Archive for November, 2012

• Oops
  Eddy Elfenbein, November 8th, 2012 at 11:39 am

  From yesterday’s New York Times:

  Correction: November 7, 2012

  An earlier version of this article misspelled the singer’s surname in a number of places. He is Bruce Springsteen, not Springstein.

• Earnings Projections Are Still Coming Down
  Eddy Elfenbein, November 8th, 2012 at 11:24 am

  Here’s a look at the S&P 500 along with its earnings. The black line is the S&P 500 and it follows the left scale. The yellow line is the earnings and it follows the right scale. The two lines are scaled at a ratio of 16-to-1. This means that whenever the two lines cross, the market’s P/E Ratio is exactly 16.

  

  The earnings line into the future represents the consensus from analysts. The problem is that earnings projections have been coming down. The analyst community now expects the S&P 500 to earn $113 next year. That’s still a good number but it will require earnings growth to ramp from the small earnings decline we saw with Q3.

  When I saw Barry Ritholtz’s investment conference last month, Barry posted a graph showing how poor analysts have been in getting earnings growth right. It seems to me that as long as the earnings growth trend continues, then analysts are pretty accurate in getting that right. Of course, that’s the least important information. Where they’re wrong is in targeting when earnings suddenly drop. That’s the most important information.

• The Day After the Day After
  Eddy Elfenbein, November 8th, 2012 at 10:34 am

  The market is weakly recovering today after the second-worst sell-off this year. Yesterday’s 2.37% loss for the S&P 500 was only exceeded by a 2.46% plunge on June 1st. Right now, we’re up by about two points.

  This morning we learned that weekly jobless claims fell 8,000 to 355,000 however this data set over the next few weeks will be impacted by the effects of Hurricane Sandy. We may see a bump up in jobless claims in another month, but for now, the numbers look good.

  The government also reported that the trade deficit fell by 5.1% in September. The trade deficit is now close to its lowest levels in two years. Of course, much of this isn’t due to strength here, but weakness there.

  Speaking of which, the biggest news today came from the Bernanke of Europe, Mario Draghi. The head of the European Central Bank said he’s ready to buy bonds as the European economy continues to get worse. The ECB met today and decided to leave interest rates at 0.75%.

  The concern now for the Europeans is that Germany is beginning to look weak. Until now, that country had been holding things together. Now some analysts think that an ECB rate cut will come before the end of the year.

  The big area of concern now is Spain. This is one of the reasons why I told investors to expect a difficult market this autumn. Spain needs to ask for a bailout but they haven’t done so yet. The problem is that the political leaders see what’s going on in Greece where folks are rioting over forced austerity. As a result, Spain wants the best deal it can get. The problem gets worse because the ECB can’t make any hard promises before the fact. An economy is a dynamic system and facts on the ground can change quickly.

  There at least was some good news for Americans today. Monthly sales at McDonald’s ($MCD) fell for the first time in nine years. We’re either getting healthier, or perhaps, going to Arby’s.

• Morning News: November 8, 2012
  Eddy Elfenbein, November 8th, 2012 at 6:56 am

  Molotov Cocktails Light Up Athens Ahead Of Austerity Vote As Draghi Admits German Slowdown

  Weidmann in Defeat Still Influences ECB Bond-Buying Plan

  Qualcomm Helped, Hurt By Close Apple Ties

  US Panel Affirms Tariffs On Chinese Solar Products

  How Quickly Do Stock Markets Lose Their Obama Bounce

  For Wall Street, Obama’s Reelection Means No Dismantling Of Dodd-Frank Law

  SocGen Quarterly Net Falls 86% on Debt Charge, Greek Sale

  Lenovo Profit Rises 13% as Share Overtakes Hewlett-Packard

  Deutsche Telekom In €6bn Loss On US Deal

  Qualcomm Helped, Hurt By Close Apple Ties

  Boeing Says Cuts Save $1.6 Billion

  EADS Cash Dwindles as Superjumbos Line Up for Deliveries

  Monster Posts Slowing Growth

  Walmart Moves “Black Friday” Earlier On Thanksgiving Night

  Joshua Brown: Fire in the Disco!

  Howard Lindzon: Four More Years for Obama…Will Apple go to Zero and What Does It Mean for the Stock Market?

  Be sure to follow me on Twitter.

• Four More Years
  Eddy Elfenbein, November 7th, 2012 at 1:15 pm

  Not every stock is getting pounded today. News Corp ($NWSA), the parent of Fox News, is one of the few stocks that’s up. I guess Obama is good for ratings.

  

• The Dow Drops 330 Points
  Eddy Elfenbein, November 7th, 2012 at 11:30 am

  Wall Street, apparently, wasn’t thrilled with yesterday’s election. The stock market is taking a bit hit this morning. The S&P 500 has been down as much as 2.3% today which if it holds up would make it one of the worst days this year. I’m a little surprised the stock market is so surprised.

  Of course, there could be other factors at work. For example, there was a lousy report on German manufacturing today which comes on the heels of another bad one yesterday.

  There’s also a general strike in Greece as the legislature gets ready to vote on more austerity measures. I noticed that of the seven worst performing stocks in the S&P 100, five are major banks ($JPM $C $GS $JPM $BAC). Also, the defense contractors are having a rough day.

• Morning News: November 7, 2012
  Eddy Elfenbein, November 7th, 2012 at 6:48 am

  Stocks, Treasuries Rise on Obama’s Victory

  Greece Prepares to Vote on $23 Billion in New Cuts

  France Announces Cut in Payroll Taxes for Businesses

  Facing Protests, China’s Business Investment Slows

  Sinopec Said to Buy Nigeria Oil Blocks From French Total

  Don’t Worry Big Oil, President Obama Probably Doesn’t Hate You As Much As You Think

  Suzuki to Exit U.S. Car Market After Almost Three Decades

  ING Groep Cutting 2,350 Jobs as Quarterly Profit Slides 64%

  Munich Re Shrugs Off Sandy to Raise 2012 Profit Target

  AOL Climbs After Posting Profit on Higher Advertising Sales

  Morgan Stanley Selling Its Indian Private Bank

  Burberry Posts Profit That Exceeds Analysts’ Estimates

  What An Office-Supply Cabinet Says About The Future Of The Economy

  Jeff Carter: Financial Distress, Coming to A State or City Near You (Let’s Hope Not a Country)

  Cullen Roche: All Fiat Money Systems Fail, Right? Wrong.

  Be sure to follow me on Twitter.

• Home Depot Closes in on All-Time High
  Eddy Elfenbein, November 6th, 2012 at 12:04 pm

  One month ago, Home Depot ($HD) closed at a twelve-and-a-half year high. That’s an eighth of a century. The stock is back up and looks to take out the October high any day now. If so, Home Depot will be the latest in a string of mega-cap blue chip stocks to break very long-term highs.

  

  HD set its all-time high close on the final day of the 20th century, December 31, 1999. Home Depot finished that day at $68.75. The stock is currently around $62.70, so it’s not too far away.

  Share of HD are riding the recovery of the housing market. The shares are up 119% in the last 15 months. The stock has actually been outperforming the S&P 500 for close to five years. The stock had such a rotten time from 2000 to 2007, I don’t think people realize how cheap it had become.

  I think Home Depot has become a bit too pricy here. But it goes to show you that if you wait long enough, every stock can have its day.

  Since 1978, shares of Home Depot are up 180,000%. That’s a gain of 1,801-fold which works out to 23.8% per year. Over the same time, the S&P 500 has gained 1,170%.

• DirecTV Misses By Four Cents Per Share
  Eddy Elfenbein, November 6th, 2012 at 10:38 am

  Election Day is finally here. I’m not in the business of trying to predict who will win, but I think the market will be very pleased to have the uncertainty behind us. The S&P 500 is back over 1,420 this morning but I don’t expect much price action this week.

  The weak spot on the Buy List today is DirecTV ($DTV). The satellite TV company missed earnings by four cents per share. For their Q3, DirecTV earned 90 cents per share compared with Wall Street’s consensus of 94 cents per share. The good news is that revenue rose 8.4% to $7.42 billion which was $110 million better than consensus.

  DirecTV added 543,000 net subscribers in Latin America, fewer than the 585,000 estimate from nine analysts surveyed by Bloomberg. The disappointing results may indicate a deterioration in the region’s economies, especially Venezuela, said Chris Marangi, a portfolio manager at Gamco Investors Inc. whose funds own 7.4 million DirecTV shares.

  Latin American customer additions fell from 645,000 in the quarter ended in June. Last year, DirecTV reported 574,000 new Latin American users in the third quarter, an increase from the prior three-month period.

  DirecTV added 67,000 net U.S. customers, less than the 99,000 average analyst estimate. The company has tried to entice subscribers with National Football League Sunday Ticket promotions, which give new customers access to all Sunday football games for free for a year. DirecTV also lowered the price for Sunday Ticket for current customers.

  I also forgot to mention the good earnings report last Friday from Moog ($MOG-A). The company reported earnings 91 cents per share which was two cents better than estimates. Moog earned 83 cents per share for the same quarter one year ago.

  This was for their fiscal fourth quarter. For the entire year, Moog earned $3.33 per share which was a nice increase over the $2.95 per share they earned in the year before that. Moog reiterated its earnings forecast of $3.50 to $3.70 per share for the coming year. That’s a very good number.

  “Over the last three years, sales have increased 34% and earnings per share are up 68%,” said John Scannell, CEO. “We have delivered this improvement despite the reduced military spending and the tepid industrial recovery. We believe our diversity across markets and geographies, as well as our excellent position on the most important military and commercial programs has been the key to this strong performance and we’re confident these factors will continue to benefit us in 2013.”

  I think Moog is one of the cheaper stocks on our Buy List.

• Morning News: November 6, 2012
  Eddy Elfenbein, November 6th, 2012 at 6:54 am

  Greek Strike Shuts Down Country Ahead Of Cliffhanger Austerity Vote

  A Year On And Draghi Remains ECB’s ‘Super Mario’

  Hollande to Raise French Sales Tax, Cut Spending From 2014

  China Row Drags On Nissan, Cuts FY Forecasts

  South Africa Banknotes Launched With Mandela Image

  Unprecedented Forties Loading Delays Inflate Brent Oil Price

  Inergy to Buy Bakken Hub Owner Rangeland for $425 Million

  BMW Profit Beats Estimates as China Growth Offsets Europe

  Zillow Tumbles as Quarterly Forecast Trails Estimates

  Stifel’s Savvy Purchase of KBW

  Tesla Advances as Revenue Beats Estimates

  Express Scripts Falls Hard; Estimates Appear ‘Overly Aggressive’

  The Election Won’t Solve All Puzzles

  Phil Pearlman: Please Help Me Understand Why We Have Not and Are Not Spending Massively on Infrastructure

  Epicurean Dealmaker: Get Up Offa That Thing

  Be sure to follow me on Twitter.