Archive for February, 2017

• Morning News: February 8, 2017
  Eddy Elfenbein, February 8th, 2017 at 7:09 am

  IMF Revives Greek Euro-Exit Warning Amid Deadlocked Bailout Talks

  Bonds Face Worst Loss Since 2013 as India Signals End to Easing

  Chinese FX Reserve Crosses Risky Line in Sand

  Oil Prices Fall On Bloated U.S. Fuel Inventories, Stalling China Demand

  Saudi Aramco Picks Moelis to Advise on Biggest IPO

  Dodd-Frank Rollback May Fall Short of G.O.P. Hopes

  Why Silicon Valley Wouldn’t Work Without Immigrants

  German Automakers Step Up to Silicon Valley Challenge

  Why Some Investors May Boycott Snapchat’s IPO

  Maersk Slumps as It Unveils Second Loss Since World War II

  Japan’s Sharp May Begin Construction on $7 Billion Plant Before June 30

  This Japanese Billionaire CEO Expects to Benefit from Trump’s Deregulation

  Oreo Maker Mondelez’s Sales, Profit Miss Estimates

  Jeff Carter: The Series B Investor

  Howard Lindzon: The White House is Spamming Me and Apple is Planning on Leaving Planet Earth

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• Should the S&P’s Quiet Streak Affect Your Investing Strategy?
  Eddy Elfenbein, February 7th, 2017 at 7:09 pm

• Apple Surges to Two-Year High
  Eddy Elfenbein, February 7th, 2017 at 3:54 pm

  I was on CNBC’s “Trading Nation” this afternoon. True story. I was in the green room at the DC studio. I heard a voice behind me say, “nice tie.” It was Howard Dean.

  I said, “it’s from Vermont!”

  He said, “really?”

  I told him I was kidding. He said it didn’t look like a Vermont tie.

  Anyway, here’s my tie and me on Apple.

• IntercontinentalExchange Beats and Raises Dividend
  Eddy Elfenbein, February 7th, 2017 at 11:21 am

  Good news this morning from IntercontinentalExchange (ICE). The stock exchange operator reported Q4 earnings of 71 cents per share, which was two cents better than estimates. Revenues rose 30.1% to $1.14 billion, which matched estimates.

  “Amidst a volatile and dynamic environment, we delivered our eleventh consecutive year of record revenue,” said ICE Chairman and CEO Jeffrey C. Sprecher. “Despite the challenges of market volatility driven by geopolitics, we achieved our objectives by working closely with our customers across trading, risk management and data to again deliver strong revenue growth, margin expansion and double-digit profit increases. We are excited about collaborating with our customers in 2017 given the range of ways we are working to serve their evolving trading, listing, data and risk management needs.”

  Scott A. Hill, ICE CFO, added: “In the first year of our integration of Interactive Data, we surpassed our synergy target and met our ambitious revenue growth target while expanding margins. We also generated record operating cash flow of $2.1 billion in 2016, which enabled us to reduce our debt by approximately $1 billion, announce our third double digit increase in our dividend, and increase our share repurchases for 2017. Our strategy, execution, and disciplined capital allocation has led to significant value creation and future growth opportunities.”

  ICE also raised their quarterly dividend from 17 to 20 cents per share. For 2017, ICE sees revenues adjusted for currency rising by 6%.

• Morning News: February 7, 2017
  Eddy Elfenbein, February 7th, 2017 at 6:57 am

  European Central Bank to Trump: ‘We Are Not Currency Manipulators’

  Greek Two-Year Yields Approach 10% Amid IMF Standoff With EU

  Euro, European Bonds Unnerved By French Political Jitters

  China Jan FX Reserves Fall Below $3 Trillion For First Time In Nearly 6 Years

  Wall Street Is Confused By President Trump’s Memo on the Broker Advice Rule

  Trump’s H1-B Visa Crackdown Threatens Cutting-Edge U.S. Medicine

  Offshore Wind Moves Into Energy’s Mainstream

  Honda and Hitachi Are Forming an Electric Vehicle Motor Company

  BP Misses Fourth Quarter Profit Estimate as Refining Margins Offset Higher Oil Prices

  Tyson Reveals Subpoena Linked To Alleged Price Fixing

  Rio Gifts India Diamond Mine to Madhya Pradesh Government

  Uber Hires Veteran NASA Engineer to Develop Flying Cars

  Snapchat Thinks Its Ads Are Better Than TV’s — Here’s Why

  Josh Brown: The Riskalyze Report: The Untold Story of 2017 So Far

  Roger Nusbaum: A Job Report For Everybody!

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• HBO’s Warren Buffett Documentary
  Eddy Elfenbein, February 6th, 2017 at 3:32 pm

• 34 Day Streak of Less than 1% Ranges
  Eddy Elfenbein, February 6th, 2017 at 12:00 pm

  The S&P 500 has gone 34 days in a row with the distance between the daily high and low being less than 1%.

  

  This looks to be the longest such streak in 40 years.

• 2018 Earnings Estimate = $147.98
  Eddy Elfenbein, February 6th, 2017 at 11:18 am

  I see that S&P has posted its first operating earnings estimate for 2018. The figure is $147.98. That’s adjusted to the index so the S&P 500 is currently going for about 15.5 times next year’s earnings estimate.

  That estimate is almost certainly too high, and I expect to see it come down over the next two years. How far it will fall is still an open question.

  Here’s a look at the S&P 500 (in black, left scale), along with its operating earnings (in blue, right scale). I’ve put the estimated part in red. The two lines are scaled at a ratio of 16-to-1. That means whenever the lines cross, the S&P 500 is going for 16 times earnings. Please note that I’m not saying 16 P/E is fair value. It’s just that the chart looks best that way.

  

  You can see that the “earnings recession” of 2014-15 doesn’t appear to be that big even though it scared a lot of folks at the time. The stock market, rightly, wasn’t fazed. What’s interesting is that the estimates foresee a robust earnings recovery this year and next. In fact, the stock market has already priced much of that in.

  If the stock market were to hit 16 times 2018 earnings (meaning, the black line meets the red line by year-end 2018), that’s growth of about 3% over nearly two years.

• “How One Blogger Blew Up the Way ETFs Work”
  Eddy Elfenbein, February 6th, 2017 at 9:28 am

  Very nice article about me by Jeff Reeves, Executive Editor of InvestorPlace.com.

  ———————————————————

  Last September, Eddy Elfenbein made a remarkable transformation. He went from being a blogger over at his site Crossing Wall Street to being a real-life portfolio manager.

  “I never even thought it was possible. I guess there were more people out there who felt betrayed by traditional Wall Street,” Elfenbein told me earlier this week.

  I’ve known Eddy for almost a decade now, and I’ve always respected his long-term investing approach and down-to earth writing style. He’s always been an advocate for the little guy.

  But what’s really interesting about his new exchange-traded fund, the AdvisorShares Focused Equity ETF (NYSEARCA:CWS), is how it looks to upend how Americans go about investing altogether.

  For one, CWS uses an innovative “fulcrum fee.” So far, it’s the only ETF among several thousands that uses one. A fulcrum fee means that Elfenbein gets a bonus if CWS beats the S&P 500, but if he loses to the market, then the fund’s investors get a savings. “Wall Street really wants my scalp for that one,” Elfenbein laughs. “It breaks the unspoken rule, ‘you win or lose, we always win,’ that’s standard operating procedure on the Street.”

  Elfenbein said he was influenced by Nassim Taleb’s concept of having “skin in the game.”

  “I feel that people who invest in CWS are my partners, and they should be treated as such. If we do well, then we all do well,” he said.

  That’s an idea long overdue.

  As the “Focused Equity” name suggests, CWS is kept impressively lean, with a portfolio of just 25 stocks. CWS also has radical approach to trading—it doesn’t do any. The 25 stocks are bought at the start of each year, and they’re held for the next 12 months. Elfenbein explains, “unless there’s a merger, our rule is no trading. Period.”

  The fund’s strategy is simple—buy and hold smaller, overlooked companies that have well-defined market niches. For example, CWS owns Heico Corp (NYSE:HEI), a small-cap firm that makes hard-to-find replacement parts for the aircraft industry. Elfenbein says, “HEICO has a great business. The FAA regs say you have to own some very particular part. Well, HEICO can probably make a cheaper version for you.”

  Elfenbein has an enviable track record. Since he started blogging at Crossing Wall Street in 2005, his yearly Buy List has gained nearly 170%, well ahead of the S&P 500. The new ETF is designed to track the Buy List step for step. “So many people asked me how they could invest in the Buy List, so we thought, ‘hey, let’s build an ETF around it.’ ”

  Elfenbein was one of the first to break onto the scene of stock blogging. Over the years, he’s built an impressive following on his blog and on Twitter (@EddyElfenbein). In fact, in what most certainly must be a Wall Street first, the fund’s sticker symbol (CWS) is based of the name of Elfenbein’s blog, Crossing Wall Street. “I never had to choose a ticker symbol before. Thankfully, the Chicago White Sox hadn’t beaten me to the punch.”

  Baseball aside, what makes CWS truly revolutionary is that you can easily follow the portfolio manager’s thoughts on the market. Where hedge funds zealously keep their portfolio moves secret, Elfenbein’s are perfectly transparent. “You’re flying along next to me in the captain’s chair, and you can see exactly what’s going in.”

  I have high hopes for Elfenbein’s fund, and expect to see more like it in the near future. My reasoning is simple. Since the financial crisis roiled the global economy, there’s been an erosion of investor confidence in Wall Street as an institution. The public is suspicious of both big banks and big government.

  As a result, investors are taking back control. They’re demanding transparency. They’re demanding “skin in the game.” They’re demanding accountability. Funds like CWS fit the bill.

  I asked Elfenbein if he has any reservations about going from a lowly blogger to an actual Wall Street portfolio manager. “Not really, but my dad told me that it’s a good thing I never blogged about MMA.”

• 14 Stocks Have Created 20% of the Stock Market’s Gain Since 1924
  Eddy Elfenbein, February 6th, 2017 at 9:20 am

  This is an amazing stat I found via Lee Jackson. Just 14 stocks have created 20% of the stock market’s gain since 1924. The 14 stocks are:

  1. Exxon Mobil Corp. (XOM)
  2. Apple Inc. (AAPL)
  3. General Electric Co. (GE)
  4. Microsoft Corp. (MSFT)
  5. International Business Machines Corp. (IBM)
  6. Altria Inc. (MO)
  7. General Motors Co. (GM)
  8. Johnson & Johnson (JNJ)
  9. Wal-Mart Stores Inc. (WMT)
  10. Procter & Gamble Co. (PG)
  11. Chevron Inc. (CVX)
  12. Coca-Cola Co. (KO)
  13. AT&T Inc. (T)
  14. Amazon.com Inc. (AMZN)