Archive for January, 2022

• Four Rate Hikes in 2022
  Eddy Elfenbein, January 10th, 2022 at 3:30 pm

  The futures market now sees four rate hikes coming from the Federal Reserve this year:

  

• RIP Louis Simpson
  Eddy Elfenbein, January 10th, 2022 at 3:24 pm

  Louis Simpson, who helped pick stocks for Warren Buffett, has died at age 85.

  Simpson spent more than three decades selecting equities for Geico, the auto insurer owned by Omaha, Nebraska-based Berkshire Hathaway Inc. Buffett, Berkshire’s billionaire chief executive officer whose stock-picking prowess earned him a worldwide following, was a longtime stakeholder in Geico and helped choose Simpson to be its chief investment officer in 1979. When Berkshire acquired full ownership of Geico in 1996, Buffett asked Simpson to continue managing its stock portfolio.

  Simpson was a “Hall of Famer” as an investor and “the best investment manager in the property-casualty business,” Buffett wrote in annual letters to Berkshire shareholders. In his 2004 letter, Buffett included a section called “Portrait of a Disciplined Investor,” saying Simpson’s picks had produced an annual average return of 20 percent since 1980, compared with 14 percent for the S&P 500 Index.

  (…)

  One of Simpson’s successes came with the breakup of American Telephone & Telegraph Co. in the 1980s. He invested about 40 percent of Geico’s capital in three of the regional “Baby Bell” operating companies formed by the dismantling. The stake doubled over two years and added $400 million to the insurer’s $1 billion net worth, according to Jack Byrne, the former chairman of Geico. His other notable investments included Nike Inc., an athletic apparel maker, and CarMax Inc., which sells used autos.

  “He just knocked the cover off the ball year after year after year,” Byrne said in a 2011 interview. “I have been asking Lou for 20 years whether he would take a separate account with me.”

• Anything Risky Is Down
  Eddy Elfenbein, January 10th, 2022 at 1:42 pm

  The stock market is having a rough day so far today. The S&P 500 has been as low as 4,582.24. Right now, the index is hanging around 4,600 which is a loss of 1.65%.

  The Nasdaq is down even more. That index is currently off by about 2.3%. In fact, the Nasdaq is basically flat over the last six months. The S&P 500 Tech sector is down about 2.4%.

  Anything risky, folks are running from. Bitcoin briefly dipped below $40,000. GameStop has been down as much as 15%.

  This is a good time to revisit my favorite comparison of late which is the S&P 500 Low Vol vs. the S&P 500 High Beta index. The High Beta index is currently off by 2.43% while the Low Vol index is down 0.89%.

  Despite all the selling, on our Buy List, AFLAC (AFL), Church & Dwight (CHD) and Reynolds Consumer Products (REYN) all got to new 52-week highs today.

• Morning News: January 10, 2021
  Eddy Elfenbein, January 10th, 2022 at 7:08 am

  Mark Mobius Sees ‘Much Much Higher’ U.S. Yields on Inflation Risks

  Goldman Now Expects Four Fed Hikes, Sees Faster Runoff in 2022

  The Federal Reserve Can Neither Shrink You, Nor Elevate You

  Big U.S. Banks Expected to Post Uptick In Core Q4 Revenues on Economic Rebound

  Robert Birnbaum, Architect of Modern-Day Financial Markets, Dies at 94

  Forget Shareholder Resolutions, Fund Manager Says: Hire Better Directors

  Even Companies in Workaholic Japan Are Introducting Four-Day Workweek

  Shimao Puts Residential Projects on Sale As China Property Woes Deepen

  Intel Erases Reference to China’s Xinjiang After Social-Media Backlash

  Intel Is About to Relinquish Its Chipmaking Crown to Samsung

  Why Tesla Soared as Other Automakers Struggled to Make Cars

  World’s Biggest Crypto Fortune Began With a Friendly Poker Game

  Quiet Awards Season Has Hollywood Uneasy

  Must the Shows Go On?

  Elizabeth Holmes’s Mixed Verdict Could Handicap an Appeal, Lawyers Say

  U.S. Sues Shop Owner Who Dumped 91,500 Pennies on Ex-Worker’s Driveway

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• December Jobs Report: +199,000
  Eddy Elfenbein, January 7th, 2022 at 11:58 am

  The December jobs report is out, and the U.S. economy created 199,000 net new jobs last month. That was well below expectations of 422,000.

  The unemployment rate fell to 3.9%. That’s lower than where it was during every single month of the 1970s, 80s and 90s.

  Average hourly earnings were up 0.6% last month and 4.7% for the whole year.

  The broader U-6 employment rate fell 0.4% to 7.3%.

  Job creation was highest in leisure and hospitality, a key recovery sector, which added 53,000. Professional and business services contributed 43,000, while manufacturing added 26,000.

  The unemployment rate was a fresh pandemic-era low and near the 50-year low of 3.5% in February 2020. That decline came even though the labor force participation rate was unchanged at 61.9% amid an ongoing labor shortage in the U.S.

  A more encompassing measure of unemployment that includes discouraged workers and those holding part-time jobs for economic reasons slid to 7.3%, down 0.4 percentage point. Though the overall jobless rates fell, unemployment for Blacks spiked during the month, rising to 7.1% from 6.5%. The rate for white women 20 years and older fell sharply, to 3.1% from 3.7%.

  “The new year is off to a rocky start,” wrote Nick Bunker, economic research director at job placement site Indeed. “These less than stellar numbers were recorded before the omicron variant started to spread significantly in the United States. Hopefully the current wave of the pandemic will lead to limited labor market damage. The labor market is still recovering, but a more sustainable comeback is only possible in a post-pandemic environment.”

• Morning News: January 7, 2022
  Eddy Elfenbein, January 7th, 2022 at 7:02 am

  BOE Push to Green Quantitative Easing Isn’t Working, Study Shows

  China’s Shocking Start to 2022 Pressures Beijing to Calm Markets

  Kazakhstan’s Huge Bitcoin Mining Industry Is Upended By Unrest

  December Jobs Report Is Expected to Show Record Annual Gain

  Fed’s ‘Maximum Employment’ Is Here; Not Everyone Has Benefited

  U.S. Treasuries Off to Worst-Ever Start of the Year

  Look Ahead to 2032, at the Very Least

  ‘I Know What the End of the World Looks Like’

  Meme Stocks Meet Crypto Mania With GameStop Pursuing NFTs

  Wall Street Is Using Tech Firms Like Zillow to Eat Up Starter Homes

  At CES, Tech Alliances Firm Up in the Self-Driving Car Wars

  Mortgage Rates Surge. It’s Just the Beginning

  After Two Weeks of Flight Cancellations, Airlines Assess What Went Wrong

  That $1,000 Bourbon You Bought May Be a Phony

  Coca-Cola’s Fresca to Join Crowd of Canned Cocktails

  Apple CEO Tim Cook Received Nearly $100 Million in Compensation in 2021

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• Jobless Claims Come in at 207,000
  Eddy Elfenbein, January 6th, 2022 at 9:56 am

  This morning’s weekly jobless claims report was 207,000. That’s up 7,000 from last week but it’s still quite low. It was above expectations of 195,000.

  The stock market turned very weak yesterday after the Fed minutes came out. Investors found the minutes to be more hawkish than expected. I’m not sure that that should have been a surprise.

  The market is flat so far this morning, but Energy stocks are doing quite well.

  This morning, Stryker’s (SYK) said it’s going to buy Vocera Communications (VCRA) for $79.25 in cash. The stock closed yesterday at $62.52 per share. Shares of Stryker are down a bit. The deal values Vocera at $2.97 billion.

  Kevin Lobo, Stryker’s CEO, said, “Vocera will help Stryker significantly accelerate our digital aspirations to improve the lives of caregivers and patients.”

• Morning News: January 6, 2021
  Eddy Elfenbein, January 6th, 2022 at 7:30 am

  Taiwan’s Tech Giants Are Being Hit by India Culture Shock

  Fed Minutes Point to Earlier, Faster Rate Hikes and More Aggressive Tightening

  Fed Leaves Gradualism Behind With Urgency on Rates, Assets

  A Fed Official’s 2020 Trade Drew Outcry. It Went Further Than First Disclosed

  Bitcoin Tanked After the Fed Minutes Were Released. Here’s Why

  How Six States Could Transform the U.S. Trucking Industry

  How Corporate America Has Changed After the Capitol Attack

  The M&A Boom Times Are Set to Continue in 2022

  Stocks Are Great for the Very Young — and the Very Old

  Consumer Demand for Goods Likely Drove U.S. Import Surge During Holidays

  Target Holiday Shopper Traffic Growth Topped Walmart, Best Buy

  Despite Theranos and Other Disasters, Startup Founders Have More Power Than Ever

  Best of CES 2022: New Tech That’s Practical, Innovative or Just Plain Crazy

  Forever 21 Owner Authentic Brands Withdraws IPO Plans

  Cases Rise, Criticism Mounts, but Ships Keep Cruising

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• Mettler Toledo EPS Growth
  Eddy Elfenbein, January 5th, 2022 at 3:12 pm

  Here’s something I thought you might find interesting. This is the growth in the earnings per share for Mettler Toledo (MTD):

  

  The red line is Wall Street’s estimate.

  That’s pretty remarkable growth. There’s only one down year. To show you how steady, MTD’s growth has been, here’s the same chart but I’ve added a trend line growing at 15%.

  

  Despite have a market cap of $36 billion, you almost never hear about Mettler Toledo. So what do they do? From their press release:

  METTLER TOLEDO (NYSE: MTD) is a leading global supplier of precision instruments and services. We have strong leadership positions in all of our businesses and believe we hold global number-one market positions in most of them. We are recognized as an innovation leader and our solutions are critical in key R&D, quality control, and manufacturing processes for customers in a wide range of industries including life sciences, food, and chemicals. Our sales and service network is one of the most extensive in the industry. Our products are sold in more than 140 countries and we have a direct presence in approximately 40 countries. With proven growth strategies and a focus on execution, we have achieved a long-term track record of strong financial performance.

  I highlight MTD for you because it has one of the most impressive track records of growing its profits consistently.

  It’s not cheap. Based on yesterday’s close, MTD is going for 40 times next year’s earnings.

• ADP Payroll Report = 807,000
  Eddy Elfenbein, January 5th, 2022 at 10:26 am

  The S&P 500 is about flat this morning. Value is having a good day while Growth appears sluggish. On our Buy List, AFLAC (AFL), Hershey (HSY) and Church & Dwight (CHD) are each up to a new all-time high.

  The big news this morning is that the ADP payroll report came in very strong. According to ADP, 807,000 new jobs were created last month. That more than doubled expectations of 375,000.

  Private job growth totaled 807,000 for the month, well ahead of the Dow Jones estimate for 375,000 and the November gain of 505,000. The November total was revised lower from the initially reported 534,000.

  The total was the best for the job market since May 2021′s 882,000 figure, according to the ADP data.

  Hiring was broad-based, though leisure and hospitality led with 246,000 new positions. Trade, transportation and utilities contributed 138,000, professional and business services increased by 130,000, and education and health services added 85,000.

  While service-related professions led with 669,000 new hires, the goods-producing side also showed strong gains. Manufacturing rose 74,000 and construction contributed 62,000 to the total.