James Surowiecki on CEO Pay
Posted by Eddy Elfenbein on January 19th, 2007 at 12:58 pm

From the latest New Yorker:

For all the talk of restraining C.E.O. pay, most compensation committees remain what Warren Buffett once called them—“tail-wagging puppy dogs.” At some companies, this is simply because the C.E.O. has packed the board with cronies. But at Home Depot Nardelli did not pick the board members, and most of them were what are usually called independent directors—ones who don’t work for the company or do any business with it. Even when an independent board negotiates a C.E.O.’s contract, however, the directors are often, in a sense, negotiating with themselves. Of the ten independent members of Home Depot’s board, for instance, eight are or have been C.E.O.s. Since C.E.O. pay is often driven by comparisons between companies, directors have a certain interest in keeping executive pay high. Furthermore, the salaries keep escalating because, board members argue, there just aren’t enough good C.E.O. candidates out there. There’s no evidence that this is actually the case, but who is more likely to feel that good C.E.O.s are indispensable and rare than other C.E.O.s?

I’m not so sure interlocking corporate boards is a major source of rising CEO pay. In fact, I’m not convinced that rising CEO is even a problem. Until I see hard evidence, I simply see it as a natural market adjustment. The modern CEO needs more skills to navigate his or her firm through an increasingly complex legal and regulatory environment.

Ten Years After
Posted by Eddy Elfenbein on January 19th, 2007 at 7:56 am

Intel‘s (INTC) stock is where it was ten years ago.

Earnings from HOG and UNH
Posted by Eddy Elfenbein on January 18th, 2007 at 8:51 am

This morning, Harley-Davidson (HOG) reported earnings of 97 cents a share, one penny better than expectations. The Hogs are particularly popular overseas:

Worldwide retail sales of Harley-Davidson motorcycles grew 6.4 percent for the quarter. Shipments grew 6 percent to 92,848 units. Domestically, sales were up only 0.3 percent, but Harley estimated the overall heavyweight motorcycle market was down 1.7 percent for the quarter. Overseas, sales of the iconic bikes were up 29.4 percent, with Canada seeing an increase of 37.4 percent and Europe, an increase of 31.2 percent for the quarter.

UnitedHealth Group (UNH) reported earnings of $1.2 billion. The company didn’t release an earnings-per-share figure because it’s still trying to untangle the stock options mess. As I’ve said before, most of these problems are over. The only impact is that we don’t know exactly what the historical results were. This will probably hang over the stock, but it has zero impact on current operations. The company is doing very well. I think it’s very likely that UNH will make as much as $3.50 a share this year, which means that it’s going for less than 16 times earnings. That’s a good price.

Buy List to Date
Posted by Eddy Elfenbein on January 17th, 2007 at 10:33 pm

I’m happy to report that the Buy List has gotten the year off to a good start. In just ten days of trading, the 20 stocks on the Buy List are up an average of 2.73% compared with 0.87% for the S&P 500.
Here’s how the 20 stocks have done:

Crossing Wall Street Now Being Studied at Wharton
Posted by Eddy Elfenbein on January 17th, 2007 at 9:57 am

Seriously. Under “What Not to Do.”

This is just a little after the course refresher note. I was just doing my web due diligence and I saw a piece at SeekingAlpha that offered some quantitative analysis of the bonds versus stocks for the last months of 2006. The analysis is comically flawed. Have fun with it, and rest assured that no (not even one!) Stat 434 student could make such fundamental, logical errors. Were not talking fancy details here, just stone cold stupidity (mixed with a nice dose of ignorance).

Professor Michael Steele calls my analysis “comically flawed” because I did a regression of prices instead of price changes.
ROFLMAO
OK, maybe it’s not that comical.
Well, I’ll never make that mistake again. In any event, the point I was trying to make was that the stock and bond markets had been rising together until about one month ago. Since then, the two markets have parted ways.
Here lookie:

The S&P 500 is the blue (left scale). The American Century Target 2025 fund (BTTRX), which I used as a bond proxy, is the red (right scale).
Note that even the recent up-and-down move in the BTTRX is mirrored by an opposite move in the S&P 500.

Amphenol’s Earnings Report
Posted by Eddy Elfenbein on January 17th, 2007 at 9:26 am

Amphenol (APH) reported earnings this morning of 83 cents a share, two cents more than Wall Street was expecting. This was a 40% increase over last year’s total. Sales rose 30% to $659.4 million.
The company also laid out its future guidance:

For the first quarter, the company expects earnings between 80 cents and 82 cents per share on sales between $635 million to $645 million. Analysts are looking for earnings of 80 cents per share on sales of $647.7 million.
For the full year, Amphenol sees earnings between $3.45 and $3.55 per share on sales between $2.65 billion and $2.71 billion. Analysts are expecting earnings of $3.49 per share on sales of 2.7 billion.

Going by yesterday’s close, Amphenol is selling for about 18 times 2007’s earnings. The company also annouced a 2-for-1 stock split for late-March.

Ameritrade: Keeping It Real
Posted by Eddy Elfenbein on January 16th, 2007 at 2:17 pm

Ugh! Ameritrade (AMTD) is one of those stocks that I kick myself over. It was an obvious buy 18 months ago and I missed it. (The blue line is the price on the left scale, the yellow is the EPS on the right scale.)
In October, the company won my “Earnings Guidance for the Year” award when it changed its FY07 EPS range to $0.98 – $1.22 from $0.99 – $1.21. Glad they cleared that up.
It was only a few months ago that the online brokers took a beating when Bank of America (BAC) announced its free online trading offer (30 trades a month for accounts over $25,000). This morning, Ameritrade reported earnings of 28 cents a share, six cents better than estimates. Profits grew by 69%. The stock is up big in today’s trading.

NASDAQ 2500!
Posted by Eddy Elfenbein on January 16th, 2007 at 11:59 am

I nearly forgot to mention this. On Friday, the NASDAQ Composite (^IXIC) broke 2500. Since I’ve blocked out much of late-1990s, I think this is a new all-time high. It may have gone higher, I don’t remember. Anyway, here’s a long-term chart:

Yep, that’s an all-time high baby!

Bed Bath & Beyond Makes New 52-Week High
Posted by Eddy Elfenbein on January 16th, 2007 at 10:25 am

Shares of Bed Bath & Beyond (BBBY) hit a new 52-week high this morning. Lower gas prices basically act like a tax cut for consumers. FactSet (FDS) and SEI Investments (SEIC) are also at new highs.

The Buy List So Far
Posted by Eddy Elfenbein on January 11th, 2007 at 10:58 am

I’m happy to report that our Buy List is off to a good start for 2007. As of mid-day today, we’re up about 1.36% compared with 0.39% for the S&P 500. Of course, this is only the seventh day of trading, so a lot can change, but it’s nice to get a fresh start out of the gate.
Our biggest winner so far is Joe Bank (JOSB), which is one of our new stocks for this year. It’s up 8.9%. Our second-best stock is Bed Bath & Beyond (BBBY) which is up 7.2%. SEI Investments (SEIC) was our biggest winner from last year, and it made a new 52-week high this morning.