Author Archive

  • Oracle Snaps Up Taleo for $1.9 Billion
    , February 9th, 2012 at 12:41 pm

    In December, Oracle ($ORCL) bought RightNow. Apparently, they’re still in a buying mode. The company just bought Taleo ($TLEO) for $1.9 billion. TLEO shareholders will get $46 per share which is an 18% premium to yesterday’s close.

    Oracle is using acquisitions to build its cloud business as part of efforts to help blunt the impact of a possible slowdown in software sales growth. Cloud services are meant to appeal to customers seeking to save money by letting them access computing power over the Web. Taleo is another fit-in with that strategy, following the $1.5 billion purchase of RightNow Technologies Inc. (RNOW) last year, said Mark Moerdler, an analyst at Sanford C. Bernstein & Co. in New York.

    “Taleo is the next-largest player in the talent-management space,” said Moerdler, who rates Oracle “market perform.”

  • Blast from the Past: Credit Suisse Analyst Raises Price Target on Google to $900
    , February 9th, 2012 at 12:02 pm

    From November 20, 2007:

    Credit Suisse Internet analyst Heath Terry this morning raised his price target for Google (GOOG) to $900, from $800, in what he describes as an “attempt to better account for long-term opportunities in areas like display, local and mobile.”

    Terry contends that “as all advertising goes digital, including television, radio and outdoor, and Google becomes the de facto operating system for advertisers, providing them with the dashboard to monitor and optimize their advertising, tremendous value will be created for Google shareholders.”

    He sees the advertising opportunity driving top line growth of 35% or more, and profit growth of at least 30%, over the next five years.

    Terry upped his 2008 EPS estimate to $18.93 from $18.75.

    He also says that the company eventually will get “effectively” 100% of the Internet search market. He expects ongoing share gains to provide 38% growth in its search business over the next five years.

    Google today is up $25.60, or 4%, to $651.45.

  • Visa Soars to $112
    , February 9th, 2012 at 11:11 am

    Visa ($V) has been on my Watch List for sometime. It’s a great company and I wish I had added to my Buy List a long time ago.

    This is one of the those stocks that you watch go up and up and then beat yourself up for not getting in earlier. The stock is up again today on strong results:

    Visa Inc. (V) posted a 16.4% increase in fiscal first-quarter profit as the credit-card processor continued to benefit from consumers’ increased use of plastic while grappling with new federal rules that affect debit-card purchases.

    The San Francisco-based company said Wednesday cardholders ratcheted up their use of Visa’s credit and debit cards, driving up the volume of transactions it processed 8% to 13.6 billion.

    “Consumers’ desire to use our products is evident in the strong growth we see outside the U.S. and the resiliency we are seeing in the U.S. in the wake of debit regulation,” Joe Saunders, chairman and chief executive of Visa, said in a statement.

    Visa posted net income of $1.03 billion, or $1.49 per share, up from $884 million, or $1.23 per share, a year ago. Revenue rose 13.8% to $2.55 billion.

    Visa’s results beat the estimates of analysts, who were expecting the company to earn $1.45 per share on revenue of $2.43 billion, according to Thomson Reuters.

    The company said its board of directors authorized a new $500 million repurchase program for Class A shares.

    The stock is currently at $112. Wall Street expects them to earn $5.87 per share for this fiscal year (ending in September) and $6.80 for next year. Unfortunately, it’s starting to look pricey now.

    If anyone needs me, I’ll be beating myself up some more.

  • Changes at the Top in Ford
    , February 9th, 2012 at 10:40 am

    I’ve been pleased with Ford‘s ($F) performance this year. I continue to believe this is an underpriced stock.

    Today, two key members of the company’s management team announced their retirements. The CFO, Lewis Booth, and global product chief, Derrick M. Kuzak, will leave their positions on April 1st. The best news for investors is that Alan Mulally said he has no plans to leave anytime soon. Mulally has been critical to Ford’s turnaround.

    Last month, Ford had a fairly mediocre earnings report. I expect that the next earnings report in late April will be much better. Ford’s stock is currently up 18% on the year for us.

  • Jobless Claims Continue to Fall
    , February 9th, 2012 at 10:30 am

    Jobless claims fell again last week, this time by 15,000. The Labor Department reported that 358,000 Americans filed for unemployment payments. Economists were expecting 370,000.

    The important thing here is the trend. While the jobs market remains weak, we now have evidence that things are getting better. The problem, of course, is that things are getting better at a very slow pace.

    Combined with last week’s jobs report which showed that the unemployment rate dropped to 8.3%, we can see that the economy is improving.

  • Morning News: February 9, 2012
    , February 9th, 2012 at 6:25 am

    Greece Talks Stall as Venizelos Heads to Brussels

    China Inflation Spike Pricks Policy Easing Expectations

    Chinese Policy Banks Looking to Make Yuan Loans in Latin America

    Holiday Hits China Auto Sales in January

    Indonesia Unexpectedly Cuts Interest Rate to Support Growth

    Obama Advisers Offer Rosier Jobs Outlook

    Fed Delays Vote on Capital One Deal for ING Direct

    States Negotiate $26 Billion Deal for Homeowners

    Goldman Wins New York Fed Auction for A.I.G. Assets

    Groupon Posts Loss of $9.8 Million

    Credit Suisse Posts First Loss in Three Years

    Daimler Profit Rises on Record Mercedes Demand

    Caesars Surges 71% in Debut After Slashing IPO From 2010 Try

    ING Feels Impact of Euro Crisis

    Alibaba Seeks to Buy Back Yahoo Stake

    Joshua Brown: The Economy’s Improving, Have a Cupcake

    Jeff Miller: Navigating Silly Season: An Investor Guide to the Political Landscape

    Be sure to follow me on Twitter.

  • The Reversal Market of 2012
    , February 8th, 2012 at 8:06 pm

    One of the interesting facts of this year’s market is how much it’s the complete opposite of last year’s market. Bank of America ($BAC), for example, was one of the worst stocks to own last year and it’s been one of the best this year (+46%).

    Here’s a look at how the different S&P sectors performed last year and this year so far. Notice how (except for telecom which probably shouldn’t be its own sector) the rank ordering is almost completely inverted from 2011 to 2012.

    Sector 2011 2012
    Financials -18.41% 13.42%
    Materials -11.64% 12.59%
    Tech 1.33% 11.47%
    Industrials -2.92% 9.84%
    Discretionary 4.41% 8.75%
    S&P 500 0.00% 7.34%
    Energy 2.77% 5.42%
    Healthcare 10.18% 3.84%
    Staples 10.53% -0.26%
    Telecom 0.84% -2.11%
    Utilities 14.83% -3.11%

  • Strange Response to Wright’s Earnings
    , February 8th, 2012 at 2:12 pm

    On the news each evening, the anchors report that the market did X due to Y. In reality, the market did X while Y happened as well. The market has a mind of its own, and we can’t always say why it did what it did.

    This morning, I pointed out what I thought were good earnings from Wright Express ($WXS). Yet the shares dropped 5% early today. Wright then rallied to a 5% gain. That’s a 10% turnaround in 90 minutes.

    Why?

    Honestly, I have no idea, and you can’t say why traders act they way they do. Wright held their earnings call at 10 am, but there was nothing there that should have altered anyone’s perception of the stock. This is another reason why I avoid trading and focus on the fundamentals. A stock can fool the market for a while, but eventually, the true value will shine through.

  • It’s All Been Apple
    , February 8th, 2012 at 11:11 am

    Jonathan Golub of UBS claims that Apple‘s ($AAPL) earnings have distorted the entire earnings picture. He says that if you take away Apple’s results, earnings for the S&P 500 are up just 1.6%.

    Apple’s report “obfuscates the fact that the underlying earnings trend is really weak,” Golub said. “It’s a terrific company, but it’s also important you get a sense of how the average stock, the average company is doing. You want to make sure you don’t distort that view.”

    Analysts project income for S&P 500 companies climbed 4.9 percent in the fourth quarter, according to data compiled by Bloomberg. Out of 280 companies that have reported since Jan. 9, 68 percent have exceeded analysts’ estimates by an average 2.9 percent, while profit has gained 3.5 percent.

  • Reynolds American Earns 72 Cents Per Share
    , February 8th, 2012 at 10:40 am

    Our tobacco stock, Reynolds American ($RAI), released strong fourth-quarter earnings today of 72 cents per share which was four cents better than Wall Street’s estimates. That’s a 12.5% increase over the fourth quarter of 2010. For the full year, Reynolds earned $2.81 per share. One year ago, Reynolds issued guidance for 2011 of $2.60 to $2.70 per share.

    Reynolds also offered earnings guidance for this year of $2.91 to $3.01 per share. Now let’s focus on the most important part of owning Reynolds: the dividend. According to company policy, they aim to pay 75% to 80% of their earnings to shareholders as dividends. So if Reynolds were to pay 80% of $3 per share, that would be a quarterly dividend of 60 cents per share. The dividend is currently 56 cents per share (it was raised twice last year).

    Here are some details from Market Watch:

    R.J. Reynolds Tobacco, the company’s cigarette unit, saw its revenue slip 0.4% to $1.76 billion as domestic volume fell 7.2%. Accounting for the elimination of private-label brands, volume dropped 7.1%. Total market share, excluding private label brands, fell 1.1 percentage points to 27%. Meanwhile, growth brands–which include Camel and Pall Mall–gained 0.3 percentage points of market share to hold 16.5% of the market.

    At American Snuff, the smokeless tobacco unit that makes Grizzly and Kodiak moist snuff, total volume increased 6.1%, though revenue declined 14%.

    Larger rival Altria last month reported its fourth-quarter earnings slid 9% due to several charges, though the tobacco company’s revenue rose 3.4% on strong volume growth for smokeless products and a modest increase in volume for cigarettes.

    Going by yesterday’s close, Reynolds yields 5.58%. That’s a good deal. Reynolds benefitted last year as investors rushed to buy high-yield stocks as bond yields evaporated. The stock probably won’t see a capital gains surge this year like it did in 2011.