Archive for May, 2016

• April Ford Sales Miss
  Eddy Elfenbein, May 3rd, 2016 at 3:01 pm

  Ford‘s (F) sales were up 4% last month but that was below expectations.

  The automaker recorded 3% growth for its namesake Ford brand and 20% growth for the Lincoln luxury brand. Overall the company sold 231,316 vehicles.

  The average Ford discount per vehicle rose by 24% in April, compared to a year earlier, to $3,423, according to TrueCar. That was the industry’s second-highest increase and outpaced the industry average of 13% growth to an average of $3,021.

  On a positive note, though, average transaction prices rose $1,500 over a year ago, according to Ford.

  “We saw strong consumer demand in April, especially for pickups,” said Mark LaNeve, Ford vice president of U.S. marketing, sales and service, in a statement. “F-Series has moved past the quarter million sales mark year to date – the strongest start for F-Series in a decade, while Ford brand SUVs are having their best year ever.”

  I think the takeaway is that shoppers are out there but they’re looking for bargains. Ford’s Q1 earnings were very strong. The stock is down about 1.3% today.

• Status quo bias
  Eddy Elfenbein, May 3rd, 2016 at 12:02 pm

  From Wikipedia on Status quo bias:

  Status quo bias is an emotional bias; a preference for the current state of affairs. The current baseline (or status quo) is taken as a reference point, and any change from that baseline is perceived as a loss. Status quo bias should be distinguished from a rational preference for the status quo ante, as when the current state of affairs is objectively superior to the available alternatives, or when imperfect information is a significant problem. A large body of evidence, however, shows that status quo bias frequently affects human decision-making.

  Status quo bias interacts with other non-rational cognitive processes such as loss aversion, existence bias, endowment effect, longevity, mere exposure, and regret avoidance. Experimental evidence for the detection of status quo bias is seen through the use of the reversal test. A vast amount of experimental and field examples exist. Behavior in regard to retirement plans, health, and ethical choices show evidence of the status quo bias.

  Something for investors to think about.

• The Lost Decade for Value
  Eddy Elfenbein, May 3rd, 2016 at 11:51 am

  It’s a well-known fact that value stocks have, over the long-term, outperformed the overall stock market. But how long is long-term?

  As it turns out, it can be pretty long.

  We’re coming up on ten years of value underperforming. The last value cycle peaked on August 8, 2006. (I’m using the Russell 3000 Value and Russell 3000 indexes.)

  A lot of the reason value has done so poorly is due to the financial crisis. Many banks get classified as value, and so many have been blown out of the water.

  According to the chart, value led from November 1980 to August 1998. Then it lagged until December 1991. There was a brief value surge until September 1993. After that, value trailed the long bull market until March 9, 2000.

  Maybe the cycle has already turned? Value hit a recent low on January 25, 2016 and has been outperforming (a little) ever since.

• Biogen to Spin Off Hemophilia Business
  Eddy Elfenbein, May 3rd, 2016 at 11:09 am

  Big news for one of our Buy List stocks. Biogen (BIIB) said that it will spin off its hemophilia business into a stand-alone company:

  Biogen Inc. said it plans to spin off its hemophilia business as a separate publicly traded company so the biotechnology company can increase its focus on its neurology drugs.

  The Massachusetts company expects the planned spinoff will be completed late this year or in early 2017.

  According to the rules of the Buy List, the new company would join our Buy List as the 21st stock. This is what happened last year when eBay spun off PayPal.

  The hemophilia drug assets represent a small portion of the company’s overall revenue, but could generate more than $6 billion in a sale, Leerink Partners had estimated last month. Reuters had previously reported Biogen was considering selling off the assets.

  Biogen Chief Executive George Scangos said in prepared remarks Tuesday that Biogen thinks the best way to realize the potential of the hemophilia business is to let it operate independently “with a management team dedicated to providing therapies to people living with hemophilia.”

  It’s a good idea to pay attention when good companies hold garage sales. While mergers often don’t work out so well, spin-offs can be very good for shareholders.

  The remaining company will have a greater focus on treatments for neurodegenerative diseases for which there are few or no effective treatment options, Mr. Scangos stated. The company also will accelerate efforts to develop therapies for patients with diseases including multiple sclerosis, Alzheimer’s disease and Parkinson’s disease.

  John G. Cox, currently a pharmaceutical operations and technology executive at Biogen, will be CEO of the as-yet unnamed new company. Mr. Cox, who joined Biogen, in 2003, has held a series of senior executive roles and has been closely involved with the hemophilia business.

  The new company will be anchored by Biogen’s hemophilia drugs Eloctate and Alprolix, which generated combined revenue of $640 million during the 12 months ended March 31.

  The spinoff plans come roughly six months after Biogen announced plans to reduce its workforce by 11% amid slowing revenue growth. At the time, Biogen said it would reinvest the savings in its most promising research and development programs, including an experimental treatment for Alzheimer’s disease, and discontinue others.

  Last month Biogen reported its first-quarter profit grew 18% thanks to higher sales of multiple-sclerosis drug Tecfidera and lower expenses.

• Morning News: May 3, 2016
  Eddy Elfenbein, May 3rd, 2016 at 7:16 am

  EU Trims Economic Growth Forecasts Amid Global Uncertainty

  The Hottest Metric in Finance: ROIC

  IMS Health to Merge With Quintiles in $23 Billion Deal

  Utilities Must Stop Blocking Solar Growth

  Oracle Agrees to Buy Arlington Energy Data Firm Opower for $532 Million

  Philips to Sell Lighting Via IPO After Failing to Find Buyer

  UBS Drops as Profit Misses Estimates on Wealth, Trading Income

  BMW Profit Slips as Battle With Mercedes Means Cheaper Cars

  CVS Health Exhibits Healthy Stock Lead Year-to-Date

  Starwood 1Q Results Top Street, Raises Full-Year Outlook

  New Delta CEO Weighs Cutting Overseas Service as Fuel Costs Rise

  McDonald’s All-Day Breakfast Sparks a Fast Food Fight

  Robert Reich: The Rich Simply Can’t Lose in Our Rigged Economy

  Jeff Carter: High Frequency Trading Does More Than Trade

  Roger Nusbaum: Fed Hike Off The Table?

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• “Sell in May” Continues to Seduce Market Timers
  Eddy Elfenbein, May 2nd, 2016 at 9:52 pm

  This is from Gary Alexander at Navellier Marketmail:

  The S&P 500 tumbled 30 points (-1.4%) in the last two trading days of April, pushing its six-month performance (since October 31) below zero (-0.7%) for the first time since the 2008-09 bear market. Perhaps some of the “Sell in May and go away” crowd was trying to steal a march by selling stocks early.

  As any market timer will tell you, November 1 to April 30 is the stronger half of the year, giving birth to the “sell in May and go away” strategy. According to Jeff Hirsch’s “Almanac Trader” (April 26, 2016, “Worst Six Months Begin in May,”) a hypothetical $10,000 invested in the DJIA in 1950 compounded to $838,486 during the six month periods from November 1 to April 30, while the DJIA actually declined a bit during the May to October months over the last 65 years, netting a $221 (-2.2%) cumulative loss.

  That trend has continued recently with stronger gains in cold months vs. slower growth in warm months:

  The S&P 500 declined over the last 12 months – down 0.29% in May-to-October and down 0.68% November-to-April. Beyond that, I see practical problems with acting on this “sell in May” theory: (1) For average investors, tax considerations (short-term capital gains) would deeply cut into your returns. (2) Lately, we’ve averaged small gains in the summer months. A gain is a gain, even if it is smaller. Why give up the 10% gain in the May-October season of 2013 or the 7% gain in 2014? (3) For most investors, a preferable strategy to selling all stocks is to be more selective. There’s always a bull market somewhere. And finally, (4) the “sell in May” theory ignores some historically good months in the heart of summer. According to Bespoke Investment Group (in their “2015 Market Calendar,”) July is the best-performing month in the last century (+1.51% average gains), while August is the #5 best month, at +0.91%.

  This makes “sell in mid-August and go on vacation” more sensible than “sell in May and go away.”

• April ISM = 50.8
  Eddy Elfenbein, May 2nd, 2016 at 1:17 pm

  The ISM for April fell to 50.8. It’s not great but it’s above 50 which indicates that the manufacturing sector is expanding.

• It’s Good to be a Billionaire
  Eddy Elfenbein, May 2nd, 2016 at 12:47 pm

  Steve Cohen’s firm reported that they took a 5.8% stake in Pernix Therapeutics (PTX), a small biotech. Apparently, the market took notice.

  

• Fintech: Shaking Up The Financial Industry
  Eddy Elfenbein, May 2nd, 2016 at 12:02 pm

  View More: 60 Minutes News|Live News|More News Videos

• Morning News: May 2, 2016
  Eddy Elfenbein, May 2nd, 2016 at 7:03 am

  Japan Stocks Fall Sharply as Yen Hits 18-Month High

  China Lending Inflates Real Estate, Stocks, Even Egg Futures

  Puerto Rico Will Default on Government Development Bank Debt

  Fed Ponders Catchup With Economic Theory Signaling Rates Too Low

  Gold Rallies Above $1,300 as Investors Like Low Interest Rates

  Wrong-Way Bets Rule U.S. Stock Market’s $3 Trillion Recovery

  Craig Wright Claims He’s Bitcoin Creator Satoshi — Experts Fear An Epic Scam

  Halliburton-Baker Hughes Deal Collapses Amid Global Opposition

  Exxon’s Worrying Lack of Worry

  Digiday Media Launches Fashion-Focused Publication Called Glossy

  Diabetes Drug Test Results Boost Novo Nordisk

  Sports Authority To Be Liquidated

  The $100 Million Superhorse Powering This Year’s Kentucky Derby

  Josh Brown: John Oliver: Puerto Rico Deserves Relief

  Howard Lindzon: The ‘Feed’ has Never Been More Important

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