Archive for February, 2021

• Morning News: February 9, 2021
  Eddy Elfenbein, February 9th, 2021 at 7:05 am

  U.S. Maritime Regulator Urges Freight ‘Silos’ to Unite in Crisis

  California’s Net-Neutrality Rules Clear Major Hurdle as Biden’s DOJ Abandons Its Efforts to Block Them

  The Clash of Liberal Wonks That Could Shape the Economy, Explained

  The Gig Economy Dipped Again in the Fall. But How Bad Was It?

  Crisis Spurs Congress Toward Big Measures to Lift Families From Poverty

  Bitcoin Powers Towards $50K as Tesla Takes It Mainstream

  Reddit’s Valuation Doubles to $6 Billion After New $250 Million Funding

  Lost In the ‘Gamestonks’ Mania – What is GameStop Actually Worth?

  JP Morgan’s Board Rejects Switch to Stakeholder-Focused Entity

  Apple Is the $2.3 Trillion Fortress That Tim Cook Built

  Elon Musk’s Love-In With China May Be Over As Regulators Go After Tesla

  Amazon to Buy Half of the Energy Produced by Huge Offshore Wind Farm in the Netherlands

  Ben Carlson: The Catch-22 of Selling Your House Right Now

  Howard Lindzon: From Tiny Bubbles To Frothy McBubbles

  Joshua Brown: Shorts and Longs Are NOT Enemies!, Repeat After Me: That Sounds Stupid, I’m Buying Some Just In Case, Reddit App Installs Explode, Up 127% Year Over Year & The Plumbing

  Be sure to follow me on Twitter.

• Low Qual Is Leading the Charge
  Eddy Elfenbein, February 8th, 2021 at 11:53 am

  The stock market was up every day last week, and it’s up again today. If the market holds, this will be another all-time high close.

  Friday’s jobs report showed that the U.S. economy created 49,000 net new jobs last month. The unemployment rate fell to 6.3%. Very roughly speaking, I’d say we’re about 10 million jobs away from something resembling full employment.

  On our Buy List, Trex (TREX), Abbott Labs (ABT) and Disney (DIS) are all at new highs, and Ansys (ANSS) is very close. There are no Buy List earnings reports today. Our next one will come tomorrow when Fiserv (FISV) reports after the close.

  One of the factors that is used to dissect the market is “quality.” Analysts like to see if high-quality stocks are leading the charge, or if they’re being left behind. That’s assumed to be a good indicator of what investors are thinking.

  At the outbreak of the coronavirus, investors flocked to high-quality names. That makes sense. But since May, high quality has lagged. Actually, it’s lagged pretty badly.

  Here’s a chart of Fidelity’s Quality ETF divided by the S&P 500.

  

• Morning News: February 8, 2021
  Eddy Elfenbein, February 8th, 2021 at 7:05 am

  What Recovery? Clothes Retailers Cut Orders While Factories Fight to Survive

  Biden Appointments Signal a Trade Approach That Hews to the Left

  Treasury Long Bond Reaches 2% Milestone as Global Yields Awaken

  Without A Big Aid Bill Like Biden’s, Jobs Will Be Slow to Rebound, Yellen Warns

  Tightening Oil Supplies Inject New Momentum Into Price Rally

  Dogecoin Smokes Its All-Time High After Snoop Dogg Becomes Snoop DOGE

  Wall Street’s Most Reviled Investors Worry About Their Fate & Short-Sellers Fear for the Future

  Renaissance Clients Pull Out After Firm’s Rotten Run of Results

  SoftBank’s Son Hails ‘Golden Eggs’ as Vision Fund Rallies

  Apple Supplier Dialog Semiconductor Snapped Up by Japanese Tech Giant for $6 Billion

  Dating App Bumble Boosts IPO Fundraising Target to $1.8 Billion

  Big Publishing Pushes Out Trump’s Last Fan

  Ben Carlson: Some Friendly Reminders About Day Trading & Will Robinhood Become the Facebook of Finance?

  Michael Batnick: Animal Spirits: Commission-Free Insurance

  Howard Lindzon: Sunday Sentiment….Access To Markets Not Democratization

  Joshua Brown: Wall Street’s First Black Millionaire (with Shane White), the Case for Buying Silver (with Peter Boockvar)

  Be sure to follow me on Twitter.

• Happy 50th Birthday to the Nasdaq Composite
  Eddy Elfenbein, February 5th, 2021 at 10:22 am

  Today is the 50th birthday for the Nasdaq Composite index.

  The index started at 100 based on the closing prices of February 5, 1971. That was also a Friday. The first day of trading was Monday, February 8. The index closed that day at 100.84.

  However, the start wasn’t that great. By October 3, 1974, the Nasdaq had fallen down to 54.87.

  The index crashed 77.93% during a two-and-a-half year stretch from March 2000 to October 2003.

  The Nasdaq closed Thursday at 13,777.74. Not including dividends, that’s an annualized gain of 10.35% per year.

  

• CWS Market Review – February 5, 2021
  Eddy Elfenbein, February 5th, 2021 at 7:08 am

  ”Investment is most successful when it is most businesslike. – Ben Graham”

  So far this earning season, we’re a perfect 12 for 12. All 12 of our Buy List stocks that have reported earnings so far have beaten Wall Street’s consensus. I probably shouldn’t jinx it, since we still have ten more reports to go.

  It looks like Wall Street has survived the meme-stock rebellion. At least for now. Shares of GameStop crashed 83.5% this week, and there’s still one more trading day left. GameStop’s plunge this week works out to an average loss of 1% for every eight minutes and 41 seconds of market time. That’s pretty painful.

  Meanwhile, the S&P 500 closed at another all-time high on Thursday. Since October 30, the S&P 500 has rallied 18.4%. Notice how we bounced off the 50-day moving average (blue line).

  

  (Side note: Six months ago, the now-famous “Roaring Kitty” cc’d several Wall Street big shots in an attempt to draw attention to his bullish videos on GameStop. Amongst those big shots was your humble editor. At the time, GameStop was going for about $4 per share. I didn’t learn about the tweet until this week.)

  In this week’s CWS Market Review, I’ll cover all of our Buy List reports. We also had two dividend hikes this week, plus Sherwin-Williams announced a 3-for-1 stock split. I’ll also preview four more earnings reports coming our way next week, including Disney. There’s a lot to get to, so let’s jump right in.

  Six Buy List Earnings Reports

  Here’s our updated Earnings Calendar:

  Stock	Ticker	Date	Estimate	Result
  Silgan	SLGN	26-Jan	$0.53	$0.60
  Abbott Labs	ABT	27-Jan	$1.35	$1.45
  Stryker	SYK	27-Jan	$2.55	$2.81
  Danaher	DHR	28-Jan	$1.87	$2.08
  Sherwin-Williams	SHW	28-Jan	$4.85	$5.09
  Church & Dwight	CHD	29-Jan	$0.52	$0.53
  Thermo Fisher	TMO	1-Feb	$6.56	$7.09
  Broadridge Financial Sol	BR	2-Feb	$0.70	$0.73
  AFLAC	AFL	3-Feb	$1.05	$1.07
  Check Point Software	CHKP	3-Feb	$2.11	$2.17
  Hershey	HSY	4-Feb	$1.43	$1.49
  Intercontinental Exchange	ICE	4-Feb	$1.08	$1.13
  Fiserv	FISV	9-Feb	$1.29
  Cerner	CERN	10-Feb	$0.78
  Disney	DIS	11-Feb	-$0.42
  Moody’s	MCO	12-Feb	$1.96
  Zoetis	ZTS	16-Feb	$0.86
  Stepan	SCL	18-Feb	$1.08
  Trex	TREX	22-Feb	$0.36
  Ansys	ANSS	24-Feb	$2.54
  Middleby	MIDD	TBA	$1.40
  Miller Industries	MLR	TBA	n/a

  Last Friday, Church & Dwight (CHD) reported Q4 earnings of 53 cents per share. That beat the company’s own range of 50 to 52 cents per share. You really can’t go wrong with condoms and baking soda.

  For 2020, C&D made $2.83 per share. That’s an increase of 14.6% over 2019. The company had been expecting growth of 13%. Full-year net sales grew 12.3% to $4.9 billion. Cash from operating activities increased 14.6% to $990.3 million.

  The best news is that Church & Dwight increased its quarterly dividend by 5.2% to 25.25 cents per share. This makes the annual payout $1.01 per share. This is the 25th consecutive year in which Church & Dwight has increased its dividend. I love seeing long streaks like this.

  For 2021, C&D expects earnings of $3.00 to $3.06 per share. That’s growth of 6% to 8%. Wall Street had been expecting $3.05 per share.

  For Q1, the company sees sales growth of 3% and organic sales growth of 2%. For EPS, Church & Dwight expects 80 cents per share. The Street had been expecting 86 cents per share.

  That’s not great, and the shares pulled back after the earnings report, but I’m not too concerned. For now, I’m dropping our Buy Below on Church & Dwight to $90 per share.

  On Monday, Thermo Fisher Scientific (TMO) reported Q4 earnings of $7.09 per share. This was a very good quarter for TMO. Wall Street had been expecting $6.56 per share. Q4 revenue grew by 54% to $10.55 billion. Full-year revenue increased 26% to $32.22 billion, and full-year EPS increased 58% to $19.55.

  On the earnings call, Thermo said it expects 2021 earnings of $21.62 per share and revenue of $35.1 billion. I like that forecast. Wall Street had been expecting $20.74 per share on revenue of $33.7 billion. I’m lifting our Buy Below price on Thermo to $500 per share.

  On Tuesday, Broadridge Financial Solutions (BR) reported fiscal Q2 earnings of 73 cents per share. That topped Wall Street’s estimates of 70 cents per share.

  CEO Tim Gokey said that Broadridge now expects sales and earnings growth to be at the “higher end” of their full-year guidance. The current guidance is for revenue growth of 3% to 6% and earnings growth of 6% to 10%.

  “Broadridge delivered 7% recurring-revenue growth and 38% adjusted-EPS growth in the second quarter.

  “We are executing well on our targeted-growth plans across governance, capital markets, and wealth and investment management. As we enter our seasonally more significant second half of the year, we will continue to invest to support our long-term growth strategies,” Mr. Gokey added.

  “Our fiscal-2021 outlook puts us squarely on track to achieve the three-year growth objectives we presented at our investor day two months ago, including 7-9% recurring revenue and 8-12% adjusted-EPS growth,” Mr. Gokey concluded.

  Let’s do a little math. Last fiscal year (ending in June), Broadridge made $5.03 per share. So that higher end of guidance roughly translates to earnings this fiscal year of $5.43 to $5.53 per share. For the first six months of this year, the company has made $1.70 per share.

  This isn’t an outstanding report like BR’s last one, but it’s a good one. Broadridge remains a buy up to $150 per share.

  There’s always a dud each earning season, and this time, it looks to be Check Point Software’s (CHKP) turn. On Wednesday, the cyber-security company reported earnings of $2.17 per share. That beat Wall Street’s consensus by six cents per share.

  For the same quarter one year before, Check Point made $2.02 per share. Sales rose 4% to $564 million. Wall Street had been expecting revenue of $555.4 million. During the quarter, Check Point bought back 2.7 million shares for $323 million.

  So what upset traders? The answer is Check Point’s guidance. For Q1, Check Point sees earnings ranging between $1.45 and $1.55 per share. Consensus was $1.51 per share. For the whole year, Check Point expects $6.45 to $6.85 per share. Consensus was $6.92 per share.

  Shares of CHKP plunged 10.5% on Wednesday. The stock is still higher than it was two months ago, but that kind of move hurts. Personally, I think traders overdid it. At the current price, Check Point is going for about 18 times this year’s estimate. Let’s also remember that Check Point might exceed its own guidance. After all, the company has topped expectations for the last 16 quarters in a row. (It could be longer, but that’s all the data I have.)

  Look for a rebound here. Check Point remains a buy up to $133 per share.

  In last week’s issue, I said I expected an earnings beat from AFLAC (AFL), and we got one, although it was close. For Q4, the duck stock reported operating earnings of $1.07 per share. That beat Wall Street’s forecast of $1.05 per share. The yen/dollar exchange rate pinged earnings by two cents per share.

  For the year, AFLAC made $4.96 per share. That’s up from $4.44 in 2019. For the full-year, forex added four cents per share to the bottom line. During the quarter, AFLAC bought back 11.8 million shares of AFL for $500 million.

  As always, the details are solid with AFLAC. At the end of the quarter, total shareholder equity was $48.46 per share. The annualized ROE on shareholders’ equity in Q4 was 11.5% and 15.3% for the full year.

  My take: AFLAC had a very tough year in 2020. Given what they had to deal with, the company performed admirably. The recent 18% dividend hike reflects that. AFLAC remains a buy up to $50 per share.

  On Thursday, Hershey (HSY) said it made $1.49 per share, which beat estimates by six cents per share.

  Sales grew 5.7% to $2.19 billion, beating the FactSet consensus of $2.11 billion, as volume and prices increased. North America sales rose 8.9% to $1.97 billion, beating the FactSet consensus of $1.90 billion, while international and other revenue dropped 17.3% to $211.3 million to miss expectations of $219.7 million.

  For 2021, Hershey expects EPS growth of 6% to 8%. Last year, the confectioner made $6.29 per share, so this year’s range is about $6.67 to $6.80 per share. That’s quite good. Wall Street had been expecting $6.58 per share. Hershey is a buy up to $160 per share.

  Finally, Intercontinental Exchange (ICE) earned $1.13 per share, which beat estimates of $1.08 per share.

  This is ICE’s 15th year in a row of record revenues. For the year, ICE earned $4.51 per share. ICE’s adjusted operating margin was 59%. This is why I love near-monopolies.

  ICE is also raising its quarterly dividend by 10% to 33 cents per share. The first quarter dividend is payable on March 31 to stockholders of record as of March 17. Intercontinental Exchange is a buy up to $123 per share.

  

  Four Buy List Earnings Reports Next Week

  We have four more Buy List earnings reports scheduled for next week. Let’s start with Fiserv (FISV), which is due to report on Tuesday. I’m looking forward to this report because it should confirm Fiserv’s 35th year in a row of double-digit earnings growth. That’s a remarkable streak.

  Fiserv expects to see its earnings rise by 11% over 2019. Fiserv earned $4 per share in 2019, so an 11% earnings increase translates to full-year earnings of $4.44 per share.

  For the first nine months of this year, the company made $3.12 per share. That works out to Q4 earnings of $1.32 per share.

  On Tuesday, it’s Cerner’s (CERN) turn. This company is usually quite accurate with its forecasts, so that takes some of the excitement out of earnings time. That’s fine by me. For Q4, Cerner expects revenue between $1.365 billion and $1.415 billion and earnings between 76 and 80 cents per share. That implies full-year earnings of $2.82 to $2.86 per share. Cerner is delivering as expected.

  Disney (DIS) is due to report its fiscal Q1 on Thursday. This should be an interesting one. For the third quarter in a row, the Mouse House is expecting to report a loss, but for the quarter ending in June, Disney actually made a small profit. Disney has been hurt by the lockdowns, but it’s held up much better than Wall Street had expected.

  Six months ago, Disney creamed estimates by 72 cents per share. Then, three months ago, Disney beat by 50 cents per share. This time around, the Street is looking for a loss of 42 cents per share. That forecast has crept higher in the past few weeks.

  In October, I told you to expect a big earnings beat from Moody’s (MCO), but even I didn’t think it was going to be that much. For Q3, the ratings agency earned $2.69 per share which creamed estimates by 59 cents per share. Moody’s Analytics, which is a key business for them, saw a revenue increase of 7% to $531 million.

  At the time, Moody’s raised its full-year guidance range from $8.80 to $9.20 per share to $9.95 to $10.15 per share. For the first three quarters, Moody’s has made $8.24 per share. That implies Q4 earnings of $1.71 to $1.91 per share.

  Sherwin-Williams to Split 3-for-1

  On Wednesday, Sherwin-Williams (SHW) said it will split its stock three for one. This means shareholders will get two more shares for each share they own. However, the share price will fall by two thirds.

  The split will happen on April 1. Last week, the paint stock reported very good earnings. For Q1, Sherwin expects that “sales will increase high single digits.” For 2021, the company sees earnings ranging between $26.40 to $27.20 per share.

  When the split happens, our $720 Buy Below price will adjust to $240 per share.

  That’s all for now. The January jobs report is due out later today. The consensus is that the U.S. economy created 50,000 net new jobs in January and that the unemployment rate is 6.7%. Next week’s news will probably be dominated by earnings. We’ll also get the consumer inflation report on Wednesday. I doubt we will see much inflation, but there seems to be an emerging consensus that inflation will be gaining steam over the next few years. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

  – Eddy

• Morning News: February 5, 2021
  Eddy Elfenbein, February 5th, 2021 at 7:02 am

  India Wants Retail Investors to Trade Nation’s Sovereign Debt

  The Bank of England Tells Banks to Prepare for Negative Interest Rates

  The Unemployment Rate Hasn’t Budged In Months As America’s Jobs Crisis Drags On

  When Will Life Return to Normal? In 7 Years at Today’s Vaccine Rates

  GameStop, AMC Entertainment Shares Jump As Robinhood Removes Trading Limits

  ‘To The Moon’ Or To A Lawyer, GameStop Investors Cope With Stock’s Rollercoaster

  Why Jeff Bezos’s Departure Letter to Amazon Employees Is Effective

  Fox News Is Sued by Election Technology Company for Over $2.7 Billion

  Tiktok Rival Kuaishou Surges 160% in $5.3 Billion Hong Kong Debut

  Online Super Bowl Bets Expected to Increase 63% This Year

  Super Bowl Means Snacking, Even Without Parties

  Will Ferrell’s Super Bowl Ad Has Norway Taking an EV Victory Lap

  Howard Lindzon: No Code Is Cool

  Cullen Roche: Why Pump & Dumps Are Dangerous

  Michael Batnick: Large Caps Are…Underperforming?

  Ben Carlson: The Best Way to Manage Sequence of Return Risk

  Be sure to follow me on Twitter.

• Two More Earnings Beats
  Eddy Elfenbein, February 4th, 2021 at 11:05 am

  Another busy morning for news. First off, the initial-jobless claims report came in at 779,000. That beat estimates of 830,000. That’s good news. The government’s jobs report is due out tomorrow.

  

  We also had two more Buy List earnings reports. Hershey (HSY) earned $1.49 per share which beat estimates by six cents per share.

  Sales grew 5.7% to $2.19 billion, beating the FactSet consensus of $2.11 billion, as volume and prices increased. North America sales rose 8.9% to $1.97 billion, beating the FactSet consensus of $1.90 billion, while international and other revenue dropped 17.3% to $211.3 million to miss expectations of $219.7 million.

  For 2021, Hershey expects EPS growth of 6% to 8%. Last year, Hershey made $6.29 per share so this year’s range is about $6.67 to $6.80 per share. Wall Street had been expecting $6.58 per share.

  Also, Intercontinental Exchange (ICE) earned $1.13 per share which beat estimates of $1.08 per share.

  This is ICE’s 15th year in a row of record revenues. For the year, ICE earned $4.51 per share. Adjusted operating margin was 59%.

  The company is also raising its quarterly dividend by 10% to 33 cents per share. The first quarter cash dividend is payable on March 31, 2021 to stockholders of record as of March 17, 2021.

• Morning News: February 4, 2021
  Eddy Elfenbein, February 4th, 2021 at 7:04 am

  Good News In Α Terrible Time

  South Korea Leads World in Innovation as U.S. Exits Top Ten

  How to Win at the Stock Market by Being Lazy

  Yellen’s Step Into Market Mania Tests Consumer-Protection Stance

  Coming Soon: The ‘Vaccine Passport’

  Deutsche Bank Just Posted Its First Profit in Years

  Oil Major Shell Reports Sharp Drop in Full-Year Profit, Raises Dividend

  E.V.s Force Carmakers to Reinvent the Wheel, and Brakes, and Mirrors …

  How Andy Jassy, Amazon’s Next C.E.O., Was a ‘Brain Double’ for Jeff Bezos

  China’s Ant to Hive Off Credit Data in Revamp; Sees IPO in 2 Years

  McKinsey Agrees to $550 Million Opioid-Claim Settlement

  Parler CEO Says He Was Fired

  Howard Lindzon: The Irritable Steve Jobs and Apple Enterprise?

  Michael Batnick: Animal Spirits: The Big Squeeze

  Joshua Brown: How David Beats Goliath in Real Life & GM’s “Electric” Super Bowl Commercial

  Be sure to follow me on Twitter.

• AFLAC Earned $1.07 per Share for Q4
  Eddy Elfenbein, February 3rd, 2021 at 4:26 pm

  After the bell, AFLAC (AFL) reported Q4 operating earnings of $1.07 per share. That beat Wall Street’s forecast of $1.05 per share. The yen/dollar exchange rate pinged earnings by two cents per share.

  For the year, AFLAC made $4.96 per share. That’s up from $4.44 in 2019. For the full-year, forex added four cents per share to the bottom line. During the quarter, AFLAC bought back 11.8 million shares of AFL for $500 million.

  At the end of the quarter, total shareholder equity was $48.46 per share. The annualized ROE on shareholders’ equity in Q4 was 11.5% and 15.3% for the full year.

  The takeaway is that AFLAC had a very tough year in 2020. Given what they had to deal with, the company performed admirably. The recent 18% dividend hike reflects that.

  CEO Dan Amos:

  “Pandemic conditions continue to impact our sales results both in the United States and Japan, as well as earned premium and revenues. We expect these pandemic conditions to remain with us through the first half of 2021. We have seen marginal sales improvements on a sequential basis in the last two quarters, and we would look for this to continue if conditions improve to allow more face-to-face interactions. At the same time, we continue to invest in virtual and digital sales methods and promote new products, as we face uncertain economic conditions and claims activity in both countries. For example, we launched a new medical product in Japan, closed on the acquisition of Zurich North America’s group benefits business and announced the national launch of Aflac Dental & Vision. While we will continue to monitor the rollout of vaccines, we remain encouraged about the second half of the year, expecting to slowly return to normal and realize the benefits of our 2020 investments.

  “As always, we are committed to prudent liquidity and capital management. This includes maintaining strong capital ratios on behalf of our policyholders in both the U.S. and Japan. It goes without saying that we treasure our record of dividend growth. Coming off our 38th consecutive year of dividend increases, I am pleased with the board’s decision to increase the quarterly dividend by 17.9% in the first quarter, as we announced in November. Our dividend track record is supported by the strength of our capital and cash flows. At the same time, we remain in the market repurchasing shares with a tactical approach and focused on integrating the growth investments we have made in our platform. By doing so, we look to emerge from this period in a continued position of strength and leadership.”

• Check Point Software Earned $2.17 per Share
  Eddy Elfenbein, February 3rd, 2021 at 9:49 am

  There’s been a lot of news this morning. Let’s start with Check Point Software (CHKP). The company reported earnings of $2.17 per share. That beat Wall Street’s consensus by six cents per share. For the same quarter one year before, Check Point made $2.02 per share. Sales rose 4% to $564 million. Wall Street had been expecting revenue of $555.4 million.

  “Business in our fourth quarter grew across all focus areas including cloud, network and remote access security,” Chief Executive Gil Shwed said.

  “The global pandemic drove the new normal, a hybrid work environment and accelerated digital transformation that created security challenges across all types of organizations … Delivering cyber security is now more critical than ever.”

  Check Point said it bought back 2.7 million shares in the quarter worth $323 million as part of its share repurchase program.

  Check Point sees Q1 ranging between $1.45 and $1.55 per share. Consensus was $1.51 per share. For the whole year, Check Point expects $6.45 to $6.85 per share. Consensus was $6.92 per share. The stock is down about 8% this morning.

  The other big news is that Sherwin-Williams (SHW) said it will split its stock three-for-one. This means shareholders will get three times as many shares, but the share price will fall by two thirds.

  Each Sherwin-Williams shareholder of record at the close of business on March 23, 2021 will receive two additional common shares for each then-held common share, to be distributed after close of trading on March 31, 2021. Trading of Sherwin-Williams common shares will begin on a stock split-adjusted basis on April 1, 2021.

  Also this morning, ADP said that private payrolls grew by 174,000 jobs last month. That beat estimates of 45,000. The real test comes on Friday when the government releases the official jobs report. The current consensus is for a gain of 50,000 jobs.