3/25/10 Midafternoon Report: Bailouts, stimulus, and earnings. Oh My!

The rally is on again as Germany says they will back Greece, earnings are crushing estimates, and Bernanke is going to continue to stimulate the economy like he's the delightful young actress Jessica Pare (moderately safe for work) and the economy is Money McBags.  Bernanke spoke to the House Financial Services Committee today and he tried his best to use small words so the elected officials could understand him.  Bernanke reiterated that "The economy continues to require the support of accommodative monetary policies" and cited the high unemployment numbers, the weak housing market, and the decline of Paul Reubens' career.  He did say that the Fed has a plan to tighten monetary policy and he will do so at the appropriate time even if it causes Alan Greenspan to roll over in his grave.  More importantly, new claims for unemployment fell by 14k to 442k which was 8k below economists' forecasts (forecasts called for it to be overcast with a chance for showers and instead it was sunny and thus caused the showers to be golden to the delight of urolagniacs everywhere).  11.1MM people are still claming unemployment which is only slightly fewer than the number of people in Ohio or the number of pornstars claiming to have seen Tiger's wood, so it is still a big fucking number.  Economists think that if the new claims for unmeployment can drop to 425k, that could signal job growth, of course most of these same economists also thought that home prices could go up forever, that steady state unemployment could be achieved, and that Adam Smith actually had an invisible hand, so be careful to whom you listen (and as an aside, if Money McBags had an invisible hand it would be firmly attached to Bar Refaeli at all times).

In international news, Germany's Chancelor Angela Merkel told the EU and Greece that Germany would support aid to Greece if the IMF were to be involved and if the Greeks finally cleaned up the Parthenon (I mean seriously, it's been around for 2,500 years.  Can someone in Greece do like 1 days work and just dust around the edges a bit?).  France is backing the German plan which marks the first time these two countries have worked together since their ill-fated Broadway run in the musical Les Miserables Time We Had On Das Boot: A Love Story.  Not only did Greece get positive news, but Dubai is putting up to $9.5B in to Dubai World and it's failing real estate business to make sure that the illusion of grandeur can continue.  Dubai World creditors will be paid back in 5 to 8 years or just in time for the next bubble.

The big news of the day has been in the US stock markets where earnings have continued to impress like Beethoven on "Take your kid to work day" or Salma Hayek at a treasure chest convention.  Best Buy easily beat their numbers posting a profit of $1.82 per share vs. analyst guesses of $1.79.  They also gave full year guidance of $3.45 to $3.60 per share which is well above the $3.36 consensus analyst guess.  Same store sales rose by 7% after the company cut prices on flat panel TVs and started offering free taint massages for any purchases over $2,500.  Best Buy also announced further international expansion, continued stock buybacks, and Olivia Munn to be in charge of the Geek Squad's free "modem adujstment" promotion.  In other stock news Qualcomm is off to the races after they raised their expectations for the second time.  They now think Q2 earnings will be between $.56 and $.58 per share which is higher than analyst guesses of $.53 and higher than previous guidance of $.49 to $.53.  They cited better licensing revenues and the addition of crack cocaine directly into their Snapdragon chipset.  Both QCOM and BBY are up 7%+ on the day as investors run to chase good news like Alabamans chase leprechauns.

In small cap news, Money McBags ditched his RICK shares and it really hurt him to do so.  The easy money had been made, though in positive news for those still holding RICK, Money McBags will be putting a portion of his >50% profits back in to Rick's business through the purchase of many Jack and Cokes without the Coke while watching the fine classically trained dancers.  In other small cap news, you might be able to make a momentum trade on CRTX.  Money McBags wrote about CRTX after their Q in the first week of March and they seem to have picked up some steam since then.  They are up 7% today on no news and slightly higher than average volume, but they have been steadily rising for the past couple of weeks.  The company still has a ton of risk as their top selling drugs are in decline, they gave away controlling interest of the company to Italian pharma company Chiesi last year in order to help their balance sheet and acquire new drugs, and their operating record is thinner than Keira Knightley.  If you believe their projections though, they are trading at only ~1.5x sales and that is way too low for a real company to be valued (of course this may not be a real company like, Nohjay Nimpson may not be a real name, oh wait, scratch that).  So if you're feeling lucky, this is a total momentum trade with absolutely no news behind it other than valuation seems relatively cheap and thus your downside should be limited (that is if the company's proections are accurate).

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.

1/7/10 Midday Report: Low end retailers post good sales numbers as formerly rich learn to slum it

Before we get to the better than expected December sales numbers for most retailers, we need to address the macroeconomy (So hello macroeconomy, would you like some viagra for your slow growth?).  Today's initial claims for unemployment came out and were slightly better than expectations (and all sources tend to agree about this, unlike yesterday's free for all where there was less agreement by news sources about expectations than there is typically agreement by Bjork's stylists).  There were 434k newly filed claims, up only 1k from last week, so that is a slightly positive sign (though not as positive as this sign).  However, analysts/economists/reporters/Bea Arthur are overlooking the fact that those who are unemployed are remaining unemployed for longer as claims for extended unemployment benefits climbed by 165k to 5.44MM (and I can understand how Bea Arthur overlooked this fact since she is not an economist, and dead, but the the others overlooking this puzzles me a bit).  Anyway, the data has continued to show that those with jobs should become less worried and those without jobs should become more screwed as the chasm between the haves and have nots gets wider than Jessica Simpson's cleavage.

In other macro new today, China is raising a key interest rates as they move closer to admitting that inflation may be a problem (which is a bit like the first mate of the Titanic telling Edward Smith that the upcoming icebergs may case some slight turbulence).  The dollar is bouncing up a bit on this news as gold and commodities tick down.

In stock news today, retail sales came out for the most part stronger than expectations and retailers, led by Sears, Macy's, The Limited Brands, and BJ's Wholesale Club, upped their earnings estimates.  BJ's said they would have had double the 2.7% growth if not for the snowstorms in the Northeast and the computer viruses people got when inadvertently going to BJ.com (instead of the actual company website BJS.com) and learning it wasn't really the place to buy footlong packs of Tums (though it was the place to see many other things that were a foot long).  Sears is having a huge day as KMart showed a 5.3% increase in sales thanks to toys and home goods and they raised Q4 estimaes to $3.36, much higher than analyst estimates of $2.75.  Eddie Lampert hopes this can stave off the 2 year Blue Light Special on his SHLD shares.

It wasn't all champagne and hummers for the retail sector though as specialty retailer HOTT showed a 10% drop in same store sales as their market strategy may be reaching it's twilight (for those of you who don't follow HOTT, the last line is punny because they rely on sales of crappy t-shirts from that movie Twilight to drive business.  Hit me up in the comments section if anything else needs explaining).

And in small cap news, CRTX came out today with revenue estimates for 2010 of $115MM, almost exactly what Money McBags said a few short days ago.  In fact, Money said "this company could easily do $115MM of revenue in 2010 (maybe $130MM at the top end)."  This new guidance looks like that $115MM may not be so easy as sales of their legacy generic drugs are likely falling faster than expectations, but the analyst on the street had $148MM in revene for 2010, so just remember who loves you (and I would toot my own here, but that job is being reserved for the lovely Olivia Munn).  Either way, Money McBags' intial analysis holds.  The stock is ridiculously cheap for a drug company, but you have to be a bit wary that they can grow given the decline of their legacy drugs and the yet to be proven future of the drugs they purchased.  The stock could easily double from here since it is trading at less than 1.5x sales, but we're going to sit this one out until we get some more data.

12/29/09 Midday Report: Consumers more confused than Alan Greenspan in a housing bubble

Data came out today showing a rise in consumer confidence for the second consecutive month, despite consumers rating their current situation as the worst since February 1983 (and to give you an idea about how long ago February 1983 was, Tennessee Williams was alive for most of the month, Case had yet to mix his chocolate with Shiller's peanut butter,  Beat It was released as a single (and Michael Jackson was still black, and alive), and Hilary Scott was born and thus had yet to expertly fellate her first johnson).  That's right, in the same report today, the consumer's expectations of wages and jobs fell to 26 year lows while consumer confidence rose.  So it all makes perfect sense.  Consumer confidence is rising, while falling to new lows at the same fucking time.  Somewhere Kafka is happily sitting up in his grave and applauding while Zeno Cosini has his last cigarette.

Speaking of Case-Shiller, home prices in 20 cities rose for the 5th consecutive month, or they were flat, depending which news source you read of the exact same fucking data.  And seriously, for you reporters out here, you're not reporting on the existential feeling of Antoine de Saint Exupery or the exact location of a quantum particle (and for the record, under my balls would be an acceptable enough guess) so how hard is it get the one number fact correct?  Luckily, a third news source clears up any confusion by stating that home prices were up, but when adjusted for seasonality, they were flat.  Who knew that one needed to hire someone from NAFA (where I am told they party until their valuation allowances reverse) just to read a simple news story.

In stock news, a Money McBags favorite, RICK continues rise (and it is from more than the table dance) while a Money McBags watchlist company, CRTX, gets some momentum.  CRTX is a roll-up drug maker/supplier focused on the respiratory market who went public through a reverse merger last year.  Since that time they have acquired the rights to a number of drugs while revamping their sales force and selling controlling interest in themselves to Italian pharma company Chiesi (in return for the rights to market one of Chiesi's drugs in the US and a lifetime supply of parmesan cheese).  While trying to piece this company together, CRTX has seen their top selling drugs face increasing competition from generics (which they admit is happening and say is not unplanned, hence the acquisition of other drugs) and has disappointed the street (though only one analyst covers them and that analyst has been consistently too high, thus tripping quant funds' models when numbers come in low).  The point is, this company could easily do $115MM of revenue in 2010 (maybe $130MM at the top end) and has a current market cap of around $145MM.  Drug companies at a minimum should tade at 2x earnings, and more likely 3x to 4x.  So if this company can just execute and fend off lost drug sales through their new drugs (Curosurf and Factive) while purchasing another underutilized drug or two, the stock could easily double from here.  It definitely bears watching, as does the majestic Gracie Glam.