Archive for December, 2016

• Express Scripts Gives 2017 Guidance
  Eddy Elfenbein, December 14th, 2016 at 1:18 pm

  Today, Express Scripts (ESRX) reiterated their 2016 EPS guidance of $6.36 to $6.42 per share. The company also said they expect 2017 EPS to range between $6.82 and $7.02. Wall Street had been expecting $6.93.

  The stock is down about 4% so far today.

• Ahead of the Fed
  Eddy Elfenbein, December 14th, 2016 at 12:53 pm

  The Fed’s statement is due out at 2 pm, and they’ll almost certainly raise rates.

  Earlier today, we had two key economic reports.

  The first is that retail sales rose by 0.1% last month. Excluding gasoline, retail sales also rose by 0.1%.

  Industrial production dropped by 0.4% last month. Part of that was due to warmer weather impacting utilities.

• Josh Saves the Mutual Fund Industry
  Eddy Elfenbein, December 14th, 2016 at 12:39 pm

  My pal, Josh Brown has six ideas on how to save the mutual fund industry. If the industry were smart (if!), they’d implement these immediately. I’ll summarize them.

  Idea One: Don’t play no game that you can’t win. There should be an industry-wide moratorium on new large-cap US stock funds.

  Idea Two: Exclusivity sells. Everyone wants what they can’t have.

  Idea Three: Ask more of your investors. Behavior is the single biggest determinant of investor success – not manager tenure or how many analysts you have or how many Morningstar stars you accumulate.

  Idea Four: Benchmarks are bullsh*t. Benchmarks are not handed down from God on Mount Sinai and they do not appear in nature.

  Idea Five: (Read it for yourself).

  Idea Six: Shrink! There’s been some consolidation among the big asset management firms and fund families. There should be more. Bill Miller said that 70% of all managers are essentially benchmark-huggers.

  Read the whole thing.

• Morning News: December 14, 2016
  Eddy Elfenbein, December 14th, 2016 at 7:10 am

  Japan, EU in Talks Seeking Free-Trade Deal By Year-End

  Japan, Looking for Money, Is Poised to Legalize Casino Gambling

  Finance Titans Face Off Over $5 Trillion London Gold Market

  Dow Flirts With 20,000 as Stocks Rise, Gold Falls Ahead of Fed

  Having Addressed Supply, Oil Markets Face New Threat: Demand

  Fed Expected to Raise Interest Rates: What to Watch

  Trump’s Threat Damps Companies’ Plans to Move U.S. Jobs Abroad

  Donald Trump Tweets And Investors Cringe — But Some Make Money

  Aramco Keeps Building Oil Rigs Even as Saudis Agree to Pump Less

  Goldman Sachs to Name David Solomon, Harvey Schwartz to Succeed Gary Cohn

  Wells Fargo’s ‘Living Will’ Plan Is Rejected Again by Regulators

  Maersk, DONG Oil And Gas Merger Talks Stall

  Big Banks Fight to Block Crisis-Era Lawsuits From Continuing

  Cullen Roche: The Best Value Vacations This Winter

  Howard Lindzon: All-Time Highs, Dow 20,000 and the Hangover that Awaits…

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• HEICO Earns 65 Cents per Share for Q4
  Eddy Elfenbein, December 13th, 2016 at 4:32 pm

  HEICO (HEI) just reported fiscal Q4 earnings of 65 cents per share. That’s up from 56 cents per share for last year’s Q4. Wall Street had been expecting 62 cents per share. This was a very good quarter and fiscal year.

  For the year, HEICO earned $2.29 per share. In their Q3 report, HEICO said they forecast net income to rise by 13% to 15%. Since they made $1.97 per share last year, that works out to a range of $2.23 to $2.27 per share. As it turns out, their net income increased 17% this year to a record $156.2 million, or $2.29 per share.

  For the year, net sales rose 16% to $1.3763 billion. Impressively, their operating margin was 19.3% both this year and last year.

  Laurans A. Mendelson, HEICO’s Chairman and CEO, commented on the Company’s full fiscal year and fourth quarter results stating, “Our record full year and fourth quarter of fiscal 2016 results in consolidated net sales, operating income and net income reflect the impact of our profitable fiscal 2016 and 2015 acquisitions, as well as continued increased demand for the majority of HEICO’s products.

  Cash flow provided by operating activities was very strong, increasing 44% to a record $249.2 million in the fiscal year ended October 31, 2016, representing 160% of net income, as compared to $172.9 million in the fiscal year ended October 31, 2015.

  Our net debt to shareholders’ equity ratio was 39.6% as of October 31, 2016, with net debt (total debt less cash and cash equivalents) of $415.3 million principally incurred to fund acquisitions in fiscal 2016 and 2015. We have no significant debt maturities until fiscal 2019 and plan to utilize our financial flexibility to aggressively pursue high quality acquisition opportunities to accelerate growth and maximize shareholder returns.

  As I mentioned earlier, HEICO announced a 13% dividend increase. The company also said they’re looking forward to a stock split next year.

  Considering the impact of cash dividends, prior stock splits and stock dividends, one share of HEI worth $8.38 in 1990 has become worth on a combined basis approximately $1,417, representing an increase of approximately 169 times the 1990 value and a compound annual growth rate of approximately 22%.

  Not bad.

  For 2017, HEICO sees net sales growth of 5% to 7%, and net income growth of 7% to 10%. That works out to an EPS range of $2.45 to $2.52. Wall Street had been expecting $2.53 per share.

• The S&P 100 Breaks 1,000
  Eddy Elfenbein, December 13th, 2016 at 11:25 am

  While most eyes are on the Dow approaching 20,000, there’s another milestone we just had. For the first time ever, the S&P 100 broke 1,000 today.

  The S&P 100 is the top 100 stocks in the S&P 500. Despite its small sample size, the S&P 100 is a pretty decent index. The market cap of the S&P 100 is about 62% of the S&P 500.

  

  One of the least understood points about the public markets is how disproportionate it is. The largest stocks are vastly larger than most other stocks. You can buy hundreds of small-cap stocks and their combined value would still be smaller than only a few mega-caps.

• HEICO Raises Dividend
  Eddy Elfenbein, December 13th, 2016 at 10:17 am

  HEICO is due to report its earnings later today, but this morning, the company went ahead and announced a dividend increase. HEI is raising its semi-annual dividend from eight to nine cents per share.

  The company also said they’re considering a stock split early next year.

• Predicting Dow 20,000
  Eddy Elfenbein, December 13th, 2016 at 8:48 am

  I’m not one for making big market calls, but I got this one pretty close. This is from my CNBC appearance on July 12. Yesterday, the Dow got as high as 19,824.59. On July 12, it was at 18,372.12.

  Brian: With the Dow hitting an all-time high on Tuesday, could Dow 20,000 be far ahead? And if so, what stocks might lead us there? Welcome to Trading Nation. I’m Brian Sullivan. Eddy Elfenbein of the “Crossing Wall Street” blog and Jonathan Krinsky of MKM Partners are with us.

  Brian: You know, Eddy, ok…listen…we’re hitting a new high but 20,000 is still a long way away. I’m sure at some point in our lifetimes, hopefully, we will hit it. When do you think that might be?

  Eddy: I think there is a very good chance it could happen before the end of this year.

  Brian: This year?!

  Eddy: Yeah, I think it’s very possible. You know, investing at the all-time high. Believe it or not, that’s a good trade. Historically, if you take the day after an all-time high and just squeeze all those together, it’s an 18% annualized gain. On top of that, the volatility is much, much lower. Plus, if you look at the Dow right now, 13 of the Dow stocks yield more than 3%. That’s two years’ work out of the 10-year bond right now.

  Brian: You’re asking for…your new name, by the way, is Eddy Elfenbull…but another 18%? You’re asking for a lot, Eddy.

  Eddy: I think it can be done. Particularly with the Dow, of course it’s price-weighting…a lot of those high-priced names, particularly in the financial sector, like Goldman, like JP Morgan — they look pretty good here. (Note: Since then, Goldman is up 51%. JPM is up 34%.) Also, in the tech sector, a lot of those names like IBM and Microsoft? The valuation — I think it’s pretty favorable.

  Brian: Yeah, it’s actually about 10.5% so we’re being a little hyperbolistic there, but 10.5% is doable. There have been many years when we’ve done better than that, although we are halfway through the year. Jonathan Krinsky…

• Morning News: December 13, 2016
  Eddy Elfenbein, December 13th, 2016 at 7:08 am

  OPEC Deal to Create Oil-Supply Deficit Next Half, IEA Says

  Oil Prices Near One-Year High

  U.K. Inflation Accelerates to Highest in More Than Two Years

  Rex Tillerson, Exxon C.E.O., Chosen as Secretary of State

  Trump Says No Deals While in Office; Sons Will Run Company

  Tweeter-in-Chief Trump Faces Test After Yellen’s Rate Decision

  When Trump Meets Tech Leaders, Jobs Will Be on the Agenda

  Trump Attack on Lockheed Martin Foreshadows War on Defense Industry

  Asahi to Pay $7.8 Billion for AB InBev Beer Brands in Eastern Europe

  Viacom’s New CEO Pursues Turnaround With CBS Out of the Picture

  Silicon Valley VCs Are Growing Wary of On-Demand Delivery

  UniCredit to Cut 14,000 Jobs and Raise Nearly $14 Billion in Overhaul

  Accusations of Fraud at Wells Fargo Spread to Sham Insurance Policies

  Roger Nusbaum: 2016: Not Going Out Quietly

  Josh Brown: ESG Links: Allocating with Purpose

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• Stocks Divided by Bonds
  Eddy Elfenbein, December 12th, 2016 at 12:06 pm

  The big story hasn’t been rising stocks; it’s been rising stocks along with cratering bonds.

  Here’s a simple chart to see it — stocks divided by bonds (SPY/TLT). If you look really hard, you can almost make out a major shift starting about a month ago.