Archive for February, 2013

• Walgreen Breaks $41
  Eddy Elfenbein, February 5th, 2013 at 1:35 pm

  Last March, I tweeted:

  $WAG is looking like a good value. Earnings are next week. Anyone else think it can be a $40 stock? $$

  At the time, shares of Walgreen ($WAG) were at $33.56. This morning, the company reported strong sales for January thanks to flu season. The stock has been as high as $41.61 today which is a new 52-week high. The stock has done about three times better than the S&P 500.

  

• Canada Fires Its Penny
  Eddy Elfenbein, February 5th, 2013 at 12:33 pm

  From the Chicago Tribune

  The Canadian government has begun to phase out the penny, saying it’s too expensive to produce the coin.

  Besides its “excessive” production value, Canada has long cited the significant handling costs for the nation’s retailers and environmental considerations that lessen the penny’s worth. The country, which produced its last pennies on Monday, estimates the move will save taxpayers about $11 million a year.

  The potential savings have enticed U.S. officials to consider the possibility as well.

  Cash transactions in Canada will now be rounded to the nearest 5-cent mark. The penny’s retirement will have no effect on payments made by checks or credit cards.

  For example, if the total price of coffee and a sandwich is $4.92, a customer that was paying in cash would owe $4.90, according to the Royal Canadian Mint. But those using another method of payment would pay $4.92, and the pennies would be tallied electronically.

  The cost of the metal that goes into a penny has surged in recent years, making the coin’s production more expensive than its face value.

  In the U.S., it now cost 2.41 cents to make every penny, which is made mostly of zinc. The penny has cost more than its face value since 2006.

  Although the U.S. has conducted significant research into alternatives for the penny, the U.S. Mint says it still needs more research before it can make a decision to either change its composition or do away with it altogether.

  Any new materials for the penny would need to simulate the current look and durability of the nation’s most circulated coin.

• Dell to Go Private at $13.65
  Eddy Elfenbein, February 5th, 2013 at 9:59 am

  It’s official. Dell is going to be taken private. A group of investors led by Michael Dell will buy the entire firm for $13.65 per share. Interestingly, Microsoft will lend the buyout syndicate $2 billion for the deal.

  Let’s look at some numbers: Dell’s IPO was on June 22, 1988 at $8.50. Since then, the stock has split 96-for-1 so that initial price works out to 8.85 cents per share. The buyout price is 154 times the IPO price. At one point in the late-1990s, shares of Dell split 2-for-1 three separate times in less than one year. At one point, Dell split 2-for-1 six times in just over 40 months.

  Dell was actually not a screaming success as an IPO. The shares did indeed rally from the IPO price of $8.50 to a high of $12.50 by October 25, 1988 (or 13 cents adjusted for splits). But after that, Dell plunged to an all-time low of $4-5/8 by early 1990 (or 4.8 cents).

  Then Dell put on one of the most remarkable runs in the history of capitalism. The shares skyrocketed to an all-time high close of $58.13 on March 22, 2000 ($59.69 intraday). During the decade of the 1990s, Dell advanced 890-fold which works out to 97% per year. Today’s buyout price is 77% below Dell’s high reached 13 years ago.

  

• Legacy of Benjamin Graham
  Eddy Elfenbein, February 5th, 2013 at 9:37 am

• Morning News: February 5, 2013
  Eddy Elfenbein, February 5th, 2013 at 7:15 am

  Euro Zone Economy Shows Signs Of Recovery

  Momentum Suggests Investors Seeking Euro Exit

  World Risks ‘Perfect Storm’ on Capital Flows, Carstens Says

  Platinum Trades Near 17-Week High on Concern Supplies Will Fall

  McGraw-Hill, S&P Sued by U.S. Over Mortgage-Bond Ratings

  The Morning Ledger: DOJ vs. Rating Firms

  UBS Posts Quarterly Loss on Libor Fine, Reorganization

  Barclays Sets Aside Additional $1.6 Billion on Misselling

  Malone Eyes Virgin Media in Challenge to Murdoch

  Dell Nears a Buyout of More Than $23 Billion

  Toyota Raises Fiscal-Year Outlook

  Seeking a Company’s Elusive Sales Data

  BP Profits Hit By Gulf Of Mexico Crisis, Oil Giant Puts Another £2.6 Billion For Deepwater Horizon Disaster

  Roger Nusbaum: Charlie Sheen Portfolion (winning)

  Howard Lindzon: Momentum Wrap – Expected Pullback

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• Predicting Disaster Is a Great Business
  Eddy Elfenbein, February 4th, 2013 at 12:25 pm

  One of my constant complaints about market commentary is that predictions of doom and gloom are rarely held accountable. Bearish news sells and the scarier the better.

  I don’t mind people saying bad things will happen, but I do mind the way that certain (not all) perma-bears are allowed to move the goal posts with their predictions. They key, it seems, is to never give a time horizon for the Apocalypse. That way, you’re never wrong, just a little early.

  There’s a mini-industry of folks who predict the most outrageous events, and then when something bad comes along, they claim credit for predicting it.

  Sixteen months ago, the BBC had Alessio Rastani on as a guest. I’m still not exactly sure who this clown is, but he said that the market was about to collapse, and he got a huge amount of attention.

  Since then, the Dow has gained 3,000 points and no one seems to care how badly Rastani was off the mark. Note that the embedded video has more than 2.2 million views, and likes outnumber dislikes by 14-to-1.

• “We Are Way Overdue for Some Sort of Bullshit Crisis”
  Eddy Elfenbein, February 4th, 2013 at 11:18 am

  In the WSJ, Scott Adams makes the case to “buy, buy, buy“:

  Should you dive into the stock market? Absolutely. And if you have no money to invest, I recommend getting cash advances against your credit cards. And stop eating, entertaining, and saving for your kids’ educations. Sell your blood if you need to. Put all of that extra money in the stock market. My reasoning is simple: I own stocks and I want you to drive up their prices.

  I have a feeling that the smart money is already in the market and those folks are crouching like sprinters, waiting for any sign of bad news. Meanwhile, we are way overdue for some sort of bullshit crisis like the Year 2000 bug, or California going into a death spiral, or an artificial debt limit, or North Korea testing a satellite-based death-ray. When the new fake crisis happens, sometime within the next month, the market will pull back 10%. That’s when I expect to go into a panic and start selling my stocks at a loss.

  What the stock market needs – and what I need – is for lots of people who know absolutely nothing about investing to pile into the market and buy broad market ETFs. Then I need those people to poke out their own eyes and caulk their ear holes so they don’t accidentally encounter any news. I don’t think that is too much to ask.

• Factory Orders Weigh on Market
  Eddy Elfenbein, February 4th, 2013 at 11:06 am

  The stock market is backing off the five-year highs it made on Friday. The S&P 500 is currently down 10 points or about 0.7%.

  The Commerce Department said that factory orders rose by 1.8% in December which was below the 2.3% Wall Street was expecting. The number for November was revised down to a 0.3% drop.

  A fourth-quarter pickup in consumer spending is spurring companies including automakers such as Chrysler Group LLC and Ford Motor Co. (F), reviving a manufacturing industry that cooled in the second half of 2012. The acceleration extended into January, according to a gauge last week that showed factories expanded at the strongest pace in nine months.

  “Manufacturing’s fine,” said Brian Jones, senior U.S. economist at Societe Generale in New York, who projected a 1.9 percent gain in orders. “The economy continues to improve.”

  The bright spot in today’s report is that demand for durable goods rose by 4.3%. That increase was helped by a 12.2% increase in construction equipment and a 6.4% rise for computers.

  On our Buy List, Oracle ($ORCL) is buying Acme Packet for $2.1 billion.

  The deal is Oracle’s biggest since it bought Sun Microsystems in 2010 for about $7 billion. The company bought nearly a dozen companies in 2012, including Eloqua Inc for $810 million in December.

  Telecom carriers have been dumping wireline and other legacy services as people increasingly use a newer breed of devices to access Internet and businesses shift to IP (internet protocol) networks, an area where Acme Packet specializes.

  “Users are increasingly connected and expect to communicate anytime and anywhere using their application, device, and network of choice,” Oracle said in a statement.

  Oracle Chief Executive Larry Ellison, who has used acquisitions to boost the company’s revenue dramatically over the past decade, had said in October he would not rule out a big deal “down the road”.

  Oracle has rallied almost non-stop since the middle of November. From the November 14th low to last Friday’s high, Oracle has gained 23%.

• Morning News: February 4, 2013
  Eddy Elfenbein, February 4th, 2013 at 6:18 am

  Cameron Demands Risk U.K. Becoming Hedge Fund Island for Merkel

  Dangers Ahead for the E.C.B.

  Spanish, Italian Bonds Plunge Amid Signs of Politcal Risk

  Japan Finance Minister Models Policy After 1930s Stimulus

  Too-Big-to-Fail Too Hard to Fix Amid Calls to Curb Banks

  Small Lenders Ride U.S. Mortgage Wave As Big Banks Cut Back

  Land Battles Rise as U.S. Eyes 450,000 Miles of New Pipe

  Strikes Force Amplats Into Loss

  Japan Air Raises Profit Forecast as Travel Demand Rebounds

  Japan’s Hitachi cuts full-year operating profit forecast

  Swatch Rises to Record as Profit Growth Accelerates

  China Startup Dodges IPO Ban, Floats On Shopping Website

  New Details Suggest a Defense in SAC Case

  Phil Pearlman: Update: Recent Research Supporting the Value of Technical Analysis

  Jeff Miller: Weighing the Week Ahead: Market Correction Coming?

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• “Nearer My God to Thee” Mississippi John Hurt
  Eddy Elfenbein, February 2nd, 2013 at 7:55 pm