Home Sales Rise to 11-Year High
Posted by Eddy Elfenbein on December 20th, 2017 at 2:37 pm

From USA Today:

Americans purchased homes at the fastest pace in nearly 11 years, as sales climbed 5.6% in November.

The National Association of Realtors said Wednesday that sales of existing homes rose last month to a seasonally adjusted annual rate of 5.81 million units. Home sales were last this strong in December 2006, when properties sold at an annual pace of 6.42 million.

The strong demand for buying homes is a sign of an increasingly vibrant economy after a steady, eight-year expansion. The unemployment rate has fallen to a 17-year low, while more people in the younger millennial generation appear to be forming their own households and looking for places to buy. Yet the demand has done little to resolve an increasing vulnerability of the U.S. real estate market as the number of listings has been declining on a yearly basis for two-and-a-half years.

In November, there were 1.67 million properties for sale, a 9.7% decline from a year ago. There is only 3.4 months’ supply of homes on the market, the lowest level ever tracked by the Realtors.

The Long End Rises
Posted by Eddy Elfenbein on December 20th, 2017 at 11:39 am

It’s early but the yield on the 10-year Treasury has been creeping up lately. Perhaps it’s due to tax reform. Perhaps it’s due to stronger economic growth. I don’t know.

Of course, every prior prediction for higher long-term rates has failed. Maybe this time someone will be right.

By the way, the NY Fed’s “Nowcast” currently predicts Q4 GDP growth of 4%. If that’s right, then…wow!.

I should add that forecasts from central bankers haven’t always been accurate.

Morning News: December 20, 2017
Posted by Eddy Elfenbein on December 20th, 2017 at 7:04 am

Uber Is a Taxi Service, the E.C.J. Says, in Major Setback to Firm

IMF: Brexit Could Fundamentally Alter the Shape of the British Economy

After 7,500% Rally, Cryptocurrency Founder Sells All His Coins

The Real Tulip Mania Looked Nothing Like Bitcoin

Coinbase to Offer Bitcoin Cash, Will Probe Early Price Move

Senate Panel Rejects Trump’s Nominee to Lead Export-Import Bank

Skepticism Greets Republican Plan to Restore Open-Internet Rules

Electric Cars’ Race to Nowhere

Wells Fargo Wants to Finance Metal Trade in Test of New Rule

Microsoft Moves to End Secrecy in Sexual Harassment Claims

KPMG Partners Face Court Contempt Over China Audit

Michael Batnick: What Time Is It?

Ben Carlson: The Pros & Cons of Momentum Investing

Josh Brown: QOTD: When Valuation Attempts are Silly

Howard Lindzon: December 2017…Borrowed Crypto Time

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Down to the Wire…
Posted by Eddy Elfenbein on December 19th, 2017 at 11:22 pm

There are just seven trading left in 2017. While this has been another good one for the Buy List, we’re running very, very close to the S&P 500.

I have a competitive streak in me that loves to beat the index, even if by a small amount. I suppose I should be happy with a big gain for the year.

Let’s see where we stand. Through Tuesday’s trading, our Buy List is up 20.71% for the year while the S&P 500 is up 19.77%.

But that doesn’t include dividends, and it’s the dividend-adjusted total that counts. Typically, our Buy List yields less than the S&P 500 (around 1% vs. 2%), but our dividends usually grow a little faster during the year.

Through Tuesday, our Buy List’s dividend-adjusted gain is 21.92%. That works out to a dividend yield of 1.00%.

Through Tuesday, the S&P 500’s dividend adjusted YTD gain is 22.13%. That’s a return to dividends of 1.97%.

So we’re trailing by 21 basis points with seven days to go! (By my estimate, Axalta not taking the deal at $37 cost the Buy List about 80 basis points.)

Strong Housing Starts Report
Posted by Eddy Elfenbein on December 19th, 2017 at 9:01 am

A very good report on housing starts:

U.S. homebuilding unexpectedly rose in November, with the construction of single-family housing units surging to a 10-year high, but revisions to the prior month’s data indicated the sector was continuing to struggle with supply constraints.

Housing starts increased 3.3 percent to a seasonally adjusted annual rate of 1.297 million units, the Commerce Department said on Tuesday. That was the highest level since October 2016. But October’s sales pace was revised down to 1.256 million units from the previously reported 1.290 million units.

Economists polled by Reuters had forecast housing starts decreasing to a pace of 1.250 million units last month.

I call this my “Desert Isle” economic report. Meaning, if I only had access to one econ report, above all others, it would be housing starts.

Morning News: December 19, 2017
Posted by Eddy Elfenbein on December 19th, 2017 at 7:05 am

Bond Underwriting in Europe Is a Story of Capitulation

China Unveils an Ambitious Plan to Curb Climate Change Emissions

Google’s China Bid Won’t End Well

The Fed Interest Rate Hike: How Hard Will It Hit Asia?

Tax Cuts Benefit the Ultra Rich, but Not the Merely Rich

3 Moves to Make by the End of 2017 If GOP Tax Bill Becomes Law

The Latest Episode Of The Net Neutrality Saga Opens To Mixed Reviews

A Feud Between Boeing and Bombardier is Casting a Spotlight on U.S.-Canadian Trade Deals

Big Deals From Hershey and Campbell Show the Stakes Are Higher for Big Food

Virgin Hyperloop One Rebuffs a Sale and Takes $50 Million Lifeline

Ikea Is Focus of European Inquiry Over Possible Skirting of Tax Bills

Facebook Makes German Market Push as Hate Speech Law Bites

Michael Batnick: What Time Is It?

Ben Carlson: Seeing Both Sides

Jeff Carter: Create An Endowment Effect

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HEICO Earns 62 Cents per Share
Posted by Eddy Elfenbein on December 18th, 2017 at 8:25 pm

After the close today, HEICO (HEI) reported 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 their guidance 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 expense 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 Monday, HEICO is up 55.48% YTD for us. Moody’s is #1 with a 59.62% gain. If we get a nice bump in tomorrow’s trading, HEICO can slide into first.

The Nasdaq Breaks 7,000
Posted by Eddy Elfenbein on December 18th, 2017 at 3:24 pm

This is shaping up to be a good day for the market. The S&P 500 has been as high as 2,685.92 today, which is another all-time high. The Nasdaq Composite broke 7,000 for the first time ever.

Today’s movement is heavily skewed toward high beta stocks. As I look at the numbers, the S&P 500 High Beta Index is currently up 1.51% while the S&P 500 Low Vol Index is up just 0.01%. The Russell 2000 is up 1.14% today.

Our Buy List is now up over 20% on the year. AFLAC, Danaher, Fiserv, Ingredion and Microsoft are all at new highs today.

Morning News: December 18, 2017
Posted by Eddy Elfenbein on December 18th, 2017 at 7:03 am

U.K.’s Next Brexit Agony: What Sort of Trade Deal?

Futures On Bitcoin – Let The Games Begin

Coal’s Two-Year Rally to End in Europe as China Addiction Fades

The Fast and the Financed: China’s Well-Funded Auto Startups Race to Overtake Tesla

Toyota Plays Catch-Up With Plans for More Than 10 EV Models

How Republicans Learned to Sell Tax Cuts for the Rich

Have You Ever Felt Sorry for the I.R.S.? Now Might Be the Time

Thales’ 4.8 Billion-Euro Bid for Gemalto Gets Thumbs Up from Investors

Thai Beer Magnate Extends SE Asia Push With $4.8 Billion Sabeco Deal

Hershey Nears $1.6 Billion Deal to Buy Amplify Brands

Oracle Clinches A$1.56 Billion Deal to Buy Australia’s Aconex

Farewell to the 747, the Plane That Shrank the World

Roger Nusbaum: Good News, Bad News, News We Don’t Understand? Market Up!

Jeff Miller: Weighing the Week Ahead: Fresh Legs for the Stock Rally in 2018?

Michael Batnick: These Are The Goods

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New All-Time High
Posted by Eddy Elfenbein on December 15th, 2017 at 4:39 pm

The S&P 500 closed today at another new all-time high. The S&P 500 is now up 19.52% YTD (not including dividends).

Our Buy List is up 19.80% YTD (again, without divs). Four of our Buy List stocks are at new highs: AFLAC (AFL), Hormel Foods (HRL), Ingredion (INGR) and Microsoft (MSFT).

Express Scripts (ESRX) was up 3.67% today thanks to an upgrade from Baird.

HEICO (HEI) was up 4.72% today after they announced their stock split and dividend increase.