Holy crap is it hot out today. It's so hot that the only difference between the East Coast and hell is that Jim Cramer isn't in hell, yet. Anyway, the market was rebounding a bit after downing several vials of muscle relaxant to help cure the severe case of lockjaw it developed from going down so much and so frequently over the past few weeks, but that all changed in the afternoon when reality sunk back in to investors' portfolios. While this was likely a minor temporary relief rally, like Mel Gibson's career after his first anti-semitic tirade but before his second tirade where he told his wife that that he was going to burn the house down among other colorful and completely insane ramblings, you should all trade in to it carefully. And yes, things have now gotten so bad that Money McBags is forced to use Mel Gibson's racist rants as analogies for the market, so we've got that going for us, but at least we'll always have the dot-com boom.
The main problem today is that macro news is lighter than Suze Orman's resume and that is why the market tried to rally a bit. The ISM released their non-manufacturing index which measures 90% of the legal economic activity in the US and to the surprise of no one (other than analysts, economists, and CNBC), it fell to 53.8 which was a 4 month low and below the 55 guess of analysts. Out of the 11 metrics the ISM measures, 10 slowed down and one stayed the same (something called Supplier Deliveries, and in this economy all deliveries are being supplied in the rear).
Internationally, Australia kept interest rates at 4.5% claiming “uncertainty about the pace of future global growth." Though if you read the fine print, they say the uncertainty is whether it will be 0%, negative, or global economy crushing. Finally, the market waits for Thursday's ECB policy meeting where Jean-Claude Trichet will try to the soothe the market's fear of european banks failing by assuring them that stress tests will be run and then offering the market a nice sitz bath. While it's nice that the ECB is contemplating stress tests (which will no doubt show that european banks need to add more fish oil to their diets, start running for 30 minutes a day, and clean up their fucking balance sheets to try to get healthy), there is absolutely no way that european banks don't get a clean bill of health and there is absolutley no way the ECB's assessment will be correct. 151 banks just rushed to get funding from the ECB which is the most in a year and if that is a signal of health, than my name isn't Money McBags.
In large cap stocks, a report from the Semiconductor Industry Association showed chip sales were up 47% last month thanks to demand from China, India, and the Lawson family. This has helped lift chip stocks and regardless of the economy, Money McBags is a believer that the pace of technological advancement will continue to accelerate and thus having some semi exposure in your portfolio should be a longterm benefit like windpower should be a benefit to the environment, saving should be a benefit to the economy, and a tracheotomy to Lady Gaga should be a benefit to ending noise pollution. Also, BP was up today after an upgrade by RBS from "Hold" to "Buy." In addition to that upgrade, RBS announced they will be dropping the "R" from their name to hereby just go as "BS" and are retroactively initiating coverage on Enron with an "Accumulate" and Kate Beckinsale with a "Sell."
In small cap news, it is ugly out there. Money McBags favorites KITD and KIRK continue to get pounded even though they are so cheap that if they were materials, not even China would use them. KITD is a bit funky because so much of their revenue is Euro driven so Money McBags has no feel for their upcoming revenue because a lot will depend on the average fx rate they use in conversion as well as the actual revenue split. So he expects them to miss analyst revenue estimates in the short term but long term, this company is growing 50%+ ex. currency effects, it is in a fast growing market, and they are among the biggest players with cash to spend to continue the roll up. This is the time to be building a position here even though the market is totally full of shit. You wait for chances like this to buy good companies cheaply, same with KIRK, so keep KITD and KIRK front of mind.
One interesting name which continues to fall and is becoming more appealing is IMAX. Money McBags broke them down a few months ago but basically they have been able to grow rapidly due to a JV theater strategy that has allowed them to open more theatres and take less risk. The did $42MM of adjusted EBITDA in Q1 but that was driven by a little something called Avatar which has now passed through the theater system like a kidney stone through a urethra only with less pain and with more aliens.
In the quarter prior to last, the company did ~$20MM in EBITDA (so $80MM annual run rate) and estimates are for $100M both this year and next year with the Avatar business leaving but new theaters picking up that lost growth. The current EV is ~$800MM so the company is trading as 8x to 10x EV/EBITDA which isn't terribly cheap on the high end, but at the low end, it is getting to be attractive (not quite Alice Eve attractive, but probably Amber Lancaster attractive, and Money Mcbags is ok with that). The problems are that there has been a lot of retail money in this name which needs to get out, there is fear of pricing pressure killing their high ticket premiums, it is unknown how many JVs they opened this Q, and the business still relies on content and content is fickle (as noted by the brilliant WGP which every now and then misses the mark, like perhaps today, but in Money McBags' defense it is very very hot).
The most recent Shrek movie underperformed because at some point even little kids can only take so much of Mike Myers so that, on the heels of Avatar going CGbye, is setting up IMAX for a top line miss. Today, the stock was down 10%+ on no news other than pretty decent numbers for the latest Twilight movie which is sure to slowly, unoriginally, and vapidly kill pre-teen brain cells everywhere. IMAX brought in $9MM from that likely abortionally bad movie in the opening week which is certainly at least as good as they could have expected.
Look, Money McBags could talk about EBITDA, revenue growth, and Ashley Greene in 3D, until he turns bluer in the face than a depressed smurf but the issue with IMAX stock is not the fundamentals, it's the investor base. The stock was a high flyer, a momentum trendy name that drew in a lot of retail investors who institutional investors and hedge funds were able to continue to milk until deciding to blow out. Basically, once Avatar left and the story went from "we have the hottest fucking movie in history in a unique format" to "come watch an animated donkey in 3D," growth investors ran. They bought the rumor and sold the news as if the news had slept with Magic Johnson. So now IMAX is in that weird stage where momentum investors have left and it is not yet cheap enough for value investors to buy. That thesis makes less fundamental sense than string theory, but it is what it is. So with institutions having puked this out, retail sellers are now taking their losses and when they wash out, value investors may start to kick the tires, check the oil, and make sure all of the company's johnson rods are in order.
So look, Money McBags thinks this company is certainly on pace to do $80MM-$100MM of EBITDA this year and will likely at least hit those same numbers next year as JVs grow and people take even fewer vacations and thus spend more money on cheap family entertainment. So if you are a longterm owner, you don't need to ditch anything here. That said, this should trade down with the market as people take gains and value investors probably won't get interested until ~6x EV/EBITDA and if they earn $80MM-$100MM of EBITDA, that is still 25%-40% down to go, so you can probably still find a better entry point. Now it is possible for the company to earn much more than $100MM of EBITDA next year, but one has to make a few leaps of faith on JV openings, content, and the economy not going to $0, to get there, which is why Money McBags prefers to use the safer $80MM-$100MM run rate. The company basically needs to show they can perform without Avatar and while Money McBags thinks it is likely they will continue to drive traffic, he would hold off buying for another 20% down (and if it rockets up and you miss it, you need to be ok with that) because no matter how much you try there are four things you shouldn't do in life: Spit in to the wind, start a land war in Asia, forget to look for the Adam's apple, and fight the market. So keep IMAX on your watch list and get ready to pounce when it washes out.
And don't forget, When Genius Prevailed recently joined Facebook to make it easier to spread the gospel.
Showing posts with label ISM. Show all posts
Showing posts with label ISM. Show all posts
Tuesday, July 6, 2010
Tuesday, June 1, 2010
6/1/10 Midafternoon Report: Market adopts new tagline "Sell the rumor, sell the news"
Stocks bounced around today like BP's excuses for the Gulf oil spill or like Kelly Brook's "oil domes" while she jumps on a trampoline. Solid US economic data pushed the market in to positive territory in the morning, giving investors a slight glimmer of hope before that hope was flushed away like a 3 story building in a Guatelamian sink hole or the Sears Tower in Paris Hilton's pants. Leading off the slew of economic reports was that manufacturing in the US grew at a faster pace than analysts guessed with the ISM index coming in at 59.7, a whopping .7 above expectations. The rounding error was driven by increased demand for exports which will clearly be short lived as the dollar strengthens against the Euro. That said, the ISM's employment gauge climbed to its highest level since May 2004 when the subprime boom was still just a twinkle in Alan Greenspan's eye. Factories did add 101k workers through the first four months of the year which is likely a huge relief for the 20MM americans still unemployed, and yes, that was sarcasm. Construction spend in the US also rose by 2.7% which was the most since April of 2000 but it was likely spurred by the ending of the first time home buyers tax credit so it is more likely an outlier (like the straight Wiggle) than a sign of real recovery.
While US economic reports were as positive as a Pam Anderson hepatitis test, international macro data was as negative as an antithalian at a county fair. Leading the way was data on unemployment in Europe where the 16 countries who use the Euro saw unemployment rise from 10% to 10.1% with Spain coming in at a robust 19.7%. Making matter worse was that the Euro fell to a four year low against the dollar, though it claims it is just low because it is practicing its limbo technique for its 18th birthday bash also honoring the Treaty of Maastricht and Kaya Scodelario. The Euro remains on shakier ground than Al Gore's marriage as it drops towards $1.20. In other international developments, China's manufacturing grew at a slower pace than guessed as the government tries to curb its bubblicious growth. China's Purchasing Manager's Index fell to 53.9 which was lower than the 54.5 estimates even though it included an ample dose of MSG. The government is said to be introducing taxes on property holdings, cutting back loans provided by state owned banks, and only allowing one chopstick to be used at all meals. China has simply grown too fast as the government unleashed huge spending programs last year so efforts to reign in the economy now are better than trying to do it later when it's too late, you hear that Bernanke? Finally, the Bank of Canada raised the country's interest rate by 25 bps to 50bps causing the loonie to weaken a bit against the US dollar. It was the first rate hike by Canada in three years and Canada now becomes the first G7 country to raise rates as inflation begins to rear its ugly head.
In stock news, HP is set to cut 9k jobs due to automation and CEO Mark Hurd's cold heart while AAPL is rising on reports that it has sold 2MM iPads and those are just the ones purchased by Steve Jobs' ego. GOOG is also up today and they announced that they will only allow employees to use Linux operating systems blaming the overall crappiness of MSFT Windows for their Chinese operations being hacked. The dumping of MSFT has made Bill Gates feel like he was back in high school. Finally, BP is getting shit canned again, as they should be, with their "top kill" attempt to stop the oil leak failing worse than Gary Coleman's liver (what, still too soon?). Money McBags has avoided writing about this catastrophe because thinking about it makes him wonder if he has been incorrectly using the word "clusterfuck" for all of his years.
In small cap news, QCOR continues to rally with investors awaiting FDA approval for QCOR to be able to market their Acthar drug to the infantile spasm market. You know, the market in which they already have the leading fucking market share. Money McBags has broken down this stock many times (just put QCOR into the fancy search box up top) and is excited for their nascent NS market but he is still confused as to why their Net Sales were such a high % of their Gross Sales last Q. Also, a small crappy company Money McBags follows yet has been embarrassed to bring up before, NTZ, put up a decent quarter on Friday but is now continuing its slide to $0. NTZ produces high end upholstered furniture like sofas, love seats, and bondage benches (ok, maybe not the last one but the definition of "love seat" can be so nebulous). But here's the kicker, NTZ is an Italian company with ~50% of their sales coming from Europe. So it sells a high end, highly discretionary consumer product targeted to european clients with Europe in the midst of bail outs, a crumbling Euro, and record unemployment. Wow. Investing in this company is like those old SNL Bad Idea Jeans commercials. Honestly, buying shares of NTZ is dumber than jumping in to a Hot Tub Time Machine set for the 1980s and then going Lucky Pierre between Magic Johnson and Rock Hudson. You might as well have bought shares of Amercian Home Mortgage right as the subprime mortgage market was melting down, invested in Daguerreotypes in the mid 19th century, or hired Bernie Madoff to manage your assets. So why is Money McBags following/writing about this company seeing as how it is apparently more fucked than Taylor Rain in a Monsters of Cock video? Simple, because it is cheaper than balls in the Castro. The company just put up a quarter where they actually had revenue growth, but to be fair, revenue had fallen more than Eliot Spitzer's dignity after emptying his "mini-bar" at the Hotel Mayflower so the comps were easier than winning a spelling bee on a short bus. Their net sales grew 14% to 126 Euro and their margin was up y/y from 25.5% to 38.5% which was inline with last Q. This was enough to give them a .5MM euro operating income which is still piss awful (and not regular piss, but burning gonorrhea piss), but at least it is positive. Of course, after taxes they lost 1.3 euro but tax rates in Italy are about as predictable as Lindsay Lohan's behavior after taking a powder break and as far as Money McBags can tell more spuriously correlated to profits than the market currently is to company fundamentals. So lets throw out the taxes and look at EBITDA. NTZ had ~8MM euro of EBITDA this Q and translating that to dollars is about $.99 or enough to buy a pack of M&Ms. Actually, with the Euro now settling in around $1.20, that would be ~$9.6MM in EBITDA and the company has a $196MM market cap and $66MM of net cash (55MM euro) so ~$130MM enterprise value. So if you annualize their EBITDA, it's trading at ~3.5 EV/EBITDA and less than .5 sales. Sure they burned through a little cash this quarter, sure annualizing that EBITDA is giving them credit they may not deserve, sure they have one year of profitability in the last five, and sure they are selling one of the stupidest fucking items in one of the worst possible markets in the last 100 years, but how much worse can things get? They cut selling expenses by ~15% for the year last year and are running at about that same rate so they have seen nice operating improvement and if sales can level off, there is no reason this company shouldn't trade at more than 3.5x EBITDA. The point is, despite their CEO dropping another turd in the punchbowl by saying on the quarterly call that "the economic crisis and the worsening market conditions are not yet over and the Group order flows for the first months of 2010 with respect to the last months of 2009 confirm a slow down as compared to the previous positive trend," this company is trading as if its business is going to zero, which may well be the case, but they still have $66MM net cash and decent brand equity. Even if Europe crumbles like Alan Greenspan's reputation, rich people are still going to spend on shit they don't need and as long as this company can stay afloat and keep their cash burn to a minimum, there should be long term upside. Money McBags is not saying you should buy today, or even ever, but this is a stock that will shoot up faster than a heroin addict going through the DTs if and when the global economy stabilizes. So put this on your watch list, be glad you haven't owned it, but be ready to pounce if shit starts gettting better.
While US economic reports were as positive as a Pam Anderson hepatitis test, international macro data was as negative as an antithalian at a county fair. Leading the way was data on unemployment in Europe where the 16 countries who use the Euro saw unemployment rise from 10% to 10.1% with Spain coming in at a robust 19.7%. Making matter worse was that the Euro fell to a four year low against the dollar, though it claims it is just low because it is practicing its limbo technique for its 18th birthday bash also honoring the Treaty of Maastricht and Kaya Scodelario. The Euro remains on shakier ground than Al Gore's marriage as it drops towards $1.20. In other international developments, China's manufacturing grew at a slower pace than guessed as the government tries to curb its bubblicious growth. China's Purchasing Manager's Index fell to 53.9 which was lower than the 54.5 estimates even though it included an ample dose of MSG. The government is said to be introducing taxes on property holdings, cutting back loans provided by state owned banks, and only allowing one chopstick to be used at all meals. China has simply grown too fast as the government unleashed huge spending programs last year so efforts to reign in the economy now are better than trying to do it later when it's too late, you hear that Bernanke? Finally, the Bank of Canada raised the country's interest rate by 25 bps to 50bps causing the loonie to weaken a bit against the US dollar. It was the first rate hike by Canada in three years and Canada now becomes the first G7 country to raise rates as inflation begins to rear its ugly head.
In stock news, HP is set to cut 9k jobs due to automation and CEO Mark Hurd's cold heart while AAPL is rising on reports that it has sold 2MM iPads and those are just the ones purchased by Steve Jobs' ego. GOOG is also up today and they announced that they will only allow employees to use Linux operating systems blaming the overall crappiness of MSFT Windows for their Chinese operations being hacked. The dumping of MSFT has made Bill Gates feel like he was back in high school. Finally, BP is getting shit canned again, as they should be, with their "top kill" attempt to stop the oil leak failing worse than Gary Coleman's liver (what, still too soon?). Money McBags has avoided writing about this catastrophe because thinking about it makes him wonder if he has been incorrectly using the word "clusterfuck" for all of his years.
In small cap news, QCOR continues to rally with investors awaiting FDA approval for QCOR to be able to market their Acthar drug to the infantile spasm market. You know, the market in which they already have the leading fucking market share. Money McBags has broken down this stock many times (just put QCOR into the fancy search box up top) and is excited for their nascent NS market but he is still confused as to why their Net Sales were such a high % of their Gross Sales last Q. Also, a small crappy company Money McBags follows yet has been embarrassed to bring up before, NTZ, put up a decent quarter on Friday but is now continuing its slide to $0. NTZ produces high end upholstered furniture like sofas, love seats, and bondage benches (ok, maybe not the last one but the definition of "love seat" can be so nebulous). But here's the kicker, NTZ is an Italian company with ~50% of their sales coming from Europe. So it sells a high end, highly discretionary consumer product targeted to european clients with Europe in the midst of bail outs, a crumbling Euro, and record unemployment. Wow. Investing in this company is like those old SNL Bad Idea Jeans commercials. Honestly, buying shares of NTZ is dumber than jumping in to a Hot Tub Time Machine set for the 1980s and then going Lucky Pierre between Magic Johnson and Rock Hudson. You might as well have bought shares of Amercian Home Mortgage right as the subprime mortgage market was melting down, invested in Daguerreotypes in the mid 19th century, or hired Bernie Madoff to manage your assets. So why is Money McBags following/writing about this company seeing as how it is apparently more fucked than Taylor Rain in a Monsters of Cock video? Simple, because it is cheaper than balls in the Castro. The company just put up a quarter where they actually had revenue growth, but to be fair, revenue had fallen more than Eliot Spitzer's dignity after emptying his "mini-bar" at the Hotel Mayflower so the comps were easier than winning a spelling bee on a short bus. Their net sales grew 14% to 126 Euro and their margin was up y/y from 25.5% to 38.5% which was inline with last Q. This was enough to give them a .5MM euro operating income which is still piss awful (and not regular piss, but burning gonorrhea piss), but at least it is positive. Of course, after taxes they lost 1.3 euro but tax rates in Italy are about as predictable as Lindsay Lohan's behavior after taking a powder break and as far as Money McBags can tell more spuriously correlated to profits than the market currently is to company fundamentals. So lets throw out the taxes and look at EBITDA. NTZ had ~8MM euro of EBITDA this Q and translating that to dollars is about $.99 or enough to buy a pack of M&Ms. Actually, with the Euro now settling in around $1.20, that would be ~$9.6MM in EBITDA and the company has a $196MM market cap and $66MM of net cash (55MM euro) so ~$130MM enterprise value. So if you annualize their EBITDA, it's trading at ~3.5 EV/EBITDA and less than .5 sales. Sure they burned through a little cash this quarter, sure annualizing that EBITDA is giving them credit they may not deserve, sure they have one year of profitability in the last five, and sure they are selling one of the stupidest fucking items in one of the worst possible markets in the last 100 years, but how much worse can things get? They cut selling expenses by ~15% for the year last year and are running at about that same rate so they have seen nice operating improvement and if sales can level off, there is no reason this company shouldn't trade at more than 3.5x EBITDA. The point is, despite their CEO dropping another turd in the punchbowl by saying on the quarterly call that "the economic crisis and the worsening market conditions are not yet over and the Group order flows for the first months of 2010 with respect to the last months of 2009 confirm a slow down as compared to the previous positive trend," this company is trading as if its business is going to zero, which may well be the case, but they still have $66MM net cash and decent brand equity. Even if Europe crumbles like Alan Greenspan's reputation, rich people are still going to spend on shit they don't need and as long as this company can stay afloat and keep their cash burn to a minimum, there should be long term upside. Money McBags is not saying you should buy today, or even ever, but this is a stock that will shoot up faster than a heroin addict going through the DTs if and when the global economy stabilizes. So put this on your watch list, be glad you haven't owned it, but be ready to pounce if shit starts gettting better.
Wednesday, May 5, 2010
5/5/10 Midday Report: Investors celebrate May 5th with Sink-o de Marketo celebration
Buenos dias on this lovely Cinqo de Mayo as investors smack the market like a pinata in hopes of breaking it open to catch some falling CDS. Things remain ugly today as Europe is still on the verge of going bankrupt thanks to Greece's steroidal Wimpy strategy of having a gyro today while promising to pay for five of them on Tuesday. Unfortunately this strategy is finally coming back to bite Greece on its hairy proktos. Fear continues that Spain and Portugal will be next to need bailouts while even more fear continues that Heidi Montag will put out a new album or Alan Greenspan will find someone to listen to him again. Moody's put Portugal on review telling the country that they need to start paying down their debts, show up to class on time, and stop throwing spitballs at Spain. Moody's is threatening to cut Portugal by two notches from the contrived "Aa2" to the less contrived "AaYour'efucked." Of course as always, Money McBags cares what the rating agencies have to say as much as he cares about John Meriwether's advice on starting a hedge fund or Fabulous Fab Tourre's sales pitch for subprime bonds. Moody's will likely be late once again to the dance with their downgrade of Portugal as by the time Moody's figures it out, Portugal will long have fled the prom in a fit of tears after busting out of their prom dress and leaving their assets exposed and devalued. Making matters worse in Europe is that Europeans hate to shower and it's getting hot outside, but making matters even worse than that is that three people were killed when Greek workers protested the new austerity measures yesterday. On the bright side, that is one way for the government to extinguish the debt, though on the negative side it's a bit morally lacking. In the protests a bank branch also burned to the ground, luckily, the bank only held subprime debt and thus was worth more as ash than as a solvent entity. And finally, EU central banker Axel Foley Weber warned about “grave contagion effects” of the Greek debt crisis for the rest of Europe but added that it doesn't mean the EU should use every instrument necessary to quell it such as more bailouts, rate changes, or sticking bananas in tailpipes (though if it is Kristin Bell's tailpipe and Money McBags' banana, Money McBags will heartily disagree).
In US macro news, ADP reported that 32k jobs were added to the economy and it was the third month in a row of increases while Challenger, Gray & Christmas stopped by for some milk and cookies before reporting that planned layoffs decreased by 40% from the previous month. Also, mortgage applications soared to a 7 month high thanks to the ending of the federal home buyer tax credit and an extra strong dose of meth while the ISM reported that service industry expanded at the same pace as last month as a result of a Viagra milkshake and being shown Carmen Electra workout videos.
In stock news, News Corp put up a good quarter thanks to revenues from Avatar which Money McBags will see as soon as he grows a vagina. The company is trading down 5% though as they warned of a likely fourth quarter profit decline due to rising costs and lower revenues in their Fox network TV business, decelerating revenue in their cable business, and lower revenues in their film division as they are replacing Avatar with a film slate including the sequeals Alvin and The Chipmunks Get Rabies, The Thunder From Down Under Presents: What Happens in Vegas, and My Big Fat Greek Bankruptcy. In other market news, GOOG is up today on news they are going to start selling e-books and investors realizing that GOOG is only a nut hair away from world domination.
In small cap stocks, Money McBags' biggest small cap holding KITD is getting pounded like they walked up to Brock Lesnar and told him not only is his mom a whore, but she's like a shotgun because one cock and she blows. KITD has ~70% international revenue so with Europe about to join Atlantis and Chritsina Applegate's breasts in the annals of fictional places that once really existed, it is not a surprise that there is some movement down. That said, Money McBags believes in this company and is in it for the long term (and by long term, he means until CEO Kaleil Tuzman sells to CSCO or whomever). Tomorrow pay attention to EBIX reporting quarterly results which Money McBags is sure will look good but will lack any semblance of detail as that business is more obfuscated than John Goodman's belly button or Tiger Woods' sense of dignity. On any metric the company is a screaming buy yet the red flags with CEO's disdain of the Street, his self promotional nature that makes Kim Kardashian seem like a recluse, and his penchant for changing auditors like Ben Roethlisberger changes alibis, is alarming. Money McBags is going to stay away but if any of you can get comfortable with whatever it is in the insurance business they are doing other than installing johnson rods, you could have some nice upside. FHCO also reports tomorrow and with any luck they will have been protected from the European debt disease. FHCO has had a nice run on good earnings and a newly declared dividend and remains a strange and small company which Money McBags likes. He doesn't own it as it ran a bit too much for him but he's going to reconsider after they report the Q. Money McBags did make a couple of trades today by hedging his portfolio with EPV and selling his CIT shares for no reason other than to take profits and get some risk off the table. CIT should actually fare well with new CEO John Thain, a cleaner balance sheet (but who really knows for sure how clean it is no matter what the 10k says), and a valuation of right around book value. Should the market continue to drop, Money McBags will look to re-enter CIT while should Abigail Clancy's knickers drop, he will look to re-enter her.
In US macro news, ADP reported that 32k jobs were added to the economy and it was the third month in a row of increases while Challenger, Gray & Christmas stopped by for some milk and cookies before reporting that planned layoffs decreased by 40% from the previous month. Also, mortgage applications soared to a 7 month high thanks to the ending of the federal home buyer tax credit and an extra strong dose of meth while the ISM reported that service industry expanded at the same pace as last month as a result of a Viagra milkshake and being shown Carmen Electra workout videos.
In stock news, News Corp put up a good quarter thanks to revenues from Avatar which Money McBags will see as soon as he grows a vagina. The company is trading down 5% though as they warned of a likely fourth quarter profit decline due to rising costs and lower revenues in their Fox network TV business, decelerating revenue in their cable business, and lower revenues in their film division as they are replacing Avatar with a film slate including the sequeals Alvin and The Chipmunks Get Rabies, The Thunder From Down Under Presents: What Happens in Vegas, and My Big Fat Greek Bankruptcy. In other market news, GOOG is up today on news they are going to start selling e-books and investors realizing that GOOG is only a nut hair away from world domination.
In small cap stocks, Money McBags' biggest small cap holding KITD is getting pounded like they walked up to Brock Lesnar and told him not only is his mom a whore, but she's like a shotgun because one cock and she blows. KITD has ~70% international revenue so with Europe about to join Atlantis and Chritsina Applegate's breasts in the annals of fictional places that once really existed, it is not a surprise that there is some movement down. That said, Money McBags believes in this company and is in it for the long term (and by long term, he means until CEO Kaleil Tuzman sells to CSCO or whomever). Tomorrow pay attention to EBIX reporting quarterly results which Money McBags is sure will look good but will lack any semblance of detail as that business is more obfuscated than John Goodman's belly button or Tiger Woods' sense of dignity. On any metric the company is a screaming buy yet the red flags with CEO's disdain of the Street, his self promotional nature that makes Kim Kardashian seem like a recluse, and his penchant for changing auditors like Ben Roethlisberger changes alibis, is alarming. Money McBags is going to stay away but if any of you can get comfortable with whatever it is in the insurance business they are doing other than installing johnson rods, you could have some nice upside. FHCO also reports tomorrow and with any luck they will have been protected from the European debt disease. FHCO has had a nice run on good earnings and a newly declared dividend and remains a strange and small company which Money McBags likes. He doesn't own it as it ran a bit too much for him but he's going to reconsider after they report the Q. Money McBags did make a couple of trades today by hedging his portfolio with EPV and selling his CIT shares for no reason other than to take profits and get some risk off the table. CIT should actually fare well with new CEO John Thain, a cleaner balance sheet (but who really knows for sure how clean it is no matter what the 10k says), and a valuation of right around book value. Should the market continue to drop, Money McBags will look to re-enter CIT while should Abigail Clancy's knickers drop, he will look to re-enter her.
Thursday, April 1, 2010
4/1/10 Midafternoon Report: A disappointing RIMM job
Before we get to the markets, Money McBags found a picture of the hottest female in the history of history and wanted to share it with his readers as a sign of his gratitude. This is the hottest female ever*, so you're welcome. Anyway, stocks are up today as macro data was more encouraging than a Stephen Hawking pinky raise or Anne Sullivan Macy. The ISM reported that manufacturing expanded at its fastest pace in 5 years to a whopping 59.6 (and if it had been 59.9 the market may have shot more loads than a Japanese bukakke film). Prices paid (cough, inflation, cough) drove the index higher while the unemployment gauge slipped once again. More importantly, first time jobless claims fell to 439k, while even more importantly, Audrina Patridge is hot. The Street is hoping that the 6k drop in first time unemployment claims will bode well for the Labor Department's unemployment report to be released tommorow on paper made from the tears of the homeless. However, providing the proverbial turd in the punchbowl, or the penis in the MFF scene, was a report released today by some firm called Challenger, Gray, and Christmas who bah humbugged on the labor market by reporting that job cuts accelerated in March. The outplacment firm announced that the pace of job cuts had increased 61% sequentially from February but optimists will point out that the job cuts were down 55% from March of last year. So hoo-fucking-ray. The economy is either better or worse depending on your comparison. It's like the old saying, in the land of the blind, the one-eyed man is king (though in the land of the blind, the one-eyed man better not develop macular degeneration because there sure as fuck won't be any ophthalmologists).
International markets are all a buzz today as Asia and Europe saw strong manufacturing reports which signal the recovery is coming. China's manufacturing expanded for a 13th consecutive month, Europe's manufacturing industry expanded at its fastest pace in three years, and somethng in Japan called the Tankan index of sentiment jumped from minus 25 to minus 14. April fucking fools!!!!!!! Oh wait, that data is actually real. Wow. The international markets may have found their Viagra or Peter Gowland's private photo collection.
In stock news, RIMM missed their earnings estimates by $.01 eps and their revenue estimates by 6%. So despite earning $1.27, showing better margins, and growing 18%, the stock is down 5%+. Money McBags is actually surprised it isn't down more because when a growth stock in a competitive market needs to make their numbers and whiffs, nothing good can happen. Goldman Sachs cut their rating on RIMM to sell and basically called them a has been in the handset market. Their products are less differentiated than a Dahm triplet and a whole lot less delicious. Money McBags puked out his RIMM shares because fool me once, shame on me, fool me twice and you can go fuck yourself.
In small cap news everything is up except for Chinese power generation company APWR who handed out fortune cookies with their earnings release yesterday that all read "suckers." Their guidance was 30% below analyst guesses who apparently were just chasing windmills when covering the stock (and that is funny because APWR produces windmills, but you all knew that anyway, right?). Also, there was a comment in yesterday's blog comment section asking about MLNK and Money McBags will address it here. The reader wanted to know what was going on with MLNK and if it is still a hold. Money McBags broke down their fuck awful quarter a few weeks ago and nothing has changed since then of which he is aware. They earned $13MM of EBITDA and said this upcoming Q was going to be worse while they would see some sequential improvement after that. Of course they also said that last quarter would be flat and it was down worse than a than a clinically depressed person who just lost their dog and had a virus wipe out their computer's porn collection, so who the fuck knows if management can be trusted. Their excuse for missing the quarter is still a little squirrely as they blamed their clients for delaying decision making but Money McBags doesn't quite get that. HP's revenues were up ~10% and HP is like 25% of MLNK's business, so why the fuck didn't that help drive revenues more? And if MLNK is earlier in the cycle, why did they not see revenues jump by more in the previous Qs or why is their revenue being impacted by clients delaying their decision making now (since decisions should have already been made for this upcoming cycle). The simple fact is the company is underperforming, but even so, they still earned $13MM of EBITDA in the Q. They have a $163MM in cash and a $375MM market cap so an enterprise value of $210MM. If you think their business bounces back after likely sucking this Q coming up (Money Mcbags' words, their guidance), then a $52MM EBITDA run rate is possible and thus they are trading at 4x that. The stock is cheap on that basis, but on an EPS basis, they'll probably be lucky to earn $.45 this year so are trading at almost 20x that for no growth. The EV/EBITDA and cash give us some downside protection so Money McBags sees no reason to sell, but he also thinks this is dead fucking money for a while. Their business should ramp with electronics sales (though it didn't despite HP being up 10% as Money McBags said earlier, so if someone can explain that, Money McBags is all ears), so if the economy can really come back, they should be able to grow the business. Look, it ain't fucking AAPL, but it is sort of cheap with a cash cushion that has some nice operating leverage. So in short, the downside seems a bit limited but the upside may be further away than Paris Hilton's Academy Award (One Night in Paris excluded).
*April fucking fools'.
International markets are all a buzz today as Asia and Europe saw strong manufacturing reports which signal the recovery is coming. China's manufacturing expanded for a 13th consecutive month, Europe's manufacturing industry expanded at its fastest pace in three years, and somethng in Japan called the Tankan index of sentiment jumped from minus 25 to minus 14. April fucking fools!!!!!!! Oh wait, that data is actually real. Wow. The international markets may have found their Viagra or Peter Gowland's private photo collection.
In stock news, RIMM missed their earnings estimates by $.01 eps and their revenue estimates by 6%. So despite earning $1.27, showing better margins, and growing 18%, the stock is down 5%+. Money McBags is actually surprised it isn't down more because when a growth stock in a competitive market needs to make their numbers and whiffs, nothing good can happen. Goldman Sachs cut their rating on RIMM to sell and basically called them a has been in the handset market. Their products are less differentiated than a Dahm triplet and a whole lot less delicious. Money McBags puked out his RIMM shares because fool me once, shame on me, fool me twice and you can go fuck yourself.
In small cap news everything is up except for Chinese power generation company APWR who handed out fortune cookies with their earnings release yesterday that all read "suckers." Their guidance was 30% below analyst guesses who apparently were just chasing windmills when covering the stock (and that is funny because APWR produces windmills, but you all knew that anyway, right?). Also, there was a comment in yesterday's blog comment section asking about MLNK and Money McBags will address it here. The reader wanted to know what was going on with MLNK and if it is still a hold. Money McBags broke down their fuck awful quarter a few weeks ago and nothing has changed since then of which he is aware. They earned $13MM of EBITDA and said this upcoming Q was going to be worse while they would see some sequential improvement after that. Of course they also said that last quarter would be flat and it was down worse than a than a clinically depressed person who just lost their dog and had a virus wipe out their computer's porn collection, so who the fuck knows if management can be trusted. Their excuse for missing the quarter is still a little squirrely as they blamed their clients for delaying decision making but Money McBags doesn't quite get that. HP's revenues were up ~10% and HP is like 25% of MLNK's business, so why the fuck didn't that help drive revenues more? And if MLNK is earlier in the cycle, why did they not see revenues jump by more in the previous Qs or why is their revenue being impacted by clients delaying their decision making now (since decisions should have already been made for this upcoming cycle). The simple fact is the company is underperforming, but even so, they still earned $13MM of EBITDA in the Q. They have a $163MM in cash and a $375MM market cap so an enterprise value of $210MM. If you think their business bounces back after likely sucking this Q coming up (Money Mcbags' words, their guidance), then a $52MM EBITDA run rate is possible and thus they are trading at 4x that. The stock is cheap on that basis, but on an EPS basis, they'll probably be lucky to earn $.45 this year so are trading at almost 20x that for no growth. The EV/EBITDA and cash give us some downside protection so Money McBags sees no reason to sell, but he also thinks this is dead fucking money for a while. Their business should ramp with electronics sales (though it didn't despite HP being up 10% as Money McBags said earlier, so if someone can explain that, Money McBags is all ears), so if the economy can really come back, they should be able to grow the business. Look, it ain't fucking AAPL, but it is sort of cheap with a cash cushion that has some nice operating leverage. So in short, the downside seems a bit limited but the upside may be further away than Paris Hilton's Academy Award (One Night in Paris excluded).
*April fucking fools'.
Monday, March 1, 2010
3/1/10 Midevening Report: Semis conduct market higher, next up, Beethoven's Fifth
Wow. The market ripped up today like it was competing for the Ansari X Prize in 2004 or like it was rushing to claim the last seat in a dream Hayley Atwell-Kate Bosworth Ultimate Surrender match (nsfw, unless your work doesn't suck). Technology led the way thanks to an upbeat report on chip sales and the fact that we are at the inflection point of exponential technological growth, regardless of the economy (or at least Ray Kurzweil's fancy graphs say so*). Chip sales were up 47% from last year and .3% from December leaving Semiconductor Industry Association President George Scalise (whose last name is an unfortunate anagram for one of the world's worst afflictions, "ass lice") to explain that sales were helped by "growing demand for semiconductors used in personal computers, cell phones, automobiles and industrial applications." He then pointed to the reporter and while being egged on by his minions used the old SIA favorite line, "Is that a pre-Moore's Law semiconductor in your pants or are you just happy to see me." Along wth a positive report on semi sales, consumer spending was up .5% despite incomes only being up .1% which led to the lowest savings rate since January of 2008, you know, back when the market was crashing because EVERYONE WAS FUCKING OVERLEVERAGED. So at least it looks like that problem has been solved. This country continues to treat savings like Lindsay Lohan treats vaginal hygiene or Larry Craig treats truthfulness, but hey, at least spending more than one earned sent the market on an orgiastic run today, so damn you common sense. In other macro news today, the ISM’s factory index fell to 56.5 from January’s 58.4, which was a 5 year high. While a number falling is usually a bad thing, unless it's the number of times Sweet Homa Alabama is played on the radio, the ISM index was still above 50 and that magical made-up line of delineation apparently indicates the economy is still in expansion based on the at times subjective inputs of the purchasing managers reporting to the ISM. However, according to the ISM website, a "PMI in excess of 42 percent, over a period of time, generally indicates an expansion of the overall economy," so that magical 50 number that people are claiming is good, could be as low as 42 and everything would still be ok. Whew, I am glad we have an arbitrarily declining scale to measure whatever it is the PMI measures, though perhaps they should hire some of the 20MM unemployed people to take more exact readings on what managers are purchasing.
In stock news, AIG sold their Asian life insurance unit to Prudential for $35.5B and PRU's promise to love them long time. The sale will allow AIG to pay back the government and strategically rids them of one of their most profitable companies, thereby continuing AIG's policy of doing things that suck. While selling assets is something AIG needs to do to get out of debt, selling their profitable business is a bit like McDonalds selling Burger King the rights to the Big Mac and thus leaving them with just the Filet O'Fish and Salmonella McNuggets. AIG is also determined to sell their US life business to MET, which means they can focus on their prized P&C business which was only one of the biggest reasons they underperformed last quarter. In other large cap news, Sandisk was up 11% today after raising their first quarter revenue guidance by 6% during Friday's analyst day. This caused analysts to upgrade the stock including Wedbush's Betsy Van Hees who had a sell on the company but was able to finally get the sand(isk) out of her vagina and raise SNDK to neutral.
In small cap news, Money McBags favorite MLNK shot up 6% likely on the positive semi news which should augur well for the computer market. MLNK still remains more undervalued than a taint licking. Money McBags broke MLNK down for all of you in January, but the company has treaded water since then despite the fact that their $.17 quarterly eps can easily turn into $.22 with just continued cost cutting. Add in just a Pam Anderson's dignity amount of growth and you're at $.25 per quarter eps or $1 for the year. So with very little positive news, MLNK could take off and rise out of it's way too cheap valuation of 10.5x eps and 4x-5x EBITDA with a ton of cash on the balance sheet. This stock should be owned by anyone who hates being poor, so Mickey Rourke need not apply. Also, another Money McBags stock which is frequently blogged about on When Genius Prevailed, RICK, briefly bounced up to Money McBags sell target of $16 today before getting absolutely ass raped around noon. No one has witnessed a nooner that violent since David Carradine dined alone in his hotel closet. Look at the chart below and notice right at 12:45 someone wanted to get the fuck out like RICK was two girls and they were the one cup. Huge volume. The stock usually trades about 200k shares a day and in a 15 minute span almost 600k shares blew out on the market. Perhaps every quant fund had Money McBags $16 price target hardwired in as the sell time as we all know Money McBags moves markets, or perhaps one of the 20 funds who own 600k+ shares had a little too much champagne in the chanmpagne room, but fuck did someone want out of this thing.
Money McBags is a bit flummoxed by the need to puke out so many shares and it reeks of a capital call, except funds should be relatively stable now, so this run for the door is more perplexing (and nowhere near as delicious) as teenage girls claiming that having anal sex still leaves them virgins.
Tomorrow's blog may be out late, so follow Money McBags on twitter for updates.
*For those futurist tech geeks out ther Money McBags hopes to put his singularity near Kurzweil's prophesized spiritual machines, especially if they're as frisky as Riley Steele. So keep grokking Spock, my friends, keep grokking Spock).
In stock news, AIG sold their Asian life insurance unit to Prudential for $35.5B and PRU's promise to love them long time. The sale will allow AIG to pay back the government and strategically rids them of one of their most profitable companies, thereby continuing AIG's policy of doing things that suck. While selling assets is something AIG needs to do to get out of debt, selling their profitable business is a bit like McDonalds selling Burger King the rights to the Big Mac and thus leaving them with just the Filet O'Fish and Salmonella McNuggets. AIG is also determined to sell their US life business to MET, which means they can focus on their prized P&C business which was only one of the biggest reasons they underperformed last quarter. In other large cap news, Sandisk was up 11% today after raising their first quarter revenue guidance by 6% during Friday's analyst day. This caused analysts to upgrade the stock including Wedbush's Betsy Van Hees who had a sell on the company but was able to finally get the sand(isk) out of her vagina and raise SNDK to neutral.
In small cap news, Money McBags favorite MLNK shot up 6% likely on the positive semi news which should augur well for the computer market. MLNK still remains more undervalued than a taint licking. Money McBags broke MLNK down for all of you in January, but the company has treaded water since then despite the fact that their $.17 quarterly eps can easily turn into $.22 with just continued cost cutting. Add in just a Pam Anderson's dignity amount of growth and you're at $.25 per quarter eps or $1 for the year. So with very little positive news, MLNK could take off and rise out of it's way too cheap valuation of 10.5x eps and 4x-5x EBITDA with a ton of cash on the balance sheet. This stock should be owned by anyone who hates being poor, so Mickey Rourke need not apply. Also, another Money McBags stock which is frequently blogged about on When Genius Prevailed, RICK, briefly bounced up to Money McBags sell target of $16 today before getting absolutely ass raped around noon. No one has witnessed a nooner that violent since David Carradine dined alone in his hotel closet. Look at the chart below and notice right at 12:45 someone wanted to get the fuck out like RICK was two girls and they were the one cup. Huge volume. The stock usually trades about 200k shares a day and in a 15 minute span almost 600k shares blew out on the market. Perhaps every quant fund had Money McBags $16 price target hardwired in as the sell time as we all know Money McBags moves markets, or perhaps one of the 20 funds who own 600k+ shares had a little too much champagne in the chanmpagne room, but fuck did someone want out of this thing.
Money McBags is a bit flummoxed by the need to puke out so many shares and it reeks of a capital call, except funds should be relatively stable now, so this run for the door is more perplexing (and nowhere near as delicious) as teenage girls claiming that having anal sex still leaves them virgins.
Tomorrow's blog may be out late, so follow Money McBags on twitter for updates.
*For those futurist tech geeks out ther Money McBags hopes to put his singularity near Kurzweil's prophesized spiritual machines, especially if they're as frisky as Riley Steele. So keep grokking Spock, my friends, keep grokking Spock).
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.
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.
Wednesday, January 6, 2010
1/6/10 Midday Report: A flat market at your service (sector)
The news out today is that the service sector grew, but less than expectations, so now we know how Vern Troyer's parents felt. The ISM index of non-manufacturing jobs rose from 48.7 to 50.1 and anything over 50 signals expansion according to the arbitrary metrics measured by the index and the directionally correct economists who are paid to interpret them. This is the third time in four months the index has been over that oh so helpful 50 number (even if at 50.1 it was only over by a rounding error or a He Ping Ping nut hair, and yes that has been two "little person" jokes in the first paragraph so I am sure "Bridget the Midget" is anxiously waiting by her tiny phone). This is a marginally good sign for the economy, but not significant enough for anyone to break out the Dom Perignon or slush fund to pay for that special Hannah Hilton visit.
Also today, ADP released their forecast of job losses for the month of December which came in at 84k, worse than the expectations of 75k according to Bloomberg, but better than expectations of 90k losses according to CNBC. So for the tie breaker, we go to the always reliable New York Times who reports estimates were for 73k job losses. So there we have it, 2 out 3 news sources reporting the same data have a different spin on it. What say you Wall Street Journal? Oh, you have estimates of 90k, so job losses were better than expecations. So we're back to a tie and everyone knows, the tie goes to the runner. Anway, the point is no matter how you spin this number (though hopefully not on one of those old school sit'n spins, because Money McBags is out of barf bags after watching 10 seconds of Kathy Griffin on CNN New Year's Eve, and please CNN, make the bad lady go away. Wow, that was quick, but as long as you're granting wishes, can you have Franco-Nevada up their proposed buyout offer to ROY and give my phone number to Hayley Atwell?), it is directionally positive yet inconclusive as to where the economy is going. The number did reflect the fewest job losses according to ADP since March of 2008 (and if you can remember back that far, it was when Brett Favre first announced his retirement. I wonder what ever happened to that guy?), so yeah for us.
In stock news, gold and commodities continue to run as the Fed remains adamant that they will keep rates near zero until the next bubble, while news from Hershey's board is squirting out that they may decide to make a bid for Cadbury. And in the small cap universe, EBIX finally split yesterday and has continued to run after a sell off. Now EBIX's actual business is more confusing than giffen goods, a Higg's boson, or Dane Cook's popularity but they essentially try to build/buy networks to be part of every insurance transaction globally. The CEO's ego is bigger than Alexis Texas's voluptuous backside (and that is if she had elephantitus of the anus) and there is always something Enron/Satyam-ish to be concerned about when investing in a complex/hard to define business that shuns the street, relies on acquisitions, and has a cult following centered around their egotistical CEO, but the company has been growing rapidly, is developing networks which are extremely profitable to first movers, has had phenomenal returns, and is almost completely underfollowed by the street. Estimates are for them to earn at least $1.20 next year (though estimates are few and far between) and they are currenty trading at less 20x that (or is it fewer than 20x that? Can someone exhume William Safire and let me know?) since the street does not yet value them as a growing technology company, which they really are. Given that there is upside to that EPS number and their new goal is $200MM in reveune and 42% operating margins by Q4 2011 (which is admittedly a long way out and will require a number of acquisition for which they will probably have to raise more cash), the stock has room to move back up after an unwarranted sell off. Money McBags is an owner of EBIX, but do your own research because why would you trust a random guy on the internet, even if he is the preeminent dick joke teller and money maker in the world (though if you can clearly state what EBIX does in fewer than 5k words, please share with those in the group).
Also today, ADP released their forecast of job losses for the month of December which came in at 84k, worse than the expectations of 75k according to Bloomberg, but better than expectations of 90k losses according to CNBC. So for the tie breaker, we go to the always reliable New York Times who reports estimates were for 73k job losses. So there we have it, 2 out 3 news sources reporting the same data have a different spin on it. What say you Wall Street Journal? Oh, you have estimates of 90k, so job losses were better than expecations. So we're back to a tie and everyone knows, the tie goes to the runner. Anway, the point is no matter how you spin this number (though hopefully not on one of those old school sit'n spins, because Money McBags is out of barf bags after watching 10 seconds of Kathy Griffin on CNN New Year's Eve, and please CNN, make the bad lady go away. Wow, that was quick, but as long as you're granting wishes, can you have Franco-Nevada up their proposed buyout offer to ROY and give my phone number to Hayley Atwell?), it is directionally positive yet inconclusive as to where the economy is going. The number did reflect the fewest job losses according to ADP since March of 2008 (and if you can remember back that far, it was when Brett Favre first announced his retirement. I wonder what ever happened to that guy?), so yeah for us.
In stock news, gold and commodities continue to run as the Fed remains adamant that they will keep rates near zero until the next bubble, while news from Hershey's board is squirting out that they may decide to make a bid for Cadbury. And in the small cap universe, EBIX finally split yesterday and has continued to run after a sell off. Now EBIX's actual business is more confusing than giffen goods, a Higg's boson, or Dane Cook's popularity but they essentially try to build/buy networks to be part of every insurance transaction globally. The CEO's ego is bigger than Alexis Texas's voluptuous backside (and that is if she had elephantitus of the anus) and there is always something Enron/Satyam-ish to be concerned about when investing in a complex/hard to define business that shuns the street, relies on acquisitions, and has a cult following centered around their egotistical CEO, but the company has been growing rapidly, is developing networks which are extremely profitable to first movers, has had phenomenal returns, and is almost completely underfollowed by the street. Estimates are for them to earn at least $1.20 next year (though estimates are few and far between) and they are currenty trading at less 20x that (or is it fewer than 20x that? Can someone exhume William Safire and let me know?) since the street does not yet value them as a growing technology company, which they really are. Given that there is upside to that EPS number and their new goal is $200MM in reveune and 42% operating margins by Q4 2011 (which is admittedly a long way out and will require a number of acquisition for which they will probably have to raise more cash), the stock has room to move back up after an unwarranted sell off. Money McBags is an owner of EBIX, but do your own research because why would you trust a random guy on the internet, even if he is the preeminent dick joke teller and money maker in the world (though if you can clearly state what EBIX does in fewer than 5k words, please share with those in the group).
Wednesday, December 30, 2009
12/30/09 Midday Report: The market mimics the Alabama school system as investors close their books until the New Year
With the year coming to a close, trading is thinner than a bulimic after a good gastric banding while market news is scarcer than Paris Hilton's panties or Bernie Madoff's investment returns. The only real market news out today is that the Chicago ISM was released and measured a whopping 60, though it is unclear what 60 is out of and what 60 actually means, but it was higher than estimates so that must be good. Apparently, readings over 50 signal expansion which means every time Bar Refaeli shows up on my screen, my pants would read about a 99 on the Chicago ISM scale. Directionally, the results point to manufacturing in the midwest gaining strength and could signal positive changes for the job market as long as you are looking for a job as a competitve eater, snow shoveler, or corrupt politician (Chicago's 3 big industries).
The dollar is also on a bit of a rally as people forget how much money the US printed and borrowed, thus sending metals prices down. Money McBags has talked about gold's Bubblicious rise in the past and we are now witnessing some sell off. Long term, gold still remains a good hedge, though not as good as wearing two condoms when in Thailand.
Finally, GMAC may need more money from the government to the tune of $3B to $3.5B as not only did they finance shitty cars, but they financed them shittily. As a result of this news, the financial services sector is down as the fear of more bad loans and bail outs is leaving a slight scent on the market (and that scent is a bit like a young skunk who has been urinated on and left to sleep with Amy Winehouse for a week). That said, remember, these banks are getting free money and lending it out for a heck of a lot more than free so they should be raking in the dough so there are still some good buys out there.
In stock news, Money McBags favorite WILC hit its 52 week high as the shekel increases vs. the dollar and companies (unlike overweight strippers and kleenex) just can't stay ridiculously cheap forever. Also there appears to be a sell off of momentum names in the weight loss space as NTRI and MED are dropping like Alan Greenspan's credibility. NTRI announced a $5MM impairment charge yesterday, MED's CEO is regstered as having sold shares, and these names have been flying higher than a coked up Ruppell's griffon so a sell off is not unexpected. Money McBags does recommend keeping an eye on NTRI as they have had solid returns, recently entered the diabetic market, and have new deals with WMT and Walgreens. The company is a solid cash flow generator and this country has more fat people than Tiger Woods has STDs, so their business has plenty of room to grow. It is worth following and waiting for the momentum buyers to finish selling.
The dollar is also on a bit of a rally as people forget how much money the US printed and borrowed, thus sending metals prices down. Money McBags has talked about gold's Bubblicious rise in the past and we are now witnessing some sell off. Long term, gold still remains a good hedge, though not as good as wearing two condoms when in Thailand.
Finally, GMAC may need more money from the government to the tune of $3B to $3.5B as not only did they finance shitty cars, but they financed them shittily. As a result of this news, the financial services sector is down as the fear of more bad loans and bail outs is leaving a slight scent on the market (and that scent is a bit like a young skunk who has been urinated on and left to sleep with Amy Winehouse for a week). That said, remember, these banks are getting free money and lending it out for a heck of a lot more than free so they should be raking in the dough so there are still some good buys out there.
In stock news, Money McBags favorite WILC hit its 52 week high as the shekel increases vs. the dollar and companies (unlike overweight strippers and kleenex) just can't stay ridiculously cheap forever. Also there appears to be a sell off of momentum names in the weight loss space as NTRI and MED are dropping like Alan Greenspan's credibility. NTRI announced a $5MM impairment charge yesterday, MED's CEO is regstered as having sold shares, and these names have been flying higher than a coked up Ruppell's griffon so a sell off is not unexpected. Money McBags does recommend keeping an eye on NTRI as they have had solid returns, recently entered the diabetic market, and have new deals with WMT and Walgreens. The company is a solid cash flow generator and this country has more fat people than Tiger Woods has STDs, so their business has plenty of room to grow. It is worth following and waiting for the momentum buyers to finish selling.
Monday, November 30, 2009
11/30/09 Midday Report: Business and Retail Activity Disagree Like My Stomach and Ten Day Old Bean Burritos That Have Been Sitting in the Hot Mexican Sun
Business activity is back as the Chicago ISM reported today its barometer rose to 56.1, the highest level since August 2008, from 54.2 the prior month . And we all know how much of a difference 56.1 is compared to 54.2, right? Oh yeah, we don’t, we just take the mindless commentary from Bloomberg/CNBC/www.Welivetogether.com (NSFW, so heads up) and assume it is up, so that is good. Well according to Bloomberg, above 50 signals an expansion so we went from being in an expansion last month to still being in an expansion this month. Whoop-de-dam-doo. What they don’t say is that the magnitude of the expansion is similar to Herve Villechaize getting a boner.
But wait. Consumers spent $30 less this year (around 8%) shopping during the Thanksgiving weekend than last year. Apparently people are only buying shit on discount, like well, like everything. The consumer is still weaker than a virgin bloody mary and you know what we call a virgin bloody mary? Shit.
Anyway, today has brought us more mixed news, but it is pretty simple to cut through all of the crap. Business activity is picking up marginally because businesses cut inventory faster than Tiger Woods cut out of his house once his wife got hold of the 7 iron, so they have to do some rebuilding as the government stimulates the fuck out of the economy (much like a Haley Atwell and Faye Reagan threesome stimulates the fuck out of teenage boys everywhere). However, jobs are still sparse and people are unemployed so they can only afford to buy stuff on sale or just not at all. Therefore, inventories may continue to peak up a bit just to replenish what was shitcanned, but it is unlikely they really take off unless people get back to work.
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