Archive for 2011

  • Housing Starts Best in 19 Months
    , December 20th, 2011 at 11:10 am

    After dropping 4.4% since December 7th, the market is rallying today. Part of the reason was a good housing report, and we haven’t seen much of those. The Commerce Department said that housing starts jumped 9.3% last month. That’s the biggest gain in 19 months.

    The Dow is currently up 277 points. Treasuries are up, yields and the $VIX are down.

    Jefferies ($JEF) had a very good earnings report which lifted the stock by 9%. That helped lift Leucadia ($LUK), which will be leaving our Buy List soon, to a 5% gain today.

    Stayed tuned for Oracle’s ($ORCL) earnings which are due out after the close.

  • Morning News: December 20, 2011
    , December 20th, 2011 at 7:02 am

    German Push to Remodel Europe May Backfire

    E.C.B. Warns of Dangers Ahead for Euro Zone Economy

    Spanish Yields Drop at T-Bill Auction

    Sweden Cuts Interest Rate

    Lenders Losing Battle of ‘Basel’

    Bankers Seek to Debunk ‘Imbecile’ Attack on Top 1%

    FBI Runs ‘Perfect Hedge’ to Nab Inside Traders

    U.S. Backs Apple in Patent Ruling That Hits Google

    AT&T Left With Few Options After T-Mobile Bid

    Deutsche Telekom silent on Plan B for T-Mobile USA

    Lockheed Wins Japanese Order for F-35 Fighters

    Bi-Lo to Buy Winn-Dixie for $560 Million

    Spanish Oil Major Repsol to Buy 10% Of Own Shares

    Saab Files for Liquidation After G.M. Balks at China Deal

    Stone Street: Two New ZAGG Datapoints

    James Altucher: How to Have a BIG Idea

    Howard Lindzon: The Year 2012…Sales Matter even for Web Startups

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  • AT&T and T-Mobile
    , December 19th, 2011 at 5:30 pm

    Just a quick note about the news that AT&T ($T) is ditching its plans to buy T-Mobile. I thought this might happen. I like AT&T a lot and I strongly considered adding it to next year’s Buy List, but the T-Mobile issue was too much to bear.

    Even without the deal, AT&T will still take a $4 billion charge.

    The charge is part of a break-up fee agreement, giving Deutsche Telekom a cash payment of $3 billion, roaming services agreement and a package of mobile licenses for T-Mobile USA.

    Ultimately, AT&T made the right decision. I just wish it didn’t cost so much money.

  • The Dow-To-S&P 500 Ratio
    , December 19th, 2011 at 1:44 pm

    The Dow has been beating up the S&P 500 this year. The two indexes generally follow each other, but some gaps do open up.

    The Dow is currently 9.758 times the S&P 500 (I mean index values, not market value). This is close to the highest level in three years. As a very general rule, the ratio rises as economic recessions approach.

    On November 20 and 21, 2008, the Dow-to-S&P 500 Ratio closed above 10. That was the first time it happened since November 1966. If the next two months are like the last two, we might break 10 again very soon.

  • Dividends Have Been Big Winners This Year
    , December 19th, 2011 at 11:14 am

    Bloomberg notes that dividend stocks have done well this year:

    In a year when American companies piled up record amounts of cash, the worst stocks were the savers and the best gave the money back to investors with dividends and buybacks.

    Companies that hoarded cash such as CareFusion Corp. (CFN), Western Digital Corp. and 18 other members of the Standard & Poor’s 500 Index lost an average 15 percent in 2011, according to data compiled by Bloomberg. The 40 that repurchased the most stock or offered the biggest dividends climbed 5.7 percent, led by DirecTV and Reynolds American Inc. (RAI), the data show.

    Bulls say gains in companies that returned money will help unlock almost $1 trillion of cash that chief executive officers have been hoarding for three years. Thomas Lee, the chief U.S. equity strategist at JPMorgan Chase & Co., says distributions should increase 28 percent to $1.1 trillion into next year. Bears say dividends and buybacks will be insufficient to keep the rally going as mandated budget cuts curb growth.

    When investors get nervous, they seek stability and that means higher dividends. What’s also attractive about dividends is that they’re easy to understand and somewhat easy to project. Dividend payments tend to be much more stable than earnings.

    The big change in recent years is that so many financial stocks slashed their dividends or got rid of them entirely. The Financial Sector ETF ($XLF), for example, used to pay more than 90 cents per share a year in dividends. That dropped as low as 17 cents per share but should start climbing higher as the Fed allows more dividend payments.

  • Investing Tips
    , December 19th, 2011 at 10:43 am

    From The Onion:

    Invest everything in Morton Salt, then run around screaming, “The Slug-men are coming! The Slug-men are coming!”

    Before choosing a brokerage firm, carefully study the TV commercials of several firms. Go with the one with the most impressive ads.

    When your stock begins to drop, gesticulate wildly to coax it back in the right direction. (Note: Also works in bowling.)

    Instead of investing in stocks, why not invest your time and energy in your community? You will reap dividends far more precious than wealth.

    Stock-market losses are only losses on paper. Use Wite-Out to your advantage.

    Keep a close eye on Dan Aykroyd and Eddie Murphy. They may try to outfox you and your cold-hearted brother.

    Diversify your portfolio with some colored yarn or pictures clipped from magazines.

    Many small, privately held companies are now issuing IPOs, often with incredible success. Among those rumored to be going public: The West End Valu-Shopper, The Marzipan Bunny Sweet Shoppe, and www.geocities.com/chadspage/favekornpics.html.

    Wait until stocks are just about to soar in value, then buy lots of them. When they’ve gone as high as they’re going to go, sell them all.

    Take your screeching trophy wife’s advice: Invest all your money in designer handbags.

    If at all possible, start out with $80 million. This will reduce both the pressure on you and the risks involved.

    Ask your company if it offers an employee stock plan. If it doesn’t, consider working for a different gas station.

    Go to a financial advisor and act as if you understand and are carefully weighing what they say, then blindly do whatever they tell you.

    Invest in your friends’ band. They rock.

    When examining the balance sheet of a corporation, a good sign of health is an assets-to-liabilities ratio of two to one. Then again, if you understand that, you’re probably a rich prick who doesn’t need any more money.

  • Hudson City Pays Off Debt Early
    , December 19th, 2011 at 10:14 am

    Our Buy List is doing well so far this morning. While the S&P 500 is up 0.20%, our Buy List is up 0.49%. Stocks like Moog ($MOG-A), Jos A Bank ($JOSB) and Deluxe ($DLX) are particularly strong. I also see that Nicholas Financial ($NICK) is now trading above $12 per share.

    I would think the departure of the world’s most gruesome person would be a positive for the market. I think it’s interesting that three main points of the yield curve are now separated by 1%; the five-year yields 0.81%, the ten-year is at 1.85% and the 30-year yields 2.84%. I really doubt if those low yields will hang around much longer.

    On Friday, one of our new stocks for 2012, Hudson City Bancorp($HCBK), jumped 3.8%. I’d like to think this was on the news that it’s joining my Buy List. Alas, the news that the bank is paying off $4.3 billion in structured debt before it’s due probably played a much larger role in the rally.

    Unfortunately for me (but not for you), since the 2012 Buy List doesn’t go into effect for another two weeks, none of the positive move in HCBK will go towards helping my tracking record.

  • Bed Bath & Beyond’s Upcoming Earnings Report
    , December 19th, 2011 at 9:27 am

    I had a mistake in Friday’s CWS Market Review. I said that Oracle ($ORCL) is the only Buy List company to report earnings this week. That’s not right; Bed Bath & Beyond ($BBBY) will report its fiscal third-quarter earnings on Wednesday, December 21st.

    This was a bad oversight on my part because BBBY had a great earnings report three months ago. In September, the company said it earned 93 cents per share which was nine cents more than Wall Street’s expectations. They had told investors to expect fiscal Q2 earnings to range between 77 and 82 cents per share.

    For the third quarter, BBBY projects earnings between 82 and 87 cents per share. The company also raised their full-year guidance to earnings growth of 22% to 25%.

    This is the second time that BBBY has raised their full-year growth forecast this year. They went from forecasting an earnings increase of 10% – 15% to a revised range of 15% – 20% to the current range of 22% – 25%. For 2010, Bed Bath & Beyond earned $3.07 per share, so the updated forecast translates to a range of $3.74 – $3.84 per share.

  • Morning News: December 19, 2011
    , December 19th, 2011 at 6:59 am

    Kim Jong Il, North Korea’s Dictator, Dies

    Stocks Fall as Dollar Gains on Kim’s Death

    EU Ministers Seek Crisis IMF Funding Deal

    European Leaders Face Bundesbank Hurdle Over IMF Funds

    Germany Says Full ESM Payment in 2012 Not Very Likely

    ECB’s Draghi Puts Hopes on EFSF Bailout Fund, Rules

    Instability a New Fear for Investors in Russia

    S&P Cut Proves Absurd as Investors Prefer U.S.

    S.E.C. Accuses Fannie and Freddie Ex-Chiefs of Deception

    Goldman Sachs Winning CEOs as Global No. 1

    Private Investment Rounds Weaken I.P.O.’s

    Microsoft Shrinking Margins Loom on Cloud Push

    Saudi Prince Buys $300 Million Stake in Twitter

    Saab Runs Out of Road as Lengthy Rescue Quest Fails

    Jeff Miller: Weighing the Week Ahead: What Should We Expect From Santa?

    Phil Pearlman: Institutional Journalism and the Race to Zero

    Cullen Roche: 10 Outrageous Predictions for 2012

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  • Most Mutual Funds Are Down for the Year
    , December 19th, 2011 at 12:34 am

    USA Today reports that most stock mutual funds are down for the year:

    The average diversified U.S. stock mutual fund has fallen 5.9% this year, vs. a 1.4% loss for the Standard & Poor’s 500-stock index, says Lipper, which tracks the funds. Out of 8,036 funds, 7,399, or 92%, are showing a loss — and some are doozies.

    (…)

    One reason the average fund has lagged so badly: expenses. The average fund charges about 1.3% a year to pay for salaries, offices and other costs, according to Morningstar. Stock indexes have no expenses.

    Also, stock funds tend to invest in midsize and small companies, which have lagged behind the S&P 500. The Russell 2000 small-cap index, for example, has fallen 8.4% this year.

    Another reason is technical: Lipper’s average U.S. stock fund figure includes many new funds that use futures and options to amplify gains and losses. Without those funds, the average loss for U.S. stock funds would have been 4.1%.

    Thanks to the European crisis, international funds have been smacked even harder: The average large-company international fund has plunged 15.5%.

    Some specialized funds have tanked even more. Direxion Daily Real Estate Bear 3X, which uses futures and options to amplify performance up and down, plunged 57.7%.

    It’s not all bad news. Virtus Small-Cap Sustainable Growth leads the pack among diversified U.S. funds, jumping 16.5%. And Direxion Daily India Bear 3X, an amped-up single-country fund, soared 58.8%.

    Continued market volatility has sent investors fleeing stock funds this year. Investors have yanked out $133 billion more than they have put in to stock funds this year, according to the Investment Company Institute, the funds’ trade group.

    Last year through October, investors pulled $37.2 billion from stock funds, vs. $84.5 billion the same period this year.

    Few investors put all their money in stock funds, however, so the year hasn’t been a total wash. The average bond fund that invests in U.S. Treasury securities has soared 14.7% this year, as investors flocked to government securities for safety.

    Funds that invest in Treasury Inflation Protected Securities, or TIPS, have surged 11% even though the consumer price index, the government’s main gauge of inflation, has risen only 3.4% the 12 months ended November.