Archive for 2011

• Models and Confidence
  Eddy Elfenbein, December 8th, 2011 at 5:59 pm

  Arnold Kling writes:

  Indeed, elsewhere Kahneman has told a story of a group of Swiss soldiers who were lost in the Alps because of bad weather. One of them realized he had a map. Only after they had successfully climbed down to safety did anyone discover that it was a map of the Pyrenees. Kahneman tells that story in the context of discussing economic and financial models. Even if those maps are wrong, we still feel better when using them.

• Can the S&P 500 Hit 1720 Next Year?
  Eddy Elfenbein, December 8th, 2011 at 3:07 pm

  I like post titles that are questions rather than statements because it doesn’t require any commitment from me. Still, if we take some reasonable assumptions, we can arrive at very decent numbers for the S&P 500 one year from now.

  Right now, Wall Street expects the S&P 500 to earn $97.45 this year and $107.68 for 2012. If we assume an earnings multiple, which is hardly excessive, then we get a year-end target of 1723 for the index.

  

• After Five Year Absence, Ford’s Dividend Will Return
  Eddy Elfenbein, December 8th, 2011 at 12:13 pm

  Ford ($F) just announced that it’s going to pay a dividend of five cents per share. The dividend is payable March 1, 2012 to shareholders of record on Jan. 31, 2012.

  The Board of Directors of Ford Motor Company today declared a quarterly dividend of 5 cents per share.

  “We have made tremendous progress in reducing debt and generating consistent positive earnings and cash flow,” said Bill Ford , executive chairman, Ford Motor Company. “The board believes it is important to share the benefits of our improved financial performance with our shareholders. We are pleased to reinstate a quarterly dividend, as it is an important sign of our progress in building a profitably growing company and our confidence in the future.”

  Lewis Booth , Ford executive vice president and chief financial officer, said the company’s strong liquidity and balance sheet improvements provide the underlying financial strength to resume paying a quarterly dividend.

  “Building a strong balance sheet that supports our growth plans remains a core part of our One Ford strategy,” said Booth. “We have demonstrated our capability to finance our plans and we are confident that we can begin to pay a dividend that will be sustainable through economic cycles.”

  A five-cent dividend is a puny portion of Ford’s annual profit. The company will earn about $1.87 per share this year and it’s expected to earn another $1.62 per share next year.

  From 2002 to early 2006, Ford had paid a quarterly dividend of 10 cents per share. Then Ford cut it five cents for one quarter; then they got rid of it entirely.

• The New Dividend Aristocrats
  Eddy Elfenbein, December 8th, 2011 at 11:31 am

  S&P follows an index it calls the Dividend Aristocrats which is a group of S&P 500 stocks that have increased their dividends every year for the last 25 years in a row.

  S&P just announced that it’s adding 10 new stocks to the Dividend Aristocrats and deleting one. This brings the new list of Aristocrats up to 52.

  The new additions are:

  Franklin Resources ($BEN)
  HCP Incorporated ($HCP)
  T. Rowe Price ($TROW)
  AT&T ($T)
  Colgate-Palmolive ($CL)
  Genuine Parts ($GPC)
  Illinois Tool Works ($ITW)
  Medtronic ($MDT)
  Nucor ($NUE)
  Sysco ($SYY)

  The only deletion was CenturyLink ($CTL).

  Howard Silverblatt of S&P passes on some dividend facts (via Michael Aneiro):

  * Year-to-date (YTD) dividend payers in the S&P 500 have returned 1.72%, compared to the non-payers loss of 4.63%

  * The actual dividend payment YTD is up 16.2%

  * The indicated dividend rate (based on the current rate) is up 16.8% YTD, but still off 4.9% from the June 2008 high

  * From 1995 the S&P 500 indicated dividend yield has averaged 43% of the U.S. 10-year Treasury note, the current rate is 105%

  * 215 issues have a current yield higher than the 10-year Treasury

  Now that Medtronic and Sysco are Dividend Aristocrats, this makes six of our Buy List stocks that are Aristocrats. The other four are AFLAC ($AFL), Abbott Laboratories ($ABT), Becton, Dickinson ($BDX) and Johnson & Johnson ($JNJ).

  The Dividend Aristocrats have had a decent year. Here’s a look at the Dividend Aristocrats ETF ($SDY) divided by the $SPY:

  

• A Turnaround for Financials
  Eddy Elfenbein, December 8th, 2011 at 10:48 am

  I’ve been pretty down on financials for the past several months, but I think the sector is finally a good buy. Two months ago, I said that the Financial Sector ETF ($XLF) would be a good speculative buy if it fell below $12 per share. Eventually it did. On October 3, the XLF got as low as $10.95. I think it has a reasonable shot of hitting $16 within the next 12 months. In early 2007, the ETF came close to $37.

  

• Morning News: December 8, 2011
  Eddy Elfenbein, December 8th, 2011 at 5:21 am

  European Stocks Tentatively Higher

  ECB May Dig Deeper Into Crisis Toolbox

  Franco-British Alarm of 1989 Comes True as Merkel Prevails

  Draghi Courts Bundesbank in Bid to Avoid Trichet Fate

  Asian Central Banks Hold Rates on Euro Uncertainty

  Entrepreneur’s Rival in China: The State

  New China Life Said to Raise $1.9 Billion in Stock Offering

  India Suspends Plan to Let in Foreign Retailers

  Japan “Mulls $13-19 Billion Bailout” of Nuclear Operator

  China’s “Best Buys” Scramble to Tap E-commerce Boom

  Crude Oil Rises From One-Week Low Before European Debt Meetings

  First Solar Rises on Sale of Topaz Project to Buffett

  The Wild West of Finance

  Matthew Winkler: Why We Should Welcome Bernanke’s Complaints

  James Altucher: Stop Listening!

  Phil Pearlman: The Relative Negativity of a Flattish Open

  Be sure to follow me on Twitter.

• Stryker Raises Dividend By 18%
  Eddy Elfenbein, December 7th, 2011 at 2:13 pm

  The market is down so far today but it’s not too bad. The S&P 500 is currently at 1,255 though we’re up about 10 points from today’s low. The defensive sectors are doing the best today while the cyclicals are pulling up the rear.

  There’s not much action today on the Buy List though I want to highlight a few items.

  The best news is that Stryker ($SYK) is raising its quarterly dividend from 18 cents per share to 21.25 cents per share. That’s an 18% increase. The new 85-cent annual dividend translates to a yield of 1.75%.

  My advice to investors is to not overlook moves like this. We want to look at the overall trends of a business. Bear in mind that Stryker raised its dividend by 20% last year. These things add up.

  The other news is that Moody’s may downgrade Leucadia ($LUK), and Gilead ($GILD) just priced $3.7 billion in unsecured notes. That just reminds me of how much I hate the Pharmasset deal.

• 70 Years Ago Today
  Eddy Elfenbein, December 7th, 2011 at 7:48 am

  On Google Earth:

  21° 21′ 53″ N 157° 57′ 00″ W
  The USS Arizona

  You can see the whole ship underwater. You can even see the oil slick coming from the boat. I used the “Measure” function under “Tools.” It’s 590 feet long. That’s the “Lady Mo” to the southwest, and the sunken USS Utah is about 0.8 miles to the northwest, on the other side of Ford Island.

• Morning News: December 7, 2011
  Eddy Elfenbein, December 7th, 2011 at 5:21 am

  Merkel’s Path: Brinkmanship for Debt Crisis

  New European Bank Chief Takes a Bold Approach

  ‘Buy French’ Becomes Crisis Battle Cry in France

  China Growth Calls Ease as Export Outlook Darkens

  India Suspends Foreign Retail Plan on Protests

  Geithner Backs French-German Plan for Tighter EU

  Geithner: Europe ‘Will Succeed’

  Separating Fact From Fiction on the Fed’s Loans

  Fed Lashes Out at ‘Errors’ in Reporting

  The Robin Hood Tax

  Prudential Sells Real Estate Brokerage, Relocation Business to Brookfield

  Daimler Losing to BMW as Pure Luxury Wins

  ING Takes U.S. Annuities Hit

  Limited Choices for Yahoo, Each One With Its Own Risks

  Olympus Report Seeks Purge of ‘Yes Men’ Who Failed to Act

  Joshua Brown: Should You Follow Tom DeMark?

  Jeff Miller: Weighing the (rest of the) Week Ahead: The Eurozone Summit

  Be sure to follow me on Twitter.

• The New Buy List
  Eddy Elfenbein, December 6th, 2011 at 3:21 pm

  I’m going to unveil the 2012 Buy List on Thursday, December 15th.

  Although the Buy List won’t take effect until January 1st (the first day of trading in 2012 will be Tuesday, January 3rd), I like to pre-announce the new list so no one can claim that I’m trying to “front-run” my picks.

  As usual, the Buy List will have 20 names. Once the list is chosen, the names are locked and sealed, and I can’t make any change for the entire year. Also, as per usual, I’m only going to add and delete five names to the Buy List.

  My goal is to show investors that by being disciplined, investors can beat the market.

  For tracking purposes, I assume the Buy List is a portfolio of $1 million that’s equally weighted among the 20 stocks based on the price at the start of the year.