• The Stock Market’s Compressed Range
    Posted by on May 29th, 2018 at 10:47 am

    Over the past 13 trading days, the S&P 500 has traded within a very narrow band. Not once has the index left the range of 2,698 to 2,742. That’s about 1.5%.

    The index is still above its 50- and 200-DMA; however, a retest may come soon. A narrow range could be the precursor to a strong move in either direction. For now, though, the market is listlessly drifting in a very narrow range.

  • Morning News: May 29, 2018
    Posted by on May 29th, 2018 at 7:25 am

    Political Uncertainty in Italy, Spain Roils Markets

    Truckers’ Strike Paralyzes Brazil as President Courts Investors

    Oil Is Still Going To $80

    US and EU Dig in on Dispute Over Airbus Subsidies at WTO

    EU Proposes to Ban on Plastic Straws, Stirs, and Cotton Buds

    Bank Indonesia’s Call for Special Meeting Welcomed by Investors

    Dodd-Frank Rollback Will Reinvigorate Main Street

    Swiss Re `Open’ to Anchor Investor as SoftBank Talks Fail

    De Beers to Sell Diamonds Made in a Lab

    JAB to Buy Sandwich Chain Pret A Manger From Bridgepoint

    The World’s Biggest Ever Semiconductor Merger May Be Back on Track, Thanks to a China Thaw

    Tech-Savvy Buskers Now Accepting Card Payment

    Lawrence Hamtil: Your Focus Should Be On Risk, Not Reward

    Howard Lindzon: Momentum Monday – Software is Hungry All The Time

    Roger Nusbaum: Creating Your Own Antifragility

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  • Morning News: May 28, 2018
    Posted by on May 28th, 2018 at 6:36 am

    OPEC and Allied Producers Have Already Cleared Oil Surplus

    The Next Privacy Battle in Europe is Over This New Law

    Why Voters Are Unlikely to Punish Erdogan for the Lira Turmoil

    Brazil Reaches New Deal to End Truck Drivers’ Strike

    Why India’s New Bankruptcy Law is Reshaping Big Business

    Qualcomm to Meet China Regulators in Push to Clear $44 Billion NXP Deal

    Money Is About to Flow Into China, Just as It Pours Out of Tencent

    China Industrial Profit Growth Accelerates on Improved Margins

    Bombardier Plans Two New Luxury Aircraft Amid Growing Demand

    Thousands of Chipotle Workers Could be Shut Out of Wage-Theft Lawsuit by New Supreme Court Ruling

    Here’s the Maximum Social Security You Can Get If You Claim at 62

    Vintage Levis Jeans First Bought In 1893 Sells For Nearly $100K

    Ben Carlson: Playing in Traffic

    Jeff Miller: Should Investors Ignore the Shifting Geopolitical Winds?

    Roger Nusbaum: Revisiting Ranchester

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  • Spam Recall
    Posted by on May 27th, 2018 at 3:29 pm

    From Money Magazine:

    Spam lovers beware.

    A recall has been issued for 228,614 pounds of the famous canned meat product due to contamination from shards of metal.

    The recall was announced Saturday after Hormel Food Corp., which manufactures Spam, “received four consumer complaints stating that metal objects were found in the canned products,” according to the United States Department of Agriculture.

    The types of Spam affected are 12-ounce “Spam classic” cans, which were shipped nationally across the U.S., and 12-ounce “Hormel Foods Black-Label Luncheon Loaf” cans, which were only shipped to Guam.

    The canned meat products were produced Feb. 8 through Feb. 10 and the USDA’s Food Safety and Inspection Service said it is concerned some of the Spam product may still be in people’s homes.

    While only reports of “minor oral injuries” have been reported, anyone worried about further sickness or injury should get in touch with a health care provider. Regardless of illness, any Spam cans fitting the description “should be thrown away or returned to the place of purchase,” according to the USDA.

    Here’s what to look for on the labels of Spam to check whether you have a potentially contaminated product:

    Spam Classic: a “best by” date of February 2021 and production codes: F020881, F020882, F020883, F020884, F020885, F020886, F020887, F020888 and F020889.
    Hormel Foods Black-Label Luncheon Loaf: a “best by” date of February 2021 and production codes F02098 and F02108.
    If you have any questions or concerns about the recalled Spam you can contact Hormel Foods’ consumer response at (800) 523-4635.

  • Reagan’s Remarks at the Veterans Day 1985
    Posted by on May 27th, 2018 at 2:08 pm

    This is Ronald Reagan’s speech for Veteran’s Day in 1985, but I thought it was appropriate for Memorial Day.

  • Hormel Rebounds
    Posted by on May 25th, 2018 at 11:04 am

    We had two earnings reports yesterday. Hormel Foods was in the morning and Ross Stores was after the close.

    Yesterday, Hormel opened sharply lower but moved back up as the day wore on. We saw the same thing happen recently with Cerner. That seems to be a common move — traders panic and only slowly regain their senses.

    Ross Stores is down this morning just as HRL was yesterday. We may see another rebound. Their earnings report looked just fine to me.

  • Morning News: May 25, 2018
    Posted by on May 25th, 2018 at 7:06 am

    Russia, OPEC Members to Discuss Easing Oil Output Cap

    Europe to Clinch Cheaper Russian Gas With Gazprom Deal

    Erdogan Needs to Leave Turkey’s Central Bank Alone

    BOE’s Carney Says His Guidance Is Vital in ‘Crucial’ Brexit Phase

    Tech Companies Scramble as Sweeping Data Rules Take Effect

    Rusal CEO Quits Amid Pressure Over U.S. Sanctions

    Disney Wants to Kill Netflix, But Comcast Has Totally Different Reasons for Wanting Fox

    Doctor, No: Short Seller Steps Up Fight With Samsonite Over CEO’s Credentials

    Chesapeake Energy: Still Ugly

    Maker of Necco Wafers Gets Sweet Reprieve at Bankruptcy Auction

    What the Hell Happened at GE?

    J&J Verdict Reaches Almost $26 Million in Baby Powder Trial

    Joshua Brown: Stock Prices Are a Proxy For Our Beliefs About the Future

    Blue Harbinger: The Most Costly Trading Mistakes To Avoid

    Jeff Carter: Perpetrating a Fraud

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  • Ross Stores Earns $1.17 per Share for Q1
    Posted by on May 24th, 2018 at 4:05 pm

    Ross Stores (ROST) just reported fiscal Q1 earnings of $1.17 per share. The company had projected earnings of $1.03 to $1.07 per share. They made 82 cents per share for last year’s Q1.

    Ross said they were helped in Q1 by 17 cents per share due to tax reform plus two cents per share thanks to “the favorable timing of packaway-related expenses that we expect to reverse in subsequent quarters.”

    Q1 sales rose 9% to $3.6 billion, and comparable-stores sales were up 3%. Ross had been expecting 1% to 2%. I knew that forecast was too low.

    Barbara Rentler, Chief Executive Officer, commented, “Despite unfavorable weather throughout the period, we achieved above-plan growth in both sales and earnings in the first quarter. Operating margin for the period of 15.1% was down slightly from the prior year as an improvement in merchandise gross margin and favorable timing of packaway-related expenses were offset by higher freight costs and wage-related investments.”

    Ms. Rentler continued, “During the first quarter of fiscal 2018, we repurchased 3.3 million shares of common stock for an aggregate price of $255 million. As planned, we remain on track to buy back a total of $1.075 billion in common stock during fiscal 2018.”

    Looking ahead, Ms. Rentler said, “For the 13 weeks ending August 4, 2018, we are forecasting same store sales to be up 1% to 2% over the 13 weeks ended August 5, 2017. Second quarter 2018 earnings per share are projected to be $.95 to $.99, which includes the benefit from lower taxes, partially offset by the previously mentioned shift in packaway expenses.”

    Ms. Rentler continued, “Based on our first quarter results and guidance for the second quarter, we now project earnings per share for the 52 weeks ending February 2, 2019 to be in the range of $3.92 to $4.05, which includes the benefit from lower taxes.”

    That’s up from previous range of $3.86 to $4.03 per share. Shares of ROST are down about 4% in the after-hours market.

  • The Market-Timing Game
    Posted by on May 24th, 2018 at 10:32 am

    You know why I don’t time the market? Check out the game at this link, and you’ll see why.

    The game asks you to make buy/sell decisions over a three-year period of the market. It’s based on real data between 1950 and 2018, we just don’t know when.

    Investors often think they can “feel” the market based on recent movements. Well, it’s pretty hard to outguess the line.

    After playing this a few times, the hardest part psychologically is being out of a market that spikes higher. The fear of missing out is powerful.

    One of the parts that makes the game challenging is the fluid vertical axis. When we look at a static chart, the playing field is known. That’s not how it works in real life.

  • Hormel Foods Earns 44 Cents per Share
    Posted by on May 24th, 2018 at 8:53 am

    This morning, Hormel Foods (HRL) posted fiscal Q2 earnings of 44 cents per share. That was up 13% over last year’s Q2.

    In last week’s CWS Market Review, I said Wall Street’s estimate of 45 cents per share might be a bit too high. I was right on that. I also said I didn’t see Hormel adjusting their full-year guidance. I was right on that as well. The company reaffirmed that full-year range of $1.81 to $1.95 per share.

    Here are some details from the earnings report:

    COMMENTARY

    “Our team delivered record earnings per share of $0.44 which was in line with our expectation and keeps us on track to maintain our full year earnings guidance,” said Jim Snee, chairman of the board, president, and chief executive officer. “We were particularly pleased with the bottom-line performance from Refrigerated Foods as our experienced team grew our value-added profits while navigating through volatile markets. Our balanced business model helped mitigate higher freight costs and a difficult commodity environment.”

    “We delivered record sales led by our Refrigerated Foods and International segments. Strong top-line growth from brands such as Hormel® Natural Choice® and Hormel® Bacon 1TM and international sales of products such as Skippy® peanut butter was complemented by the strategic acquisitions of Fontanini, Columbus Craft Meats, and Ceratti,” Snee said. “Our core center store portfolio of brands such as SPAM®, Dinty Moore®, and Herdez® also showed strong growth this quarter.”

    SEGMENT HIGHLIGHTS – SECOND QUARTER

    Refrigerated Foods

    Volume up 6%; Organic volume1 down 1%
    Net sales up 14%; Organic net sales1 flat to last year
    Segment profit up 18%
    Volume and sales increases benefited from the inclusion of the Columbus and Fontanini acquisitions in addition to strong retail sales of Hormel® Natural Choice® products and foodservice sales of Hormel® pepperoni and Hormel® Bacon 1TM fully cooked bacon. Organic volume decreased due to lower hog harvest volumes.

    Refrigerated Foods delivered segment profit growth of 18% despite a 25% decline in commodity profits, a double-digit increase in per-unit freight expenses, and higher advertising expenses. Strong results were delivered by our branded retail and foodservice businesses in addition to the inclusion of the Fontanini and Columbus acquisitions.

    Grocery Products

    Volume down 2%
    Net sales down 1%
    Segment profit down 12%
    Low-single-digit sales growth in our core Grocery Products portfolio, led by Wholly Guacamole® dips, the SPAM® family of products, Herdez® salsas, Dinty Moore® stew, and Hormel® chili, was more than offset by significant sales declines across the CytoSport portfolio and our contract manufacturing business. Total Grocery Products segment profit was down due to increased promotional activity and lower volumes at CytoSport and lower earnings from our contract manufacturing business.

    Jennie-O Turkey Store

    Volume down 3%
    Net sales down 4%
    Segment profit down 34%
    Sales declines were primarily due to lower whole bird pricing and volume as a result of continued oversupply of turkeys in the industry and excess meat in cold storage. Sales declines of whole birds were partially offset by increased retail sales, led by Jennie-O® lean ground turkey and Jennie-O® Oven Ready® products. Segment profit decreased as a result of lower profits from whole bird and commodity sales, double-digit increases in per-unit freight costs, and increased advertising.

    International & Other

    Volume up 14%; Organic volume1 up 1%
    Net sales up 22%; Organic net sales1 up 8%
    Segment profit up 6%
    International volume and sales increases were related to strong results in China, increased export sales, and the inclusion of the Ceratti business. Earnings increased on improved profitability in China due to lower raw material costs but were partially offset by higher advertising expenses and lower branded export margins.

    SELECTED FINANCIAL DETAILS

    Income Statement

    Selling, general and administrative expenses increased due to the impact from acquisitions and higher advertising expense.
    Advertising expenses were $37 million compared to $30 million last year. Full year advertising expenses are expected to increase by approximately 20% over last year.
    Operating margin was 13.1% compared to 14.4% last year.
    The effective tax rate was 20.0% compared to 33.2% last year due to the passage of The Tax Cuts and Jobs Act in December 2017. The full year effective tax rate is expected to be between 17.5% and 19.5%.

    Cash Flow Statement

    Capital expenditures in the second quarter were $87 million compared to $39 million last year. Full year capital expenditures are expected to total $425 million. Key projects include bacon capacity increases in our Wichita, Kans., facility, a new whole bird facility in Melrose, Minn., modernization of the Austin, Minn., plant, and projects designed to increase value-added capacity.
    Depreciation and amortization expense in the second quarter was $41 million compared to $32 million last year. Full year expenses are expected to be approximately $160 million.
    Share repurchases to date total $45 million, representing 1.3 million shares purchased.
    The Company repaid $70 million in short-term debt in the quarter.
    The Company paid its 359th consecutive quarterly dividend at the annual rate of $0.75 per share, a 10% increase over the prior year.

    Balance Sheet

    Working capital increased to $702 million from $625 million in the first quarter, primarily related to a higher inventories from acquisitions and lower accounts payable.
    Cash on hand decreased to $262 million from $386 million for the first quarter as the Company continues to pay down short-term debt related to the Columbus Craft Meats acquisition.
    Total debt is $810 million. The debt is split between short-term borrowings of $185 million and long-term borrowings of $625 million.
    The Company remains in a strong financial position to fund other capital needs.

    OUTLOOK

    “We are reaffirming our sales and earnings outlook for fiscal 2018,” Snee said. “Our balanced business model allows us to manage through volatility and deliver consistent earnings growth. We continue to execute our value-added growth strategy in Refrigerated Foods and expect our retail and foodservice branded businesses to offset higher freight costs and lower pork commodity profits. Our expectation is for strong year-over-year earnings growth for International and for Grocery Products to return to its growth trajectory. While we are starting to see early signs of a recovery in the turkey industry, we expect Jennie-O Turkey Store to continue showing earnings declines for the remainder of this year.”

    “We are making excellent progress on the integrations of our recent acquisitions. These efforts, in combination with continued execution of our strategic imperatives, will ensure we remain in a position to deliver strong growth in the future.”

    Fiscal 2018 Outlook

    Net Sales Guidance (in billions)
    $9.70 – $10.10

    Earnings per Share Guidance
    $1.81 – $1.95