Archive for May, 2016

• Morning News: May 11, 2016
  Eddy Elfenbein, May 11th, 2016 at 7:11 am

  EU Blocks U.K. Hutchison-Telefónica Deal

  China’s Anonymous Economic Oracle Signals Shift From Debt

  US Takes China To WTO Again Over Chicken Trade: Rightly So

  Tax Shift Marks Trump’s Latest Test of Conservative Orthodoxy

  ‘Contract for Deed’ Lending Gets Federal Scrutiny

  Staples-Office Depot Merger Collapses After Block by Judge

  Office Depot Falls 34%, Staples Down 15% in Pre-Market Trading

  Toyota Struggles to Find That Extra Gear

  Don’t Buy Disney…Yet

  ABN Amro Victim of Bad Timing as Market Rout Dents Profit

  Facebook Debuts Retargeted Ads On Instagram, Tests New Travel Ads

  Dean Foods to Buy Friendly’s Ice Cream, Swings to Profit

  Macau Plans Oversight, Entry Capital Hike for Gaming Promoters

  Josh Brown: Why God Sent Financial Advisors Into the World

  Jeff Carter: Some Mountains Are Too Hard To Climb

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• Amazon Cracks $700 per Share
  Eddy Elfenbein, May 10th, 2016 at 1:24 pm

  Shares of Amazon.com (AMZN) broke $700 today. The stock went public 19 years ago next week at $1.50 per share (adjusted for splits). Bear in mind, that includes one price drop of 95%, plus a much smaller one of just 65%.

  

• Defense Stocks Are Rallying
  Eddy Elfenbein, May 10th, 2016 at 9:57 am

  One area of the market that’s clearly in an uptrend is defense/aerospace stocks. Northrop Grumman (NOC) has beaten expectations by more than 20% for the last three quarters in a row. Check out the rise in three major defense stocks:

  

• Morning News: May 10, 2016
  Eddy Elfenbein, May 10th, 2016 at 7:08 am

  Ukraine Makes Iffy Progress After Trade Pact With Europe

  Dead-of-Night Reversal Puts Brazil Impeachment Back on Track

  As Lending Club Stumbles, Its Entire Industry Faces Skepticism

  Hedge Funds Faced Choppy Waters in 2015, but Chiefs Cashed In

  Emirates Profit Rises 50% on Fuel Windfall, Long-Haul Routes

  IBM Watson Brings AI Wonders to Cybersecurity

  Gap Inc. Can Go Lower

  Lumber Liquidators Posts Worse-Than-Expected Loss as Sales Dip

  SBE Entertainment to Acquire Morgans Hotel Group

  Nokia Network Sales Weighed Down by Alcatel Integration

  Credit Suisse Takes the Pain

  ING Profit Falls on Regulatory Costs, Loss at Markets Unit

  J.C. Penney Tops Quarterly Profit Goal and Expands Appliance Availability

  Roger Nusbaum: Are FOMC Members Losing Hope?

  Cullen Roche: The Appropriate Portfolio vs. the Optimal Portfolio

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• Low Vol Doesn’t Mean Value
  Eddy Elfenbein, May 9th, 2016 at 9:20 pm

  Jason Zweig writes in the WSJ on the allure of Low Vol funds:

  At year end, the stocks in the iShares portfolio — among them Newmont Mining, AT&T, McDonald’s Corp. and Johnson & Johnson — traded at an average price of 22.2 times their earnings over the previous 12 months. That was almost identical to the P/E ratio of 21.8 for the U.S. stock market as a whole.

  By the end of April, after all that new money had flowed in, the holdings of the iShares fund were at an average P/E of 24.3; the stock market overall was at 22.4. In four months, the fund’s portfolio shot from being only a hair more costly to nearly 10% more expensive than the market average.

  It’s true that the academic research has shown that Low Vol portfolios have historically outperformed the market. But some investors have confused Low Vol with Value. There’s a lot of overlap but they’re not the same.

  For example, there are many stalwart growth stocks that exhibit low daily volatility, yet their blue chip status accords them lofty valuations.

• New High for CR Bard
  Eddy Elfenbein, May 9th, 2016 at 8:53 pm

  Shares of CR Bard (BCR) reached a new high today. This comes two weeks after they reported very good earnings.

  The stock has been on our Buy List since 2012. I wanted to pass along an important lesson for investors. Oftentimes, a very good buy only really pays off for you after a few years.

  Check out the chart below. After two years, Bard was a decent stock for us. But look what happened after 2015. Only since then has it turned into a home run.

  

  Next month, Bard should raise their dividend again. The company has raised its dividend every year since 1972.

• Growth or Value
  Eddy Elfenbein, May 9th, 2016 at 3:57 pm

  In honor of Prince, I broke out the purple tie:

  For context, here’s the Russell 3000 Value Total Return divided by the Russell 3000 Total Return:

• Morning News: May 9, 2016
  Eddy Elfenbein, May 9th, 2016 at 7:13 am

  Panama Papers Law Firm Apologizes to Chinese Bank Over Leak

  Leading Economists Wrong To Claim Tax Havens Serve No Useful Economic Purpose

  Greek PM Tsipras Seeks Debt Relief and End to “Vicious Cycle”

  EU Envoy Calls for Fairer Economic Relationship With China

  German Factory Orders Rebounded in March as Exports Gained

  Oil Prices Rise on Fundamentals Amid Uncertainty Over Saudi Oil Minister’s Exit

  Crude Oil: The Rally May Be Running Out Of Gas, For Now

  Lew, Lawmakers Intensify Push for Puerto Rico Bill After Default

  Fed Should Aim for Inflation Overshoot, Says Evans

  Total to Buy Battery Maker Saft in Push to Expand Clean Energy

  LendingClub Draws Skepticism From Investors

  Ford: Critical Investment Or Burning Cash?

  How Risky Is Ferrellgas Partners Stock?

  Jeff Miller: Weighing the Week Ahead: Why the Surprising Strength in Employment?

  Howard Lindzon: The ‘Sloppy And Untucked’ Market Top of 2016

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• From Fiserv’s Earnings Call
  Eddy Elfenbein, May 6th, 2016 at 4:16 pm

  This was too late for the newsletter but I wanted to pass along this passage from Fiserv‘s (FISV) earnings call. You can sense the company’s optimism.

  As I mentioned, we are on track to achieve our full-year financial objectives. We continue to expect internal revenue growth of 5% to 6%, which includes internal revenue growth acceleration in the second half of the year. We anticipate adjusted earnings per share will grow 12% to 15%, in a range of $4.32 to $4.44.

  Given our strong start to the year, we now expect our full-year results to bias above the midpoint of the range and that the adjusted EPS growth rate will be generally equivalent between the first and second halves of the year. We continue to expect adjusted operating margin to increase at least 50 basis points for the year, even with the approximately 30 basis points of acquisition margin pressure Bob mentioned earlier. And importantly, we still expect free cash flow per share for the full year to be at least $4.70.

  In conclusion, we’re pleased with our start to the year. We expect to meet or exceed our financial and strategic commitments, including another step up in our level of sustainable high-quality revenue growth. Our ability to excel is based entirely on the dedication, commitment, and innovation of our 22,000 associates who band together to achieve client excellence each and every day.

  Fiserv gained 3.4% today.

• Take the Under on a Fed Rate Hike
  Eddy Elfenbein, May 6th, 2016 at 10:19 am

  On Wednesday, I said that the safe bet was to take the under on any Fed rate hike coming this year. Today’s jobs report seems to agree.