Archive for October, 2012

• “Ways to Make Your Money Grow”
  Eddy Elfenbein, October 31st, 2012 at 5:58 pm

  In an insightful article on investing, John DeFeo of TheStreet drops this nugget:

  Meanwhile, if you’re looking for insightful analysis of individual stocks, Eddy Elfenbein’s Crossing Wall Street blog is a must-read.

  Thanks! Check out the whole column.

• Hubbell Inc. ($HUB-B)
  Eddy Elfenbein, October 31st, 2012 at 3:09 pm

  Ever heard of Hubbell Inc. ($HUB-B)? Don’t worry, you’re not alone.

  The reason I’m highlighting it — and let me make it clear that I’m not saying it’s a buy — is that it’s a pretty high-quality company. Despite Hubbell’s strong performance the stock is almost completely ignored by Wall Street. It has a market value of $5 billion and there are no earnings estimates for it. Not a single one.

  Here’s a description from Hoovers:

  The Hubble telescope and Hubbell Inc. both feature lots of modern electrical equipment — but you don’t have to go into space to check out Hubbell’s wares. The company’s two operating segments — Electrical (which now includes Hubbell’s former Industrial Technology segment) and Power — make electrical and electronic products for commercial, industrial, telecommunications, and utility applications. Hubbell’s products include lighting fixtures, outlet boxes, enclosures and fittings, wire and cable, insulators and surge arresters, and test and measurement equipment. The company gets most of its sales in the US.

  Now check out this long-term chart. I’ve added the trailing earnings-per-share at the bottom.

  

  I’ll let you in on a secret — you don’t need an MBA or a CFA or anything else to analyze a company. You simply want to find a company with a nice track record of growing earnings, just like we see above with Hubbell. The earnings don’t grow every quarter or every year, but there’s a clear upward trend. That’s exactly what we want to see.

  The stock reacts in lots of short-term fits and starts, but over the long haul, it moves up with the earnings.

  Hubbell is clearly a good company, yet it’s almost never mentioned on CNBC. Hubbell rarely makes news that you can find in the Wall Street Journal. Every bump and wiggle from Apple is covered relentlessly. Yet Hubbell quietly goes about their business.

  Since 1978, Hawkins ($HWKN) is up about 17,250% while the S&P 500 is up 1,386%. Yet the number of analysts who follow HWKN = 0.

  As an investor, don’t ever feel pinned in by the top names on Wall Street. There are thousands of companies out there. Many are bad, but there are a few gems.

• Books for New Investors
  Eddy Elfenbein, October 31st, 2012 at 3:02 pm

  This is from my FAQ page but I wanted to highlight it for new visitors.

  I’m new to investing. Do you recommend any books to learn about the stock market?

  I think the best place to start is Peter Lynch’s “One Up On Wall Street.” It’s easy-to-read and Lynch’s conservative message is still timely. Another excellent book is “The Essays of Warren Buffett,” which is a collection of Buffett’s writings over the years.

• Nicholas Financial Earns 42 Cents Per Share
  Eddy Elfenbein, October 31st, 2012 at 12:11 pm

  The results are out! For their fiscal second quarter, Nicholas Financial ($NICK) earned 42 cents per share. This was on the low side of my expectations, but it’s hardly troubling. The company was dinged by about four cents per share (pre-tax, about 2.4 cents per share by my math, post tax) on their interest rate swaps. Operating costs rose about 8% over the last rise which is pretty steep considering that revenues only rose about 3% over last year.

  Still, the fundamentals of NICK’s business look solid. Their pre-tax yield is still running over 12% which is very good. My assumption is that NICK will earn about 45 cents per share for the next several quarters (plus or minus).

  Put it this way: Even if NICK’s numbers for this quarter were to continue for the next four quarters (and I tend to doubt that since this was on the low side), that still means NICK would earn $1.69 per share for the year. That’s less than eight times earnings going by yesterday’s close.

  Here’s a spreadsheet of NICK’s financials going back a few years.

• The Stock Market Is Open…Finally!
  Eddy Elfenbein, October 31st, 2012 at 10:22 am

  After four days, the stock market is finally open today. The S&P 500 is up about three points to 1,415. On our Buy List, Ford ($F) is currently up more than 52 cents to 5.1% to $10.83 per share.

  WEX Inc. ($WXS), formerly Wright Express, reported earnings of $1.08 per share. That was six cents below estimates. Revenues rose 6% to $161 million. WXS sees Q4 ranging between $1.01 and $1.08 per share. The Street had been expecting $1.10 per share. The stock is currently up 35 cents today to $72.46 per share.

• Morning News: October 31, 2012
  Eddy Elfenbein, October 31st, 2012 at 6:43 am

  Spain Narrows Central Government Budget Deficit to 4.39%

  Euro Chiefs Set to Grant Greece Extension Amid Squabbles

  Cameron Faces Revolt as Conservatives Demand EU Budget Cut

  Hong Kong Named Top Financial Center For Second Year

  Sandy Could Cost Economy $20 Billion

  Home Prices Continue Upward Trend In August

  Disney Buys ‘Star Wars’ Producer Lucasfilm for $4.05 Billion

  Barclays Pretax Profit Climbs 29% on Fixed-Income Revenue

  Weakness in Europe Undercuts Ford’s Profit

  Chrysler Group Quarterly Net Income Rises to $381 Million

  Deutsche Bank Posts $975 Million Profit in Third Quarter

  Panasonic Projects $9.6 Billion Loss on TVs, Restructuring

  ArcelorMittal Posts Profit Drop, Cuts Dividend on Steel Demand

  Roger Nusbaum: A Useful Set of Financial Rules

  Jeff Miller: Weighing the Week Ahead: A Three-Day Homestretch

  Be sure to follow me on Twitter.

• Fiserv Earns $1.27 Per Share
  Eddy Elfenbein, October 30th, 2012 at 4:50 pm

  Not a single mutual fund manger has underperformed the S&P 500 in four days! Fortunately, trading will resume tomorrow morning. But the earnings parade continues.

  After the bell, Fiserv ($FISV) reported Q3 earnings of $1.27 per share which matched estimates. The company describes itself as “a leading global technology provider serving the financial services industry, driving innovation in payments, processing services, risk and compliance, customer and channel management, and business insights and optimization.” Fiserv reiterated its full-year forecast of earnings growth of 11% to 14% which comes to $5.05 to $5.20 per share.

  Here are some highlights from the quarter:

  • Adjusted revenue grew 5 percent in the quarter to $1.05 billion and increased 4 percent in the first nine months of 2012 to $3.11 billion, compared to the respective prior year periods.

  • Adjusted internal revenue growth was 4 percent in the quarter, consisting of 2 percent growth in the Payments segment and 5 percent growth in the Financial segment. Adjusted internal revenue growth for the first nine months of 2012 was 3 percent, including 2 percent growth in the Payments segment and 3 percent growth in the Financial segment.

  • Adjusted operating margin was 29.8 percent in the quarter, an increase of 80 basis points compared to the prior year’s quarter, and was up 40 basis points to 29.3 percent for the first nine months of 2012 compared to the prior year.

  • Adjusted earnings per share in the quarter increased 9 percent to $1.27 and increased 13 percent in the first nine months of 2012 to $3.75, compared to the respective prior year periods.

  • Free cash flow was up 18 percent in the quarter and was $501 million for the first nine months of 2012 compared with $507 million in the prior year period.

  • The company repurchased 2.7 million shares of common stock in the third quarter for $189 million and, through the end of the third quarter, has repurchased 8.5 million shares for $577 million. As of September 30, 2012, the company had approximately 6 million shares remaining under its existing share repurchase authorization.

• Ford Earns 40 Cents Per Share
  Eddy Elfenbein, October 30th, 2012 at 11:38 am

  Although the stock market is closed again, we still have earnings reports coming out. This morning, Ford Motor ($F) released an outstanding earnings report. For the third quarter, the automaker made 40 cents per share. That was 10 cents more than Wall Street had been expecting.

  The story is very simple—North America is strong and Europe is weak. The company has done a very good job of expanding its margins.

  For Q3, Ford had profits of $2.2 billion which was up from $1.9 billion, or 34 cents per share, for the same quarter last year. Total revenue dropped 4%, from $32.1 billion to $30.9 billion.

  Its Asia and Africa operations posted a pre-tax profit of $45 million, compared with a loss of $43 million. Ford said the unit benefitted from the launch of its new Ranger pick up and redesigned Focus compact in the region. Ford is investing heavily in Asia and the investment, along with a sluggish Chinese market, is damping profitability.

  South American operations posted a pre-tax profit $9 million, compared with $276 million pre-tax profits a year earlier. Ford said the region should post a profit for the year.

  In North America, Ford made $2.3 billion; but in Europe, Ford lost $468 million. The company expects to see more losses going forward. Over the last few years, Ford has cut capacity in North America and we’re seeing the fruits of those efforts today. They need to use the same strategy in Europe.

• Morning News: October 30, 2012
  Eddy Elfenbein, October 30th, 2012 at 7:23 am

  German October Unemployment Rose Twice as Much as Forecast

  Spain Stays In Recession As Inflation Bites

  Euro-Area October Economic Sentiment Falls to Three-Year Low

  Bank Of Japan Boosts Stimulus For Sagging Economy, Markets Unimpressed

  Turkish Banks Go for Gold to Lure $302 Billion Hoard

  Hurricane Sandy Threatens $20 Billion in Economic Damage

  Standard Chartered Investors Still Fear Iranian Investigation Fallout

  UBS to Cut 10,000 Jobs in Major Overhaul

  Hitachi Buys UK Nuclear Project From E.On And RWE

  TNK-BP Profit Rises 53% on Crude Export Duty Lag, Strong Ruble

  Deutsche Bank Q3 Lifted By Rebounding Markets

  Fiat Reports Third-Quarter Earnings Increase

  In Shake-Up, Apple’s Mobile Software and Retail Chiefs to Depart

  Cullen Roche: Natural Disasters, the Broken Window Fallacy and MR….

  John Hempton: My Pick For CEO Dead Pool: Omar S Ishrak At Medtronic

  Be sure to follow me on Twitter.

• Harris Earns $1.14 Per Share
  Eddy Elfenbein, October 29th, 2012 at 8:11 pm

  By the way, we did have one earnings report today. Harris Corp. ($HRS) said that quarterly revenue dropped from $1.34 billion to $1.26 billion. For the quarter, Harris earned $138 million or $1.14 per share. That beat Wall Street’s estimate by two cents per share.

  “Harris first quarter results were solid in a challenging government spending environment,” said William M. Brown, president and chief executive officer. “We were awarded a number of large contracts in both RF Communications and in Government Communications Systems, and revenue in Government Communications Systems increased 5 percent over the prior year. First quarter operating performance was positive with operating margin flat compared to the prior year, despite lower revenue and higher R&D investment. Harris generates strong free cash flow, and in the first quarter we increased the dividend by 12 percent, the second increase this calendar year.”

  The most important news is that Harris is sticking by its full-year guidance of $5.10 to $5.30 per share. If the next three quarters are like the first, Harris should have no trouble hitting that target.