New Home Sales and Personal Income
Posted by Eddy Elfenbein on December 26th, 2017 at 11:30 am

I wanted to highlight some good economic reports that came out on Friday.

The first said that new home sales rose to an annual rate of 733,000 in November. That’s a 10-year high and it’s an increase of 17.5% over October.

We also learned that personal income rose 0.3% last month while spending rose by 0.6%. Both are good numbers although it means our savings rate dipped a little.

Finally, durable goods orders rose 1.3% in November which was below estimates of 2%.

These are pretty good numbers we’re seeing.

Morning News: December 26, 2017
Posted by Eddy Elfenbein on December 26th, 2017 at 7:20 am

China to Overtake U.S. Economy by 2032 as Asian Might Builds

China’s New Lenders Collect Invasive Data and Offer Billions. Beijing Is Worried.

Bitcoin Rises 10%, Recovers From Last Week’s Brutal Selloff

Morgan Stanley Says the True Price of Bitcoin Might Be Zero

QuickTakes Explain the Year Ahead

General Electric: An Excellent Long-Term Investment

Apple Suppliers Drop on Report of iPhone X Demand; Analysts’ Views Mixed

Hyundai Heavy Industries Group to List Oilbank, Issue $1.2 Billion Rights Shares

Material World: Movie Theaters Want You Back, So They’re Rushing to Modernize

In a Year of Nonstop News, a Batch of Business Books Worth Reading

Steven Cohen Plans a New Hedge Fund. Investors Are Wary.

Big Tech Succeeded in Getting Bigger in 2017 — But Its Failures to Society Became Much More Apparent

Jeff Miller: Which Stocks are the Tax Cut Winners (or Losers)?

Jeff Carter: Regulating Bitcoin

Howard Lindzon: Predictions for 2018 – Supply, Supply, Supply!

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Morning News: December 25, 2017
Posted by Eddy Elfenbein on December 25th, 2017 at 8:26 am

China Central Bank Official Says Bankruptcy May Benefit the Country

Power Prices Go Negative in Germany, a Positive for Energy Users

Here’s Why You Should Invest In Bitcoins This Holiday Season

The Bitcoin Hoax

The Year in Money

From Record Bankruptcies to Walmart’s E-Commerce Leaps, the Year In Retail

Harry Potter and the Magical Profit Margins Under the Tree

6 Tales of Parents Who Did What It Takes to Snag Must-Have Toys at Christmas

Blood-Testing Firm Theranos Gets $100 Million Lifeline From Fortress

Yandex to Expand UberEats in Russia With Local Acquisition

The Loopholes Drug Companies Use to Keep Prices High

Amgen Estimates Its U.S. Tax Bill at Over $6 Billion as it Repatriates Cash

Michael Batnick: These Are the Goods

Ben Carlson: Constructive Dissatisfaction

Josh Brown: You’re On Your Own Now

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Merry Everything!
Posted by Eddy Elfenbein on December 24th, 2017 at 7:09 am

I wanted to take this opportunity to wish everyone a Merry Christmas and a happy, healthy and profitable new year.

This has been an incredible year for us. The blog continues to grow its readership. The newsletter has a record number of subscribers and our Twitter following is growing as well.

Our ETF turned one year old. I want to thank all our shareholders for their trust and confidence in me.

I also want to thank my tireless editor, Marcia Hippen. She also posts the invaluable morning news links. I also want to acknowledge some of my fellow financial bloggers Barry Ritholtz, Josh Brown, Morgan Housel, Michael Batnick, Howard Lindzon, Tadas Viskanta, Jeff Miller and many, many others for their continued support.

I’d also like to thank the people who follow and interact with me each day on Twitter.

Most of all, I want to thank all of my readers for your continued support.

Let’s hope 2018 brings us more success!

Bard and BDX, It’s Really Happening
Posted by Eddy Elfenbein on December 22nd, 2017 at 3:23 pm

Press Release:

BD (Becton, Dickinson and Company) (BDX), a leading global medical technology company, issued the following statement regarding today’s clearance by the U.S. Federal Trade Commission (FTC) for BD to acquire C. R. Bard (BCR), contingent on the divestitures of BD’s soft tissue core needle biopsy product line and C. R. Bard’s Aspira® product line of tunneled home drainage catheters and accessories:

“FTC approval brings us one step closer to full regulatory clearance of the Bard acquisition,” said Vincent A. Forlenza, chairman and CEO of BD. “We currently expect that the Bard acquisition will close in December, pending approval by the Ministry of Commerce of the People’s Republic of China (MOFCOM) and the satisfaction of customary closing conditions.”

The deal calls for BCR shareholders to get $222.93 in cash plus 0.5077 shares of BDX for each share of BCR they own. Today that comes to $330.50, which is about 80 cents above BCR’s current share price.

CWS Market Review – December 22, 2017
Posted by Eddy Elfenbein on December 22nd, 2017 at 7:08 am

Ladies and gentlemen, here are the 25 stocks for the 2018 Crossing Wall Street Buy List:

AFLAC (AFL)

Alliance Data Systems (ADS)

Carriage Services (CSV)

Cerner (CERN)

Check Point Software Technologies (CHKP)

Church & Dwight (CHD)

Continental Building Products (CBPX)

Cognizant Technology Solutions (CTSH)

CR Bard (BCR) soon to be Becton, Dickinson (BDX)

Danaher (DHR)

FactSet Research Systems (FDS)

Fiserv (FISV)

Hormel Foods (HRL)

Ingredion (INGR)

Intercontinental Exchange (ICE)

Moody’s (MCO)

Ross Stores (ROST)

RPM International (RPM)

Sherwin-Williams (SHW)

Signature Bank (SBNY)

JM Smucker (SJM)

Snap-on (SNA)

Stryker (SYK)

Torchmark (TMK)

Wabtec (WAB)

The five new stocks are Carriage Services (CSV), Check Point Software Technologies (CHKP), Church & Dwight (CHD), FactSet Research Systems (FDS) and Torchmark (TMK).

I’ll have more details on the new buys in next week’s issue.

The five sells are Axalta Coating Systems (AXTA), Cinemark Holdings (CNK), Express Scripts (ESRX), HEICO (HEI) and Microsoft (MSFT).

To recap, I assume the Buy List is equally weighted among the 25 stocks. The buy price for each stock will be the closing price on Friday, December 29, 2017. The new Buy List goes into effect on Tuesday, January 2, 2018, the first day of trading of the new year.

The Buy List is now locked and sealed, and I won’t be able to make any changes for the entire year. I’ll have a complete recap of 2017 in next week’s issue. I’ll also have more to say about our new buys, and I’ll give you new Buy Below prices.

With a week to go, we’re running neck-and-neck with the S&P 500. Through Thursday, our Buy List is up 20.75% for the year compared with 19.91% for the S&P 500. Including dividends, which is what counts, our Buy List is up 21.96% which is a tad below the S&P 500’s total return of 22.29%. We still have a few more days to catch up.

I want to add a few points about this year’s market. One is that had Axalta taken the $37-per-share offer from Nippon Paint, then we’d be in a better position today (about 0.7% for the entire portfolio). Also, the market this year has been distorted due to the surge in large-cap tech stocks. Apple, Amazon and Facebook are all up more than 50% this year. As a result, the median performer in the S&P 500 this year trails the overall index by more than 3%. That’s not normal, and it makes it more difficult to beat the overall market.

Our 12-year track record against the market is still quite good. I’ll have complete details in next week’s issue.

Our Five Sells

Let me add a few words on the sells. My belief is that each new buy should last a few years. I turn against a stock when it turns out to be something quite different from what I originally believed, or if the share price is just too high.

Axalta Coating Systems (AXTA) is a tough one to sell because I still think my original thesis was correct. However, it was a big mistake for them to shoot down the offer from Nippon Paint. According to some sources, the offer was for $37 per share. They should have taken it. They got greedy and lost out.

Cinemark Holdings (CNK) was a mistake. My bad. I don’t think I fully realized how much the business is at the mercy of the film industry. If there’s nothing pulling in moviegoers, then their business will suffer. There’s not much you can do. The last two earnings reports were not encouraging.

It’s probably not a surprise that I’m ditching Express Scripts (ESRX). This has been such a good business for so long, but the game is changing for them. The loss of Anthem didn’t help. At least we’re getting out after an impressive rebound since October. I suspect they’ll be bought out sometime in 2018.

HEICO (HEI) may be the toughest one for me to sell. I like this company a lot, and it’s been a big winner for us. This one just comes down to math. HEICO is simply too expensive. The shares are going for 44 times the fiscal year, which ended in October (I’ll summarize the earnings report in a bit). If the company grows its earnings by 12% for the next two years, which is very reasonable, and the stock stays the exact same, then it’s still expensive. HEICO doubled for us in two years.

Microsoft (MSFT) is similar to HEICO. I like the company a lot, and they’ve done a great job in turning the ship around. We also got lucky because the market favored big-cap techs this year. We added Microsoft to the Buy List five years ago. At the time, MSFT was going for $26.71. Today, it’s at $85.50. Thank you, Satya!

Strong Earnings Finale from HEICO

Even though we’re getting rid of HEICO next year, I wanted to cover their earnings report this week. After Monday’s closing bell, HEICO (HEI) reported fiscal-Q4 earnings of 62 cents per share. That’s up from 52 cents per share in last year’s Q4. HEICO doesn’t give per-share guidance, but I ballparked theirs at 55 to 59 cents per share. The consensus on Wall Street was for 57 cents per share, so this was a very good quarter for HEICO.

For the fiscal year, HEICO made $2.14 per share which is up from $1.83 per share last year. Quarterly sales rose 18% to $421.2 million. Operating margin increased to 21.2%.

Laurans A. Mendelson, HEICO’s Chairman and CEO, said:

HEICO’s record fiscal 2017 fourth quarter and full-year results were principally driven by continued organic growth, exemplary execution by our subsidiaries and the acquisition of profitable, well-managed businesses within both our Electronic Technologies Group and Flight Support Group.

(…)

As we look ahead to fiscal 2018, we anticipate net sales growth within the Flight Support Group’s commercial-aviation and defense-product lines. We also expect growth within the Electronic Technologies Group, principally driven by demand for the majority of our products. During fiscal 2018, we will continue our commitments to developing new products and services, further market penetration, and an aggressive acquisition strategy while maintaining our financial strength and flexibility.

Based on our current economic visibility, we are estimating 10% – 12% growth in full-year net sales and in full-year net income over fiscal 2017 levels. We anticipate our fiscal-year 2018 consolidated operating margin to approximate 20%, depreciation and amortization expenses of approximately $75 million, capital expenditures to approximate $50 million and cash flow from operations to approximate $290 million. These estimates exclude the impact of any pending tax reforms that are currently being legislated in Congress. Furthermore, these estimates exclude additional acquired businesses, if any.

Through Thursday, HEICO is up 53.18% YTD for us. That trails only Moody’s. I really like HEICO, but I don’t see much upside from here.

Before I go, a heads-up that RPM International (RPM) will release its fiscal Q2 earnings report on January 4. I’ll have more to say about this next week. Wall Street expects 59 cents per share.

That’s all for now. The stock market will be closed on Monday, December 25 for Christmas. Trading resumes on Tuesday, and the final day of trading for 2017 will be on Friday, December 29. The next issue of CWS Market Review will be on Sunday, December 31. I’ll have a complete summary of how we did in 2017, plus I’ll list the starting prices for 2018. 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

P.S. Shareholders of my AdvisorShares Focused Equity ETF (CWS) should have received proxy voting materials in mid-November. For many shareholders, proxy materials are available online through the brokerage firm where the account is located.

It is very important to record your vote. As noted in the materials, the Board of Trustees recommends voting “For” each proposal. For assistance, or to have your votes quickly accepted by phone, please call Alliance Shareholder Communications at 855-973-0090. You may also call the team at AdvisorShares at 877-843-3831 if you have additional questions.

Morning News: December 22, 2017
Posted by Eddy Elfenbein on December 22nd, 2017 at 7:02 am

The Year in Money

Tax Bill Is Great for Accountants – Unless They Have Holiday Plans

Congress Averts a Shutdown But Now Faces a Messy Start to 2018

Bitcoin Price Drops Below $14,000 as Cryptocurrency Competition Heats Up

Goldman Is Setting Up a Cryptocurrency Trading Desk

Trade Group Warns Investors of Bitcoin Pump & Dump Scams

Can You Spot the Latest Blockchain Stock? It’s a Long Island Beverage Maker

Eric Schmidt to Step Down as Alphabet’s Executive Chairman

A Boeing-Embraer Tie-Up Is Hardly A Surprise, But It Sure Would Make Things Interesting

Ho, Ho, Ho, Xiaomi

Papa John’s Funder to Step Down as CEO

Lotte Chief Gets Suspended Prison Sentence; Free to Run Firm

Jeff Carter: Additions to the Tax Bill I’d Like to See

Mark Hines: Stock Exchange: Is This Trend Really Your Friend?

Cullen Roche: The State of the Trump Bubble

Be sure to follow me on Twitter.

Q3 GDP Revised to 3.2%
Posted by Eddy Elfenbein on December 21st, 2017 at 12:11 pm

This morning, the government revised downward its estimates for Q3 GDP growth from 3.3% to 3.2%. Not a big change.

The good news is that we know it was a good quarter. Bear in mind that Q3 is now pretty distant from us. It began six months ago and ended three months ago. We’re about to wrap up Q4 and that’s what’s on everyone’s mind.

The NY Fed thinks Q4 had growth of 4% while the Atlanta Fed thinks it was 3.3%. I’ll let them and their models fight it out, but it looks like it will be another good quarter for the U.S. economy.

Morning News: December 21, 2017
Posted by Eddy Elfenbein on December 21st, 2017 at 6:26 am

Is Bitcoin in a Bear Market When It’s Still Up 1,600% for Year?

Online Brokerage E*Trade Is Now Letting Its Customers Trade Cboe Bitcoin Futures

Bitcoin Schmitcoin: Why Altcoins Will Become FAANG 2.0

Hackers/Founders’ Jonathan Nelson Says Venture Capital Is Broken. His Answer? An Ethereum-Based Fund

Uber’s Loss in Europe Shows Trans-Atlantic Split Over Technology

Didi Chuxing, a Chinese Rival to Uber, Raises $4 Billion

Skepticism Greets Republican Plan to Restore Net Neutrality Rules

U.S. Banks Make Progress on Their Living Wills

In Tax Overhaul, Trump Tries to Defy the Economic Odds

Trump Administration Sides With Boeing in Bombardier Dispute

Rolling Stone’s Owner Sells Controlling Stake to Penske Media

Facebook Ads That Let Employers Target Younger Workers Focus of U.S. Lawsuit

Shel and Eni to Be Tried Over $1.3 Billion Nigerian Oil Deal

Michael Batnick: Why Young Investors Should Hope For a Crash

Roger Nusbaum: Goals For 2018!

Be sure to follow me on Twitter.

Buy List Performance Update
Posted by Eddy Elfenbein on December 20th, 2017 at 8:49 pm

In today’s trading, our Buy List gained 0.21% while the S&P 500 lost 0.08%.

I haven’t run the full numbers, but based off the totals I posted yesterday, our Buy List should have a very, very tiny lead over the S&P 500.

Six trading days left.