The market is down again today as Europe's sovereign debt problem keeps rearing it's ugly head like Mayim Bialik on the ABC Family network. The big news in the US markets is that the unemployment rate fell to a measly 9.7% (though if you include people who stopped looking for work and those working part time, it was 16.5%, but that is just a minor detail, like needing to keep your eyes on the road when you drive or not crossing the streams). The economy lost 20k jobs in January while totals for November were revised up by 60k (to 64k jobs created) and the totals for December were revised down by 65k (to 150k jobs lost, or as they say on the streets, a "fuckload"). While the revised numbers essentially cancel each other out, it does leave us wondering if any of these numbers are reliable at all, like the brakes on that shiny new Prius you just bought. Money McBags will wager Alan Geenspan's credibility and Eliot Spitzer's dignity (and since both of those are non-existent, it may be a bit of a sucker's bet) that the 20k number released today is not within 20k of the actual revised number to come out in two months when no one will really care. The point is, people are not working regardless of what made up number Hilda Solis and her No-Labor Department release.
In international news, potential sovereign debt defaults in Greece, Portugal, and Spain have investors questioning the viability of the Euro like people with working auditory canals question Heidi Montag's singing career. European Central Bank President Jean-Claude Trichet (or as he's known in investment circles, "deluded") has said there is nothing to worry about as the budget shortfall will be smaller than that of Japan and the US. He then called Haiti and said not to worry because their recent earthquake was smaller than the Chile earthquake in 1960, and later was heard telling NBC President Dick Ebersol not to worry because ad revenue is way overrated. With the debt of Greece, Spain, and Portugal all forecast to be near or above their GDPs by 2011, investors are questioning if/when the EU will bail them out. The good news is that the Greeks are trying their best to help out in all of this mess by going on a two day worker's strike, which means they will be working three more days than they usually do (though to be honest, a worker's strike to protest an economy in the shitter is like the state of Alabama burning books to protest their high illiteracy rates or Noise Free America blasting anything by the Black Eyed Peas to protest noise pollution).
In business news Toyota is apologizing for selling you a car that could kill you but reminding you that even if your brakes went out causing you to plummet to an early death, at least you would have cut down on your carbon footprint while you were alive by owning a Prius. Berkshire Hathaway is selling $8B of debt to finance their acquisition of BNI and outfit executives with their own conductor caps (of course those conductor caps will be made 100% from the shards of Giaocometti's "The Walking Man I"). Finally, AETNA missed on earnings as their medical costs grew 14% as a result of increased brain aneurysms for those who sat through an entire screening of Avatar (that joke was brought to you by the Jay Leno Appreciation Society, making comedy dull and unfunny one observation at a time).
In small cap news TSYS beat their quarterly esimates thanks to 15% revenue growth and 17% EBITDA growth to $10MM. For the year EBITDA was $50MM and 2010 guidance was for $80MM-$85MM EBITDA with revenue guidance for over 40% growth (though they are an acquisitive company so that is not all organic). The company is now trading at around 7x 2010 EV/EBITDA and continues to be in growth markets and consistently beats estimates. Of course it is down 5% today despite the solid Q and the good backlog because apparently people hate owning businesses that work. Some analysts are concerned about their long term net interest margins but the company is getting cheap enough for those concerns to be less worrisome than a back hair on Marissa Miller. Money McBags is not yet an owner of TSYS, as he is going to let the market creep down a bit before he gets his invesment on, but this company is worth all of you digging in and trying to get a better feel for their organic growth and competitive advantage in the location based software and military businesses.
Money McBags is off until Monday, so enjoy the Super Bowl.
Friday, February 5, 2010
Thursday, February 4, 2010
2/4/10 Midday Report: Market shows Paris Hilton isn't the only thing that can go down
Tim-motherfucking-ber. The market is nosediving today like a Biggest Loser contestant going after the last gravy covered deep fried twinkie at an all you can eat "stuff that's bad" for you bar (and no offense to you weight-challenged people out there, but did you really need to go on a TV show to figure out you need to eat a fucking salad every once in a while? I mean for fucksake, it's not like you need to decipher M-Theory or particle physics, you just need to stop eating crap and walk a little. Jeesh.) Driving the market down is what we here at When Genius Prevailed call serial unemployment (as opposed to Quisp's cereal unemployment, which we hear has caused Quisp to resort to tickling Franken's berries to pay the rent). New claims for unemployment came out and they were higher than last week and above analyst estimates. Claims rose 8k to 480k while expectations were for a drop to 460k. 10MM people continue to receive unemployment benefits or extended benefits and to give you an idea of how large of a group that is, it is is roughly equivalent to the population of Portugal, Belgium, or people who will show someone their tits on Bourbon Street should the Saints win the Super Bowl (and Money McBags fully supports Saints fans). So the economy may be getting a bit better but as long as there are so many displaced workers, full recovery will be difficult (to put it mildly) which is why the S&P is probably a wee bit overvalued, like long walks on the beach, Alan Greenspan, or Michael Chabon novels. Alternatively, labor productivity increased in January above analyst estimates as those with jobs have to work a fuckload harder to keep them (so instead of slacking off and looking at Miranda Kerr pictures for 6 hours a day like workers in a healthy economy like Australia, US worker now only slack off for 4 hours a day and are forced to look at internet pictures of Shirley Hemphill). Also positive news is out today on factory orders which gained again in December as businesses build back and try to maintain inventory.
In international economic news, investors are getting more skittish on Europe as they deal with the Greek budget crisis which will likely cause the EU to revive their hit doin da butt in making Greece their submissive (though luckily, and not to overgeneralize, but the Greeks seem to enjoy that). Fears are now spreading to Portugal, Spain, and any other country where two hour midday siesta's are followed by 3 hour midafternoon siestas. Also, China is gettng a bit frisky with the US, objecting to claims that they are keeping down their currency in order to help exports. The Chinese Foreign Ministry spokesman said they will stop artificially deflating their currency when the US stops artificially inflating the value of free speech.
In stock news Cisco put up a nice quarter (and for the record Money McBags has been long CSCO, though the stock has moved strongly sideways on him) as revenue was up 8% and their adjusted earnings of $.40 beat analyst estimates of $.35. While many companies have beat earnings forecasts, CSCO was one of the few who also beat on the top line and not only that, they said the global technology environment is getting better and they will be hiring 3,000 people. So take that rise in jobless claims to 480k, Cisco will be hiring 3k of the 15MM-20MM unemployed so the recovery is on like Donkey Kong. CEO John Chambers did say that “we are already in the second phase of a capital spending increase" which is great news, though Money McBags was unaware that phase one had actually ended.
In small cap news, TSYS reports tonight and Money McBags eagerly awaits their earnings release which he discussed two days ago while JOEZ put up a nice quarter. Now Money McBags understands the appeal of Joes jeans about as much as he understands the appeal of Desperate Houswives or unshaved lady parts (and that is not at all). They are expensive jeans which people really have no reason to buy given the recession and cheaper alternatives. That said, Joe's grew net sales by 42% as apparently people not only like the jeans but things called "woven shirts" and "denim leggings" (we'll assume "pants ponies" are not one of Joe's SKUs). The company earned about $.05 per share (excluding their big one-time tax benefit due to chugging a jar of metamucil and thus releasing their valuation allowance) thanks to the increase in sales and a higher gross margin. For the year, they earned somewhere between $.09 and $.13 depending on how you want to deal with their taxes and had around $3MM of EBITDA in the latest Q. On the call they talk about aggressively growing stores and categories so they will continue to expand which means a bigger marketing spend and a more complicated business to manage. On the positive side, they have $13MM cash, no debt, and products that snugly fit the lovely Anna Lynne McCord. It's possible that they can continue to grow and keep gross margins the same with some better channel distribution, so maybe they earn $.15 per share next year, though that is a total stab in the dark guess based on growth off of last year and something analysts refer to as "putting a finger in the air." The company is trading at around $1.85 today, is rapidly growing, and is relatively cheap (1.5x current revenue and if they can best their current earnings number, under 20x eps). If you want retail risk in this shaky economy, this is one way to get that with some pretty nice upside. Money McBags will not be purchasing JOEZ, despite the potentially good returns, because he just doesn't get overpriced jeans and never trusts the easily changing fashion tastes of US consumers (the ones who brought you the rat tail and Hammer pants). That said, people are making money here and it does not appear to be ridiculously overpriced for a growth company.
In international economic news, investors are getting more skittish on Europe as they deal with the Greek budget crisis which will likely cause the EU to revive their hit doin da butt in making Greece their submissive (though luckily, and not to overgeneralize, but the Greeks seem to enjoy that). Fears are now spreading to Portugal, Spain, and any other country where two hour midday siesta's are followed by 3 hour midafternoon siestas. Also, China is gettng a bit frisky with the US, objecting to claims that they are keeping down their currency in order to help exports. The Chinese Foreign Ministry spokesman said they will stop artificially deflating their currency when the US stops artificially inflating the value of free speech.
In stock news Cisco put up a nice quarter (and for the record Money McBags has been long CSCO, though the stock has moved strongly sideways on him) as revenue was up 8% and their adjusted earnings of $.40 beat analyst estimates of $.35. While many companies have beat earnings forecasts, CSCO was one of the few who also beat on the top line and not only that, they said the global technology environment is getting better and they will be hiring 3,000 people. So take that rise in jobless claims to 480k, Cisco will be hiring 3k of the 15MM-20MM unemployed so the recovery is on like Donkey Kong. CEO John Chambers did say that “we are already in the second phase of a capital spending increase" which is great news, though Money McBags was unaware that phase one had actually ended.
In small cap news, TSYS reports tonight and Money McBags eagerly awaits their earnings release which he discussed two days ago while JOEZ put up a nice quarter. Now Money McBags understands the appeal of Joes jeans about as much as he understands the appeal of Desperate Houswives or unshaved lady parts (and that is not at all). They are expensive jeans which people really have no reason to buy given the recession and cheaper alternatives. That said, Joe's grew net sales by 42% as apparently people not only like the jeans but things called "woven shirts" and "denim leggings" (we'll assume "pants ponies" are not one of Joe's SKUs). The company earned about $.05 per share (excluding their big one-time tax benefit due to chugging a jar of metamucil and thus releasing their valuation allowance) thanks to the increase in sales and a higher gross margin. For the year, they earned somewhere between $.09 and $.13 depending on how you want to deal with their taxes and had around $3MM of EBITDA in the latest Q. On the call they talk about aggressively growing stores and categories so they will continue to expand which means a bigger marketing spend and a more complicated business to manage. On the positive side, they have $13MM cash, no debt, and products that snugly fit the lovely Anna Lynne McCord. It's possible that they can continue to grow and keep gross margins the same with some better channel distribution, so maybe they earn $.15 per share next year, though that is a total stab in the dark guess based on growth off of last year and something analysts refer to as "putting a finger in the air." The company is trading at around $1.85 today, is rapidly growing, and is relatively cheap (1.5x current revenue and if they can best their current earnings number, under 20x eps). If you want retail risk in this shaky economy, this is one way to get that with some pretty nice upside. Money McBags will not be purchasing JOEZ, despite the potentially good returns, because he just doesn't get overpriced jeans and never trusts the easily changing fashion tastes of US consumers (the ones who brought you the rat tail and Hammer pants). That said, people are making money here and it does not appear to be ridiculously overpriced for a growth company.
Wednesday, February 3, 2010
2/3/10 Midafternoon Report: Market seeking direction like troubled teen in ABC afterschool special, though with less crying and less Meredith Baxter Birney
The market is mostly lower today despite some moderately postive macro reports (moderately positive in the way that learning you have syphilis is moderately more positive than learning you have nut cancer). The ISM said the service industry expanded in January for the first time in three months, which may be one reason RICK is bouncing back today since they provide the type of service into which all industries should be expanding. While the ISM's index for the service industry rose to a whopping 50.5 (and again, for those of you playing at home, anything above 50 signals growth, so 50.5 signals about as much growth as Ben Bernanke's cranium follicles), it was slightly below analyst estimates. Also, ADP came out with their job data for January showing only 22k jobs had been cut which was inline with forecasts and the smallest drop in two years which is good news for everyone but those 22k people who lost their jobs or the 15MM or 20MM (what's 5MM among friends) people who remain unemployed.
In world news, the EU is getting all up in Greece's souvlaki telling Greece that they are ok with the deficit reduction plan but will be watching them closer than a 25 year old virgin watches the lovely Amanda Seyfried at a movie premier (and as an aside, Money McBags had never heard of the delightful Ms. Seyfried until yesterday but he will now be investigating her full body of work which we can all assume is spanktacular. Unexpectedly finding this charming young lass is like finding that that undervalued small cap stock with no analyst coverage, growing at 40%, and trading at less than 4x cash flow). The EU commissioner for economic and monetary affairs called the Greek government’s objectives and targets "ambitious" but"“achievable." He added, "every time we observe slippages we will ask the Greek authorities to adopt additional measures such as putting less tzatzki sauce on their gyros, conserving water by showering only twice a month instead of their usual three times, and allowing Maria Menounos to man the Athens welcome center kissing booth."
In stock news, investors are getting less confident in the market with the expectations that the market will fall 10% or more at its highest level since 1984 according to a survey of investment writers. Of course those investment writers also thought 2008 would be a banner year for the S&P, Dewey would defeat Truman, and Fermat's last thereom would go unsolved (hey guys, all you had to do was carry the 1). Money McBags was happily not one of the writers polled because he refuses to be associated with other financial writers and their groupthink (plus there was that incident last year at the Financial Writers of America Conference involving a punch bowl and a Money McBags' turd, so it's not clear he is welcome anyway). Also, Time Warner and AOL both put up good quarters, just not together, as they proved that two heads are often better than one (unless the head in question is Bar Refaeli's, and then one is perfectly acceptable). Time Warner not only beat estimates, but they raised their dividend thanks to strength in their film and cable business which was able to provide a boost for continuing publishing declines (why buy an investment magazine when you can read Money McBags for free?). AOL's earnings were $.01 per share, though their revenue shrunk by 17% because people don't use fucking dial-up internet service anymore. Jeesh. To diversify out of the dial-up business, AOL is said to be working on an updated abacus (featuring different colored beads), tins for dageurreotypes, and a re-invention of the wheel (they are apparently making it square).
In small cap news, HDIX (aptly named H sucks a DIX by Money McBags who owned them for a while last year) is up 89% on a buyout proposal from a Japanese company named Nipro (or as it's pronounced in the US, Nipple). HDIX makes cheap over the counter diabetes blood test readers that sell for less than half the price of competitor's products and work just as well. It was that thesis that led Money McBags to buy the stock last year as the recession should have caused people to trade down, of course it was HDIX's shitty performance that caused Money McBags to sell well before today's payoff. In other news, CKSW is down after their inline Q though guidance was for slighly above street revenue estimates for 2010. Money McBags has yet to fully go through their quarter but the sell-off is likely because license revenue did not grow. That said, their book to bill was greater than 1 (and book to bill is a strong leading indicator of future performance, like packs of unopened condoms at the beginning of a gang bang), they are forecasting near 20% growth, and are trading at 16x or so 2010 earnings or 3x revenues. The company isn't terribly cheap, but they are growing, their fleet optimization software is supposed to be the best in the business, and they have a burgeoning partnership with SAP to deliver this software. Money McBags will look in to their Q a bit more tonight, but this is another watch list stock for all of you out there because they have a market leading technology in a growing market and a huge partner (SAP). This smells more of an acquisition candidate than Paris Hilton smells of AIDS.
In world news, the EU is getting all up in Greece's souvlaki telling Greece that they are ok with the deficit reduction plan but will be watching them closer than a 25 year old virgin watches the lovely Amanda Seyfried at a movie premier (and as an aside, Money McBags had never heard of the delightful Ms. Seyfried until yesterday but he will now be investigating her full body of work which we can all assume is spanktacular. Unexpectedly finding this charming young lass is like finding that that undervalued small cap stock with no analyst coverage, growing at 40%, and trading at less than 4x cash flow). The EU commissioner for economic and monetary affairs called the Greek government’s objectives and targets "ambitious" but"“achievable." He added, "every time we observe slippages we will ask the Greek authorities to adopt additional measures such as putting less tzatzki sauce on their gyros, conserving water by showering only twice a month instead of their usual three times, and allowing Maria Menounos to man the Athens welcome center kissing booth."
In stock news, investors are getting less confident in the market with the expectations that the market will fall 10% or more at its highest level since 1984 according to a survey of investment writers. Of course those investment writers also thought 2008 would be a banner year for the S&P, Dewey would defeat Truman, and Fermat's last thereom would go unsolved (hey guys, all you had to do was carry the 1). Money McBags was happily not one of the writers polled because he refuses to be associated with other financial writers and their groupthink (plus there was that incident last year at the Financial Writers of America Conference involving a punch bowl and a Money McBags' turd, so it's not clear he is welcome anyway). Also, Time Warner and AOL both put up good quarters, just not together, as they proved that two heads are often better than one (unless the head in question is Bar Refaeli's, and then one is perfectly acceptable). Time Warner not only beat estimates, but they raised their dividend thanks to strength in their film and cable business which was able to provide a boost for continuing publishing declines (why buy an investment magazine when you can read Money McBags for free?). AOL's earnings were $.01 per share, though their revenue shrunk by 17% because people don't use fucking dial-up internet service anymore. Jeesh. To diversify out of the dial-up business, AOL is said to be working on an updated abacus (featuring different colored beads), tins for dageurreotypes, and a re-invention of the wheel (they are apparently making it square).
In small cap news, HDIX (aptly named H sucks a DIX by Money McBags who owned them for a while last year) is up 89% on a buyout proposal from a Japanese company named Nipro (or as it's pronounced in the US, Nipple). HDIX makes cheap over the counter diabetes blood test readers that sell for less than half the price of competitor's products and work just as well. It was that thesis that led Money McBags to buy the stock last year as the recession should have caused people to trade down, of course it was HDIX's shitty performance that caused Money McBags to sell well before today's payoff. In other news, CKSW is down after their inline Q though guidance was for slighly above street revenue estimates for 2010. Money McBags has yet to fully go through their quarter but the sell-off is likely because license revenue did not grow. That said, their book to bill was greater than 1 (and book to bill is a strong leading indicator of future performance, like packs of unopened condoms at the beginning of a gang bang), they are forecasting near 20% growth, and are trading at 16x or so 2010 earnings or 3x revenues. The company isn't terribly cheap, but they are growing, their fleet optimization software is supposed to be the best in the business, and they have a burgeoning partnership with SAP to deliver this software. Money McBags will look in to their Q a bit more tonight, but this is another watch list stock for all of you out there because they have a market leading technology in a growing market and a huge partner (SAP). This smells more of an acquisition candidate than Paris Hilton smells of AIDS.
Tuesday, February 2, 2010
2/2/10 Midday Report: Volcker to Banks: "Prop trade this!"
The market is bouncing back today even though it is a relatively quiet day news wise (though not as quiet as a Lindsay Lohan straight to video movie premier or a Trappist monk game of hide and seek). Pending home sales in the US rose 1% after falling 16% last month thanks to renewed tax credits and something called math. Sure the 1% rise is good, but it is still down 15% from October, so let's not break open the bottles of Dom and tins of beluga just yet. The biggest problem with home sales is that frictional unemployment has dropped the frictional and is just plain old unemployment. People are no longer moving between jobs and thus moving to new houses because, to close the transitive logic, there are no jobs. Also, Paul Volcker is supposed to testify in front of the Senate Banking Committee today where the 82 year old will rant about proprietary trading at banks, how he used to walk 2 miles up hill both ways to get to school, and then wonder why none of the dames look like Clara Bow anymore. The banking industry awaits Lord Volcker's testimony like a necrophiliac awaits the cremation of a loved one.
In global macro news, Australia held their interest rates flat which was somewhat of a surprise since their economy is healthier than a vial of Jack LaLanne's urine (and that is for my older readers, but I can assure you young'ens out there that there is nothing on this planet healthier than the dickwater of the workout guru Mr. LaLanne who even at the age of 96 still can still rip a man's heart out with his pinky finger). For those sheltered Americans out there, Australia is more than just boomerangs, crocodiles, and Miranda Kerr and Patsy Kensit pillow fights (though if it were just Miranda Kerr-Patty Kensit pillow fights, that would be sufficient). For the past several years Australia has benefitted from being close enough to China to supply it with natural resources out the wazzou while serving as a middleman in the shipping/trade business. Additonally, their banks missed out on the opportunity to cut up packages of mortgages and sell them for additional yield by inflating the mortgage market through lending money to speculators who bought and then sold houses to other speculators who couldn't afford the houses in what is known now as the subprime vicious circle (and the circle was even more vicious than a daisy chain at an overeaters anonymous meeting). The point being, Australia has had a robust economy during this downturn and thus Australia holding their rates is a bit of a good sign that inflation is not running away, but it is more likely just a pause in their monetary rate hikes
As for stocks, Lexmark put up a huge quarter tripling earnings to $.76 a share and giving guidance for next Q of $.80, thus besting the $.62 earnings per share estimates. The printer maker also beat revenue projections and attributed their success to strong customer demand and the fact that HP makes such shitty printers. UPS also saw profits triple, yet their topline was down 2.5% and their CFO said the first quarter ''will be the most challenging of the year.'' He then said it will be more challenging than the time they tried to ship a plane full of angry circus bears who hadn't eaten in a week. However, the CEO said "It looks like this recession is finally over," so I guess there's nothing to see here.
In small cap news, ARTG was upgraded or maintained at strong buy today by most analysts on the street even though they chose to dilute shareholders yesterday like ice cubes in a Makers Mark at an overpriced NYC bar. Money McBags addressed this in yesterday's Midday Report and its comments section, but ARTG has plenty of cash on their balance sheet so the capital raise is likely for a big acquisition and thus investors need have confidence in ARTG's management team's ability to negotiate and integrate a large deal before they become shareholders. Estimates are for around $.20 earnings for 2010 but $.25 could be reasonable so the stock isn't expensive (nor extremely cheap) at 16x to 20x earnings. COOL is up 5% today as investors perhaps forgot the assrapingly bad Q they recently put up (here were Money McBags thoughts) though this should give shorts a better entry point. And TSYS was initiated as a buy by JP Morgan and a $12 price target and this is a company Money McBags has followed off and on for a while and used to own. They basically provide licenses for text messaging to carriers, location based services (like E911), and satcom solutions for the government. You really only need to know that text messaging is still growing 100% a year (TSYS powered almost 2B messages a day last year, which is fuckload of teenagers saying "cu l8r") and they provide gateways for carriers to be able send these volumes of text messages. These licenses are sold as a step function so the company's revenues haven't scaled lockstep with the exponential growth of text messaging, plus there is competition and the pricing keeps coming down. That said, they did recently get a new deal with Verizon and their government business has been a solid performer. Estimates are for TSYS to earn $80MM of EBITDA in 2010 and they are currently trading at around 6.5x EV/EBITA. That is very cheap for a company that can still grow 20%+ (though the growth rate has been declining and that is not all organic growth). Today may be a good entry point though as the stock has been trading down and earnings are in two days so the JP Morgan analyst would not want to release a glowing report of the company two days before earnings were he/she not confident in the numbers. Now look, Money McBags is prone to mocking analysts like Adam Sandler is prone to starring in bad movies and Alexis Texas is prone to having to try on many pairs of jeans until she finds a pair to properly fit her best asset, so having faith in this JP Morgan analyst is a bit hypocritcial (though not as hypocritical as Larry Craig's gay rights (wide) voting stance), but the timing of the report should be a signal that TSYS's Q will be good or else the JP Morgan analyst is a complete dope (and unfortunately we can't rule that out, so let's say a 25% chance because JP Morgan is mildly reputable). It may be worth picking up some shares for at worst a trade. Money McBags does not own TSYS right now but may buy some before earnings after he does some more digging. If any of you have done work recently on TSYS, feel free to share with the rest of us, and if any of you have Hayley Atwell's phone number, feel free to share that too.
In global macro news, Australia held their interest rates flat which was somewhat of a surprise since their economy is healthier than a vial of Jack LaLanne's urine (and that is for my older readers, but I can assure you young'ens out there that there is nothing on this planet healthier than the dickwater of the workout guru Mr. LaLanne who even at the age of 96 still can still rip a man's heart out with his pinky finger). For those sheltered Americans out there, Australia is more than just boomerangs, crocodiles, and Miranda Kerr and Patsy Kensit pillow fights (though if it were just Miranda Kerr-Patty Kensit pillow fights, that would be sufficient). For the past several years Australia has benefitted from being close enough to China to supply it with natural resources out the wazzou while serving as a middleman in the shipping/trade business. Additonally, their banks missed out on the opportunity to cut up packages of mortgages and sell them for additional yield by inflating the mortgage market through lending money to speculators who bought and then sold houses to other speculators who couldn't afford the houses in what is known now as the subprime vicious circle (and the circle was even more vicious than a daisy chain at an overeaters anonymous meeting). The point being, Australia has had a robust economy during this downturn and thus Australia holding their rates is a bit of a good sign that inflation is not running away, but it is more likely just a pause in their monetary rate hikes
As for stocks, Lexmark put up a huge quarter tripling earnings to $.76 a share and giving guidance for next Q of $.80, thus besting the $.62 earnings per share estimates. The printer maker also beat revenue projections and attributed their success to strong customer demand and the fact that HP makes such shitty printers. UPS also saw profits triple, yet their topline was down 2.5% and their CFO said the first quarter ''will be the most challenging of the year.'' He then said it will be more challenging than the time they tried to ship a plane full of angry circus bears who hadn't eaten in a week. However, the CEO said "It looks like this recession is finally over," so I guess there's nothing to see here.
In small cap news, ARTG was upgraded or maintained at strong buy today by most analysts on the street even though they chose to dilute shareholders yesterday like ice cubes in a Makers Mark at an overpriced NYC bar. Money McBags addressed this in yesterday's Midday Report and its comments section, but ARTG has plenty of cash on their balance sheet so the capital raise is likely for a big acquisition and thus investors need have confidence in ARTG's management team's ability to negotiate and integrate a large deal before they become shareholders. Estimates are for around $.20 earnings for 2010 but $.25 could be reasonable so the stock isn't expensive (nor extremely cheap) at 16x to 20x earnings. COOL is up 5% today as investors perhaps forgot the assrapingly bad Q they recently put up (here were Money McBags thoughts) though this should give shorts a better entry point. And TSYS was initiated as a buy by JP Morgan and a $12 price target and this is a company Money McBags has followed off and on for a while and used to own. They basically provide licenses for text messaging to carriers, location based services (like E911), and satcom solutions for the government. You really only need to know that text messaging is still growing 100% a year (TSYS powered almost 2B messages a day last year, which is fuckload of teenagers saying "cu l8r") and they provide gateways for carriers to be able send these volumes of text messages. These licenses are sold as a step function so the company's revenues haven't scaled lockstep with the exponential growth of text messaging, plus there is competition and the pricing keeps coming down. That said, they did recently get a new deal with Verizon and their government business has been a solid performer. Estimates are for TSYS to earn $80MM of EBITDA in 2010 and they are currently trading at around 6.5x EV/EBITA. That is very cheap for a company that can still grow 20%+ (though the growth rate has been declining and that is not all organic growth). Today may be a good entry point though as the stock has been trading down and earnings are in two days so the JP Morgan analyst would not want to release a glowing report of the company two days before earnings were he/she not confident in the numbers. Now look, Money McBags is prone to mocking analysts like Adam Sandler is prone to starring in bad movies and Alexis Texas is prone to having to try on many pairs of jeans until she finds a pair to properly fit her best asset, so having faith in this JP Morgan analyst is a bit hypocritcial (though not as hypocritical as Larry Craig's gay rights (wide) voting stance), but the timing of the report should be a signal that TSYS's Q will be good or else the JP Morgan analyst is a complete dope (and unfortunately we can't rule that out, so let's say a 25% chance because JP Morgan is mildly reputable). It may be worth picking up some shares for at worst a trade. Money McBags does not own TSYS right now but may buy some before earnings after he does some more digging. If any of you have done work recently on TSYS, feel free to share with the rest of us, and if any of you have Hayley Atwell's phone number, feel free to share that too.
Monday, February 1, 2010
2/1/10 Midday Report: Pat Sajak miffed as $3.8T budget allows government to buy as many vowels as they'd like.
Obama's budget is out and it looks like more stimulus is coming as the administration continues to try to sweep the recession under the rug (though I hear it is a delightful afgahn this time as Mrs. Obama has uncomparable taste). The budget is roughly $3.8T which is equivalent to 190MM lap dances or as it is known in the NFL, "Wednesday." Who knows, spending our way out of this recession may work, as I have found that spending my way out of depressions by dropping $20 bills like they're unpinned hand grenades (which is fast, furious, and with immaculate precision) at my local Rick's cabaret, is a suitable remedy. Basically, the new budget is attempting to buy more time for the economy to recover on its own while channeling its inner Keynes and hoping the multiplier on GDP is somewhere near 1 billion. Given the exponential pace of technological innovation and Keynes' logically thought out and unprovable equations (like all of economics with its oh so idealisitic goals which never work in the complexity of the real world, like a contractor with no competition or anything made in China) it is possible it could work. The only problem is it gives investors more mixed signals than an indecisive three year old with tourettes. Q4 GDP seemed decent, but it was driven largely by stimulus spend so it is hard to gauge if the economy really did improve (Money McBags maintains that inventories were just being built back up and may have even overshot their targets since consumer spend was stimulus driven). Of course, to pay for the new stimulus, taxes will go up on the evil banks who we bailed out who continue to get money for free, big businesses, oil, gas and coal producers, people who make more than $250k, and Gabe Kaplan. But fear not because the budget does contain a plan to trim future deficits to give or take $1T (that is unless things remain bad) so Keynesians can still rejoice that in either case the US will still owe a fuckload of money.
In macro news, the market is up today as the ISM reported that manufacturing in the US expanded at its fastest rate since August of 2004, back when everyone was buying new flat screen tvs for the 8 houses they were about to flip. The index rose to 58.4, besting analysts forecasts and the 54.9 reading of December. Anything over 50 signals expansion which means my pants are constantly over 50 whenever Jessica Simpson comes over for dinner. Also, personal income was up .4% slightly ahead of estimates while consumer spending was also up .2% but below estimates.
In stock news, Exxon Mobil's proft fell 23% but they still beat estimates thanks to their exploration and production businesses as well as higher oil prices (OPEC this, bitches). They did have some weakness in refining to the tune of a $287MM loss which may signal a shift from those gas guzzling SUVs and will likely require CEO Lee Raymond to stop double dipping his balls in gold (only one dip now Mr. Raymond).
In small stock news ARTG and ISYS both beat estimates and yet are trading very differently today with ARTG, to use a technical term, taking it in the yingus. ARTG provides services to help power and optimitize e-commerce and we all know that even in this poor economy, e-commerce continues to grow faster than a Yeti's taint hair (and trust me that is fast, but don't ask how I know). They earned $.06 non-gaap on 9% revenue growth and recurring revenue grew to over 50%. They did around $10MM of EBITDA which would put them at a EV/EBITDA run rate of 10x to 11x but if they can continue to grow even modestly, they could earn almost $.30 next year. With $85MM in cash, the company is now trading at around 13x next year's earnings with a nice cash cushion, though not as nice as Carmen Kinsley's cushion. But here's the thing, they annonuced a 25MM share offering today despite all of that cash and gave the bland statement that it is for working capital and other general corporate purposes, such as possible acquisitions and the beginning of "Lobster Tail Tuesday's" in the company cafeteria. With 134MM shares already outstanding, adding another 25MM dilutes the company by about 16% and thus the previous numbers all have to be reduced (the $.30 eps this year is more like $.25). The stock is down 10% on the dilution, so actually up a bit on the decent quarter and now trading at around 16x a potential $.25 eps number which is still relatively cheap for a company growing like ARTG and selling at a lower multiple than comps. The big unknown is why a company with $85MM in cash and with positive cash flow from operations who could have been an acquisition candidate themselves, needs to dilute shareholders for another $100MM. Their biggest competitor is IBM so clearly $180MM is not going to allow them to take over Big Blue, so the question becomes who do they plan to buy with the capital raise or what business do they plan to enter? Money McBags awaits to get some clarity on their use of cash but the company remains in an advantaged market and is trading at a reasonable, though not cheap multiple, so deserves paying attention to. As for ISYS, they earned $37MM in revenue and had net income grow 50% to $2MM with gross margins expanding above their target 37% to 38.4%. ISYS basically builds satellite systems for the military and after going through a few years of CEO turmoil and being in tertiary businesses, they have seemingly turned the company around and started to focus on their core capabilities. The company has talked about a goal for 2010 of $20MM of EBITDA (analysts are closer to $15MM) and the company currently has about a $120MM enterprise value so is trading at 6x EV/EBITDA that goal. Of course, the recent Q had $2.5ishMM of EBITDA so the $20MM relies on the rest of the year to pick-up. They are up 5% today on their decent Q and if they can continue to improve margins and win deals, they could easily trade above $10. It's not the sexiest company in the world, but the relaince on military spending which per Obama's new budget isn't subject to the discretionary freeze, should give them ample revenue opportunities.
In macro news, the market is up today as the ISM reported that manufacturing in the US expanded at its fastest rate since August of 2004, back when everyone was buying new flat screen tvs for the 8 houses they were about to flip. The index rose to 58.4, besting analysts forecasts and the 54.9 reading of December. Anything over 50 signals expansion which means my pants are constantly over 50 whenever Jessica Simpson comes over for dinner. Also, personal income was up .4% slightly ahead of estimates while consumer spending was also up .2% but below estimates.
In stock news, Exxon Mobil's proft fell 23% but they still beat estimates thanks to their exploration and production businesses as well as higher oil prices (OPEC this, bitches). They did have some weakness in refining to the tune of a $287MM loss which may signal a shift from those gas guzzling SUVs and will likely require CEO Lee Raymond to stop double dipping his balls in gold (only one dip now Mr. Raymond).
In small stock news ARTG and ISYS both beat estimates and yet are trading very differently today with ARTG, to use a technical term, taking it in the yingus. ARTG provides services to help power and optimitize e-commerce and we all know that even in this poor economy, e-commerce continues to grow faster than a Yeti's taint hair (and trust me that is fast, but don't ask how I know). They earned $.06 non-gaap on 9% revenue growth and recurring revenue grew to over 50%. They did around $10MM of EBITDA which would put them at a EV/EBITDA run rate of 10x to 11x but if they can continue to grow even modestly, they could earn almost $.30 next year. With $85MM in cash, the company is now trading at around 13x next year's earnings with a nice cash cushion, though not as nice as Carmen Kinsley's cushion. But here's the thing, they annonuced a 25MM share offering today despite all of that cash and gave the bland statement that it is for working capital and other general corporate purposes, such as possible acquisitions and the beginning of "Lobster Tail Tuesday's" in the company cafeteria. With 134MM shares already outstanding, adding another 25MM dilutes the company by about 16% and thus the previous numbers all have to be reduced (the $.30 eps this year is more like $.25). The stock is down 10% on the dilution, so actually up a bit on the decent quarter and now trading at around 16x a potential $.25 eps number which is still relatively cheap for a company growing like ARTG and selling at a lower multiple than comps. The big unknown is why a company with $85MM in cash and with positive cash flow from operations who could have been an acquisition candidate themselves, needs to dilute shareholders for another $100MM. Their biggest competitor is IBM so clearly $180MM is not going to allow them to take over Big Blue, so the question becomes who do they plan to buy with the capital raise or what business do they plan to enter? Money McBags awaits to get some clarity on their use of cash but the company remains in an advantaged market and is trading at a reasonable, though not cheap multiple, so deserves paying attention to. As for ISYS, they earned $37MM in revenue and had net income grow 50% to $2MM with gross margins expanding above their target 37% to 38.4%. ISYS basically builds satellite systems for the military and after going through a few years of CEO turmoil and being in tertiary businesses, they have seemingly turned the company around and started to focus on their core capabilities. The company has talked about a goal for 2010 of $20MM of EBITDA (analysts are closer to $15MM) and the company currently has about a $120MM enterprise value so is trading at 6x EV/EBITDA that goal. Of course, the recent Q had $2.5ishMM of EBITDA so the $20MM relies on the rest of the year to pick-up. They are up 5% today on their decent Q and if they can continue to improve margins and win deals, they could easily trade above $10. It's not the sexiest company in the world, but the relaince on military spending which per Obama's new budget isn't subject to the discretionary freeze, should give them ample revenue opportunities.
Friday, January 29, 2010
1/29/10 Midday Report: Size doesn't matter as 6% GDP expansion fails to stimulate the market
The market is bouncing around today even though GDP grew 5.7%, the fastest pace in 6 years and beat estimates of 4.7% growth. The upside was led by a restocking of inventories from their depressed levels (and inventories were more depressed than Kathy Griffin's bikini waxer the time she ran out of rubber gloves). The change in inventories accounted for 3.4% of the growth with purchases of equipment and software up 13%, negating the 15% drop in commercial construction because building cardboard boxes is so much cheaper than actual homes. So the question becomes is this a one quarter inventory rebuilding and stimulus induced anomaly or are we really on the way to a recovery? In the delightful Elisabeth Kubler-Ross's model on the stages of grief (and for those who missed Ms. Kubler-Ross's induction into the National Women's Hall of Fame in 2007, the finger sandwiches were to die for), the economy has passed steps one and two by moving past denial (we are definitely fucked) and anger (openly calling for Dick Fuld to have his dick folded) and is now in the bargaining stage (please hire me, please, please). Unfortunatley the next stage is depression, which hopefully isn't caused by another market crash when inventories fail to turn and/or by China's bubble bursting like Christina Hendricks' bustier. Of course the last stage is acceptance and with any luck we will be accepting growth and recovery and not the realization that we are Japan circa 1989 or Taylor Rain's lovely backside in her brilliant performance in 2004's much overlooked film, Apprentass.
What is most concerning to Money McBags is that the market has been selling good news and is trading down now that the expected results are coming in much better. Of the 195 companies in the S&P 500 that have reported earnings since Jan. 11, 154 have beaten analysts’ estimates, according to Bloomberg data. That is an amazing stat and yet the market rally seems to have fizzled out like Lindsay Lohan's singing career (and acting career, and pretty much anything other than her whoring career, which actually makes us all winners).
The other big news of the day is that Ben Bernanke was confirmed by the Senate for another 4 year term by a 70 to 30 vote. The thirty who voted against him also voted for Mountain Dew in the Pepsi challenge, Curly Joe as their favorite of the 3 Stooges, and Anna Karenina as their favorite Tolstoy novel. Money McBags is a Bernanke supporter and thinks he has done a perfectly reasonable job as Fed Chairman, so kudos and huzzah for the Senate who took a wide stance and voted bi-partisanly on this one.
In stock news, MSFT earnings were up 60% thanks to Windows 7 and a little something they refer to as a "monopoly." They beat estimates by $.15 by earning $.74 per share and promised that with earnings like this Bill Gates may finally be able to move out of his mother's basement. Amazon also put up a huge quarter with sales rising 43% and earnings coming in at a robust $.85 per share, well ahead of the $.72 estimates. They also announced a $2B share buyback which boggles the mind considering that they are trading at 50x next year's earnings and with the iPad coming in to the market and potentially taking share away from the Kindle. Why a commodity business with low barriers to entry should trade at 50x is beyond me, but then again, so is M-theory and all of it's absurdly thought out 11 dimensions.
In small cap news MED and ZAGG continue to trade down while EBIX gives back some of their gains from yesterday. CRUS is also down despite their better than street guidance yesterday and run of analyst upgrades today. Money McBags did dip his toe into the CRUS waters yesterday (and it was delightfully stripper piss warm) and buy a small position so go buy some iPhones. Next week promises to be a wild week in the small cap space with more earnings announcements than Jack Nicholson has chins, so enjoy your weekend and be prepared.
What is most concerning to Money McBags is that the market has been selling good news and is trading down now that the expected results are coming in much better. Of the 195 companies in the S&P 500 that have reported earnings since Jan. 11, 154 have beaten analysts’ estimates, according to Bloomberg data. That is an amazing stat and yet the market rally seems to have fizzled out like Lindsay Lohan's singing career (and acting career, and pretty much anything other than her whoring career, which actually makes us all winners).
The other big news of the day is that Ben Bernanke was confirmed by the Senate for another 4 year term by a 70 to 30 vote. The thirty who voted against him also voted for Mountain Dew in the Pepsi challenge, Curly Joe as their favorite of the 3 Stooges, and Anna Karenina as their favorite Tolstoy novel. Money McBags is a Bernanke supporter and thinks he has done a perfectly reasonable job as Fed Chairman, so kudos and huzzah for the Senate who took a wide stance and voted bi-partisanly on this one.
In stock news, MSFT earnings were up 60% thanks to Windows 7 and a little something they refer to as a "monopoly." They beat estimates by $.15 by earning $.74 per share and promised that with earnings like this Bill Gates may finally be able to move out of his mother's basement. Amazon also put up a huge quarter with sales rising 43% and earnings coming in at a robust $.85 per share, well ahead of the $.72 estimates. They also announced a $2B share buyback which boggles the mind considering that they are trading at 50x next year's earnings and with the iPad coming in to the market and potentially taking share away from the Kindle. Why a commodity business with low barriers to entry should trade at 50x is beyond me, but then again, so is M-theory and all of it's absurdly thought out 11 dimensions.
In small cap news MED and ZAGG continue to trade down while EBIX gives back some of their gains from yesterday. CRUS is also down despite their better than street guidance yesterday and run of analyst upgrades today. Money McBags did dip his toe into the CRUS waters yesterday (and it was delightfully stripper piss warm) and buy a small position so go buy some iPhones. Next week promises to be a wild week in the small cap space with more earnings announcements than Jack Nicholson has chins, so enjoy your weekend and be prepared.
Thursday, January 28, 2010
1/28/10 Midday Report: Global economy still more fragile than faberge egg wrapped in Donald Trump's ego
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Wednesday, January 27, 2010
1/27/10 Midday Report: In bid to increase approval ratings, Obama to unveil Apple Tablet at State of the Union address as a panacea for US budget problems
The market continues to limp it's way down as investors await tonight's State of the Union address where President Obama is likely to whip out his small business tax breaks and smack them against a non-defense discretionary spending budget freeze. This budget freeze supposedly applies to 17% of the Federal budget and will have enough loopholes in it to make it less well-followed than the failed reality TV series: Federal Reserve Bank Governor Idol (though Sandra Pianalto yelling at Chuck Evans for leaving the toilet seat up in the house was must see TV). It does likely mean that the president won't be getting the X-Box he asked for for his birthday as times are tough. In addition to Obama going after the budget tonight, Apple is set to finally release their new tablet which has techies more excited than they were for the release of Avatar, extra-strength Accutane, or Olivia Munn's Princess Leia photos. Honestly, Money McBags has not seen anything this eagerly anticipated since the release of those vapidly redundant Harry Potter books or Hanna Hilton's first girl on girl scene (and Money McBags gave that two bums up). The tablet is supposed to be so awesome that it is said to have cured Steve Jobs' cancer and to run on the tears of baby unicorns. And finally, the FOMC is meeting today with Bernanke expected to keep rates at their current 0 to 25bps or what we in the business call "free."
While the market awaits that news, there were some macro-reports that came out which highlight the worries people are starting to get about the economy. New home sales fell in December by 7.6% and were short of expectations as analysts expected sales to rise (and I believe this now makes analysts' incorrect prediction of the simple 50-50 guess at the direction of home sales statistically significant at the 95% level, so they've got that going for them). Home sales were down as a result of the government tax breaks drying up and the forgotten fact that no one has any money. Plus as the job market is more frozen than an Alaskan's nuts after a midnight skinny dip in Lake Chilkoot (and yes that is really the name of Lake in Alaska), people simply aren't moving.
In world news, Greece teeters on bankruptcy causing investors to stock up on credit default swaps of sovereign debt and all the tzatziki sauce on which they can get their hands. Greece is trying to remedy the situation by pawning off 25B of Euro bonds to China as well as stadium naming rights to the Parthenon, and the Golden Fleece. The flight to quality and away from sovereign debt like Greece has caused one month treasuries to have a negative yield for the first time since March of last year which is about as good of an omen for the stock market as stairs are for Stephen Hawking.
Berkshire Hathaway's B shares are shooting up today like a young Drew Barrymore as word is they will be added to the S&P 500 index after their acquisition of BNI. Also, Toyota announced they will be shutting down production on eight lines of cars which make up 57% of their 2009 sales due to problems with the accelerator pedals seemingly caused by something called a friction lever. A friction lever joke is way too easy for Money McBags but this bears watching as the street wonders if Toyota has started to slack on their quality which has been their competitive advantage. In other stock news, YHOO turned a profit despite a 4% drop in year over year revenue. Revenue was up 10% sequentially and management said they see search revenue stabilizing so any investor who wants to own a portfolio of market laggards, now is your time to buy.
As for small cap stocks, ZAGG once again continues to trade down making Money McBags' bet on 12/31/09 seem even better as it was likely risk free. So just remember, betting against Money McBags is like challenging Greg Oden to a cock off (very NSFW or actually anyone, but the news needs reporting), you can't possibly win. And SMCI put up a huge quarter. Now SMCI basically makes custom servers and server solutions for businesses, usually being the first to market with new INTC chips, hence the Nehalem release has been driving new business for them. They just put up $.22 of earning per share on $182MM of revenue (up 42% y/y), easily beating analyst estimates of $.17 and $160MM. The company also gave above street guidance of $.18 to $.21 eps for next Q and $180MM of revenue in what is typically a down quarter for the industry. SMCI is an extremely well run little niche company with $82MM of cash on their balance sheet and no debt. They have a competitive advantage in that they are small and nimble (like Speedy Gonzales or the slightly smaller and more nimble, Shawn Johnson) and therefore can be first to market and customize at the same time. The company may be peaking but on the call management said they could get back to 30% growth rates as the end of the year should be good for them with AMD and INTC introducing new products. Estimates for fiscal 2011 are for around $1.10 and they are currently trading at 13 or so times that not including their cash after today's run up. This should be a cyclical company and this may be the top of the cycle as they have just strung together some very good quarters so Money McBags would not be buying today as the easy money has likely been made. That said, this really is a quality company and has proven over time that they are good at what they do and well managed. Should there be a dip, this is definitely a company to accumulate but either way it is worth doing your own research here as they could continue to outperform.
While the market awaits that news, there were some macro-reports that came out which highlight the worries people are starting to get about the economy. New home sales fell in December by 7.6% and were short of expectations as analysts expected sales to rise (and I believe this now makes analysts' incorrect prediction of the simple 50-50 guess at the direction of home sales statistically significant at the 95% level, so they've got that going for them). Home sales were down as a result of the government tax breaks drying up and the forgotten fact that no one has any money. Plus as the job market is more frozen than an Alaskan's nuts after a midnight skinny dip in Lake Chilkoot (and yes that is really the name of Lake in Alaska), people simply aren't moving.
In world news, Greece teeters on bankruptcy causing investors to stock up on credit default swaps of sovereign debt and all the tzatziki sauce on which they can get their hands. Greece is trying to remedy the situation by pawning off 25B of Euro bonds to China as well as stadium naming rights to the Parthenon, and the Golden Fleece. The flight to quality and away from sovereign debt like Greece has caused one month treasuries to have a negative yield for the first time since March of last year which is about as good of an omen for the stock market as stairs are for Stephen Hawking.
Berkshire Hathaway's B shares are shooting up today like a young Drew Barrymore as word is they will be added to the S&P 500 index after their acquisition of BNI. Also, Toyota announced they will be shutting down production on eight lines of cars which make up 57% of their 2009 sales due to problems with the accelerator pedals seemingly caused by something called a friction lever. A friction lever joke is way too easy for Money McBags but this bears watching as the street wonders if Toyota has started to slack on their quality which has been their competitive advantage. In other stock news, YHOO turned a profit despite a 4% drop in year over year revenue. Revenue was up 10% sequentially and management said they see search revenue stabilizing so any investor who wants to own a portfolio of market laggards, now is your time to buy.
As for small cap stocks, ZAGG once again continues to trade down making Money McBags' bet on 12/31/09 seem even better as it was likely risk free. So just remember, betting against Money McBags is like challenging Greg Oden to a cock off (very NSFW or actually anyone, but the news needs reporting), you can't possibly win. And SMCI put up a huge quarter. Now SMCI basically makes custom servers and server solutions for businesses, usually being the first to market with new INTC chips, hence the Nehalem release has been driving new business for them. They just put up $.22 of earning per share on $182MM of revenue (up 42% y/y), easily beating analyst estimates of $.17 and $160MM. The company also gave above street guidance of $.18 to $.21 eps for next Q and $180MM of revenue in what is typically a down quarter for the industry. SMCI is an extremely well run little niche company with $82MM of cash on their balance sheet and no debt. They have a competitive advantage in that they are small and nimble (like Speedy Gonzales or the slightly smaller and more nimble, Shawn Johnson) and therefore can be first to market and customize at the same time. The company may be peaking but on the call management said they could get back to 30% growth rates as the end of the year should be good for them with AMD and INTC introducing new products. Estimates for fiscal 2011 are for around $1.10 and they are currently trading at 13 or so times that not including their cash after today's run up. This should be a cyclical company and this may be the top of the cycle as they have just strung together some very good quarters so Money McBags would not be buying today as the easy money has likely been made. That said, this really is a quality company and has proven over time that they are good at what they do and well managed. Should there be a dip, this is definitely a company to accumulate but either way it is worth doing your own research here as they could continue to outperform.
Tuesday, January 26, 2010
1/26/10 Midday Report: An Apple a day will keep the recession away (especially if it's one of those new tablets)
The market is bouncing around after Apple put up a ginormous quarter and is likely to announce their tablet on Wednesday while the global economy still sputters. In macro news, US consumer confidence rose to 55.9 from 53.6 and we all know how important it was to break that 55 barrier (actually, I'm just kidding, I don't have a fucking clue as to the difference between 53.6 and 55.9, and I am guessing no one else does either, but bigger is better, just ask Keeley Hazell). Also in the US, the Case-Shiller home price index was either up or down, again depending on which news source you use. According to Bloomberg, home prices rose sequentially in November by .2% while according to the Wall Street Journal, home prices declined .2% sequentially in November. As always, our tie breaker is the NY Times because the irony of having a newspaper noted for their lapses of fact act as our determining factor makes me giddier than Charlie Sheen at a hoedown. According to the NY Times, home prices rose by .2%, so woofuckinghoo, home prices were slightly up, or not. I think the moral of this story is that home prices remain stagnant and you can't believe everything you read, unless it is about Money McBags' way with the ladies, and then all reports are 100% accurate, and delicious.
In international macro news, Standard and Poor's lowered Japan's outlook to negative and warned that they might cut Japan's debt rating if Japan can not trim their mounting public debt and reliance on Pokemon cards to spur their economy. Seeing as how the S&P credit ratings analysts did such a good job assessing US financial institutions before the biggest failure of the US banking system since the Great Depression (and yes, that is sarcasm), Japan yawned at the reports and went back to their game of Dance Dance Revolution. In Europe, the UK announced that they have momentarily come out of their longest recession since the 1930s as GDP rose .1%, or by its more familiar name "a rounding error." The growth disappointed most Brits, though not as much as their disappointment in General Cornwallis or dental floss. Weighing most on the global economy though continues to be China where some banks are said to have been ordered to stop lending for the month. With China threatening to make their monetary policy tighter and already less rigid than Joan Rivers' face, the global economy may be in for a bigger slow down than the current market implies. Be wary of what is going on in China as they are currently driving the global economic rebound so if they put on the brakes, we all may get Chris Henry-ed.
In terms of stocks, the big news is that Apple demolished numbers like they were auditioning for the lead role in a Monsters of Cock video. They earned $3.67 a share, up from $2.50 and had $15.68B in revenue, which was 32% topline growth. This was led by Mac sales which were up 33% and grew at twice the rate of the computer market thanks to a 70% increase in iMacs. Sure Apple did an accounting switcheroo from non-GAAP to GAAP which essentially pulled iPhone revenue forward by about $2B or so, but it's not like Apple has ever had other accounting issues so there's probably nothing to see here (though there is something to see here). Some analysts were disappointed that the 100% growth of the iPhone was a bit below expectations, but being disappointed in 100% growth is a bit like faulting Brooklyn Decker for having bad breath for like one second every few years (though even her bad breath must smell of gold).
In small cap news, ZAGG continues to get pulverized, though it is unclear that there is any news, except for perhaps people realizing that this one trick pony's trick may not be that hard to repeat, like walking or dividing by 1. As the market for smart phone covers has fewer barriers to entry than Paris Hilton's pants, ZAGG's business model should remain challenged. EBIX also continues to trade down making Money McBags glad he sold his EBIX holdings to avoid the attack of the shorts there who may or may not have something on EBIX's accounting. Also RICK has been selling off with the market but Money McBags missed a key announcement from them last week (unfortunately the announcement did not involve the words "free," "champagne," and "room"). Last week RICK said their high end spender is coming back. CEO Eric Langan said: "What we are seeing is customers are spending more money on higher-ticket items. For example, last year, guys who were (used to) drinking $1,000 bottle champagne were ordering the $300 bottle. Now, we are back to selling... those premium bottles of wine and champagne again." In that same interview, RICK forecast fiscal 2011 to have 20% growth to $100MM of revenue. They also expect operating margins to start expanding in Q2 and op margins were at 17.8% last year after being at a 26% the year before. So let's say RICK can earn $100MM in fiscal 2011 and their operating margins go back to only 20%. That is $20MM of operating earnings and then subtract out $3MM of scheduled interest payments and tax them at 34% and you get around $1.20 per share for their year ending September 2011. They are currently trading less than 10x that number and margins could be a lot stronger than 20%. As always, Money McBags is aware that there is a taint on this stock (pun intended) as they are just one rusty trombone away from being in serious trouble, but as long as they can keep the ladies walking that fine line of legality and awesomeness, this company should have improving financials and strong growth. Money McBags is an owner of RICK and this is one time where he tries to do as much primary research as possible.
In international macro news, Standard and Poor's lowered Japan's outlook to negative and warned that they might cut Japan's debt rating if Japan can not trim their mounting public debt and reliance on Pokemon cards to spur their economy. Seeing as how the S&P credit ratings analysts did such a good job assessing US financial institutions before the biggest failure of the US banking system since the Great Depression (and yes, that is sarcasm), Japan yawned at the reports and went back to their game of Dance Dance Revolution. In Europe, the UK announced that they have momentarily come out of their longest recession since the 1930s as GDP rose .1%, or by its more familiar name "a rounding error." The growth disappointed most Brits, though not as much as their disappointment in General Cornwallis or dental floss. Weighing most on the global economy though continues to be China where some banks are said to have been ordered to stop lending for the month. With China threatening to make their monetary policy tighter and already less rigid than Joan Rivers' face, the global economy may be in for a bigger slow down than the current market implies. Be wary of what is going on in China as they are currently driving the global economic rebound so if they put on the brakes, we all may get Chris Henry-ed.
In terms of stocks, the big news is that Apple demolished numbers like they were auditioning for the lead role in a Monsters of Cock video. They earned $3.67 a share, up from $2.50 and had $15.68B in revenue, which was 32% topline growth. This was led by Mac sales which were up 33% and grew at twice the rate of the computer market thanks to a 70% increase in iMacs. Sure Apple did an accounting switcheroo from non-GAAP to GAAP which essentially pulled iPhone revenue forward by about $2B or so, but it's not like Apple has ever had other accounting issues so there's probably nothing to see here (though there is something to see here). Some analysts were disappointed that the 100% growth of the iPhone was a bit below expectations, but being disappointed in 100% growth is a bit like faulting Brooklyn Decker for having bad breath for like one second every few years (though even her bad breath must smell of gold).
In small cap news, ZAGG continues to get pulverized, though it is unclear that there is any news, except for perhaps people realizing that this one trick pony's trick may not be that hard to repeat, like walking or dividing by 1. As the market for smart phone covers has fewer barriers to entry than Paris Hilton's pants, ZAGG's business model should remain challenged. EBIX also continues to trade down making Money McBags glad he sold his EBIX holdings to avoid the attack of the shorts there who may or may not have something on EBIX's accounting. Also RICK has been selling off with the market but Money McBags missed a key announcement from them last week (unfortunately the announcement did not involve the words "free," "champagne," and "room"). Last week RICK said their high end spender is coming back. CEO Eric Langan said: "What we are seeing is customers are spending more money on higher-ticket items. For example, last year, guys who were (used to) drinking $1,000 bottle champagne were ordering the $300 bottle. Now, we are back to selling... those premium bottles of wine and champagne again." In that same interview, RICK forecast fiscal 2011 to have 20% growth to $100MM of revenue. They also expect operating margins to start expanding in Q2 and op margins were at 17.8% last year after being at a 26% the year before. So let's say RICK can earn $100MM in fiscal 2011 and their operating margins go back to only 20%. That is $20MM of operating earnings and then subtract out $3MM of scheduled interest payments and tax them at 34% and you get around $1.20 per share for their year ending September 2011. They are currently trading less than 10x that number and margins could be a lot stronger than 20%. As always, Money McBags is aware that there is a taint on this stock (pun intended) as they are just one rusty trombone away from being in serious trouble, but as long as they can keep the ladies walking that fine line of legality and awesomeness, this company should have improving financials and strong growth. Money McBags is an owner of RICK and this is one time where he tries to do as much primary research as possible.
Monday, January 25, 2010
1/25/10 Midday Report: Bernanke likely to get bipartisan support despite claiming he doesn't swing that way
The market is trying to rally after last week's sell off which was caused by Obama letting Paul Volcker threaten to open up a can of whoop ass on the banking system, the senate seemingly hedging on reaffirming Ben Bernanke as Chairman of the Federal Reserve proving once and for all that the Senate is as good at making decisions as NBC is at handling their prime time schedule, and something called "data" which showed that unemployment remains higher than Brittany Murphy on the morning of 12/20/09. Money McBags has been saying this for a while, but we are at an inflection point. The market has rallied back to above a fair value based on earnings, so either earnings are going to have to be strong, or the market is going to have to do a very public walk of shame and re-trace some of its steps.
The news today is that the Senate has defied all known human physiology and started to think with their asses (because that is where their brains appear to be) and is likely going to reconfirm Ben Bernanke as Fed Chairman. This move is said to largely be a result of the Senate's other top choices, Bernie Madoff and Raj Rajaratnam (or Raj-squared for short), currently being a bit indisposed (though to be honest, Money McBags highly approves of Mr. Rajaratnam's hiring practices and only wonders if he would have hired Mrs. Brosnan to cover large cap stocks or some woman named Heidi Montag to cover plastics). InTrade is betting there is a 95% chance Bernanke stays as Fed chair which are exactly the same odds of the US highest income tax rate being above 38% in 2010 and Hilary Clinton being a man.
In macro news, US existing home sales plunged 17% which was the biggest decrease since they started keeping records in 1968 (thus after both the Great Depression of the 1930s and the scratch and sniff paint fad of the 1940s). The drop in home sales was driven by the end of government tax incentives for first time buyers, continued unemployment, tougher lending standards, and not being able to find a carpet to match the drapes (a problem which Jenny McCarthy can sympathize with in this very not safe for work image).
In stock news, it's still earnings season and most people are eagerly awaiting Apple's earnings tonight after the bell. If they beat estimates, will they be able to rise or will the market sell the news like they did to GOOG, INTC, and Jay Leno on prime time? Haliburton announced earnings today and profits were down 7%. The company cited weaker drilling activity and the fact that Dick Cheney is no longer vice-president. And Ericcson will be cutting 1,500 jobs due to an 82% drop in profits. However, the drop in profit does disprove Tiger Woods theory that Swedes don't go down.
In small cap news, HAFC continues it's fall from a silly rally as it shows that the book value depends on the book (you hear that Peter Cooper Village?), and ZAGG is also taking it in the yingus as the market realizes that no one wants to pay $30 for an iPhone cover (and honestly, this might have been the easiest short since Bridget the Midget). In fact on 12/31/09, Money McBags said this in the comment section of this very blog while debating with a reader: "In fact I will wager 1 share of ZAGG (and that is funny because ZAGG is going to $0)." Just a few months ago, ZAGG was trading at a multiple greater than 30x, despite the fact that they sell one product which is overpriced, don't even own the technology, are in a market with low barriers to entry with a lot of competitors coming in, and it is easier and less time consuming to get Artie Lange off drugs than it is to apply their ZaggSkin product. Plus management was talking about building ZAGG stores for all of their future products instead of figuring out how to make their current product easier to apply and cheaper. They are now trading at around 14x 2009 expected earnings of $.20 per share, a number by the way which has maintained stagnant despite top line growth (which happens when you have to distribute products to more expensive channels and you pay more for shipping than you receive). The easy money has been made on this short, but it is unlikely their ZaggBox sells even as well as Rosie O'Donnell's box and their App Store or marketplace or whatever they want to call it is more commoditized than fake boobs at a casting call for Van Wilder 3: The Rise of My Pants. In other small cap news, MED pre-announced a good quarter today of 75% growth and EPS to be $.17 to $.20 in this Q. The company has great ROEs, is growing faster than a steroidal weed, and is trading at only around 20x 2010 earnings and estimates will likely move up after today's pre-announcement. Money McBags would ordinarily like a stock like this, especially after it's big recent sell-off, but there is something about multi-level marketing that feels oh so dirty to him and apparently others agree. MED could be a big winner, but Money McBags is going to sit this one out.
The news today is that the Senate has defied all known human physiology and started to think with their asses (because that is where their brains appear to be) and is likely going to reconfirm Ben Bernanke as Fed Chairman. This move is said to largely be a result of the Senate's other top choices, Bernie Madoff and Raj Rajaratnam (or Raj-squared for short), currently being a bit indisposed (though to be honest, Money McBags highly approves of Mr. Rajaratnam's hiring practices and only wonders if he would have hired Mrs. Brosnan to cover large cap stocks or some woman named Heidi Montag to cover plastics). InTrade is betting there is a 95% chance Bernanke stays as Fed chair which are exactly the same odds of the US highest income tax rate being above 38% in 2010 and Hilary Clinton being a man.
In macro news, US existing home sales plunged 17% which was the biggest decrease since they started keeping records in 1968 (thus after both the Great Depression of the 1930s and the scratch and sniff paint fad of the 1940s). The drop in home sales was driven by the end of government tax incentives for first time buyers, continued unemployment, tougher lending standards, and not being able to find a carpet to match the drapes (a problem which Jenny McCarthy can sympathize with in this very not safe for work image).
In stock news, it's still earnings season and most people are eagerly awaiting Apple's earnings tonight after the bell. If they beat estimates, will they be able to rise or will the market sell the news like they did to GOOG, INTC, and Jay Leno on prime time? Haliburton announced earnings today and profits were down 7%. The company cited weaker drilling activity and the fact that Dick Cheney is no longer vice-president. And Ericcson will be cutting 1,500 jobs due to an 82% drop in profits. However, the drop in profit does disprove Tiger Woods theory that Swedes don't go down.
In small cap news, HAFC continues it's fall from a silly rally as it shows that the book value depends on the book (you hear that Peter Cooper Village?), and ZAGG is also taking it in the yingus as the market realizes that no one wants to pay $30 for an iPhone cover (and honestly, this might have been the easiest short since Bridget the Midget). In fact on 12/31/09, Money McBags said this in the comment section of this very blog while debating with a reader: "In fact I will wager 1 share of ZAGG (and that is funny because ZAGG is going to $0)." Just a few months ago, ZAGG was trading at a multiple greater than 30x, despite the fact that they sell one product which is overpriced, don't even own the technology, are in a market with low barriers to entry with a lot of competitors coming in, and it is easier and less time consuming to get Artie Lange off drugs than it is to apply their ZaggSkin product. Plus management was talking about building ZAGG stores for all of their future products instead of figuring out how to make their current product easier to apply and cheaper. They are now trading at around 14x 2009 expected earnings of $.20 per share, a number by the way which has maintained stagnant despite top line growth (which happens when you have to distribute products to more expensive channels and you pay more for shipping than you receive). The easy money has been made on this short, but it is unlikely their ZaggBox sells even as well as Rosie O'Donnell's box and their App Store or marketplace or whatever they want to call it is more commoditized than fake boobs at a casting call for Van Wilder 3: The Rise of My Pants. In other small cap news, MED pre-announced a good quarter today of 75% growth and EPS to be $.17 to $.20 in this Q. The company has great ROEs, is growing faster than a steroidal weed, and is trading at only around 20x 2010 earnings and estimates will likely move up after today's pre-announcement. Money McBags would ordinarily like a stock like this, especially after it's big recent sell-off, but there is something about multi-level marketing that feels oh so dirty to him and apparently others agree. MED could be a big winner, but Money McBags is going to sit this one out.
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