Archive for January, 2020

• RPM International Earns 76 Cents per Share
  Eddy Elfenbein, January 8th, 2020 at 9:34 am

  This morning, RPM International (RPM) reported fiscal Q2 earnings of 76 cents per share. Wall Street had been expecting 73 cents per share. Net sales rose 2.8% to $1.40 billion. RPM had record cash flow, and EBIT margin improved by 180 basis points.

  For fiscal 2020, RPM sees earnings ranging between $3.30 and $3.42 per share. That’s reiterating the same guidance they gave us in July. Wall Street expects $3.35 per share.

  “Our very strong bottom-line growth in the quarter was primarily driven by our 2020 MAP to Growth, which is enabling us to grow earnings at a faster rate than those of our peers. Actions taken included delayering management, consolidating manufacturing, and shedding low-margin product lines to free up capacity for more value-added, EBIT-accretive volume. Pricing and moderating raw material inflation also positively impacted results,” stated Frank C. Sullivan, RPM chairman and chief executive officer. “In spite of a challenging macroeconomic environment, we were pleased with our solid organic sales growth in the quarter of 3.5%, which resulted from market share gains and pricing. Acquisitions contributed 0.6% to the quarter’s top-line growth, while foreign currency translation was a 1.3% headwind.”

  And for Q3:

  “For the fiscal 2020 third quarter, we expect sales to be up 2.5% to 4% with strong leverage to the bottom line for an estimated 25% to 30% adjusted EBIT growth, resulting in adjusted diluted EPS in the high-teens to low-20-cent range.

  The shares are up a bit this morning.

• Morning News: January 8, 2020
  Eddy Elfenbein, January 8th, 2020 at 7:12 am

  Russia Readies New Gas Link to Europe in Defiance of U.S.

  Markets Recoil, and Then Ease, as Traders Digest Iran Attack

  Oil Price Spike Clouds Corporate Profit Outlook, Putting Investors on Edge

  Spotify Is Developing Daily Sports Programs in Podcast Expansion

  Blackstone-KKR Hidden Hand in Ad Blitz Unleashes Washington Fury

  Sonos, Squeezed by the Tech Giants, Sues Google

  Impossible Foods Has Stopped McDonald’s Burger Talks, Shares of Beyond Meat Jump

  Bytedance’s Video App TikTok Bans ‘Misleading Information’

  Toyota Plans to Build ‘City of the Future’ With Housing, Robots and Autonomous Vehicles in Japan

  Tesla Begins Delivery Of China-Made Model 3s, But Faces Increasing Competition And Shrinking Market

  What Auto Slump? BMW Sees Another Record Year for Car Sales

  Real Men Don’t Rent

  Ben Carlson: My First Piece in Fortune Magazine

  Michael Batnick: Animal Spirits: Millennials on Communism

  Joshua Brown: Uncut Gems is a Personal Finance Movie!

  Be sure to follow me on Twitter.

• Morning News: January 7, 2019
  Eddy Elfenbein, January 7th, 2020 at 7:08 am

  Japanese Prosecutors Obtain Arrest Warrant Against Carole Ghosn

  Immigration Could Help Canada Top U.S. in Economic Growth This Year

  Fear of War Sends Gold to Highest Price Since 2013

  Why Events Tied to U.S.-Iran Tensions Are Not a Good Reason to Buy Gold

  U.S. Gas Stations Rush to Adopt Chip Cards After Failed Bid to Delay Deadline

  Wine Business Fears a Possible Disaster in Potential Trump Tariffs

  Impossible Dumplings and Beyond Buns: Will China Buy Fake Meat?

  Facebook Defies China Headwinds With New Ad Sales Push

  Ford Quarterly Sales Slip on Slowdown in Passenger Cars Demand

  Uber Partners with Hyundai on Electric Air Taxi

  South Korea’s LG Display to End Domestic Production of LCD TV Panels by End of 2020

  Nick Maggiulli: How Much Does Rebalancing Frequency Matter?

  Joshua Brown: Optimism as a Default Setting

  Howard Lindzon: Momentum Monday – War…What’s It Good For?

  Michael Batnick: Financial Gravity

  Be sure to follow me on Twitter.

• Skip the Mental Accounting
  Eddy Elfenbein, January 6th, 2020 at 8:24 pm

  Barry Ritholtz collected some words of wisdom for what to do “when a trade goes awry?” Here’s my offering:

  Eddy Elfenbein, manager of the Focused Equity ETF who blogs at Crossing Wall Street, points out: “The worst investor in the world is the person who bought a stock, then realized it wasn’t the company they thought it was and they’re now sitting on a loss.” The investor who refuses to sell because they “don’t want to take the loss” has not realized yet that the loss of capital has already occurred. Waiting to break even is a form of “mental accounting” and a poor use of capital. “The stock is completely unaware of your purchase price.”

• Morning News: January 6, 2019
  Eddy Elfenbein, January 6th, 2020 at 7:16 am

  Oil Prices Surge as Markets Digest Iran News

  Why So Many Emerging Markets Are Blowing Up Right Now

  New Trump Ruling Limits AI Surveillance Exports Over China Military Fears

  Defying Gravity? What Could Bring U.S. Stocks Down to Earth

  Fed Focuses on Repo Market Exit Strategy After Avoiding Year-End Crunch

  Morgan Stanley Says Economy Can’t Promise Trump Re-Election

  Japan to Tighten Baggage and Bail Rules After Carlos Ghosn’s Escape

  Borden Becomes Second Big U.S. Milk Producer to File for Bankruptcy

  In a Burger World, Can Sweetgreen Scale Up?

  A $1 Billion Solar Plant Was Obsolete Before It Ever Went Online

  Ben Carlson: I Gotta Say, It Was a Good Year & 10 Things Investors Can Expect in 2020

  Michael Batnick: The Good, The Bad and the Ugly

  Jeff Miller: Will Middle East Conflict Bring an End to the Bull Market?

  Howard Lindzon: The Art of NOT Selling

  Joshua Brown: Hard to Have Euphoria When Everyone’s Expecting Pink Slips

  Be sure to follow me on Twitter.

• Morning News: January 3, 2020
  Eddy Elfenbein, January 3rd, 2020 at 9:06 am

  Oil Soars as U.S. Killing of Iran General Stirs Fear of Conflict

  Futures Slump After U.S. kills Top Iranian Commander

  Hong Kong Considers the Future: ‘If You Can Afford It, Leave’

  Venezuela’s Latest Problem Is There Are Now Too Many Dollars

  ‘Gut Feelings’ Are Driving the Markets

  U.S. Farmers See Another Bleak Year Despite Phase 1 Trade Deal

  Nine States Face Economic Contraction, Most Since 2009 Crisis

  Tesla Deliveries Rise to Record as Car Buyers Rush for Subsidies

  U-Haul’s Anti-Nicotine Hiring Policy Is Draconian

  Ghosn Getaway Jet’s Other Job: Ferrying Venezuelan Gold

  Carlos Ghosn Might Not Be As Safe in Lebanon As He Thought

  Ben Carlson: No One Wants to Follow a Pessimist

  Michael Batnick: The Long Suffering

  Howard Lindzon: Investing Is So Easy…

  Joshua Brown: The State of the US Consumer

  Be sure to follow me on Twitter.

• About Those Wall Street Forecasts
  Eddy Elfenbein, January 2nd, 2020 at 10:20 pm

  This is the time of year when forecasters make their predictions for the year ahead. There are folks on Wall Street who are paid lots and lots of money to come up with these predictions.

  Their track record, however, is not very good. In fact, there’s almost zero correlation between their predictions and how the market actually behaves.

  As Warren Buffett once said, “Forecasts may tell you a great deal about the forecaster; they tell you nothing about the future.” That’s certainly true. I dug into the numbers and found that there’s a decent correlation—a negative one—between their predictions and the year that just ended.

  This means that forecasters simply take what just happened and assume the opposite will happen but to a much lesser degree. Forecasters also assume a very narrow band for the market’s performance, generally about 5% to 12% (though not always). In reality, the market is far more volatile.

  First, I have to thank the folks at Bespoke for providing me the numbers. This scatterplot shows Wall Street’s prediction for the coming year on the horizontal axis and the actual result on the vertical axis. The R-square is a measly 0.0024. In other words, the pros aren’t very good.

  

  Here’s the same chart but with one difference. The horizontal axis is still the prediction for the coming year while the vertical is for the year just ended. The R-square is a respectable 0.58. Notice how the trend line points downward, indicating a negative correlation.

  

  If you want to make a respectable Wall Street forecast, here’s the equation. Take the return of the year just ended, then divide it by five. Take that and subtract it from 10.7% and presto, that’s your easy Wall Street forecast.

  Now, for forecasting for how the market actually behaves. Weeellll….

• “Water Is Boring”
  Eddy Elfenbein, January 2nd, 2020 at 3:48 pm

  Never count a sector out just because it’s boring. Here’s a 20-year look at the performance of the water sector (black) versus the S&P 500 (blue).

  Bear in mind, this isn’t one water stock. We’re talking about the entire sector.

  

  Since early 2000, water is up 1,346% compared with 134% for the S&P 500. (This doesn’t include dividends which could be even more in favor of water.)

• Right Where We Left Off
  Eddy Elfenbein, January 2nd, 2020 at 10:48 am

  Happy New Year!

  The stock market is getting started on a good note.

  Things will get a lot more interesting soon, once earnings season starts.

  Shares of Disney (DIS) are off to a nice start:

  Disney shares were on the rise to kick off 2020 after some Wall Street analysts estimated significant growth from its new streaming service and recommended clients keep buying the stock.

  Rosenblatt Securities analyst Bernie McTernan expects Disney+ to attract 25 million users by the end of the first quarter of 2020, he said in a note Wednesday. He previously estimated that figure to be 21 million subscribers.

  “Following results from our 4th streaming video survey over the past 3 months we are raising our estimates for Disney+, now assuming 25M subscribers globally at the end of FY1Q20, up from 21M prior,” he said. “Awareness of the service and penetration of respondents has continued to trend higher throughout our surveys.”

  McTernan reiterated a $175 price target and a buy rating on Disney, and added that the growth of Disney+ may be pulling some users away from Netflix.

  On the econ front, this morning’s jobless claims report fell by 2,000 to 222,000. That’s a good number. We’ll learn a lot more next Friday, January 10, when the government releases the job stats for December. The unemployment rate is currently near a 50-year low.

  Here’s an interesting stat from the Stock Trader’s Almanac: When stocks finish the first five days higher, the S&P 500 has been positive more than 80% of the time at year-end with an average gain of about 13%.

• Morning News: January 2, 2020
  Eddy Elfenbein, January 2nd, 2020 at 6:55 am

  One of Chinese Leaders’ Biggest Worries for 2020 Is Pork

  China Halts British Stock Link Over Political Tensions

  Trump Administration is Quietly “Gutting” Tax Law to Give Big New Breaks to Corporations

  The Dollar’s Losses May Just Be Getting Started

  Here’s (Almost) Everything Wall Street Expects in 2020

  Private Equity Is Starting 2020 With More Cash Than Ever Before

  U.S. Shale Producers to Tap Brakes in 2020 After Years of Rapid Growth

  HSBC Kicks Off Year with Hong Kong Branches Closed, Vandalized

  BAE to Get Green Light for $10 Billion Howitzer Project

  Pika-Who? How Pokémon Go Confused the Canadian Military

  Japan Tries to Solve the Mystery of Carlos Ghosn’s Audacious Escape

  France Wouldn’t Extradite Carlos Ghosn if He Went There, Official Says

  Cullen Roche: What Should You Do When the Stock Market Goes Bonkers?

  Joshua Brown: Ithaka

  Howard Lindzon: Happy New Year – 2020 Here We Come

  Be sure to follow me on Twitter.