Posts Tagged ‘orcl’

• CWS Market Review – March 22, 2013
  Eddy Elfenbein, March 22nd, 2013 at 7:24 am

  “There are two kinds of people who lose money: those who know
  nothing and those who know everything.” – Henry Kaufman

  What a long, strange week it’s been on Wall Street. Last Friday, the Dow’s amazing 10-day winning streak came to an end. Since then, the financial world’s attention has been focused on the little island nation of Cyprus, of all places. Despite all the attention, I doubt the problems in Cyprus will amount to a hill of beans for us.

  From our perspective, the biggest news of the week came late Wednesday, when Buy List member Nicholas Financial ($NICK) reported that it had received an unsolicited buyout offer. The shares promptly vaulted 12.1% on Thursday on 12 times the normal trading volume. It’s about time the big boys noticed NICK. This is great news for those of us who have been in NICK for the long haul (check out the chart below). In this week’s CWS Market Review, I’ll give you my thoughts on the offer.

  

  There was also news on the earnings front. Oracle ($ORCL) had an ugly report; the shares took a 9.7% hit on Thursday (I’ll have more on that in a bit). Plus, FactSet ($FDS) and Ross Stores ($ROST) reported earnings. But first, let’s look at what lies ahead for Nicholas Financial.

  Nicholas Financial Gets Buyout Offer

  After the closing bell on Wednesday, Nicholas Financial ($NICK) announced that it “received an unsolicited, non-binding indication of interest from a potential third-party acquirer.” In English, this means probably someone wrote down a price on a napkin, slid it to the board and said, “How’s this?” I have no idea who it is or how much they’re offering, but it’s serious enough for NICK to reveal that it happened. The firm has retained Janney Montgomery Scott to advise them in evaluating “strategic alternatives.”

  Some of you may remember that the same thing happened to NICK in early 2011. At the time, the stock was at $10 and it soared 18% following the news. In the end, NICK shot down that offer. Again, I don’t know what the offer was, but I’m almost positive it was too low and NICK’s board did the right thing in walking away. It’s tough to turn down a buyout offer, but sometimes it’s the right thing to do. NICK’s stock is up about 50% since then, and that doesn’t include the big dividend we got in December.

  This time around, I’m far more open to NICK being sold. The senior management is close to retirement age, so they may be looking for an exit as well. The difference between now and two years ago is that NICK has proved to the world that it navigated the financial crisis. Their portfolio is solid, and according to the Fed, short-term interest rates are going to stay low for a while more. This is a very good environment for NICK’s business. On Thursday, the stock got as high as $15.15. Obviously, I want as high a price as possible, but if I were a member of the board, I’d set $18 as a minimum.

  Here’s the reality: In a world of zero interest rates, there’s a massive hunt going on for yield. This is one of the distortions that Bernanke and the Fed are worried about. Fund managers are looking anywhere and everywhere for higher rates without too much risk. Eventually, that led someone to NICK. Fortunately, we were there first.

  Let me warn shareholders that these situations can become dramatic, and it’s largely out of our hands. If the deal is shot down or withdrawn, the shares will take a hit. But on the plus side, it’s possible that a bidding war will ensue, and the shares will be ratcheted higher. For now, I’m going to raise my Buy Below price to $16. Stay tuned for more news.

  Oracle Plunges after Weak Earnings

  While the news was good from NICK, the news from Oracle ($ORCL) wasn’t so fortunate. Three months ago, Oracle told us to expect fiscal Q3 earnings to range between 64 and 68 cents per share. As it turned out, they earned 65 cents per share, which was one penny below Wall Street’s consensus.

  Frankly, this was a big disappointment. I thought Oracle was going to earn 70 cents per share or more, but the big miss wasn’t on the bottom line. It was on the top line. Quarterly sales rose to $8.97 billion, which was $40 million below Wall Street’s consensus. The problem isn’t hard to spot—Oracle is facing more competition from Internet-based cloud systems.

  Some of these numbers are pretty ugly. Wall Street had been expecting an increase in new software sales of 8%. Instead, it fell by 1.8%. Hardware revenue has been dropping, but Oracle told us that that division is close to turning around. Apparently not. Hardware sales dropped 23% last quarter. Oracle’s stock took a big hit yesterday as it lost 9.7%. A bunch of previously bullish analysts piled on and cut their ratings.

  For Q4, Oracle sees earnings ranging between 85 cents and 91 cents per share. Actually, that’s not so bad. Oracle sees quarterly revenue coming in between $10.8 billion and $11.4 billion, which, in my opinion, is pretty light. The company also said that new software license revenue will grow between 1% and 11% this quarter, and hardware revenue will drop by 13% to 23%. That’s not what I wanted to hear.

  To be fair, Oracle was hurt last quarter by some of the mess in Europe. The CFO also said that some large contracts had been delayed last quarter, and those numbers will show up in this quarter’s earnings report. Bloomberg quoted an analyst at UBS as saying, “I’ve followed this company for a decade, and historically when they have a miss, it’s a great time to buy.” Oracle’s in my doghouse right now, but I’m not giving up on them. Oracle remains a good buy up to $37 per share.

  Buy FactSet below $95 and Ross Stores below $62

  On Tuesday, FactSet Research Systems ($FDS) reported second-quarter (ending February) adjusted earnings of $1.14 per share, which was three cents better than what Wall Street had been expecting. This is good news, and it was actually better than the forecast FactSet gave three months ago when they said earnings should range between $1.11 and $1.13 per share.

  Interestingly, at the time of that guidance, Wall Street was disappointed because they had been expecting $1.13 per share. FactSet said they expected revenues to range between $212 and $215 million. On Tuesday, they reported that Q2 revenues rose 7% to $213.1 million.

  The problem, if you can even call it that, is that banks have been working hard to cut costs. For Q3, FactSet sees revenues ranging between $213 and $216 million and earnings-per-share coming in between $1.14 and $1.16. Wall Street had been expecting revenues of $217 million and earnings of $1.13 per share.

  Even though the numbers are pretty good, shares of FDS got hammered this past week. The stock broke below $90 per share on Thursday, but I’m not worried at all about FactSet. This company has increased its earnings every year for the last 16 years, and they’re going to do it again. I’m going to lower my Buy List to $95 to reflect the recent sell-off, but FDS remains a very good buy.

  On Thursday, Ross Stores ($ROST) reported fiscal Q4 earnings of $1.07 per share, which is up from 85 cents per share last year. This was hardly a surprise, since their previous guidance was a range between $1.06 and $1.07 per share. When the range is like that, you can be pretty sure it’s not a guess. Q4 sales rose 15% to 2.761 billion. Comparable stores sales were up by 5%.

  Business is going well for Ross, and they just wrapped up a very good year. For the fiscal year, Ross earned $3.53 per share, which was up from $2.86 per share last year. Sales rose 13% to $9.721 billion. Same-store sales were up by 6%. The stock rallied 3.4% on Thursday. ROST remains a very good buy up to $62 per share.

  Don’t Let Fears over Cyprus Scare You

  Over the weekend, we learned of a dramatic bailout plan for Cyprus which involved a one-time tax of bank deposits. Let’s just say that this idea didn’t go over well on the island; the plan failed to get a single vote in the Cypriot parliament. This was the first time a legislature stood up to the ECB.

  Then there was talk of Cyprus striking a cash-for-gas deal with Russia, but that doesn’t seem to be going anywhere. Now the European Central Bank is running out of patience, and no one knows what will happen next. The ECB has set a Monday deadline for the island to agree to a deal. Paul Krugman wrote, “Cyprus has managed to combine in one place everything that has gone wrong elsewhere.”

  I know Cyprus has been getting a lot of attention, and it’s a fascinating story from an economic perspective. But I don’t want investors to be overly concerned about Cyprus’s impacting our Buy List. Let’s take a step back and remember that Cyprus makes up just 0.2% of the eurozone’s economy.

  The big fear is that once one country agrees to a tax on bank deposits, a new precedent will be set, and it could be done elsewhere. That fear would in turn lead to a run on banks in countries like Italy, Spain and Portugal. While I can’t rule a scenario like that out, it’s simply too far down the road for investors to worry about. Cyprus is such a small and unusual case that it may turn out to be a story that isn’t repeated elsewhere. I feel for the Cypriots, especially those who have their life savings at risk. But what happens on that island really doesn’t matter much to our Buy List stocks. I’m afraid that a tax on deposits may be the path of least resistance.

  That’s all for now. Next week is the final week of the first quarter. We’ll get important reports on durable goods, new home sales and another look at Q4 GDP. 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

• Oracle Earns 65 Cents Per Share
  Eddy Elfenbein, March 20th, 2013 at 4:21 pm

  For Q3, Oracle ($ORCL) earned 65 cents per share which was one penny below expectations. Revenue came in at $8.96 billion which was well below consensus of $9.38 billion.

  Oracle Corporation today announced that fiscal 2013 Q3 total revenues were down 1% to $9.0 billion. New software licenses and cloud software subscriptions revenues were down 2% to $2.3 billion. Software license updates and product support revenues were up 7% to $4.3 billion. Hardware systems products revenues were $671 million. GAAP operating income was up 1% to $3.3 billion, and GAAP operating margin was 37%. Non-GAAP operating income was down 1% to $4.2 billion, and non-GAAP operating margin was 47%. GAAP net income was unchanged at $2.5 billion, while non-GAAP net income was down 1% to $3.1 billion. GAAP earnings per share were $0.52, up 6% compared to last year while non-GAAP earnings per share were up 5% to $0.65. GAAP operating cash flow on a trailing twelve-month basis was $13.7 billion.

  Without the impact of the US dollar strengthening compared to foreign currencies, Oracle’s reported Q3 GAAP earnings per share would have been $0.01 higher at $0.53, up 8%, and Q3 non-GAAP earnings per share would have been approximately $0.01 higher. Total revenues also would have been 1% higher and new software licenses and cloud software subscription revenues would have been 2% higher than reported.

  “Our non-GAAP operating margin increased to a Q3 record of 47%, and we expect it to reach an all-time high for the fiscal year,” said Oracle President and CFO, Safra Catz. “Both operating cash flow and free cash flow were at record levels for a Q3, with operating cash flow of $13.7 billion over the last twelve months.”

  “The Oracle Cloud is the most robust and comprehensive cloud platform available with services at the infrastructure (IaaS), platform (PaaS) and application (SaaS) level,” said Oracle President, Mark Hurd. “In Q3, our SaaS revenue alone grew well over 100% as lots of new customers adopted our Sales, Service, Marketing and Human Capital Management applications in the Cloud.”

  “This month we will begin deliveries of servers based on our new SPARC T5 microprocessor: the fastest microprocessor in the world,” said Oracle CEO, Larry Ellison. “The new T5 servers can have up to eight microprocessors while our new M5 system can be configured with up to thirty-two microprocessors. The M5 runs the Oracle database 10 times faster than the M9000 it replaces.”

  Frankly, I was expecting a lot more. The shares are down 6.6% in the after-hours market.

• Factory Orders Weigh on Market
  Eddy Elfenbein, February 4th, 2013 at 11:06 am

  The stock market is backing off the five-year highs it made on Friday. The S&P 500 is currently down 10 points or about 0.7%.

  The Commerce Department said that factory orders rose by 1.8% in December which was below the 2.3% Wall Street was expecting. The number for November was revised down to a 0.3% drop.

  A fourth-quarter pickup in consumer spending is spurring companies including automakers such as Chrysler Group LLC and Ford Motor Co. (F), reviving a manufacturing industry that cooled in the second half of 2012. The acceleration extended into January, according to a gauge last week that showed factories expanded at the strongest pace in nine months.

  “Manufacturing’s fine,” said Brian Jones, senior U.S. economist at Societe Generale in New York, who projected a 1.9 percent gain in orders. “The economy continues to improve.”

  The bright spot in today’s report is that demand for durable goods rose by 4.3%. That increase was helped by a 12.2% increase in construction equipment and a 6.4% rise for computers.

  On our Buy List, Oracle ($ORCL) is buying Acme Packet for $2.1 billion.

  The deal is Oracle’s biggest since it bought Sun Microsystems in 2010 for about $7 billion. The company bought nearly a dozen companies in 2012, including Eloqua Inc for $810 million in December.

  Telecom carriers have been dumping wireline and other legacy services as people increasingly use a newer breed of devices to access Internet and businesses shift to IP (internet protocol) networks, an area where Acme Packet specializes.

  “Users are increasingly connected and expect to communicate anytime and anywhere using their application, device, and network of choice,” Oracle said in a statement.

  Oracle Chief Executive Larry Ellison, who has used acquisitions to boost the company’s revenue dramatically over the past decade, had said in October he would not rule out a big deal “down the road”.

  Oracle has rallied almost non-stop since the middle of November. From the November 14th low to last Friday’s high, Oracle has gained 23%.

• 2013 Is Off to a Strong Start
  Eddy Elfenbein, January 2nd, 2013 at 10:52 am

  For the last few weeks I’ve cautioned investors to ignore the hype about the Fiscal Cliff. Eventually, I believed, some deal would be reached, and late last night, that’s exactly what happened. Here are the details.

  It wasn’t pretty and not everybody got what they wanted, but compromise is the cornerstone of democracy. Plus, there will be more battles ahead on the debt ceiling.

  The good news is that the markets are responding very well this morning. The S&P 500 has been as high as 1,457.53 this morning. That’s a 2.2% jump and it brings the index just eight points shy of its highest close since 2007. On our Buy List, Oracle ($ORCL) is up to an 18-month high this morning.

  

  Today’s rally is what’s called a high-beta rally which means that the leaders are small-cap stocks plus industries like tech (like Oracle), finance and cyclicals. High-beta rallies usually (but not always) tend to pull along lower-quality stocks with them. There are lots of sketchy names among small-cap tech stocks. Since our Buy List is concentrated among high-quality stocks, we tend to lag the broader markets on days like this. The Russell 2000, which is a popular index of the small-cap sector, is up to an all-time high this morning.

  Still, our Buy List is beginning 2013 on a strong note. Every stock but Ross Stores ($ROST) is higher today. I was pleased to see that CR Bard ($BCR) was upgraded by JPMorgan today. (The Buy List is so new I haven’t had time to enter in comments for the new additions. I’d better get on that.)

  On the economic front, the ISM Index for December rose to 50.7. If you recall, the number for November was 49.5 which was a dud. Any reading above 50 means the manufacturing sector is expanding. Below 50 means it’s shrinking. The worry zone doesn’t really kick in until the ISM drops to 45 or so. The next big report will be Friday’s jobs report.

• Oracle Earns 64 Cents Per Share
  Eddy Elfenbein, December 18th, 2012 at 5:52 pm

  I said in last week’s CWS Market Review that I expected Oracle ($ORCL) to beat earnings, and that’s exactly what happened. After the closing bell, Oracle reported fiscal Q2 earnings of 64 cents per share which was three cents more than Wall Street’s consensus. Sales came in at $9.11 billion which beat Wall Street’s forecast of $9.02 billion.

  New software license and subscription sales — a closely watched metric because it’s a predictor of future revenue — gained 17 percent to $2.39 billion. Analysts on average had anticipated $2.24 billion, according to Olson.

  Hardware revenue — including servers and storage gained in the 2010 acquisition of Sun Microsystems Inc. — declined 23 percent to $734 million, while Olson said analysts were expecting $810 million.

  Oracle is competing with SAP AG (SAP), Microsoft Corp. and a growing number of startups for share of the cloud software market as customers replace aging software and servers with updated, Web-based products.

  Since the middle of last decade, Oracle has spent more than $50 billion on more than 80 deals, fueling an expansion in sales and earnings.

  Ellison has said Oracle will use cash to boost dividends gradually over time, rather than to make big acquisitions. The company will accelerate dividend payments for its next three quarters, making one payment on Dec. 21 and joining a list of businesses moving up payouts ahead of potential U.S. tax increases next year.

  The stock is up to $33.45 after hours. Look for a new 52-week high tomorrow.

• CWS Market Review – December 14, 2012
  Eddy Elfenbein, December 14th, 2012 at 7:42 am

  The stock market is a giant distraction to the business of investing. – Jack Bogle

  The S&P 500 rose for six straight days, and on Thursday, for the 13th time in a row, the index failed to extend a six-day winning streak into a seven-day streak. Nevertheless, the market continues to do well, which is exactly as I suspected. I’m still holding to my view that the market will rally well into 2013; this is a good time to be an investor.

  

  This was an eventful week. On Wednesday, the Federal Reserve made news by announcing economic triggers for its interest rate policy. The stock market responded by surging to a two-month high. I’ll explain what it all means for investors in just a bit. Perhaps the best news of the week was that Nicholas Financial ($NICK) joined the special dividend parade by announcing a monster $2-per-share dividend. Percentagewise, that’s a big deal, and the stock surged.

  Let me also remind you that next week, I’ll unveil our 2013 Buy List. I won’t start tracking the new list until the start of the year. I’m happy to report that the current Buy List is ending the year on a strong note. Since August 2nd, our Buy List has more than doubled the S&P 500, 9.2% to 4%. It looks like we’re going to narrowly beat the S&P 500 for our sixth-straight market-beating year. Now let’s take a look at the Fed’s announcement this week and what it means for us.

  The Fed Lays Its Card on the Table

  Meetings of central bankers are usually rather dull affairs, and that’s probably how it ought to be. This past week, however, the Federal Reserve actually did something interesting. For the first time, the Fed laid out specific trigger points for its interest rate policy.

  Let me explain, and I’ll try to avoid any econo-speak. When the economy went into the toilet, the Fed responded by slashing interest rates. In fact, they even cut rates to 0%. After all, that’s what models say you should do. The problem was that the model even said to go into negative rates. The Fed responded by doing the equivalent—they started buying bonds—or as economists call it, “Quantitative Easing” (QE if you want to sound cool).

  The Fed then ran into another problem. The central bank was simply announcing a bond-buying program with a price tag. Once that ran out, they announced another. Then another. Then in September, the Fed took a step back and said “Look, this isn’t working. Forget these dollar amounts and deadlines. We’re going to keep buying bonds and we’re not going to stop until things get better. That’s that.”

  To be more specific, the Fed said it was going to buy $40 billion of agency mortgage-backed securities (MBS) each month. In practical terms, the Fed swaps assets with a bank. The Fed gets a risky MBS, while the bank gets low-risk reserves, which, I should add, are held at (guess where?) the Federal Reserve.

  The game-changer in September wasn’t the $40 billion number. It’s that the Fed said it was going to go all in until things got better. By taking a time horizon off the table, the Fed sent a clear signal to investors that it was going to do what it had to in order to help the economy. But there was still the question “how will we know when things get better?” That’s where this week’s news comes in. But first let me quote the CWS Market Review from September 21:

  An idea gaining popularity among economists is that the Fed should buy bonds until some metric like the unemployment rate or nominal GDP hits a specific target. With today’s news, the Fed has clearly moved towards that position without expressly saying so. The Fed said that the bond buying would continue until the labor market improved “substantially” and “for a considerable time after the economic recovery strengthens.”

  In this week’s policy statement, the Fed gave us an answer. They said they won’t raise interest rates as long as the unemployment rate is over 6.5% (we’re currently at 7.7%) and inflation is under 2.5%. Basically, this means that rates are going to stay low for a long while more.

  There are a few key takeaways: This is especially good news for financial stocks. Nicholas Financial ($NICK), for example, borrows money at the short end of the yield curve. The lower rates are, the better it is for them. In fact, I think a lot of the major banks are going for good values. Given the current conditions, I think JPMorgan Chase ($JPM) will have a very profitable 2013.

  The housing market should also continue to get better. This has been an underreported story this year. A key difference between the current “Quantitative Easing” and the previous attempts is that back then, the housing market was still in free fall. Now it’s gaining strength, and in turn, that’s helping consumers. We don’t have the numbers in yet, but this may turn out to be a good holiday shopping season. We just got the retail sales report for November, and it was pretty good. The initial jobless claims report came very close to hitting a five-year low (which means the spike from Hurricane Sandy has now passed).

  This new Fed policy will also be good for economically sensitive “cyclical” stocks. These are sectors like energy, transportation and heavy industry. There’s also a key “double whammy” effect with cyclicals since they tend to outperform the market when the market itself is doing well. I like to follow how the Morgan Stanley Cyclical Index ($CYC) performs relative to the S&P 500, and it’s improved very nicely since the summer. The CYC-to-S&P 500 ratio is close at an eight-month high. I should warn you that Q4 GDP will probably be a dud (0% to 1% growth), but we may see greater than 3% growth toward the latter half of 2013.

  This week’s Fed news is a clear signal that the Fed is in the investors’ corner and is willing to boost the economy for several more quarters. The risk right now is finding yourself getting left behind. Now let’s look at my second-favorite NICK of the holiday season.

  Nicholas Financial’s Special Dividend

  On Tuesday, Nicholas Financial ($NICK) announced a special $2-per-hare dividend. In previous issues, I’ve talked about how companies have announced special dividends before the end of the year so they won’t get hit by higher taxes, which are almost certainly on their way next year.

  The major difference with NICK is that this is a pretty large dividend. It works out to be about 15% of the stock’s value. The dividend will be paid out on December 28th to shareholders of record as of December 21st. Also note that NICK is a Canadian company, so there may be foreign tax withholdings (please consult your tax advisor).

  I want to clear up a few things about this dividend. This news, by itself, doesn’t do anything to boost NICK’s value. It’s simple math: Once the dividend is paid out, we can expect the shares to fall by $2. Since the dividend works out to be roughly one year’s worth of profits, we shouldn’t expect any dividends next year.

  While the special dividend doesn’t add value to NICK, the perception did, as the value of the stock rallied nicely on Wednesday, getting as high as $14.14 per share. Why did it rally? That’s hard to say exactly, but it was probably an appreciation of the company’s boldness. Think of it this way: You’re not going to pull a big move like that unless you’re pretty darn confident about your business’s ability to rake in cash. Traders took notice. NICK continues to be a very good buy.

  Earnings from Oracle and Bed, Bath & Beyond

  Next week, we’ll get earnings reports from Oracle ($ORCL) and Bed, Bath & Beyond ($BBBY). Also, BBBY will lay out some important planning assumptions for next year. Both of these companies wrapped up the end of their quarter in November.

  Oracle made news last week by announcing that they’re going to pay out their next three dividends before the end of the year in order to avoid the taxman. The company will report its fiscal Q2 earnings on Tuesday, December 18th. In September, Oracle told us to expect earnings to range between 59 and 63 cents per share. The Street expects 61 cents per share, which Oracle should be able to beat.

  Last quarter, Oracle got dinged by currency costs. That’s frustrating, but I’m not particularly worried, since those tend to be transient concerns. I’d be much more concerned by a downturn in their overall business, and Oracle isn’t experiencing that. I’ll be interested to hear what Ellison & Co. have to say about fiscal Q3 and how badly Europe is hurting then. I continue to like Oracle a lot and rate it a good buy up to $35 per share.

  Bed Bath & Beyond is due to report on Wednesday, December 19th. In June, BBBY surprised Wall Street (and me) by guiding lower for their August quarter. The stock got hammered, and analysts quickly slashed their forecasts. When the results came out in September, BBBY still came in four cents below consensus. It was just an ugly quarter, which is very uncharacteristic of BBBY.

  The problem is that Bed Bath & Beyond had become overly reliant on coupons to get feet in the door. I understand the temptation, but a retailer can’t discount their way to sales for the long-term. I’m not giving up on BBBY. This is a very well-run outfit, and they’ve already steered their way though an historic housing bust. I think they can handle this.

  Interestingly, the guidance for Q3 was 99 cents to $1.04 per share, which really isn’t that bad. What traders seemed to overlook is that the company stood by its previous full guidance of earnings growth between the high single digits and low double digits. BBBY also has a rock-solid balance sheet. I currently rate BBBY a buy up to $62 per share. This is a solid company, and the shares are going for a good value.

  Before I go, I want to make two adjustments to our Buy Below prices. Fiserv ($FISV) has been a monster for us this year. I’m raising our Buy Below price to $83 per share. Moog ($MOG-A) has been a lousy stock this year, but I think it’s an exceptionally good value. I’m raising the Buy Below on Moog to $40 per share.

  That’s all for now. Next week, we’ll get earnings from Oracle and Bed, Bath and Beyond. The government will also update the Q3 GDP 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

• CWS Market Review – December 7, 2012
  Eddy Elfenbein, December 7th, 2012 at 6:07 am

  “If you can look into the seeds of time,
  And say which grain will grow and which will not,
  Speak then to me.”
  – Macbeth, Act 1, Scene 3

  And to me, too, while you’re at it. After a nice recovery since mid-November, the S&P 500 has settled into a narrow trading range. For the last seven days running, the index has closed between 1,407 and 1,417. Chart watchers generally think this is a positive sign because stocks haven’t immediately surrendered their gains and dipped to a new low. My advice for investors is to ignore this silly Fiscal Cliff alarmism and expect a strong rally ahead. I continue to be bullish on the market and think we’ll break 1,500 sometime early in 2013.

  Stay Tuned for the 2013 Buy List

  Before I get into today’s CWS Market Review, I want to announce that I’ll unveil next year’s Buy List two weeks from today, on Friday, December 21, 2012. As usual, the new Buy List will have 20 stocks, and as usual, I’ll take off five stocks and add five new ones. We try to keep our turnover low. I always unveil the new Buy List a few days before the end of the year so no one can claim I’m getting an unfair jump on investors.

  Once the changes are made, the Buy List is locked and sealed for the next 12 months and I’m not allowed to make any changes until next December. I’ll start tracking the new list at the start of trading on January 2nd. My purpose with the Buy List is to show investors that with patience and discipline, any investor can consistently beat the stock market with a user-friendly portfolio. I’m very fortunate that we’ve had great success at Crossing Wall Street. If all goes well, 2012 will be the sixth year in a row that we’ve beaten the S&P 500.

  The 2012 Buy List So Far

  Through Thursday, our 2012 Buy List is up 13.21% for the year (not including dividends), which is slightly more than the S&P 500. I’ll include dividends in the final numbers. The good news is that the second half of the year has been very friendly to us. Remember that you can see exactly how our Buy List is doing at any time during the year at our Buy List page. I try to make investing as transparent as possible. I also have my Buy Below prices there so you’ll know exactly what’s a good entry point.

  Let’s look at some of our recent Buy List standouts. Fiserv ($FISV) just broke $80 per share, which is an all-time high. The stock is a 36% winner for us this year. AFLAC ($AFL) finished the day on Thursday at $53.80, which is its highest close since May 17, 2011. I’m a big fan of the duck stock. Sysco ($SYY), one of the most stable stocks on our Buy List, also finished Thursday at an 18-month high. SYY currently yields 3.51%.

  How about little Nicholas Financial ($NICK)? The stock dropped sharply after what some believed were poor earnings. They weren’t poor at all (perhaps mildly disappointing), and with a little patience, NICK has nearly made back all it lost. Even after the recent rally, NICK yields 3.6%. Nicholas Financial is a great buy up to $15 per share.

  The Great Special Dividend Rush of 2012

  Recently you’ve heard me complain about the careless media alarmism about the impending Fiscal Cliff. One starts to wonder whether CNBC now stands for “Cliff, Nothing But Cliff.” Trust me: you can ignore all that.

  Wall Street has also been distracted by some turbulence in shares of Apple ($AAPL). Truthfully, the recent downturn in Apple isn’t all that surprising. Bespoke Investment Group points out that this is Apple’s 10th 20% correction in the last 10 years. As Josh Brown recently pointed out, the difference this time is that Apple’s correction begins at a very high nominal price.

  One truly important effect of the impending Fiscal Cliff is that companies have been rushing to pay special dividends to shareholders before the end the year, as dividend taxes are expected to rise. This is especially the case for cash-rich companies and firms with high insider ownership. So far, U.S. companies have announced $21 billion in special dividends. Other companies, like Walmart ($WMT), have moved up their dividend-payout dates.

  On our Buy List, Oracle ($ORCL) announced that they will pay out their next three quarterly dividends before the end of the year. To clear up any confusion, Oracle’s fiscal year ends in May, so they’re paying out their second-, third- and fourth-quarter dividends all at once. The quarterly dividends are six cents per share, so the total payment for this month will be 18 cents per share. That works out to a cool $200 million for CEO Larry Ellison.

  

  Oracle’s fiscal Q2 earnings report is due after the close on Tuesday, December 18th. I’m expecting a good report. During the earnings call in September, Oracle said Q2 earnings should range between 59 and 63 cents per share. That’s a nice increase from the 54 cents per share they made in last year’s Q2. Wall Street’s consensus is at the dead center of the range, at 61 cents per share. Earlier this week, Oracle’s stock got as high as $32.50, which is an 11-week high. Oracle remains a strong buy any time it’s below $35 per share.

  The day after Oracle reports, Bed Bath & Beyond ($BBBY) will report its fiscal Q3 earnings. An important earnings call will follow because BBBY will give their initial planning assumptions for next year. Wall Street currently expects earnings of $5.15 per share for next year, and I suspect that’s too high. Unfortunately, this will be the last we hear from BBBY for awhile. The company’s Q4 is hugely important for them: about one-third of their annual profits come during the holiday quarter. But that report won’t come out until early April. Until then, we won’t hear much of anything from BBBY. This is still a solid company. Bed Bath & Beyond is a good buy up to $62 per share.

  Stryker Raises Dividend By 25%

  In last week’s CWS Market Review, I said I expected Stryker ($SYK) to raise its quarterly dividend soon, and sure enough, I was right.

  I had said that I expected Stryker to increase its payout from 21.25 cents per share to around 23 cents per share. It turns out, I wasn’t optimistic enough. The company just announced that the dividend will rise 25% to 26.5 cents per share. That brings the annual dividend to $1.06 per share. At Thursday’s close, Stryker now yields 1.95%.

  Stryker’s board also approved a $405 million increase in the share buyback program, which brings the total to $1 billion.

  “Given the considerable strength of our balance sheet and strong cash flow generation, we are well positioned to pursue a capital allocation strategy that includes highly focused M&A, an increasingly robust dividend and share buybacks,” said Kevin A. Lobo, President and Chief Executive Officer of Stryker. “We are committed to a strategy that will help drive our sales and earnings growth while simultaneously returning capital to shareholders at meaningful and consistent levels. ”

  Stryker has raised its dividend every year since 1995. The stock is a buy up to $57.

  Not to be outdone, Medtronic ($MDT) also announced an accelerated dividend payment. The company usually pays its fiscal third-quarter dividend in early January. On Thursday, Medtronic said that it will pay out the dividend in December in order to avoid the taxman. If you recall, in June, Medtronic raised its dividend for the 35th year in a row. The company recently had a good earnings report and reiterated full-year guidance. Medtronic is a buy up to $44 per share.

  Before I go, I want to highlight the good sales report from Ford ($F). For November, vehicle sales were up 6%, and sales of the F-series trucks were up 18%. This was the best November for trucks in seven years. Ford also set a record for hybrid sales, but that’s a very small part of their overall business. I was pleased to see the company plans to build 750,000 vehicles in North America for Q1. That’s an 11% increase over last year.

  I think it’s possible we may even see a dividend increase from Ford. The company currently pays a nickel per share, which comes to an annual yield of 1.8%. Ford is on track to earn about $1.35 per share this year, so they can easily afford an increase. Ford is a good buy up to $13 per share.

  That’s all for now. Next week, we’ll get important reports on industrial production and retail sales. Also, the Fed meets on Tuesday and Wednesday. Following the meeting, Bernanke will hold a press conference. 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

• Oracle Accelerates Dividend
  Eddy Elfenbein, December 3rd, 2012 at 4:33 pm

  Oracle ($ORCL) is the latest company to jump on the dividend bandwagon in order to avoid taxes. The company said that it will pay out its second, third and fourth quarter dividends on December 21st (date of record on December 14th). Each dividend is six cents per share so the total payment will be 18 cents per share.

  To make this clear, Oracle’s fiscal year ends on May 31st, so the company just wrapped up its fiscal second quarter.

  This isn’t a special dividend. The December payment will be in lieu of dividends for the rest of the fiscal year.

  Oracle also announced that it will release its Q2 earnings on December 18th.

• CWS Market Review – November 30, 2012
  Eddy Elfenbein, November 30th, 2012 at 8:43 am

  Time is your friend, impulse is your enemy. – Jack Bogle

  After a short downturn following the election, the bulls have once again taken control. This is exactly what I expected would happen, and I continue to believe we’re in the midst of a nice year-end rally.

  On Thursday, the S&P 500 touched a three-week high, and the NASDAQ Composite broke 3,000. The bulls were helped this week by a spate of positive economic news. For example, we learned that consumer confidence is now at a four-and-a-half-year high, and pending home sales are at a five-year high. And, as hard as it may be to believe, there was even good news out of Greece.

  This is more evidence that the Double Dip crowd once again got way ahead of themselves. For the time being, there’s no immediate threat of a recession. Since November 15th, the S&P 500 has rallied 4.6%. The index is now only 0.5% away from breaking its 50-day moving average, and we’re only 3.5% away from our highest close since 2007.

  

  Of course, you probably wouldn’t know this by watching much of the financial media. The gloom-and-doomers have gotten far more attention than they deserve. Consider that 14 months ago, Intrade believed there was a 65% chance that the U.S. would enter a recession in 2012. Today that figure stands at 1%.

  In this week’s CWS Market Review, we’ll take a closer look at why the Fiscal Cliff is nothing but hype. The media is largely inventing new worries for us. We’ll also discuss the terrible, rotten earnings report from JoS. A Bank Clothiers ($JOSB). Here’s a sneak preview: I’m not pleased with JOSB. More on that later.

  Despite some unpleasantness, our Buy List continues to thrive. Our strategy of discipline and patience is working out very well. AFLAC ($AFL), for example, is at an 18-month high. Only a few months ago, it was below $40 (see chart below). Plus, stocks like Ford ($F) and Oracle ($ORCL) have been particularly strong lately. Ford finished the day on Thursday at its highest close in seven months. But first, I want to tell you why you should ignore the ridiculous hype surrounding the Fiscal Cliff.

  Don’t Fall for the Fiscal Cliff Hype

  Wall Street’s fortunes seem to be beholden to the Fiscal Cliff (a registered trademark of CNBC). Late in the day on Tuesday, some rather casual remarks by Senator Harry Reid were enough to knock a few points off the S&P 500. The same thing happened again on Thursday, but this time, the remarks came from House Speaker John Boehner. Then, as word of progress leaked out, well…the market started to gain traction.

  Let me be clear: The threat from the Fiscal Cliff is greatly, hugely and fantastically exaggerated. It’s almost reached comical levels. The behavior at CNBC in particular has been reprehensible. The network is simultaneously over-hyping the threat while presenting themselves as the saviors. Folks, there’s nothing to worry about.

  Of course, if we really were to go over the cliff, that would be bad news—and that’s precisely why it won’t happen. In the meantime, both sides need to prove to their respective bases that they’re not backing down. It’s for show, like you see in a nature program about silver-backed gorillas fighting for dominance.

  

  But let’s get some facts. For one, the threat is easily avoidable. The White House and Congress have too much to lose by not reaching a deal. In fact, a recent article at Politico suggests that, despite the rhetoric we hear in public, the framework of a deal is starting to take shape. Neither side will get everything it wants, but they’ll both get enough to walk away with some pride. Also, remember that this deal is being made with the lame-duck Congress. That means there are a few folks who won’t even be members of Congress in a few weeks. In fact, a deal may even be reached some time in the new year. In a few months, no one will be talking about this.

  The market has resigned itself to the fact that taxes will go up. That’s no surprise. In response, dozens of companies like Costco ($COST) and Las Vegas Sands ($LVS) have announced special dividends. Other companies like Walmart ($WMT) have moved up their dividend dates in order to avoid the taxman. An analyst at Deutsche Bank suggested that Bed, Bath & Beyond ($BBBY), one of our Buy List stocks, could pay a special dividend. I’m a doubter, but I will note that the home-furnishings company is sitting on $4 per share in cash.

  One good way of putting the Fiscal Cliff threat into perspective is by looking at how well defense and aerospace stocks are doing. Needless to say, any sequester would be very bad news for these companies. The Defense Sector ETF ($ITA) badly lagged the market for most of this year. Its relative performance reached a low point in late September, but then, except for a brief period in mid-November, the ITA has been leading the market ever since. This tells me that that no one has the motive for a prolonged fight. Furthermore, the Volatility Index ($VIX) has remained subdued, and the stock market has largely avoided wild daily swings in the past few weeks. There’s only been one daily swing of more than 2% in the last two months, and that was the big sell-off on the day after the election. This has been a calm market.

  The Math Still Favors Stocks

  Due to market leadership from the Industrials and Consumer Discretionary sectors, I suspected that the sell-off would be short-lived. That’s not the script that sell-offs usually follow. Since June 5th, the Consumer Discretionary ETF ($XLY) is up by 12.2%. In simpler terms, the homebuilders and shoppers are waking up from their slumber. Even some crummy tech names have been doing well. Thanks to a jump in shares of Facebook ($FB), Mark Zuckerberg has made a cool $4 billion in the last three weeks.

  The good news about pending home sales, combined with a positive report on home prices, suggests that the housing recovery (such as it is) is propping up consumers. Mind you, there are still weak spots out there. Tiffany ($TIF), for example, just lowered guidance. But these are special cases rather than general rules.

  Probably the best news for investors this week was largely ignored. Charles Evans of the Federal Reserve said that the Fed needs to extend its bond-buying programs until the economy can consistently add 200,000 jobs per month. Until now, the Fed has been reticent in giving a specific economic target as to when they need to take their foot off the gas. I don’t know if Evans will get his way, but we now know there are some voices inside the Fed willing to pursue these policies.

  The bottom line is that there’s no possible solution to the Fiscal Cliff that alters the value spread between stocks and bonds. With the Fed gobbling Treasuries like Santa eating cookies, yields are low and will likely remain so. In fact, the austerity that would result from a Fiscal Cliff deal would add even more pressure.

  Let’s look at some numbers. Analysts now expect 2012 earnings for the S&P 500 of $99.76, and $113.40 for 2013. In June 2011, analysts expected the S&P 500 to earn $111.82 for 2012. So that’s a big change in outlook, yet the market rallied. The reason we rallied is that the market had dramatically overreacted to fears from Europe. Over the last 14 months, earnings estimates for Q4 have come down, on average, about 1% per month. Yet even these lowered numbers represent an acceleration of earnings growth. Prudent investors are in excellent shape right now. The indexes are up, and dividends are having a banner year. I think the S&P 500 can hit 1,500 by March.

  JoS. A Bank Clothiers Bombs

  One aspect of being a good investor is being upfront about our mistakes. After all, that’s how we learn. One big mistake we made this year was having JoS. A Bank Clothiers ($JOSB) on our Buy List. For the second time this year, Joey B badly missed earnings. I understand it happening once, but two times tells me there are some serious problems.

  On Wednesday, JOSB reported fiscal Q3 earnings of 47 cents per share, which was nine cents below estimates. Sales actually did pretty well, both total and comparable-store. But profits tanked. This tells us that JOSB is probably overstocked, and they’re dumping inventory at any price—hence all the buy-one-suit-get-78-free commercials.

  What’s even worse is that JOSB warned that comparable-store sales were down in November, and the company is “cautious” about Q4. That’s not good. Let’s just say that JOSB probably won’t be on next year’s Buy List.

  Oracle Is a Buy Up to $35

  We have earnings reports due soon from Oracle ($ORCL) and Bed Bath & Beyond ($BBBY). In our last issue, I highlighted Oracle as a good buy, and the shares rose to a two-month high. Oracle looks ready to break out with a new 52-week high. The company is due to release its next earnings report in about two weeks. I’m expecting another strong report. Oracle remains a strong buy any time it’s below $35 per share.

  One quick word about Stryker ($SYK). I expect SYK will soon raise its quarterly dividend. The company currently pays out 21.25 cents per quarter. I think they’ll bump it to around 23 cents per share in the next week or so. This is a solid company. They’ve raised their dividend every year since 1995. Stryker is a good buy up to $57.

  That’s all for now. On Monday, we’ll get the ISM report for November. All eyes on Wall Street will be focused on Friday’s big employment 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

• Mark Hurd on CNBC
  Eddy Elfenbein, October 2nd, 2012 at 5:52 pm

  Here’s Oracle’s President Mark Hurd on CNBC earlier today: