Archive for February, 2021

• Stepan Beats by 34 Cents per Share
  Eddy Elfenbein, February 18th, 2021 at 9:53 am

  This morning, Stepan (SCL) reported Q4 earnings of $1.42 per share versus $1.10 per share in 2019. Wall Street had been expecting $1.08 per share. Sales volume increased by 7%.

  For the year, Stepan made $5.68 per share. That’s up from $5.12 per share in 2019. Sales rose 3%.

  Stepan had negative net debt at year-end as cash balances of $349.9 million exceeded total debt of $198.7 million.

  CEO F. Quinn Stepan, Jr. said:

  “Despite significant challenges during the year, inclusive of the global pandemic and the first quarter 2020 plant power outage at our Millsdale, IL facility, the Company delivered record fourth quarter and full year earnings. Both full year adjusted net income and adjusted EPS were up 11% versus the prior year. Surfactant fourth quarter operating income was up 28% on the strength of 8% volume growth, which was mostly attributable to strong demand in consumer product end markets driven by the fight against the COVID-19 virus. Our Polymer business was up significantly during the quarter due to the Millsdale insurance recovery. Excluding the insurance recovery, our Polymer business was up 12% due to strong European rigid polyol growth. Our Specialty Product business results were up slightly in the fourth quarter.”

  The shares are down about 0.5% this morning.

• Morning News: February 18, 2021
  Eddy Elfenbein, February 18th, 2021 at 7:05 am

  How Amsterdam is Stealing a March on Rivals as Brexit Trading Hub

  Facebook ‘Unfriends’ Australia: News Pages Go Dark in Test for Global Publishing

  Big Freeze in Texas Is Becoming a Global Oil Market Crisis

  Texas Clamps Down on Out-of-State Gas Sales Amid Shortages

  U.S. Price Pressures Percolate With Surging Sales, Input Costs

  Hedge Funds, Robinhood Face Grilling by Congress Over GameStop Reddit Rally

  Should the Feds Guarantee You a Job?

  Amazon’s Great Labor Awakening

  What Frustrated Workers Heard in That Dolly Parton Ad

  Barclays Reports 38% Slide in Net Profit for 2020, Resumes Dividend Payouts

  Credit Suisse Swings to Fourth-Quarter Loss, Weighed Down by Provisions for a U.S. Legal Dispute

  When Market Hordes Chase Themes, Who Needs Analysts?

  The New Debt Prisons

  Joshua Brown: The Big Long

  Michael Batnick: The Worst Year Ever for Value & Lost in the Backtest

  Howard Lindzon: Shopify President Harley Finkelstein Joins Me on Panic with Friends to Discuss the Future of E-Commerce and Positioning Shopify as the Go-To Platform for Entrepreneurs

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• Sherwin-Williams Raises Dividend
  Eddy Elfenbein, February 17th, 2021 at 5:06 pm

  Press release:

  The Board of Directors of The Sherwin-Williams Company (NYSE: SHW) today announced a regular quarterly dividend of $1.65 per common share, an increase of 23.1% over the $1.34 paid in the same quarter in 2020, payable on March 12, 2021, to shareholders of record on March 1, 2021. This increase follows 42 consecutive years of dividend increases.

  Also, the Board authorized the Company to purchase 15 million shares of the Company’s common stock for treasury, which is in addition to the shares remaining under the existing share repurchase authorization announced in October 2015. The total amount authorized will be adjusted proportionately to reflect the three-for-one stock split announced on February 3, 2021 so that there will be three times as many shares authorized for repurchase immediately after the stock split. The repurchase authorization has no expiration date, and purchases may be made from time to time for general corporate purposes.

• The Formula to Spot a Bubble
  Eddy Elfenbein, February 17th, 2021 at 3:23 pm

  Mark Hulbert has an interesting column at MarketWatch. It’s about a trio of academics who have devised a bubble-spotting formula.

  Applying the formula the researchers derive, I calculate there is an 80% chance that the Technology Hardware, Storage & Peripherals index will be 40% lower than today at some point in the next two years. Among some of the better-known firms in this industry are Apple (ticker: AAPL), Seagate Technology (STX), and Western Digital (WDC).

  Though no other industries satisfy the researchers’ definition of a bubble, two others come close. They are also in the technology arena: Semiconductors and Semiconductor Equipment, and Software.

  Why focus on an industry that may be in a bubble, rather than the market as a whole? Prof. Greenwood told Barron’s that he and his fellow researchers learned from their study of the history of bubbles that they “rarely are marketwide” events. Far more common, he said, is for a bubble to manifest in certain pockets of the market even as other sectors remain undervalued.

  So what do they look for?

  The researchers define a bubble to be any industry whose two-year return is at least 100 percentage points greater than the overall market’s. This is a high standard indeed—among all industries for which they had performance data between 1926 and 2016, just 40 satisfied the definition at any point over this 90-year period.

  Not all bubbles burst, of course, and those that do don’t always burst right away. The researchers imposed a strict precondition here as well: Once an industry satisfied their definition of a bubble, they considered it to have burst if, within the subsequent two years, it lost at least 40% of its value. Of the 40 industries that satisfied the researchers’ definition of a bubble, 21—or 53%—burst.

• Morning News: February 17, 2021
  Eddy Elfenbein, February 17th, 2021 at 7:02 am

  Inflation Isn’t Lurking Around the Corner. This Isn’t the 1970s.

  Special Report: Amazon Documents Reveal Company’s Secret Strategy to Dodge India’s Regulators

  U.S. Oil Output Slumps by Record One-Third as Permian Freezes

  In Texas’s Black-Swan Blackout, Everything Went Wrong at Once

  Winter Storm Disrupts Wide Swath of American Business

  The Auto Industry Bets Its Future on Batteries

  Ford Invests $1 Billion in German Plant, Targets Move to ‘All-Electric’ Passenger Vehicles in Europe by 2030

  Bitcoin Scales $51,000 for the First Time Amid Crypto Fever

  Big Tech’s Next Big Problem Could Come From People Like ‘Mr. Sweepy’

  Epic Games Takes Apple Fight to EU Antitrust Regulators

  Citibank Can’t Get Back $500 Million It Wired By Mistake, Judge Rules

  The Lockdown Showed How the Economy Exploits Women. She Already Knew.

  Nick Maggiulli: Respect the Base Rate

  Ben Carlson: Why Valuations Probably Won’t Matter For A While

  Michael Batnick: Animal Spirits: Bidding Wars

  Howard Lindzon: Bitcoin $1 Trillion, Wayne Gretzky Rookie Card IPO’s for $800,000, $EBAY at all-time highs, Nikkei at 30 Year Highs….Investing Is Easy!

  Be sure to follow me on Twitter.

• The Twitter Tax Code
  Eddy Elfenbein, February 16th, 2021 at 12:42 pm

  Over the weekend, I ran a series of ten polls on Twitter asking people how much should a theoretical family of four pay in federal income taxes. For the different polls, I used gradually rising incomes; $30,000, $40,000, $50,000, $60,000, $100,000, $200,000, $500,000, $1,000,000 and $10,000,000. For clarity, I only meant federal income taxes and I was asking for the effective rate.

  My goal was to see if I could calculate tax brackets that would fit the data points from our 10 polls.

  Twitter’s polls only allow for four responses, so I had to use some crude interpolation to estimate the median response.

  Here are the results:

  $50,000: 0.92%
  $60,000: 0.24%
  $75,000: 4.73%
  $100,000: 9.70%
  $200,000: 17.17%
  $500,000: 25.39%
  $1,000,000: 32.54%
  $10,000,000: 36.67%

  Here’s what a scatterplot looks like. Income is the X-axis and the tax bill is the Y-axis. Both axes have log scales.

  

  Among the 10 polls, I got more than 20,000 votes. Let me get a few things out of the way. Obviously, this is hardly a scientific poll. I was just doing it for fun.

  Also, I adjusted each of the response brackets to get a more realistic result. For example, the lower-income polls had answer ranges that were $3,000 wide. The higher polls had $20,000 ranges. This probably is a big no-no for academics, but I had to make do with what I had.

  Some of the results don’t even make sense. For example, there’s a higher tax on $50,000 than on $60,000. Also, some of the answers don’t line up well. For example, our polls show a higher tax on income from $500,000 to $1,000,000 than on income from $1,000,000 to $10,000,000.

  Nevertheless, I made a few rough adjustments, brought out some math and calculated our Twitter tax code.

  First off, the polls showed a majority for no tax on incomes of $30,000 or $40,000. To make things easy, I also left $50,000 and $60,000 tax free since our polls showed a very small rate for these levels. Also, as I said before, our polls gave these levels a regressive response.

  Here’s how it goes:

  The first $60,610.78 is tax free.

  Income between $60,610.78 and $375,534.57 is taxed at 24.63%.

  Income over $375,534.57 is taxed at 39.69%.

  That lines up with our poll results very well. One small exception is that under these brackets, the $10 million family is overtaxed by 2.3% (meaning higher than what our polls wanted.)

  A number of commenters advocated for a flat tax. That’s an interesting idea but the responses from our polls don’t line up well with any flat tax scenario.

  Here’s the log chart again, except for the two lowest data points. To find the best fitting flat tax equation, all we need to do is add a linear trend line.

  

  The slope of the line is the flat tax rate. In this case, it’s 37.04%. The deduction is the y-intercept divided by the slope. In this case, it’s $104,284.

  Interesting, but that strays pretty far from our tax responses. Still, two brackets does the trick quite well.

• Zoetis Earns 91 Cents per Share
  Eddy Elfenbein, February 16th, 2021 at 7:49 am

  This morning, Zoetis (ZTS) reported Q4 earnings of 91 cents per share. That topped Wall Street’s estimate of 87 cents per share. Quarterly net revenue rose by 8% to 1.8 billion. For the full year, Zoetis made $3.85 per share.

  “In 2020, Zoetis delivered another year of strong growth and market leadership thanks to our diverse and durable portfolio, our commitment to continuous innovation and the essential nature of our business,” said Kristin Peck, Chief Executive Officer of Zoetis. “We grew revenue 9% operationally, which is once again above market growth in a competitive, global sector. We also grew our adjusted net income faster than revenue, at 10% operationally.”

  “Looking forward, we believe this momentum sets us up for a strong 2021, even amidst ongoing COVID-19 uncertainty. We expect to continue growing revenue faster than the market in 2021 driven by continued strength in petcare; ongoing expansion in markets outside the U.S., most notably China; and acceleration of our diagnostics portfolio penetration. As a result, we are guiding to full-year operational growth of 9% to 11% in revenue,” said Peck.

  For 2021, Zoetis sees revenue between $7.40 billion and $7.55 billion, and EPS between $4.36 and $4.46. Wall Street had been expecting earnings of $4.26 per share on revenues of $7.11 billion. Shares of ZTS are up about 1.5% in premarket trading.

• Morning News: February 16, 2021
  Eddy Elfenbein, February 16th, 2021 at 7:03 am

  Global Bonds Are Suffering the Worst Start to a Year Since 2013

  ‘Super Mario’ Saved the Euro. Fixing Italy’s Economy May Be A Bigger Challenge

  Biden and the Fed Leave 1970s Inflation Fears Behind

  Stimulus Hopes Lift Futures to All-Time Highs

  Natural Gas Skyrockets Again to $500 as Blackouts Spread in U.S.

  How Extreme Cold Turned Into a U.S. Energy Crisis

  Bill Gates Has a Master Plan for Battling Climate Change

  Jaguar Vehicles To Go Fully Electric in 2025

  Elon Musk Asks ‘Major Dogecoin Holders’ To Sell Most Of Their Coins

  Is Tesla’s Bitcoin Investment a Good Move?

  TikTok’s U.S. Ad Business Roars Back As Trump’s Threats Recede

  Clubhouse, a Tiny Audio Chat App, Breaks Through

  Howard Lindzon: Momentum Monday – Everyone and Everything Is High

  Jeff Carter: How She Built It

  Michael Batnick: Insatiable

  Ben Carlson: Why Is College So Expensive?

  Be sure to follow me on Twitter.

• Morning News: February 15, 2021
  Eddy Elfenbein, February 15th, 2021 at 7:05 am

  Japan’s Nikkei 225 Tops 30,000 For First Time Since 1990

  As Lebanon’s Banks Struggle to Raise Capital, A Deadline Looms

  Global Shares Hit Fresh Peak, Oil Up On Middle East Tensions

  Bill Gates Shows How Hard It Can Be to Divest From Fossil Fuel

  W.T.O. Set to Gain New Chief, But Deep Issues Remain

  Bitcoin Rally Falters Just Short of $50,000 As Investors Take Profit

  Big Tech’s Unlikely Next Battleground: North Dakota

  Tesla to Start Making Cars in India, Targeting Vast Market

  Brevan Howard Has a Plan to Outlast Its Billionaire Founder

  Wine Tariffs Are Crushing US Importers

  Nick Maggiulli: The 10 Biggest Money Mistakes

  Jeff Miller: Weighing the Week Ahead: A Letter from Mr. Market!

  Howard Lindzon: Sentiment Sunday – Crypto in 2021…The Era of Physical and Digital Markets and Sentiments

  Joshua Brown: The Options Market is a Circus (with Dan Nathan) + The History You’ve Never Been Taught

  Michael Batnick: Animal Spirits: The Madness of Crowds & How to Square this Circle

  Ben Carlson: The Biggest Difference Between Now & the Dot-Com Bubble & A Short History of U.S. Stock Market Corrections & Bear Markets

  Be sure to follow me on Twitter.

• Moody’s Earns $1.91 per Share
  Eddy Elfenbein, February 12th, 2021 at 12:01 pm

  This morning, Moody’s (MCO) reported Q4 earnings of $1.91 per share. That was six cents below estimates. The good news is that revenues beat estimates, and Moody’s provided an upbeat forecast for this year. For Q4, revenues rose 4.6% to $1.29 billion. Wall Street had been looking for $1.22 billion.

  “MIS had another strong quarter with a favorable issuance mix from leveraged loans and infrequent bank issuers. Our MA team delivered growth by staying close to the customer, driving subscription sales and high retention,” said Robert Fauber, President and Chief Executive Officer of Moody’s. “As managing risk becomes more complex, the demand for our insights and solutions has never been greater. In 2021, we will help our customers navigate the changing environment by continuing to enhance our products, bringing new capabilities to the market and building on the strengths of our core businesses. We project 2021 revenue growth in the mid-single-digit percent range with strong growth in Moody’s Analytics offsetting expectations for a modest decline in global debt issuance.”

  Moody’s sees 2021 earnings ranging between $10.30 and $10.70 per share. Wall Street had been expecting $10.34 per share.

  Moody’s also raised its quarterly dividend by 11% to 62 cents per share.