Lowe’s or Home Depot
Posted by Eddy Elfenbein on April 28th, 2010 at 1:56 pm

An emailer asks me: “Lowe’s (LOW) or Home Depot (HD)?”
Ooohh, this is a toughy. Both are excellent companies and both have done extremely well over the past 13 months. This means that both have probably made the vast majority of their “easy gains” this cycle.
I would say that Lowe’s and Home Depot are very nearly tied. Both stocks go for almost exactly 19 times this year’s estimate. I’ll give a slight edge to Home Depot since their recent earnings reports have exceeded expectations by a nice margin.

SEI Investment’s Q1 Earnings
Posted by Eddy Elfenbein on April 28th, 2010 at 10:57 am

We have just one Buy List earnings report. SEI Investments (SEIC) reported Q1 earnings of 31 cents per share. Although this was four cents better than estimates, traders seem displeased. The shares are currently down about 5%.
I’m not sure why the stock is down. Perhaps this is just a near-term sell-off. Today’s report clearly shows that SEIC’s business is bouncing back. The company earned $1.36 per share on 2007. That dropped to $1.22 in 2008 and 94 cents last year. The business is now running well ahead of last year’s result (they made just 18 cents per share in last year’s first quarter). I shouldn’t be too worried about SEIC pulling back. The stock had been making new highs consistently.
I think SEIC has a good shot of making $1.30 a share this year which means it’s still reasonably priced (but not a screaming bargain).
Strangely, AFLAC (AFL) opened nicely this morning but is now in the red. The company reported earnings yesterday.
Tomorrow we’ll have earnings reports from Fiserv (FISV) and Becton Dickinson (BDX).

Kling on the Senate Hearings
Posted by Eddy Elfenbein on April 28th, 2010 at 9:41 am

Arnold Kling sums it nicely:

Too bad somebody at Goldman could not have called out a Senator. It must have been tempting to say, “Look. You can’t make a market by bending over backwards giving buyers every reason not to buy and sellers every reason not to sell. Sophisticated investors understand how we operate. Just like everybody who goes to play blackjack understands that some of the cards are dealt face down. You can complain that you think all the cards should be face up, but that would totally change the game. Do you hold to such high standards in your election campaigns? Do you think your disclosure of the consequences of your votes is honest? Do you disclose how lobbyists told you to vote? Do you go out of the way in your campaigns to give people all the possible reasons not to vote for you? You want to tell me about my responsibility to my clients? How would you like to hear my opinion about your responsibility to your constituents?”

AFLAC’s Earnings
Posted by Eddy Elfenbein on April 27th, 2010 at 4:17 pm

After the bell, AFLAC (AFL) reported first-quarter operating earnings of $1.41 per share. With insurance companies, it’s more important to focus on operating earnings since net earnings can be heavily influenced by investments. The Street was looking for $1.32.
This is what AFL had to say about guidance:

With one quarter of the year complete, we continue to believe we are positioned for another year of solid financial performance. Although challenges posed by weak economic conditions clearly persist, particularly in the United States, we still believe our goal for increasing operating earnings per diluted share is reasonable and attainable. As such, our goal remains an increase of 9% to 12% this year in operating earnings per diluted share, excluding the impact of the yen. If the yen averages 90 to 95 to the dollar for the full year, we would expect reported earnings to be in the range of $5.24 to $5.56 per diluted share. Using that same exchange rate assumption, we would expect second quarter operating earnings to be $1.33 to $1.38 per diluted share.

The stock is at $52.41 and they see full-year EPS coming in between $5.24 and $5.56. That’s a forward P/E Ratio of 9.4 to 10. AFLAC is a very good buy.

Putting Today In Perspective
Posted by Eddy Elfenbein on April 27th, 2010 at 3:30 pm

The Dow is off about 150 right now. I see that people are concerned.
My how we forget what real volatility looks like!
Here’s a look at the daily changes in the Dow since the beginning of 2008:

Update: The Dow closed down 213 points.

Sector Performance
Posted by Eddy Elfenbein on April 27th, 2010 at 2:42 pm

Bespoke has a handy round-up of how the S&P 500 sectors have performed over the past few years:

The important lesson for investors is to see how much less volatile the consumer staples are (these are the stocks that are the opposite of cyclicals). Staples tend to fall the least and rally the least.
Here’s a listing of the 41 stocks in the S&P 500’s Consumer Staples sector. I’ve included each stock’s dividend yield:

Watch The Senate Hearings Live
Posted by Eddy Elfenbein on April 27th, 2010 at 9:55 am

You can see the Senate testify before Goldman Sachs here.
Wait, I might have that backwards. It’s getting hard to tell.
Here are live blogs from:
TBI
WSJ
NYT
FT
Reformed Broker
Dealbreaker

Guardian
Simon Johnson at PBS
This is a perfect opportunity for a Godfather 2-like scene when Frank Pentangeli testified before the Senate. Fab starts reading his testimony and Blankfein walks in with Fab’s brother Olivier and takes a seat in the back row. Then Fab suddenly recants: “Abacus? I never heard of an Abacus.”

Wright Express’ Earnings
Posted by Eddy Elfenbein on April 27th, 2010 at 9:32 am

One more Buy List stock reported earnings this morning. Wright Express (WXS) said it earned 61 cents per share for its first quarter which was four cents better than Wall Street’s expectations. In February, Wright said to expect Q1 earnings between 53 and 58 cent per share so they’re doing even better than their own forecasts. The company’s revenues rose 22.3% to $83.8 million which was just shy of expectations.
Wright said that Q2 earnings should range between 61 and 66 cents per share. For all of 2010, Wright sees earnings-per-share coming in between $2.39 and $2.54. This is a big increase from the earlier range of $2.26 to $2.46.
Bottom line: This was a very good report. The strange thing about Wright is why its shares didn’t do anything for the first few months of the year. Going back to last September to up until a few weeks ago, WXS mostly bounced between $28 and $32. Then two weeks ago, out of the blue, WXS started to break out. Who knows what traders are thinking? The shares are down again this morning. That’s OK, I can deal with folks who don’t see a bargain. Wright Express continues to be an excellent buy.
After the closing bell, AFLAC (AFL) is due to report. This is one of my favorite Buy List stocks. The consensus estimate is that AFLAC will earn $1.32 a share.

What Letter Would You Give This Chart?
Posted by Eddy Elfenbein on April 26th, 2010 at 1:45 pm

On Friday, the government will release its initial report on first-quarter GDP growth. The economy has grown for the last two quarters but it’s been far short of what should be expected when you emerge from a nasty recession.
Economists and market-watchers are debating what letter the recovery will look like — will it look like a V, a U or possibly a W? Here’s what the Real GDP chart looks like, but I’ve added a guess for Friday’s data point (3.6% growth).

To me it looks like a U. Or maybe a backwards J. I dunno. Possibly another letter?

Buy List Earnings This Week
Posted by Eddy Elfenbein on April 26th, 2010 at 12:52 pm

Five of our Buy List stocks will report earnings this week. Here they are along with Wall Street’s consensus: