Author Archive

• Stryker Gives 2012 Guidance
  Eddy Elfenbein, January 11th, 2012 at 11:40 am

  It’s a fairly quiet morning on Wall Street. The major indexes are down but only slightly.

  I’m happy to see DirecTV ($DTV) up about 3% thanks to an upgrade from Bernstein. The firm now rates DTV as “outperform” and they raised their target price from $48 to $52. The stock is currently at $44.

  Hudson City ($HCBK) is pulling back some today but that’s after its big day yesterday.

  Stryker ($SYK) won’t report its Q4 earnings until January 24th, but yesterday the company released some early details. The company said that quarterly sales rose by 11% to $2.2 billion.

  Stryker also narrowed its full-year forecast from $3.70 – $3.74 per share to $3.72 – $3.74 per share. Remember that for much of last year, Stryker said that they would earn between $3.65 and $3.73 per share, so they were certainly on track.

  The company isn’t hiding much here since we already know that they earned $2.70 per share for the first three quarters. That means they expect to report between $1.02 and $1.04 for Q4.

  For 2012, the company said that it expects “double digit” earnings growth over 2011. If we assume that means 10% on the nose and we take the midpoint of their range, $3.73 per share, as our guide, that gives us 2012 earnings of $4.10 per share. Wall Street had been expecting $4.11 per share but this can hardly be called lower guidance.

  Also, last month Stryker raised their dividend by 18%.

• Morning News: January 11, 2012
  Eddy Elfenbein, January 11th, 2012 at 5:18 am

  Monti Warns of Italy Protests as He Meets With Merkel in Berlin

  EU Banks Resist Draghi Bid to Avert Credit Crunch

  German Growth Slowed From Record in 2011

  Google Wins Biggest Enterprise Deal in Spain

  Europe’s $39 Trillion Pension Threat Grows as Economy Sputters

  India Lets Starbucks, Ikea Open Stores

  Nigeria Shuts Down as Unions Defy Jonathan Over Fuel Subsidy

  NYSE-Deutsche Boerse Hangs in Balance

  Materials Companies Lift Indexes to 5-Month High

  Oil Trades Near a One-Week High as Iran Tension Counters European Economy

  Fed Turns Over $77 Billion in Profits to the Treasury

  Treasury Secretary Appeals to China Over Iran

  As Romney Advances, Private Equity Becomes Part of the Debate

  Urban Outfitters CEO Resigns, Stock Falls 15%

  Twinkies Maker Preparing for Chapter 11 Filing

  Jeff Miller: My Bespoke Roundtable Answers

  Stone Street: A Few Coincident Indicators

  Be sure to follow me on Twitter.

• Correction on the Mankiw Model
  Eddy Elfenbein, January 10th, 2012 at 1:53 pm

  I have to apologize. I made a mistake in a post from last week in calculating the interest rate based on Professor Greg Mankiw’s interest rate model.

  His model for where the Fed funds rate ought to be is:

  Federal funds rate = 8.5 + 1.4 (Core inflation – Unemployment)

  In my original post, I said that the model finally indicated that the Fed should have positive interest rates. A reader caught my error. The corrected model is below and it shows that interest rates according to the Mankiw model are still negative, although they’ve risen considerably in the past few months.

  The model is the blue line and the actual rate from the Fed is the red line. At the current inflation rate, the unemployment rate needs to drop to 8.3% from the current 8.5% for the model to signal positive rates. We’re getting close.

  

• Ford Drops on False News
  Eddy Elfenbein, January 10th, 2012 at 12:19 pm

  Earlier today, CNBC incorrectly reported that Ford ($F) was going to post a loss for 2011.

  The stock plunged about 35 cents in a matter of minutes. As you can see in the video, the reporter corrects himself and notes that Ford is only reporting in its Asia-Pacific and Africa region. The company also said that it expects to report earnings of 26 cents per share for Q4.

  This is yet another reason why I steer clear of day-trading. Shares of Ford are currently off their lows of the day.

• HCBK = $7.28
  Eddy Elfenbein, January 10th, 2012 at 11:23 am

  Shares of Hudson City ($HCBK) got as high as $7.28 today. The stock is up 16% so far for the year. Our Buy List is up more than 3% for the year and we’re currently about 20 basis points ahead of the S&P 500.

  

• S&P 500 At Five-Month High
  Eddy Elfenbein, January 10th, 2012 at 10:01 am

  Thanks to a decent earnings report from Alcoa ($AA), the stock market is riding higher this morning. The S&P 500 just broke above 1,290 and is now at its highest point since August 1.

  Earnings season starts this week, and JPMorgan Chase ($JPM) will be our first Buy List stock to report. JPM reports earnings on Friday. This report will be closely watched by a lot of traders to get an idea of how well the banking sector did in Q4.

  Many of the large banks have seen their earnings estimates slashed over the past several weeks. Goldman Sachs ($GS), for example, was expected to earn $2.86 per share for the fourth quarter two months ago. Today that estimate is down to $1.69. Wall Street has cut Morgan Stanley’s ($MS) earnings estimate from a profit of 30 cents per share to a loss of 56 cents per share.

  JPMorgan has mostly side-stepped the downgrade party. Over the past two months, Wall Street has cut its Q4 forecast from 98 cents per share to 91 cents per share. That’s unpleasant but it’s not nearly as bad as some others.

  Again, we need to add some context. Even if JPM’s earnings came in on the low side, the stock is still going for about eight times what it will make in 2011. That’s pretty darn cheap. Plus, I hope to see the bank raise its dividend again.

• Morning News: January 10, 2012
  Eddy Elfenbein, January 10th, 2012 at 4:52 am

  Swiss Central Bank Seeks New Blood After Chief Quits

  Currency Test Looms for Interim Swiss Bank Chief

  Italian Banking Giant UniCredit’s Weak Share Offering Is Poor Omen in Europe

  Germany and France Warn Greece on Bailout Money

  China Trade Growth Slows to 2-year Lows in December

  India Said to Be Told Turkey May Stop Helping With Iran Crude-Oil Payments

  Abu Dhabi May Rescue More Developers

  Wall Street Considers Pay Freeze on Some Bankers

  Wanted or Not: Alternative-Fuel Cars Flood Auto Show

  Recession Holds Down Health Spending

  Alcoa Posts First Quarterly Loss Since 2009

  Idenix Leads Hepatitis Drug Developers Higher After Bristol-Inhibitex deal

  Philips Says Weak European Markets Cut Quarterly Profit

  Olympus Surges as Delisting Concern Fades, Executives Sued

  Swatch Sees More Growth after Record Sales in 2011

  U.S. Inquiry of MF Global Gains Speed

  Edward Harrison: The Job Guarantee, Kleptocracy and Blogging

  Jeff Carter: CFTC Says CME No SRO

  Be sure to follow me on Twitter.

• Economists Believe Markets Are and Are Not Efficient
  Eddy Elfenbein, January 9th, 2012 at 5:58 pm

  Two years ago, I compiled a list of deep truths about the markets and investing.

  On list my I wrote: “Whatever the issue, your typical finance professor will blame the investing public and urge more self-denial as the solution. Bank on it.”

  Over the past few weeks, the IGM Economic Experts Panel has been surveying economists to get a sense of what the consensus is in the profession.

  Regarding the stock market the survey found that economists overwhelmingly agree with this statement:

  Unless they have inside information, very few investors, if any, can consistently make accurate predictions about whether the price of an individual stock will rise or fall on a given day.

  And they overwhelmingly disagree that:

  Plausible expectations of future dividends, discounted using a plausible risk-adjusted interest rate, explain well the level of stock prices for recently listed internet businesses in 1999.

  Arnold Kling points out this means that economists strongly stand behind weak market efficiency yet disagree with strong market efficiency. Theoretically, there’s nothing contradictory about this even though the vote margin is remarkable.

  Still, my explanation is much easier.

• ACE Limited Boosts Dividend By 34%
  Eddy Elfenbein, January 9th, 2012 at 2:19 pm

  One of the great secrets of investing is that insurance companies are often great investments. The hitch is that it’s only the best of the best. But those top-tier insurance companies can be great long-term performers.

  Today we learned that ACE Limited ($ACE) is raising its quarterly dividend from 35 cents per share to 43 cents per share. That’s a 34% increase. The company has raised its dividend every year since 1995. The company already had a 6% dividend increase in May. With the new payout, ACE now yields 2.45%.

  The stock currently goes for just over 9 times the estimate for 2012.

• 97% of New Jobs Are Going to Men
  Eddy Elfenbein, January 9th, 2012 at 9:59 am

  From the New York Post:

  It’s reigning men.

  Males in the workforce, who occupied 70 percent of the jobs cut during the recent economic downturn — prompting economists to dub it the “Mancession” — are now staging a monster comeback.

  Since the US economic recovery started in mid-2009, a whopping 97 percent of the new jobs — all but 43,000 of 1.4 million positions created — have gone to the guys, according to data released yesterday by the National Women’s Law Center, which analyzed jobs data between June 2009 and December 2011.

  The report showed the trend toward hiring men over women is occurring across industries, including some traditionally female professions, said Joan Entmacher, vice president of the DC advocacy group.

  In retail, for example, women lost 168,800 jobs between June 2009 and last June, while men gained 172,800 jobs. In the private health and education sector, women continue to dominate the new jobs but at a slower rate than before.

  In addition to men gaining most of the new jobs, women are also losing jobs at a faster rate. Since the recovery began, the overall unemployment rate for women has increased from 7.6 percent to 7.9 percent; the rate for men dropped from 9.9 percent to 8.0 percent.

  “We looked industry by industry to try to understand what was happening and why women were doing so badly,” Entmacher told The Post. “But looking at it, it was hard to understand what was going on,” she said.

  Indeed, the “Mancession” — a playful take on recession — was attributed to massive slashes in male-dominated industries in the wake of the housing meltdown, including construction, finance and manufacturing.