Wednesday, February 24, 2010

2/24/10 Midafternoon Report: Bernanke channels his inner Greenspan and promises to keep rates low until the next bubble

Dizzam, Benny B went in front of the House Financial Services Commitee today and let everyone know that rates will be kept low for a more "extended period" than a menometrorrhagia sufferer.  Despite last week's back and forth between Bernanke and his henchman Thomas "T-Ho" Hoenig about the language used by the Fed in their minutes (and Money McBags would vote for Esperanto just to switch things up), Benny B held to his guns and let congress know he isn't going to raise rates until he sees the whites of the recovery's eyes (or the P in their GDP).  Bernanke also said he believes the recent uptick in business growth was just an inventory restocking which is exactly what Money McBags has been yelling through the gold-plated window of his ivory tower for the past several months.

Bernanke stated: “As the impetus provided by the inventory cycle is temporary, and as the fiscal support for economic growth likely will diminish later this year, a sustained recovery will depend on continued growth in private-sector final demand for goods and services." (Bolding is from Money McBags, multisyllabic, excessive, and painfully boring verbiage is from Bernanke as apparently he gets paid by the snore).

Bernanke cited the diminishing skills of workers who have been forced into long term unemployment, the current deficit, and Hannah Hilton's apparent cinematic retirement as concerns potentially inhibiting a full recovery.  He did say he expected the unemployment rate to drop to 7% by 2012, but he didn't say that it was likely going to be as a result of a massive numerator shift caused by those currently longterm unemployed workers starving to death in the new Dust Bowl, or aptly named for our times, The Capital One Mortgage Bowl:  What Used to Be in Your Wallet?  Bernanke also said that inflation would be "subdued" for some time as the US printed so much money that investors are still trying to count it to figure out exactly how much there is, so until that time, the market will remain blissfully ignorant.  Call it the "Too Big To Count" theory. 

In other macro news, prices of new homes fell surprising everyone except for the 15MM to 20MM unemployed Americans.  Despite the government extending the tax credit for first time home buyers, purchases still declined by 11% and fell to their all-time low as any first time home buyers had likely already taken advantage of the tax credit last year by rushing in to buy before the previous deadline.  Therefore extending the tax credit was like offering lunch to the Nathan's Hot Dog Eating Contest contestants immediately after the final gag sounded.  There is currently a 9 month inventory of houses on the market and 3MM more houses are forecast to be foreclosed upon this year which is great for vermin, but not so great for the economy.

In stock news, Dollar Tree destroyed their analyst estimates as if those estimates were Joanie's rectum and they were Chachi after a blue-balled night of doing body shots off of Pinky Tuscadero.  DLTR beat estimates of $1.44 eps by $.08 thanks to better gross margins and gave guidance well above analyst estimates for Q1 and the full year with EPS slated to be $3.96 to $4.23 for 2010.  They also generate a ton of cash and for those who have been on the planet Melmac for the past few years living off of toasted feline (and to be honest, if it were Jayde Nicole's "cat" being served on Melmac, Money McBags would immediately build a spaceship) and aren't familiar with the company, they sell incredibly cheap shit in a recessionary environment.  They are now trading at around 14x 2010 guidance but this environment for them should be as profitable as the guy operating the lifeboat booth on the Titanic or whoever was selling bullets at the Alamo.  Money McBags has not followed DLTR as closely as he should have, but the story makes sense and the valuation isn't horrible.  They'll probably trade down tomorrow after today's jump, but this stock is worth investigating further.

As for small caps, CTGX reported their quarter last night and it was inline but their guidance was better than Money McBags was expecting.  Money McBags previewed ther quarter the other day and was perfectly content with their release last night as he was just expecting more of the same for now in their core business and that is what he got.  Their revenue for the Q was down 19% with equal declines in their solutions and staffing business.  Honestly, Money McBags can't do anything but yawn about this as it is completly irrelevant to the story as he previously outlined.  As long as the core business doesn't blow up (and there is really no reason it should), the EMR business CTGX is in should provide the real growth for this company over the next 3 to 5 years.  This was Money McBags favorite quote from their press release (he'd quote their call, but it was fantastically bland, like a primetime sitcom or anything written by that Michael Crichton guy):

"Looking further out, with the billions of dollars in federal stimulus money for EMRs from ARRA, Medicare, and Medicaid still unspent, we expect demand for EMR implementation support will steadily accelerate as these funds become available and access to the credit markets opens up for providers.  Based on our deep EMR experience for large providers and communitywide health information exchanges, we are confident in our ability to secure significant new EMR work over the next three years, particularly as the 2014 deadline for having systems meeting meaningful use criteria in place draws closer."  (Bolding again from Money McBags).

That is pretty much all you need to know.  Now guidance for 2010 is for eps of $.46-$.56 on 11% revenue growth.  So they are trading at around 15.5x the midpoint of guidance and they actually see their staffing business picking up into the year and have begun hiring.  Also, their balance sheet is cleaner than the grout on germaphobe's tiled bathroom floor and they are buying back shares.  There is not much reason for the company to take off right now, but EMR is coming so this stock is the definition of buy and hold, especially as it isn't horribly priced (it isn't all that cheap though).


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