the two phenomena together and you get a declining Price/Earnings Ratio.

    So is the stock cheap? Maybe.

    For the fiscal year ending in June 2012, Microsoft is expected to earn $2.75 per share. The stock is currently going for 9.24 times that.

    Over those same four quarters, the S&P 500 is expected to earn $101.73. At the current price, the index is going for 11.17 times that. This means that Microsoft’s valuation is 17% less than the overall market’s.

    Also, bear in mind that Microsoft recently raised its quarterly dividend to 20 cents per share. That 80-cent dividend for the year works out to a yield of 3.15%.

  • Amazon Is Still Too Expensive
    , November 30th, 2011 at 11:16 am

    Amazon‘s ($AMZN) stock is down a lot since its October plunge. On October 25th, the shares dropped from $227.15 to $198.40 after missing its earnings by 10 cents per share. The stock is currently down to $191.

    So is it cheap now?

    Nope, not even close. Put it this way: Wall Street has cut its EPS estimate for next year from $3.80 four months ago to “only” $2.05 today.

    At the current price, that’s still more than 93 times earnings.

    Stay away from Amazon.

  • Still More Good News
    , November 30th, 2011 at 11:00 am

    We’re not done yet. The S&P 500 has been as high as 1,239.37 today. Every single Buy List stock, save for Joey Bank ($JOSB), is up today.

    The National Association of Realtors reported that pending home sales surged 10.4% last month. The expectation was for an increase of just 2%.

    The other good news is that the Chicago PMI just hit a seven-month high.

  • Jos. A. Bank Beats By Three Cents
    , November 30th, 2011 at 9:28 am

    Another great quarter from Jos. A. Bank Clothiers ($JOSB). The company just reported fiscal Q3 earnings of 54 cents per share which was three cents more than the Street was expecting.

    Revenues rose 20.9% to $209.6 million. That’s more than $14 million more than the consensus. Comparable store sales rose by an impressive 14.6%.

    JOSB has now grown earnings for 40 of the last 41 quarters including the last 22 in a row. The company also offered a warning about the start of the fourth quarter. Here’s what they had to say:

    JoS. A. Bank Clothiers, Inc. announces that net income for the third quarter of fiscal year 2011 increased 19.3% to $15.0 million as compared with net income of $12.6 million for the third quarter of fiscal year 2010. Earnings per share for the third quarter of fiscal year 2011 increased 20.0% to $0.54 per share as compared with earnings per share of $0.45 for the third quarter of fiscal year 2010. The third quarter of fiscal year 2011 ended October 29, 2011; the third quarter of fiscal year 2010 ended October 30, 2010.

    Total sales for the third quarter of fiscal year 2011 increased 21.0% to $209.6 million from $173.3 million in the third quarter of fiscal year 2010, while comparable store sales increased 14.6% and Direct Marketing sales increased 28.6%.

    Comparing the first nine months of fiscal year 2011 with the first nine months of fiscal year 2010, net income increased 18.9% to $53.3 million as compared to $44.9 million and earnings per share increased 18.6% to $1.91 per share as compared to $1.61 per share. Total sales for the first nine months of fiscal year 2011 increased 17.4% to $633.6 million from $539.8 million for the first nine months of fiscal year 2010, while comparable store sales increased 9.9% and Direct Marketing sales increased 26.1%.

    “We are pleased to report another solid sales and earnings performance for the third quarter of fiscal year 2011 with sales growth of 21.0% and earnings growth of 19.3%. With this quarter’s results, we have achieved earnings growth in 40 of the past 41 quarters when compared to the respective prior year periods, including 22 quarters in a row,” stated R. Neal Black, President and CEO of JoS. A. Bank Clothiers, Inc. “The fourth quarter, compared to a very strong performance last year, has started out more slowly than we had planned. November comparable store sales declined, while our direct segment sales increased, compared to the same period last year. As a result, we have adjusted our December merchandising and marketing plans for stores. We believe our efforts will be effective and appealing to our customers. Therefore we remain cautiously optimistic for the outcome of this year’s fourth quarter,” continued Mr. Black.

    Update: The shares are down today due to the warning mentioned above.

  • The Fed’s Statement on Today’s News
    , November 30th, 2011 at 9:12 am

    Here’s the statement from the Federal Reserve:

    The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing coordinated actions to enhance their capacity to provide liquidity support to the global financial system. The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.

    These central banks have agreed to lower the pricing on the existing temporary U.S. dollar liquidity swap arrangements by 50 basis points so that the new rate will be the U.S. dollar overnight index swap (OIS) rate plus 50 basis points. This pricing will be applied to all operations conducted from December 5, 2011. The authorization of these swap arrangements has been extended to February 1, 2013. In addition, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank will continue to offer three-month tenders until further notice.

    As a contingency measure, these central banks have also agreed to establish temporary bilateral liquidity swap arrangements so that liquidity can be provided in each jurisdiction in any of their currencies should market conditions so warrant. At present, there is no need to offer liquidity in non-domestic currencies other than the U.S. dollar, but the central banks judge it prudent to make the necessary arrangements so that liquidity support operations could be put into place quickly should the need arise. These swap lines are authorized through February 1, 2013.

    Federal Reserve Actions
    The Federal Open Market Committee has authorized an extension of the existing temporary U.S. dollar liquidity swap arrangements with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank through February 1, 2013. The rate on these swap arrangements has been reduced from the U.S. dollar OIS rate plus 100 basis points to the OIS rate plus 50 basis points. In addition, as a contingency measure, the Federal Open Market Committee has agreed to establish similar temporary swap arrangements with these five central banks to provide liquidity in any of their currencies if necessary. Further details on the revised arrangements will be available shortly.

    U.S. financial institutions currently do not face difficulty obtaining liquidity in short-term funding markets. However, were conditions to deteriorate, the Federal Reserve has a range of tools available to provide an effective liquidity backstop for such institutions and is prepared to use these tools as needed to support financial stability and to promote the extension of credit to U.S. households and businesses.

    Information on Related Actions Being Taken by Other Central Banks
    Information on the actions to be taken by other central banks is available on the following websites:

    Bank of Canada

    Bank of England

    Bank of Japan (PDF)

    European Central Bank

    Swiss National Bank (PDF)

    Frequently Asked Questions: U.S. Dollar and Foreign Currency Liquidity Swaps