The market sold off today as it couldn't keep ignoring the data and finally had to come to grips with where the bad macro news had touched it. The biggest negative was the Fed's Beige Book report which failed to titillate the market like either Money McBags' book report on the Kama Sutra (which he described as both thought provoking and delicious) or Fonzie's little black book.
In Bernanke's beige book we found out that economic activity has slowed in some areas and that Federal Reserve Bank President of Cleveland Sandra Painalto doesn't let you get to second base on the first date (Newsflash Sandy: If you ever want to get out of Cleveland, you're going to need to loosen up a bit, lower your reserve standards, and give Bennie B. some of that gold you've been hoarding). Eight of the twelve regions tracked by the Fed saw growth including New York, Richmond, and Andy Roddick's pants (he is married to her, you know that right?), while Atlanta and Chicago saw a slowdown, and Cleveland and Kansas City held steady. The Fed cited high unemployment, an ailing housing market, and consumers being more fucked than Lisa Ann in I'm a MILFaholic as reasons for the slower than hoped for recovery.
In other macro news, durable goods orders fell by 1% in June while analysts had guessed they would rise by 1% which makes guesses just an absolute value sign away from being correct which is a fuckload better than usual. Orders for long lasting goods like machinery, metals, and herpes were down the most they have been in almost a year and a half. Even worse, non-defense aircraft orders tumbled 25.6% after falling 30.2% last month as airlines brace for the continuing growth of staycations and poverty.
Finally, mortgage applications fell 4.4% last week but were led by a 5.9% drop in refinancings as rates ticked up 10bps and anyone who still owns a non-foreclosed upon home has pretty much already refinanced it. Surprisingly new home purchase mortgage applications were up 2% but since the majority of those will likely be rejected, that 2% number is more fictitious than the easter bunny, santa claus, or male affectionate lesbians.
In stock news, RIMM jobbed it's way up today despite the bad taste it has left in investors' mouths as of late. Rumors are that the company will be launching a new operating system and potentially a new keypad before officially giving up to AAPL and thus becoming the second biggest thing to ever be defeated at Waterloo (fyi, RIMM's headquarters are in Waterloo, Ontario).
Also, BA nosedived a bit after reporting a strong bottom line but a weak topline which was down 10% from last year. The company did reaffirm guidance which was slightly below analyst guesses but BA promised their new 787 would be more spacious and thus allow more opportunities for flyers to join the mile high club. And finally, Moody's lowered their ratings on banks BAC, C, and WFC from stable to negative citing lessened government support for banks under new regulations and something about shitty track records which means those banks are going to eventually need that lessened government support. And if any company knows what a poorly run company who sucks at their jobs looks like, it is certainly Moody's who never saw a huge market collapse it couldn't misinterpret.
In small cap news, beta sold off as these stocks had run strongly over the past week or so as if they were trying to catch a glimpse of the delightful Melissa Archer and thus it's not surprising that investors would want to take profits. CTGX reported last night and results were pretty much inline with Money McBags' expectations. The company grew revenue 21% thanks to both strong staffing and health care services businesses. Health care services is now 27% of revenues and should start driving this business like Nipsey Russell drove all of the housevies crazy on the Hollywood game show circuit in the 1970s. In addition to a solid topline, SG&A was down 120bps, operating margins were up from 3.6% to 4.3%, and EPS went from $.09 to $.12.
The stock sold off on the day though due to the general market taking it in the yingus and lowered full year EPS guidance by CTGX due to a reduction in demand for solutions work from one of their large customers in their energy practice. Excuse me while Money McBags yawns on this one. Full year revenue guidance was increased to $320MM to $328MM from $314MM to $322MM (which is 18% growth) while eps guidance was reduced to $0.45 to $0.51 from $0.47 to $0.55 and although it is down, it is still a 26% increase from 2009. But the point is, Money McBags gives less of a shit about 2010 guidance than he does about Alan Greenspan's thoughts on the housing, Nassim Taleb's thoughts on lyrical prose, or Audrina Patridge's thoughts on anything other than which hole to enter.
As said frequently in this space, the coming electronic medical records implementations (and they are coming because the government has mandated them, not just because they ran in to Sonya Kraus in the hallway) are going to be huge for CTGX. As the CEO said in the press release: "We believe we are still in the early stages of the significant increases in demand expected for EMR assessments, systems implementation, and development work."
This Q, EMR was 1/2 of their health care business which was ~$10MM in revenue and means they were working on 13-20 installations at ~$2MM-$3MM a project annually. But the thing is, only ~10% of hosptials have EMR and they are MANDATED by the fucking government to have them at least underway by 2014 so this business should scale faster than a business selling bronzer, or Valtrex, on the Jersey Shore.
Money McBags has gone through his valuation on CTGX here on When Genius Prevailed many times, so feel free to throw it in the search box, but this company is set for strong growth over the next few years so use this sell off as a potential buying opportunity. Obviously the lack of trading volume and the fact that CTGX's boring staffing business is still ~70% of their revenues is a concern, but as long as EMR is on the way and this company isn't full of shit about their ability to service that sector as aplombly as Bunny De La Cruz services the ding dong sector, the company should see solid growth.
And remember, When Genius Prevailed is on Facebook and Twitter.
Showing posts with label BA. Show all posts
Showing posts with label BA. Show all posts
Wednesday, July 28, 2010
Monday, June 28, 2010
6/28/10 Midevening Report: Finance ministers come together as G-20 hits the spot
Stocks were bouncing around today as macro data came out, courts made some rulings, and the Unicorn meat industry took a hit. Consumer spending numbers were reported and shockingly, income grew faster than spending which means that either the numbers are going to be adjusted later, consumers had their credit card lines lowered significantly, or common sense has crept back in to the US consumer after a 30 year Dionysian spending orgy (and Money McBags will vote for 1 or 2 before he votes for 3). Spending was up .2% which beat the median guess, while incomes were up .4%, pushing the savings rate to its highest level in 8 months since back when people were snowed in and couldn't overconsume.
The bigger news on the day though was a couple of court rulings which brought slightly positive news to the markets. First of all, the Supreme Court decided not to listen to the federal racketeering case against the tobacco industry because it would have interferred with their daily viewing of Judge Judy (and Money McBags is told Justice John Paul Stevens would like to drop his case load onto Judy Sheindlin's thin docket). The decision is a positive for both the tobacco industry and the health care industry as tobacco companies are now unlikely to face large industry crippling fines and instead will be free to continue bringing cancer to people everywhere while also helping the top line growth of health care companies.
The other big news of the day of which Money McBags could give a fuck about (right up there with the World Cup, General McChrystal's dismissal, and anything having to do with Miley Cyrus), the Supreme Court upheld the Sarbanes-Oxley law except it allowed the SEC to now fire members of the Public Company Accounting Oversight Board (known better as the acronymly challenged PCAOB). So now the SEC, an institution that was so fuck awful that they promoted the person who ignored Bernie Madoff's machinations despite evidence gift wrapped for them, and an institution so incompetent that they spent their days investigating tranny porn instead of securities fraud (when we all know the night time is for tranny porn, the day time is for NSFW guessing muffs which thankfully is back up and running and its return has truly made Money McBags understand how Pamela Smart's family felt when they found her alive), has the ability to fire the members of some board that supposedly does something to track public auditors. Well thank you for that Supreme fucking Court, really. Money McBags is glad you are wasting your time on shit like this instead of abortion, gun control laws, and banning Ray Romano from network TV. But hey, it's great that the SEC can now fire any of the five board members of PCAOB for any reason and not just incompetence, especially as THERE ARE ONLY 4 CURRENT MEMBERS of the PCOAB board. So hoo-fucking-ray that a board which does absolutely nothing based on the fact that no one has ever heard of them and is not even at a fully staffed level, can now be better regulated. Perhaps if we got our panties out of a bunch and stopped regulating regulators (especially ones as irrelevant as PCOAB) and instead tried to stop fraudulent activity, the economy would be a wee bit less fucked.
Internationally, world leaders are still coming down from the G-20 summit which likely featured as much excitement as a summer theatre production of Pride and Prejudice. Finance leaders seem to have come to an agreement to cut deficits by 2013 yet made it clear the deficit reduction is an "expectation" and not a firm or binding deadline. In a similar vein, Money McBags has agreed to marry Brooke D Williams by 2012 but that is also just an "expectation" and not a firm deadline (he'll give her until 2095 if she really wants). So basically, all that happened at the G-20 summit is that no one fucked anything new up and everyone agreed to keep the staus quo until the the status quo causes the next major downturn, whew. Not only were fiscal policies less changed than Michael Vick after a prison sentence and rehab, but banks avoided new regulations as policy makers said any regulations won't be finished until the next G-20 summit in November, will take longer than two years to institute, and will be just as bad as current regulation but in a different way. So now we wait until Basel III for new regulation which will likely be the worst performing sequel since Karate Kid III: The Puberty Years or Speed III: Runaway Segway.
In stock news, tobacco companies were up due to the previously mentioned supreme court ruling and BA dropped 44% before the markets opened in trades that were cancelled and were either the result of a fat finger (as always, known on WGP as the Portia De Rossi) or the fact that the market structure is more broken than John Edwards' wedding vows. The market continues to ponder circuit breakers to avoid manipulated fluctuations like BA had before hours (even though only 1k shares were traded). The fact that 50% of volume is made by non-fundamental investors should make fixing the market structure a priority for all 1,800 regulatory groups looking in to Wall Street, including the now can be fired board of the PCAOB where four out of five members exist.
In small cap news, ISLE dropped 14% today as they announced their intention of issuing 9MM shares to raise $100MM (or at this rate, $75MM by the time of actual issuance). The shares should lead to ~22% dilution and Money McBags broke the company down after their last Q in which they put together a marginal quarter and yet were still burning cash. The problem with this company is that their balance sheet makes Greece look like a fucking miser and they have run down casinos that need to be upgraded because even though gambling is essentially inelastic, it's not inelastic in shitty casinos with 1970s carpeting that smell of old men and despair. So ISLE needs more cash to modernize their real estate and yet is already almost as highly levered as a Bernie Madoff fund (and his leverage was $50B to $1). So there is room for this company to fall even more since the drop today didn't equal the dilution (32MM shares going to 41MM shares so owners now own ~22% less) and thus if you want a short term short trade, what better way to do it than jumping in on a shitty company with bad things happening?
The bigger news on the day though was a couple of court rulings which brought slightly positive news to the markets. First of all, the Supreme Court decided not to listen to the federal racketeering case against the tobacco industry because it would have interferred with their daily viewing of Judge Judy (and Money McBags is told Justice John Paul Stevens would like to drop his case load onto Judy Sheindlin's thin docket). The decision is a positive for both the tobacco industry and the health care industry as tobacco companies are now unlikely to face large industry crippling fines and instead will be free to continue bringing cancer to people everywhere while also helping the top line growth of health care companies.
The other big news of the day of which Money McBags could give a fuck about (right up there with the World Cup, General McChrystal's dismissal, and anything having to do with Miley Cyrus), the Supreme Court upheld the Sarbanes-Oxley law except it allowed the SEC to now fire members of the Public Company Accounting Oversight Board (known better as the acronymly challenged PCAOB). So now the SEC, an institution that was so fuck awful that they promoted the person who ignored Bernie Madoff's machinations despite evidence gift wrapped for them, and an institution so incompetent that they spent their days investigating tranny porn instead of securities fraud (when we all know the night time is for tranny porn, the day time is for NSFW guessing muffs which thankfully is back up and running and its return has truly made Money McBags understand how Pamela Smart's family felt when they found her alive), has the ability to fire the members of some board that supposedly does something to track public auditors. Well thank you for that Supreme fucking Court, really. Money McBags is glad you are wasting your time on shit like this instead of abortion, gun control laws, and banning Ray Romano from network TV. But hey, it's great that the SEC can now fire any of the five board members of PCAOB for any reason and not just incompetence, especially as THERE ARE ONLY 4 CURRENT MEMBERS of the PCOAB board. So hoo-fucking-ray that a board which does absolutely nothing based on the fact that no one has ever heard of them and is not even at a fully staffed level, can now be better regulated. Perhaps if we got our panties out of a bunch and stopped regulating regulators (especially ones as irrelevant as PCOAB) and instead tried to stop fraudulent activity, the economy would be a wee bit less fucked.
Internationally, world leaders are still coming down from the G-20 summit which likely featured as much excitement as a summer theatre production of Pride and Prejudice. Finance leaders seem to have come to an agreement to cut deficits by 2013 yet made it clear the deficit reduction is an "expectation" and not a firm or binding deadline. In a similar vein, Money McBags has agreed to marry Brooke D Williams by 2012 but that is also just an "expectation" and not a firm deadline (he'll give her until 2095 if she really wants). So basically, all that happened at the G-20 summit is that no one fucked anything new up and everyone agreed to keep the staus quo until the the status quo causes the next major downturn, whew. Not only were fiscal policies less changed than Michael Vick after a prison sentence and rehab, but banks avoided new regulations as policy makers said any regulations won't be finished until the next G-20 summit in November, will take longer than two years to institute, and will be just as bad as current regulation but in a different way. So now we wait until Basel III for new regulation which will likely be the worst performing sequel since Karate Kid III: The Puberty Years or Speed III: Runaway Segway.
In stock news, tobacco companies were up due to the previously mentioned supreme court ruling and BA dropped 44% before the markets opened in trades that were cancelled and were either the result of a fat finger (as always, known on WGP as the Portia De Rossi) or the fact that the market structure is more broken than John Edwards' wedding vows. The market continues to ponder circuit breakers to avoid manipulated fluctuations like BA had before hours (even though only 1k shares were traded). The fact that 50% of volume is made by non-fundamental investors should make fixing the market structure a priority for all 1,800 regulatory groups looking in to Wall Street, including the now can be fired board of the PCAOB where four out of five members exist.
In small cap news, ISLE dropped 14% today as they announced their intention of issuing 9MM shares to raise $100MM (or at this rate, $75MM by the time of actual issuance). The shares should lead to ~22% dilution and Money McBags broke the company down after their last Q in which they put together a marginal quarter and yet were still burning cash. The problem with this company is that their balance sheet makes Greece look like a fucking miser and they have run down casinos that need to be upgraded because even though gambling is essentially inelastic, it's not inelastic in shitty casinos with 1970s carpeting that smell of old men and despair. So ISLE needs more cash to modernize their real estate and yet is already almost as highly levered as a Bernie Madoff fund (and his leverage was $50B to $1). So there is room for this company to fall even more since the drop today didn't equal the dilution (32MM shares going to 41MM shares so owners now own ~22% less) and thus if you want a short term short trade, what better way to do it than jumping in on a shitty company with bad things happening?
Thursday, March 4, 2010
3/4/10 Midafternoon Report: Market to Greece: "Your bonds are the one that I want," just hope they don't leave "Tears on My Pillow"
The market is bouncing around today as initial jobless claims were out and they fell by 29k to 469k, almost exactly the 470k number that economists estimated proving the old adage that "even a broken economist is almost right once a decade." While the drop is positive, it didn't drop by as much as claims rose in the past two weeks which we were told was the result of "weather," an "administrative backlog," and "more people getting laid off than expected, stupid." Also, pending sales of existing homes fell by 7.6% in January as an extension of the government tax credit for first time home buyers failed to spur sales (and Money McBags went through this before, but any first time buyer thinking about purchasing a house rushed to buy before the tax credit ran out last year and thus extending the tax credit now is like if California had reinstated same sex marriage a month after repealing it. Anyone who wanted to get gay married had already done so, thus the remaining opportunity set was thinner than an aneroxic with food allergies.). All of the data will continue to be lumpy as unemployment still remains higher than River Phoenix at the Viper Room and more stagnant than the writing here at When Genius Prevailed (but give Money McBags a break, 1k words of dick jokes and market analysis a day is more draining than being slowly exsanguinated by baby leeches and more draining (and infinitely less fun) than a 12 hour hummer, but Money McBags digresses). In other macro news factory orders were up 1.7% last month and were slightly below estimates but still positive and driven once again by aircraft sales as people have to fly around the globe for job interviews.
In international news, Greece offered up 5 billion of euro denominated bonds or as antiquities dealers will call them in a mere 2 years, worthless relics. Greece claimed there was actually demand for another 2B euros worth of the bonds, and seeing as how they need to raise 20B euros, their decision to not offer the extra 2B fits right in with their previous budget management. If I need $20, why would I sell you $5 worth of my shit when I could sell you $7 worth of it, I mean it doesn't take Euclid to fucking figure out the math here (and yes Money McBags understands the interest payments, etc., but we're talking about a country that needs money like Lindsay Lohan needs a case of Valtrex and a hot shower.)? Meanwhile traders are seeking out the next Greece in Europe claiming that it is only logical another country would be close to collapse as for every Bear Stears there is a Lehman Brothers, for every American Home Mortgage there is a New Century Mortgage, and for every Disney World there is a Kingdom of the Little People. Greek workers remain on strike as they are apparently protesting that the government overpaid them for the past several years. Really a brilliant strategy, right up there with fully clothed strip clubs (and yes I am talking about you Manhattan) and the Segway.
In stock news, retail sales climbed in February from Heidi Montag's singing bad to Heidi Montag's acting bad (and that is a slight uptick if it isn't clear). Same store sales were up 4% beating analyst estimates by 1% or so, but that rise was off of a 4.7% drop last year we so shouldn't lose perspective, like an MC Esher painting. Most interestingly e-commerce sales were up 16% which should bode well for companies like ARTG, AMZN, and Vivid Video. Large cap stocks moving up today include Disney, Coke, and Boeing, all receiving analyst upgrades. Disney was upgraded by Bank of America-Merrill Lynch in anticipation of a strong advertising market, a strong film docket, and unemployment coming down thus making it easier for people to throw away money on a crappy amusement parks just so their kids can get an overpriced picture with a minimum wage worker dressed as Cinderella. A UBS analyst upgraded KO based on the sell-off after they purchased their bottler and after reading When Genius Prevailed on 2/25/10 while UBS also upgraded Boeing because apparently airlines want more planes sooner than later.
In small cap news, RICK continues to drop and is making Money McBags feel emptier than he does after making it rain for an hour at his local Rick's Cabaret. Kind readers, you all know Money McBags has been in RICK with you for this stimulating ride, and you all know of his $16 price target (which it bounced up to before collapsing like Taryn Thomas's anus after one too many cavity searches. And yes, read the wikipedia page, it really did), but we all have to remember that when momentum stocks go bad, they really go bad. Given that, and the fact that Money McBags thought their quarter was worse than a Dan Brown novel and their acquisition of VCGH could be a bit of a clusterfuck (and not in the literal sense, which would be good, but in the "oh shit, we paid what for that?" sense), Money McBags may be bailing on this momentarily and happily taking his profits. He will likely sit it out for a day or two, but if it pops up above $15 again, that will likely be his selling floor. In other small cap news, CRTX annonuced their earnings last night and put together a decent Q while maintaining their guidance. Money McBags broke down CRTX a bit in December as a potential big upside company that needed to show some results. Well this Q could be the start of those results as numbers were generally in-line with Curosurf coming in at $8MM in revenues for the 3 months which is a good sign. While their reporting still seems to be a bit lacking (I mean for fucksake, would it kill you to put a table comparing sales of each product and maybe not lump in Spectracef sales with Factive sales since no one gives a fuck about Spectracef?) and their sales of Factive were probably a bit on the low end since they combined with Spectracef for $3.6MM in revenue and Factive should have been around $3MM by itself, this company continues to trade at around 1x estimated sales. The company maintained their guidance of $115MM but their leading drugs continue to face headwinds so they need to be able to show strong sales of Factive and Curosurf. Money McBags has not had a chance to listen to the call, but the quarter didn't contain any obvious misses and the company is cheap. If you have some gambling money that you're itching to put into play, this is the kind of company it may be worth doing some work on because if they can maintain a $100MM+ revenue run rate, they should easily trade at 2x-3x that. Plus they have a nice cash balance remaining to continue their acquisition strategy. Not the best company in the world, but cheap with upside.
In international news, Greece offered up 5 billion of euro denominated bonds or as antiquities dealers will call them in a mere 2 years, worthless relics. Greece claimed there was actually demand for another 2B euros worth of the bonds, and seeing as how they need to raise 20B euros, their decision to not offer the extra 2B fits right in with their previous budget management. If I need $20, why would I sell you $5 worth of my shit when I could sell you $7 worth of it, I mean it doesn't take Euclid to fucking figure out the math here (and yes Money McBags understands the interest payments, etc., but we're talking about a country that needs money like Lindsay Lohan needs a case of Valtrex and a hot shower.)? Meanwhile traders are seeking out the next Greece in Europe claiming that it is only logical another country would be close to collapse as for every Bear Stears there is a Lehman Brothers, for every American Home Mortgage there is a New Century Mortgage, and for every Disney World there is a Kingdom of the Little People. Greek workers remain on strike as they are apparently protesting that the government overpaid them for the past several years. Really a brilliant strategy, right up there with fully clothed strip clubs (and yes I am talking about you Manhattan) and the Segway.
In stock news, retail sales climbed in February from Heidi Montag's singing bad to Heidi Montag's acting bad (and that is a slight uptick if it isn't clear). Same store sales were up 4% beating analyst estimates by 1% or so, but that rise was off of a 4.7% drop last year we so shouldn't lose perspective, like an MC Esher painting. Most interestingly e-commerce sales were up 16% which should bode well for companies like ARTG, AMZN, and Vivid Video. Large cap stocks moving up today include Disney, Coke, and Boeing, all receiving analyst upgrades. Disney was upgraded by Bank of America-Merrill Lynch in anticipation of a strong advertising market, a strong film docket, and unemployment coming down thus making it easier for people to throw away money on a crappy amusement parks just so their kids can get an overpriced picture with a minimum wage worker dressed as Cinderella. A UBS analyst upgraded KO based on the sell-off after they purchased their bottler and after reading When Genius Prevailed on 2/25/10 while UBS also upgraded Boeing because apparently airlines want more planes sooner than later.
In small cap news, RICK continues to drop and is making Money McBags feel emptier than he does after making it rain for an hour at his local Rick's Cabaret. Kind readers, you all know Money McBags has been in RICK with you for this stimulating ride, and you all know of his $16 price target (which it bounced up to before collapsing like Taryn Thomas's anus after one too many cavity searches. And yes, read the wikipedia page, it really did), but we all have to remember that when momentum stocks go bad, they really go bad. Given that, and the fact that Money McBags thought their quarter was worse than a Dan Brown novel and their acquisition of VCGH could be a bit of a clusterfuck (and not in the literal sense, which would be good, but in the "oh shit, we paid what for that?" sense), Money McBags may be bailing on this momentarily and happily taking his profits. He will likely sit it out for a day or two, but if it pops up above $15 again, that will likely be his selling floor. In other small cap news, CRTX annonuced their earnings last night and put together a decent Q while maintaining their guidance. Money McBags broke down CRTX a bit in December as a potential big upside company that needed to show some results. Well this Q could be the start of those results as numbers were generally in-line with Curosurf coming in at $8MM in revenues for the 3 months which is a good sign. While their reporting still seems to be a bit lacking (I mean for fucksake, would it kill you to put a table comparing sales of each product and maybe not lump in Spectracef sales with Factive sales since no one gives a fuck about Spectracef?) and their sales of Factive were probably a bit on the low end since they combined with Spectracef for $3.6MM in revenue and Factive should have been around $3MM by itself, this company continues to trade at around 1x estimated sales. The company maintained their guidance of $115MM but their leading drugs continue to face headwinds so they need to be able to show strong sales of Factive and Curosurf. Money McBags has not had a chance to listen to the call, but the quarter didn't contain any obvious misses and the company is cheap. If you have some gambling money that you're itching to put into play, this is the kind of company it may be worth doing some work on because if they can maintain a $100MM+ revenue run rate, they should easily trade at 2x-3x that. Plus they have a nice cash balance remaining to continue their acquisition strategy. Not the best company in the world, but cheap with upside.
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