Tuesday, March 30, 2010

3/30/10 Midafternoon Report: Market rests today after spending all night trying to find the afikomen

Before we get to the market news, today marks an important achievement for mankind (perhaps an even more important achievement than Brooklyn Decker) as the Hadron particle collider is finally working sending two protons smashing in to each other at 99% the speed of light.  Results hope to answer some of the Universe's most essential questions such as the existence of the Higgs Boson, the presence of dark matter, and who the fuck the people are who actually watch American Idol.  So planet changing discoveries aside,  the market is flat today as international concerns temper the moderately better than expected US macro data.  Consumer confidence jumped thanks to the new health care bill, which has made it easy for people to buy deliriants.  The index reached 52 today, easily besting the 46 from February, which would be all the more impressive if we actually knew what a difference of 6 points meant.  Additionally, Home prices rose in the 20 city Case-Shiller index (named of course for "Hot" Karl Case and Bob Shiller) from "take this fucking thing off my hands" to "take this fucking thing off my hands but I am keeping the toaster."  The index was up .3% sequentially and down .7% from a year ago which is the smallest y/y decline in two years.  However, on an adjusted basis the index was down .4% sequentially due to the initial petering out (and yes, I said peter) of the government first time home buyer's tax credit and the realization that monopoly money is not a valid subsitute for cash or a claimable asset to mortgage guarantors.  That said, there was some really interesting news that tax receipts are now expected to rise in the 15 most populous states by 2011 which would be huge for the economy (no joke, it would literally be bigger than Manuel Uribe at an all you can eat taco bar.  Ok, maybe a little joke.).  California has already taken in 3.9% more in taxes than forecast since December while NY is $129MM above budget.  This is largely the result of higher sales tax receipts from increased consumer spend likely as a result of this rise in consumer confidence and the hiring of Jeffrey Skilling to audit all state tax records.

Internationally, S&P cut Iceland's local currency credit rating from BBB/A-2 to BBB/A-3 (and if Money McBags were rating Iceland, they would always be rated "frosty.).   And yes, those are the actual fucking ratings S&P uses which are about as helpful as chopsticks to a leper.  I mean really, BBB/A-2?  Even Heidi Montag's singing career and Poncaire's Conjecture are less confusing (especially if you are tone deaf or Grigori Perelman).  Money McBags hasn't seen anything so contrived since Ricky Martin acted straight in one of his videos.  That said, the downgrade made Magnus ver Magnussen, a man so important they named him twice, pick up a giant boulder and crush the S&P's entire Iceland office.  Anyway, Money McBags scoffs at any rating, no matter how confusing, by any rating agency due to the inherrent conflicts of interest and the piss poor track record of those ratings agencies (see US financial markets circa 2007). Of course this downgrade has caused investors throughout the world to not just try to locate Iceland on a map, but to learn for the first time that Iceland actually had credit ratings. In other international news, an auction of 1B euros of 12 year Greek bonds garnered interest in only 390MM euros worth of them which caused the offering to be more undersubscribed than Bernie Madoff's new investing magazine (tentatively titled, MisFortune).  The lack of interest in the bonds (well, technically the interest is actually quite high at 5.9%) has caused the yield spread between Greek debt and German debt to double.  Investors continue to worry about Greece's ability to fund themselves while Money mcBags bets in 1 year no one will remember any of this.

In stock news Apple is up on reports that they are designing an iPhone to be CDMA compatible thus potentially giving iPhone users a choice of carriers and not restricting them to AT&T.  AAPL allowing competition is a bit like North Korea alowing photographers or Ellen Degeneres allowing penetration, but it should be positive for consumers and thus positive for the stock.  In related news, RIMM announces earnings after the bell tomorrow and is limping in to that announcement.  While Money McBags likes owning the number two competitor in a market about as much as he likes country music, RIMM is cheap for its growth trading at less than 20x earnings estimates.  Money McBags is an owner of RIMM and will be holding it through the quarter because this should really be at least a $95 stock.  That said, if they miss, look out below because RIMM will go down faster than Hillary Duff after getting an engagement ring.

In small cap news, CRUS seems to be riding the news of the potential newly designed iPhone and is up 6%+.  Money McBags is an owner of CRUS (he mentioned he was buying in his 1/29 Midday Report where he said he "did dip his toe into the CRUS waters yesterday (and it was delightfully stripper piss warm))."  The original analysis of CRUS was done on 1/12/09 but the company basically produces ICs for two sectors, audio and energy.  In the audio market they won a chip in the iPhone a few quarters ago as their IC delivers better sound quality and as a result, that segment grew 83% last quarter and was 72% of sales.  In the energy market, their business was hit harder than a bottle of Mad Dog by Betty Ford in the 1970s as sales dropped ~40% in the downturn.  Their main energy segment involves selling chips that go into power meters and their biggest customer is Itron and Itron sales were up 10% last Q, so that could be a good indicator of this business coming back.  Of course a better indicator is that they have had two sequential up quarters in the energy segment after bottoming out and that segment is what delivered their positive earnings surprise last Q.  Money McBags thinks the company can earn ~$.65 in the fiscal year ending 3/2011 and that assumes just 10% growth in the audio segment (and remember they just grew 80% and could be getting more business if the Apple news from today is true) and 20% growth in the energy business.  The 20% energy business growth is a bit aggressive because it has been down so much, but that growth assumes $18MM in revenue per quarter and before the downturn they were regularly doing $20MM-$24MM.  The company has $2 in cash on it's balance sheet and is trading at ~13x Money McBags estimate (which may now be too low) including that cash.  They could also earn ~$50MM in EBITDA in this next fiscal year and thus are trading at only ~8x EV/EBITDA.  This stock is cheap and has a nice cash cushion (while Jessica Biel has a nice ass cushion).  Money McBags doesn't like to own cyclical companies, but CRUS is in the spanktasitc part of the cycle so it is worth owning at these levels.  In other small cap news, RICK continues to tumble (and remember, Money McBags sold last week, so phew) while KITD had their quarterly call and didn't disappoint.  Money McBags previewed KITD's Q yesterday but will break it down for you tomorrow.  Let's just say he found it titillating and is looking to add to his holdings.


Anonymous said...

CRUS makes chips that go into power meters, not water meters.

Anonymous said...

Hope CRUS doesn't go jumpin on oprahs couch once its in the limelight.

SGS getting ready to pop...the greatest story that nobody is aware of. Stream Global !ervices

Anonymous said...

Umm, SGS is the symbol for Stream Global Services. Kinda like MLNK, but SGS seems to be doing things right.


Money McBags said...

Anonymous 1,

You are correct, Money McBags has fixed his glaring error. It's unclear why he didn't type power meters, but it's also unclear why he didn't post a better pic of jessica biel's lovely derriere. Like this one

Per CRUS's last 10K:

"Our products are used in a wide array of high-precision, energy measurement applications including motor control, consumer utility, power measurement, energy exploration and high-power systems"

Either way, Itron sales have picked up, and CRUS can hopefully follow them.


Money McBags

Anonymous said...

CRUS does indeed make chips for power meters...actually, they are fabless, which means the chips are manufactured to their specs by a foundry.

SGS is Stream Global Services. Similar biz to MLNK; worthy of investigation