Archive for August, 2016

• Hormel Foods Earns 36 Cents per Share
  Eddy Elfenbein, August 18th, 2016 at 10:53 am

  This morning, Hormel Foods (HRL) reported Q2 earnings of 36 cents per share. That was one penny better than expectations. Quarterly revenues rose 5.2% to $2.3 billion which was a little better than expectations. This was Hormel’s 13th quarter in a row of record earnings.

  The Spam company had solid results across the board. Thanks to the inclusion of Applegate, Hormel’s Refrigerated Foods segment had its profits rise by 24%. Their Jenny-O Turkey biz saw its profits rise by 59%. Last year’s profits were impacted by the avian flu.

  “We are pleased to announce exceptional results this quarter with three of our five segments delivering volume, sales and earnings growth. This is also our thirteenth consecutive quarter of record earnings which is a testament to our balanced business model,” said Jeffrey M. Ettinger, chairman of the board and chief executive officer. “Excellent results in Refrigerated Foods were driven by the addition of the Applegate business, foodservice sales of OLD SMOKEHOUSE® bacon, HORMEL® BACON 1™ fully cooked bacon, and HORMEL® FIRE BRAISED™ meats, and retail sales of HORMEL® NATURAL CHOICE® meats. Jennie-O Turkey Store also returned to growth, posting strong double-digit sales and earnings increases,” stated Ettinger.

  “Iconic brands such as SPAM® and SKIPPY® drove increased sales in our Grocery Products and International segments. We enjoyed strong growth from MUSCLE MILK® protein products led by innovative new items such as MUSCLE MILK® protein smoothies, though Specialty Foods did not show growth this quarter due to the sale of Diamond Crystal Brands,” commented Ettinger.

  But the best news is that Hormel is raising their full year guidance. The old range was $1.56 to $1.60 per share. The new range is $1.60 to $1.64 per share. Shares of HRL are up about 3.6% this morning.

• Morning News: August 18, 2016
  Eddy Elfenbein, August 18th, 2016 at 7:05 am

  Japan Hit by Double Whammy in Fed Waiting Game

  Brits Take to the Shops Despite Brexit

  Clintn Pushed From Left and Right on Health Care

  Gold Up as Fed Minutes Cool Rate Hike Prospects, Weigh on Dollar

  Here’s Why China’s Alipay Is Teaming Up With France’s Ingenico

  A Danish Wind Turbine Maker Harnesses Data in a Push to Stay Ahead

  Target Adds Private Bathrooms to Quell Transgender Debate

  Cisco’s Earnings Are Good News

  Lenovo: Why Selling Property Can’t Fix Computer Crash

  Pinterest Follows Rivals Into Selling Video Ads

  The Wretched, Endless Cycle of Bitcoin Hacks

  SolarCity to Lay Off Staff, Cut Costs

  Och-Ziff Bribery Talks Said to Spare Firm as Unit Convicted

  Cullen Roche: Why You’re Probably a Libertarian Keynesian

  Roger Nusbaum: The Worst Months Of The Year!

  Be sure to follow me on Twitter.

• Comfort Systems USA
  Eddy Elfenbein, August 17th, 2016 at 10:08 am

  Lately, I’ve been looking at the stock of Comfort Systems USA (FIX) and I think there may be compelling value here. The company describes itself as “a leading provider of commercial, industrial and institutional heating, ventilation and air conditioning (“HVAC”) services.”

  A few weeks ago, FIX reported Q2 earnings of 47 cents per share which was four cents better than the Street. The stock hasn’t done much in the last year. The board just approved a one-million-share buyback.

  I’m not recommending FIX or adding it to the Buy List, but it’s certainly on my radar.

• Morning News: August 17, 2016
  Eddy Elfenbein, August 17th, 2016 at 7:02 am

  Stocks Struggle, Dollar Rallies Ahead of Federal Reserve Minutes

  U.S. Inflation Tame Despite Economy Gaining Momentum

  Obamacare’s in Trouble as Insurers Tire of Losing Money

  Can Tech’s Tattle Tycoon Trump Thiel?

  Target Cuts Annual Forecast After Sales Decline Last Quarter

  Lowe’s 2Q Results Miss Street, Cuts Profit Outlook

  Cathay Pacific Profits Plunge Amid Fierce Competition

  Cisco Plans to Cut Up to 14,000 Jobs Within Weeks, CRN Says

  Casino Mogul Wynn to Launch Lavish New $4.2 Billion Macau Resort

  TJX Gains Market Share Around the World. Leads in Earnings. Raises Outlook.

  Dick’s Sporting Goods Reports Surprise Increase in Quarterly Financial Results

  Staples Swings To Loss, Sticks With Plan to Close 50 Stores This Year

  Cintas to Buy Fellow Uniform Company G&K for Roughly $2 Billion

  Josh Brown: The Truth About Treasurys

  Howard Lindzon: Make Speculation Great Again…and Jeff Bezos forced Warren Buffett Into Tech Stocks

  Be sure to follow me on Twitter.

• Industrial Production and CPI
  Eddy Elfenbein, August 16th, 2016 at 10:26 am

  We had two key economic reports this morning.

  First, the Federal Reserve said that industrial production rose by 0.7% last month. That’s the biggest increase since November 2014. IP rose by 0.4% in June. For manufacturing, output rose by 0.5%. That was its biggest jump in more than a year.

  Notice that IP had been falling from November 2014 to March 2016, but that trend appears to be over.

  The other report said that the CPI was unchanged last month which matched expectations. In the last year, consumer prices have risen by 0.8%.

  The “core rate” rose by 0.1% last month. It’s up 2.2% in the last year.

  Here’s the monthly seasonally-adjusted core rate:
  

• Today Is a Big Day in Gold’s History
  Eddy Elfenbein, August 16th, 2016 at 9:04 am

  At Navellier Market Mail, Gary Alexander sums up why August 16 has been such an important day in the history of gold.

  Today marks a red-letter day in the history of gold in America. On August 16, 1896, George Carmack discovered one of the largest gold strikes in history on Rabbit Creek in Canada’s Yukon Territory, just across the border from Alaska. A century ago this week (August 14, 1916), Denmark approved the sale of the Virgin Islands to America for $25 million in gold – another land-grab bargain made possible by taking advantage of cash-starved European nations during a World War. And on August 16, 1925, Charlie Chaplin’s silent film classic, The Gold Rush, inspired by the 1849 gold rush, opened to U.S. audiences.

  The most dramatic golden event in U.S. history came 45 years ago on Monday, August 16, 1971, when the Dow Jones Industrial Average rose 33 points (+3.8%) the morning after President Richard M. Nixon appeared on national TV to “close the gold window” (refusing to honor the $35 per ounce price of gold), effectively devaluing the dollar. Nixon also imposed wage and price controls (in response to a 3% CPI inflation rate!), and a 10% surcharge on all imports. You would think this package of central controls of the economy in a free nation would have caused stocks to fall, but Nixon’s moves were very popular at the time.

  A poll of 220 households by Albert E. Sindlinger & Co. on August 16 revealed that 75% of Americans favored the President’s proposals, while “most of those who dissented did so on the ground that Mr. Nixon’s actions should have come sooner.” Mr. Sindlinger said, “In all the years I’ve been doing this business – more than 15 – I’ve never seen anything this unanimous, unless maybe it was Pearl Harbor.”

  I was on deadline at a major magazine writing about Nixon’s 1971 Dollar Crisis. I was shocked but not surprised by the announcement, since I had read Harry Browne’s 1970 book on the Coming Devaluation. I came to know at least three other people who were so shocked by Nixon’s move that they launched new businesses. All three of them intersected my life over the following decades: (1) New Orleans school teacher James U. Blanchard III formed The National Committee to Legalize Gold. Also: (2) David Nolan saw Nixon’s speech in his Colorado living room and decided to form the Libertarian Party; and (3) Robert D. Kephart, publisher of Human Events decided to publish an “Inflation Survival Letter” (which morphed into “Personal Finance”) to help investors survive the inflation that was certain to follow price controls. (Full disclosure: I eventually edited publications for Bob Kephart and Jim Blanchard during the 1980s).

  It’s still hard to believe that it was illegal for Americans to own most forms of gold from 1933 to 1974. On April 5, 1933, FDR’s Executive Order 6102 demanded we surrender our gold for $20.67 per ounce. Those who stuffed this inert metal in a mattress or vault risked 5-10 years in prison and/or a $10,000 fine!

  This gold story ends with a Pyrrhic victory for gold investors. On August 14, 1974, Congress authorized U.S. citizens to own gold for the first time in 41 years, as of December 31. This was a Pyrrhic victory since Americans missed all the gains from $20 (in 1933) to $195 (the gold price on December 30, 1974). Alas, gold then proceeded to fall sharply after it was legal to own, falling to $102.20 on August 30, 1976.

  Here’s how gold performed in the early 1970s.

• Morning News: August 16, 2016
  Eddy Elfenbein, August 16th, 2016 at 7:14 am

  China Said to Drop Total Quota for Shenzhen-Hong Kong Link

  German ZEW Investor Confidence Recovers as Brexit Shock Settles

  Offshore Wind Could Replace Hinkley Nuclear in U.K. at Same Cost

  SEC Suspends Trading in OTC Stock After Value Soars to $35 Billion

  The Rise of the Buy Side

  Aetna to Drop Some Affordable Care Act Markets

  Home Depot Lifts Profit Forecast As Housing Market Strengthens

  BHP Billiton Reports Worst-Ever Annual Loss

  Univision Among At Least Two Bidders For Gawker Media

  Praxair Holds Merger Discussions With Germany’s Linde

  Berkshire Takes Bigger Bite of Apple, Pares Wal-Mart

  AIG Reaches Deal to Sell Mortgage-Insurance Unit to Arch Capital for About $3.4 Billion

  Advance Auto Parts’ Earnings Fall Back

  Roger Nusbaum: Markets Take the Week Off to Watch The Olympics

  Cullen Roche: Auto Loans Aren’t a Repeat of the 2008 Financial Crisis

  Be sure to follow me on Twitter.

• Hormel Is Much More than Spam
  Eddy Elfenbein, August 15th, 2016 at 12:15 pm

  Bloomberg gives an in-depth look at Hormel Foods (HRL). Here’s a sample:

  Spam, more than any other product, defines Hormel. Through its 125-year history, the company’s strategy has been simple: protein, preferably with a long shelf life. Its other brands—Dinty Moore beef stew, Mary Kitchen hash, Real Bacon toppings, Herb-Ox bouillon cubes and its eponymous chili—sound like the shopping list for a Cold War fallout shelter.

  In 2014, Hormel filed a patent for a meat sandwich that lasts longer than 14 days. As Chief Executive Officer Jeffrey Ettinger put it, Hormel maintained “a very American-dominated portfolio with a lot of kind of traditional American food type items.”

  This is not, in short, a brand given to taking risks or chasing trends.

  But around 2007, Hormel quietly embarked on a venture that would take it deeper than it had ever been into the cupboards and kitchens of Americans, many of them immigrants, many of them young. It led to a series of acquisitions and a blitz of research and development that helped round out its pantry of products and inoculate it against the fickle modern food trends of a kale-and-quinoa world.

  One of the first things it did was hire an anthropologist.

  Read the whole thing.

• The Volatility Killer
  Eddy Elfenbein, August 15th, 2016 at 10:51 am

  The S&P 500 is up to another all-time high today. Since Brexit, the S&P 500 has had 11 down days. It’s closed higher the following day 10 times.

  Here are the daily changes since June.

  

  The last 43 down days for the S&P 500, the market has closed higher the following day 31 times.

  Here’s a look at the daily ranges this year, meaning the difference between the S&P 500’s high and low. Notice how much narrower it’s become all year. Brexit is an obvious exception, but that didn’t last long.

  

• The Election Year Indicator
  Eddy Elfenbein, August 15th, 2016 at 10:46 am

  I don’t place a lot of faith in these kinds of stats, but it’s interesting to note how Election Year Indicator has performed.

  The Election Year Indicator states that when the stock market rallies in the final three months before the election, the incumbent party wins. If not, the challenger wins. The indicator has been right 19 times in the last 22 elections.

  (T)he election years of 1984, 1988, 1996, 2004 and 2012 all had market corrections of 7 percent or more and yet finished the year positive.

  (…)

  (Since) 1928, only four election years had losses of greater than 3 percent.

  This year, the market started with its worst loss in history.

  When the stock market moves higher, the incumbent party usually wins. That has been the case in 12 of the 14 elections since 1928.

  Conversely, in the eight elections since 1928 when the S&P moved lower, the incumbent party lost seven times. The stock market has correctly predicted the winning party 19 out of 22 elections, Stack said.

  Perhaps people don’t vote their wallet; they vote their 401(k).