Posts Tagged ‘LUK’

  • Leucadia National Buys Jefferies
    , November 12th, 2012 at 10:33 am

    While the stock market is open today, the bond market is closed in honor of Veteran’s Day. The stock market still seems unnerved by recent events although I think it’s unfair to blame President Obama’s reelection for the entire downturn. There are still concerns about the fiscal cliff and more unresolved problems in Europe.

    Regarding the fiscal cliff, I think leaders of both parties realize that the American public is weary of more partisanship, and it’s in their best interest to reach some sort of deal. If nothing is done before the end of the year, automatic across-the-board tax increases will go into effect. I imagine that some tax increase on the wealthy will be passed in exchange for some measures on entitlements (like higher retirement age). I won’t guess as to the specifics but it’s not in anyone’s interest to have a bloody, drawn-out affair.

    There’s actually some good news out of Greece for a change. The country’s parliament passed its austerity budget by a vote of 167 to 128. Once the bigwigs in the EU give the thumbs up, this will clear the way for Greece to get another $40 billion in aid. The problem for Europe right now is that the southern part is weak and that’s starting to pull Germany down.

    One of our former Buy List stocks is in the news as Leucadia National ($LUK) is buying Jefferies ($JEF) for $3.7 billion. LUK already owns a big chunk of JEF. In fact, they even increased their stake last year during the sovereign debt crisis. Now LUK will buy the whole thing.

  • Stryker Raises Dividend By 18%
    , December 7th, 2011 at 2:13 pm

    The market is down so far today but it’s not too bad. The S&P 500 is currently at 1,255 though we’re up about 10 points from today’s low. The defensive sectors are doing the best today while the cyclicals are pulling up the rear.

    There’s not much action today on the Buy List though I want to highlight a few items.

    The best news is that Stryker ($SYK) is raising its quarterly dividend from 18 cents per share to 21.25 cents per share. That’s an 18% increase. The new 85-cent annual dividend translates to a yield of 1.75%.

    My advice to investors is to not overlook moves like this. We want to look at the overall trends of a business. Bear in mind that Stryker raised its dividend by 20% last year. These things add up.

    The other news is that Moody’s may downgrade Leucadia ($LUK), and Gilead ($GILD) just priced $3.7 billion in unsecured notes. That just reminds me of how much I hate the Pharmasset deal.

  • CWS Market Review – November 11, 2011
    , November 11th, 2011 at 8:49 am

    Just when I thought the market was getting back to something resembling normal, the S&P 500 got hit for a 3.67% loss on Wednesday. In the five weeks preceding that (more precisely, from October 3rd to November 8th), the index gained 16.1% which is an impressive rally for such a short period of time. But once again, Europe’s mess is our pain.

    The latest worry is Italy and truthfully, the story in Italy is basically the same as the story in Greece, except that it’s much larger which means that it’s potentially far worse. If need be, Greece can be tossed aside. Italy can’t. It’s perfectly positioned in no man’s land: too big to fail and too big to save. Italy is the third-largest economy in Europe and it holds $2.6 trillion in debt. That’s more than Greece, Ireland, Spain and Portugal combined. If that’s defaulted, well…people notice that sort of thing.

    Investors have grown very weary of holding Italian bonds and I don’t blame them. The yield on the ten-year bond there shot up past 7% which is the trigger point at which other countries have sought bailouts. In the realm of international finance, the bond market is the court of no appeal; once that’s turned against you, the end is certainly near. Your business or economy can be a complete wreck but as long as someone is willing to lend you money, you can stay alive. But once the money train ends, you’re done. James Carville, the former political advisor to President Clinton, once said that he’d prefer to be reincarnated as the bond because “you can intimidate everybody.” He’s right.

    To their credit, the Italian government has gotten intimidated. They’ve promised to fast-track reforms and that helped the markets recover a bit on Thursday. The European Central Bank has jumped in, starting to buy Italian debt in an effort to push down yields. Also, Prime Minister Berlusconi has promised to step down after a new budget deal is reached. Yesterday the Italian government auctioned off some one-year debt and that went much better than expected.

    As I said last week, my fear is that all these moves merely treat the symptoms without curing the disease which is an inherently dysfunctional currency union. In fact, I’m not sure that the ECB can ultimately help Italy. We might really be seeing the end of the euro. In last week’s CWS Market Review, I said that the currency might be able to survive in a smaller union. Now we learn that France and Germany have been talking about exactly that for the past several months. For the euro to live, the periphery of Europe needs to start growing again and soon, and that won’t be easy with their new-found austerity. For now, I think the most-probable path will be a much weaker euro. This mess is going to get worse before it gets better.

    One beneficiary of the nervousness in Europe is the U.S. bond market. Two weeks ago, the yield on the 10-year note broke above 2.4%, and that was a move I was happy to see. Investors are well-advised to shift out of these safe assets in exchange for riskier assets like high-yielding stocks. On Wednesday, however, the yield on the 10-year got as low 1.93%. Things could be changing. On Thursday, the Treasury auctioned off a new batch of 10-year notes and the demand was the lowest it’s been in nearly two years.

    Now let’s turn to our Buy List. Some of the higher-yielding stocks I like right now include AFLAC ($AFL), Johnson & Johnson ($JNJ), Reynolds American ($RAI) and Sysco ($SYY). This week we had a last trickle of earnings reports for this earnings season. On Friday, Moog ($MOG-A) delivered a great earnings report. For their fiscal fourth quarter, Moog made 83 cents per share which was 10 cents more than Wall Street’s estimate. That also represented 17% growth over last year.

    The more I look at Moog’s number, the more I like them. For all of 2011, Moog earned $2.95 per share. For 2012, the company sees sales increasing by 8% to $2.52 billion and EPS rising 12% to $3.31. Wall Street had been expecting $3.25 per share.

    As a business Moog is very profitable, but as a stock it’s dull as dirt and that suits me just fine. The shares are basically flat for the year, but if you’re able to get MOG-A for less than $40 (which is 12 times forward earnings), then you’ve gotten yourself a good deal.

    On Monday, Sysco ($SYY) reported quarterly earnings of 55 cents per share which topped Wall Street’s estimates by thee cents per share. Overall, the company had a very good quarter though demand wasn’t nearly as strong as I’d like. The good news, though not for consumers, was that Sysco’s bottom line was helped by higher food prices. I’m not so worried about factors that may impact Sysco’s business in the short term.

    Here’s the important part: Sysco has raised its quarterly dividend for the last 41 years in a row, and I expect to see #42 very soon. However, the increase will probably be very modest. My guess is that the board will bump up the quarterly dividend from 26 cents to 27 cents per share. That would give the shares a yield of close to 4%. In this environment, that’s not bad. Sysco is a good buy up to $30 per share.

    After the closing bell on Tuesday, Leucadia National ($LUK) reported a loss of $291 million for the third quarter. I have to explain that LUK refuses to play the quarterly earnings game. Since no analysts on Wall Street cover the stock, which is basically a large closed-end fund, the earnings report can be misleading. What’s hurt Leucadia lately is its holding of Jefferies ($JEF). LUK’s stock dropped more than 12% on Wednesday.

    That’s all for now. The bond market will be closed on November 11th in honor of Veterans’ Day. Next week will be the last full week of trading before Thanksgiving. 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

  • Leucadia National Reports Q3 Loss of $291 Million
    , November 8th, 2011 at 9:04 pm

    Leucadia National ($LUK) just reported a loss of $291 million for the third quarter. Don’t be too alarmed. LUK refuses to follow the Wall Street script of making their earnings report easy-to-read.

    The accounting they present is strictly by the book and little is done to make the numbers more accessible for shareholders. Despite the company having a market value of more than $6 billion, no analysts on the Street cover them which gives them even less incentive to play the quarterly earnings game.

  • CWS Market Review – November 4, 2011
    , November 4th, 2011 at 6:23 am

    Even though October was the eighth-best month for the S&P 500 of the last 70 years, the market has taken back some of those gains thanks to the recent political chaos in Greece. Here’s what happened: George Papandreou, the Greek Prime Minister, surprised everyone on Monday by putting the euro zone bailout plan up for a referendum. Simply put, that freaked out everyone—and I mean everyone.

    For a few hours it looked like Greece was really honestly going to default. Monsieur Sarkozy said that the Greeks wouldn’t get a single cent in aid if they didn’t adhere to the original terms of the bailout. It got so bad that the European bailout fund had to cancel a bond offering. Yields on two-year notes in Greece jumped to 112%.

    Yes, 112%.

    The ECB, under its new head Mario Draghi, stepped in and cut rates by 0.25% which seemed to calm folks down. At least for a little while. Only after his party revolted against the idea did Papandreou decide to ditch the referendum. That’s what traders wanted to hear. On Thursday, the S&P 500 jumped 1.88%, and the index is now up barely for the year.

    So we dodged a bullet for the time being, but we’re not yet out of the woods. I think it’s obvious that Greece will get the aid although the details are still unclear. My fear is that this latest cure only addresses the symptoms and not the underlying problem.

    The issue isn’t that Greece mismanaged its finances (which it did) but rather that the euro zone as currently constructed is inherently unworkable. As it now stands, the countries on the periphery of Europe have to run massive trade deficits with the heart of Europe (Germany, mostly), and without the ability to downgrade their currencies, they’re forced to run large public-sector deficits.

    The equation boils down to this: The euro zone needs fiscal union or the euro dies. Perhaps a smaller euro zone could make it. If the EU was just a trading club for the rich nations of Western Europe, fine—that might work. But what’s happening now, I fear, is just delaying a problem that can’t be avoided.

    The problems in Europe are having an unusual side effect on the stock market here. What we’re seeing is an unusually high correlation among stocks. In other words, nearly every stock is moving in the same direction, whether it’s up or down. It’s important for investors to understand this. The last time correlation was this high was in October 1987 when the market crashed.

    Bespoke Investment Group, one of my favorite sites, tracks what it calls “all or nothing days” which is when the advance/decline line for the S&P 500 exceeds plus or minus 400. Since the start of August, more than half of the trading days have been “all or nothing days” which is a rate far greater than seen in previous years. The current market divide has energy, industrial, material and most importantly, financial stocks, soaring on up days, while volatility, gold and bonds rally on down days. The market is behaving like a legislature that has only extremists and no moderates.

    I don’t believe the high correlation portends any ugliness for the U.S. market. Instead, I think it reflects the dominance of geo-political events over the market. Though one important side effect is that when everyone moves the same way, it becomes much harder for hedge fund managers to stand out from the crowd. That’s why we’ve seen crazy action in stocks like Amazon.com ($AMZN) and Netflix ($NFLX).

    As depressing as the news is from Europe, there’s been more cause for optimism here in the U.S. While the economy is far from strong, it appears that the threat of a Double Dip recession in the near-term has fizzled. Last week, we learned that the economy grew by 2.5% for the third quarter. Job growth, of course, has been distressingly poor.

    I’m writing this early Friday morning ahead of the big jobs report. Economists expect that the jobless rate will remain unchanged at 9.1% and that 100,000 new jobs were created last month. Even if we hit that expectation, that’s still pretty poor.

    The good news is that this has been a decent earnings season for the market and especially for our Buy List. The S&P 500 is on track to post record quarterly earnings. The latest numbers show that of the 415 S&P 500 stocks that have reported so far, 288 have beaten expectations, 89 have missed and 38 were in line with estimates. Outside the S&P 500, 64.5% of companies have beaten estimates and that’s better than the previous two quarters. Our Buy List has done even better. Of the 12 Buy List stocks that have reported so far, ten have beaten earnings estimates, one missed and one was inline.

    On Tuesday, Fiserv ($FISV) reported third-quarter earnings of $1.16 per share which was two cents better than estimates. The company also raised its full-year guidance (man, I love typing those words) from $4.42 – $4.54 per share to $4.54 – $4.60 per share. Shortly before the earnings report, Fiserv’s stock gapped up to over $61 but then pulled back after the earnings report came out. Fiserv is a good buy up to $62 per share.

    Our star for the week and perhaps for the entire earnings season was Wright Express ($WXS). The stock soared 12% on Wednesday after its blowout earnings report. The company, which helps firms track their expenses for their vehicle fleets, reported third-quarter earnings of 99 cents per share which was six cents better than Wall Street’s consensus. That’s a 38% jump over last year. The company also said that it expects between 88 cents and 94 cents per share for the fourth quarter (the Street was expecting 94 cents per share). I was happy to see Wright extend its gain on Thursday as well. I rate Wright Express a buy up to $53.

    The big disappointment this week came from Becton, Dickinson ($BDX). For their fiscal fourth quarter, Becton reported earnings of $1.39 per share which was inline with Wall Street’s estimate. The problem was their guidance for the coming year. Becton said that they expect earnings to range between $5.75 and $5.85 per share. That’s far below Wall Street’s forecast of $6.19 per share. I’m disappointed by this news but Becton is still a solid company. Sometime later this month the company will likely raise its dividend for the 39th year in a row. Investors shouldn’t chase this one but if the shares pull back below $65, I think Becton will be a good buy.

    I also need to explain what happened to Leucadia National ($LUK) this week. A ratings company downgraded Jefferies ($JEF) in the wake of the immolation of MF Global. Leucadia owns about one-quarter of Jefferies so that impacted their stock as well. However, it’s not clear that Jefferies’s health is anywhere as dire as MF Global’s. Actually, the facts indicate that it’s almost certainly not.

    At one point on Thursday, shares of Jefferies were off by more than 20% but cooler heads prevailed and the stock finished the session down by just 2.1%. Leucadia took advantage of the panic and picked up one million shares of JEF. At the end of the day, Leucadia’s stock managed to close six cents higher. The stock remains an excellent buy. By the way, this a good lesson on why you should be careful with stop-losses. Panic can set in and bust you out of good trades.

    That’s all for now. In addition to tomorrow’s big jobs report, Moog ($MOG-A) is due to report earnings. Then on Monday, Sysco ($SYY) is scheduled to report. 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

  • Leucadia’s Earnings Report
    , May 5th, 2011 at 9:38 pm

    I like to call Leucadia National ($LUK), “the Greta Garbo of stocks.” They only say exactly what they have to say, and no more.

    This is from their press release which came out after today’s close:

    Leucadia National Corporation today announced its operating results for the three month period ended March 31, 2011. Net income attributable to Leucadia National Corporation common shareholders for the three month periods ended March 31, 2011 and 2010 was $10,507,000 ($.04 per diluted common share) and $191,479,000 ($.78 per diluted common share).

    Well, that’s pretty much it except for the financial statements. Here’s the 10-Q which goes into much greater detail.

    Unlike most other companies, Leucadia doesn’t break down their earnings into non-GAAP numbers to make the earnings easier-to-understand.

    My rule is to look at LUK’s book value per share. According to today’s report, that’s running at $28.25. The guideline I use is that LUK should go for 1.5 times book value which gives us $42.47. LUK closed today’s trading at $36.16 so I still think it’s a good buy.