• ISM 56.3
    Posted by on September 1st, 2010 at 9:58 am

    Whew! The ISM number came in at 56.3 which was well above expectations of 53.
    I feel like we dodged a bullet here. The market should continue to rally.

  • ISM Due at 10 am
    Posted by on September 1st, 2010 at 9:29 am

    Stocks are rocking this morning, but the ISM comes out at 10 am. The Street expects 53. A negative surprise could be very nasty. I’m now hiding under my snuggie.

  • Good Earnings from Joe Bank
    Posted by on September 1st, 2010 at 8:52 am

    Jos. A. Bank Clothiers (JOSB) just released a very good Q2 earnings report this morning. The company earned 59 cents a share which was six cents more than Wall Street was expecting. Let’s hope the stock gets a nice bump today.
    The details look very solid. Sales rose 12.3% and same-store sales rose 9.2%. A year ago, the company earned 45 cents a share. I’m especially glad to see that gross margins improved to 62.8% from 61.5%.
    Right now, Wall Street pegs JOSB to earn $3 for the entire year, bear in mind that a very large part of that comes in their fourth quarter. I expect Wall Street to up its full-year estimates soon. Three months ago, JOSB beat the Street by 14 cents a share.
    JOSB has posted higher year-over-year earnings for 35 of the last 36 quarters including the last 17 in a row. Even at $3 a share, the stock is going for about 12 times forward earnings which is a decent value.
    Update: The stock is up 13% today. I’m now playing that Gary Glitter HEY song in my office.

  • From 1985: What Will Shopping Be Like in 2010?
    Posted by on August 31st, 2010 at 12:05 am

    From 1985, peer into the distant future of 2010.

  • The WSJ Takes on the P/E Ratio
    Posted by on August 30th, 2010 at 2:43 pm

    The Wall Street Journal has a rather unusual column today claiming that the Price/Earnings Ratio is not only declining, but the metric’s importance is declining as well. For supporting evidence, they offer up the fact that corporate earnings were strong this past earnings season but the stock market has since fallen.
    Sorry folks but that’s not a hard knot to entangle: The P/E Ratio looks backward while stock prices look forward. As a result, you can get some poor readings. I’m afraid to tell the WSJ that despite this minor conflict, the P/E Ratio remains very important (though we must be aware of its shortcomings).
    The WSJ goes on to say that the P/E Ratio has plunged about 36% in the past 12 months which is the biggest drop in seven years. Again, this shouldn’t be much of a surprise because, as I just mentioned, the P/E Ratio looks backward. Corporate earnings have improved very dramatically since the depths of the recession. A higher E with a flat-to-lower P means a lower P/E Ratio. Mystery solved.
    The WSJ also writes that the forward P/E Ratio has dropped from 14.4 in May to 12.2 currently. This probably means that stock prices are ahead of analysts’ forecast and that those projections may be headed lower soon.
    Because of the time discrepancy in the P/E Ratio we sometimes get “false readings.” For example, when stocks are cheapest, the earnings line is often still headed lower. As a result, the very first stages of a bull market often shows the P/E Ratio dramatically expanding. The opposite happens when the market begins to look rich, which may be happening right now. Stocks are sluggish while earnings have improved. As a result, you have stocks falling after good earnings combined with a subdued P/E Ratio.

    Three months ago, analysts expected the companies in the Standard & Poor’s 500-stock index to boost profits 18% in 2011. Now, they predict 15%. Mutual-fund, hedge-fund and other money managers put the increase at closer to 9%, according to a recent Citigroup survey, while Mr. Levkovich’s estimate is for 7% growth.
    “The sustainability of earnings is in doubt,” said Howard Silverblatt, an index analyst at S&P in New York. “Estimates are still optimistic.”

    The WSJ says that the P/E Ratio is plagued by the lack of certainty in future earnings, and on this point I agree. Think of it this way. Imagine we have two stocks that are similar in every way except for one difference. Stock A is projected to earn $1 a share next year, plus or minus 20 cents. Stock B is projected to earn $1 a share next year, plus or minus three cents. Which stock will be worth more? Outside of rare exceptions, we can assume that Stock B will be worth more. Why? Because the market rewards certainty.
    The WSJ also claims that the P/E Ratio has had earlier bouts of loss of importance — from the Great Depression to the early post-war period and again during the inflation struggles of the 1970s and early 80s. I agree on the former, but the latter was hardly a refutation of the P/E Ratio. It’s simply that the P/E is closely tied to interest rates. As rates head higher, P/E Ratios headed lower so stocks could actively compete with bonds.
    I can assure you that any obituary for the P/E Ratio is very premature.

  • Genzyme Says No to Sanofi-Aventis
    Posted by on August 30th, 2010 at 12:53 pm

    The stock market is bucking the trend of 2010 as we’re currently heading lower on a Monday. The market, however, is still well above the lows from Friday morning. Most of the rally from Friday afternoon still holds. The cyclical stocks are leading the market lower today.
    One of the big stories today is that Genzyme (GENZ) has rejected the $18.5 billion offer from Sanofi-Aventis (SNY) believing the bid is too low. I don’t have a strong opinion about either company but I’m happy to see companies reject buy-out offers right now.
    As usual, the market had the right idea. GENZ’s had already been trading above SNY’s bid price of $69 a share. Sanofi’s CEO said they made a “compelling” offer and that Genzyme’s management “has a history of overpromising and under-delivering.” Ooooh, snap!
    On the Buy List, Intel (INTC) is still in a buying mood. This time, they’re picking up the wireless unit of Germany’s Infineon Technologies for $1.4 billion. This is an area where Intel hasn’t been particularly strong.

    “The acquisition of Infineon’s wireless business strengthens the second pillar of our computing strategy–Internet connectivity–and enables us to offer a portfolio of products that covers the full range of wireless options from WiFi and 3G to WiMAX and the long-term evolution,” a standard for the new faster fourth generation mobile networks,” Intel President and Chief Executive Paul Otellini said in a statement.
    Infineon will “now fully concentrate our resources towards strong growth in our core segments,” its CEO Peter Bauer said without elaborating. He added that the sale of its wireless operations “is a strategic decision to enhance Infineon’s value.”
    Bauer added that acquisitions are an element of Infineon’s further growth strategy, although he added that there are no concrete talks and he fells no time pressure to buy.
    Infineon got a “reasonable price” for its wireless unit “but might be below ambitious market expectations that failed to factor in upcoming investment” for fourth generation networks, said Commerzbank analyst Thomas Becker, who rates the shares buy, but cut his target price to EUR5.80 from EUR6.60 to reflect the divestment.

    Intel’s stock is currently hovering around $18 a share.

  • Buffett Turns 80
    Posted by on August 30th, 2010 at 8:15 am

    Happy Birthday to Warren Buffett. Here’s to 80 more!
    warren-buffett.jpg

  • Ave Maria!
    Posted by on August 28th, 2010 at 1:07 pm

    Maria Bartiromo singing!. Here’s Part 1:

    Part 2:

  • Market Notes: August 27, 2010
    Posted by on August 27th, 2010 at 3:53 pm

    The Buy List had a very good day to close out August which was an ugly month for us.
    Here are a few notes on some of our stocks:
    Barron’s notes that First Global has downgraded Gilead Sciences (GILD).
    Eli Lilly (LLY) won a court battle which extended the blocking of generic versions of Strattera, an attention deficit disorder drug.
    Nicholas Financial (NICK) got as low as $8.06 today. The company’s book value is $8.59.
    Here’s Ben Bernanke’s speech today in Jackson Hole. I thought it didn’t say much at all, but the market bond dropped sharply and stocks rose.

  • Altria Raises Dividend
    Posted by on August 27th, 2010 at 11:46 am

    Altria (MO) announced today that it’s increasing its quarterly dividend by 8.6% to 38 cents per share. Think of it this way: If you had bought the shares 25 years ago, the dividends alone are yielding you 192%.