3/12/11 Day After Report: Market Hit by a Spoogenami
While there may have been a tsunami in Japan (and Money McBags heard rumors that it was caused by everything from Godzilla and Mothra learning that they had invested their savings with Bernie Madoff to a rush to the Apple stores to buy the new Hello Kitty themed iPad2), there was a spoogenami in the market as investors once again proved to be symphorophiliacs and fondled their long assets over the economy and geo-political peace getting ready to explode like a bad case of beaver fever (and unfortunately not the fever Money McBags has for Kate Upton’s beaver). Middle East uprisings? Jizzzzz. Falling consumer sentiment? Double jizzzzzzzzzzzzz. Job openings drying up worse than Tony Danza’s marriage? Who’s the fucking boss jizzzzzzzzzzzzzzzzzzzz. The worse the news, the more investors buy the fucking dip because, well, because Uncle Bennie would want it that way so just remember that the next time NFLX drops below $200 or support levels get blown more than Enrico Ponzo’s cover.
As for macro news on Friday, the University of Michigan’s consumer sentiment index fell to a 5 month low as people realize they need money to actually buy shit (well, at least until the crash of the ponzeconomy™ and the return to the barter system). The preliminary March reading came in at 68.2, down from 77.5 in February, and well off the median forecast of 76.5 among economists who once again show there is not one data point to which they can’t find the fat tail. That said, Money McBags gives a shit about anything that comes out of the University of Michigan (except for maybe Selma Blair) because there is a reason it is a safety school.
In other macro news, job openings dropped 161k to 2.76MM which was a 5,.5% fall and means there are fewer openings than in an imperfortate anus. The data points to 5 people now vying for every position, though twice that if the position is the rusty bike pump. When the recession began in December 2007, there we 1.8 people going for every job so if the (No)Labor Department can just remember to carry the one and continue to cut the labor force participation rate in Money McBags’ “Fuck Off Strategy”, we should be back there in no time.
Elsewhere, business inventories rose 0.9% in January to their highest level in two years which might be meaningful news if this weren’t already March. Also, retail sales posted their largest gain in four months as consumers increased purchases of autos, apparel, tiger’s blood, and bras to hold their monkeys (and um, really? Shit Money McBags has heard of a titmouse, but a titmonkey? What the fuck is this world coming to (other than Brooklyn Decker)?). The rise in retail sales was the largest gain since October and the eighth consecutive monthly advance as rising oil prices did nothing to dissuade rich assholes from spending some of the paper profits they have made thanks to the Federal Reserve/White House/Wall Street money printing cartel where greenbacks flow like Clarence Thomas threesomes. But just imagine how much stronger retail spending would have been if Warren Buffett hadn’t only paid himself $100k (and note to assholes writing that story who make it seem like Mr. Boofay is some kind of fucking saint and man of the people for taking such a low salary. 1. The guy is worth $50B so um, real fucking magnanimous of him there, really, it’s like applauding Hugh Hefner for not sucking every tit. 2. The guy is living high off the hog thanks to the government bail outs so if he were really magnanimous, he would give that $100k to Hammerin’ Hank Paulson. 3. As Charles Barkely would say” “Shut the hell up.“).
Internationally, consumer prices rose in China by 4.9% thanks to food prices rising 11% in February which means more people will have to opt for the cheaper non-pee pee flavored Coke. Additionally, Chinese PPI was up 7.2% and the rise in prices across the board is more worrisome than being David Davis’ barber. With China fueling global growth, any attempt by the government to curb inflation may cause a slowdown in the world economy which would be as helpful to this recession as a right sleeve is to Aron Ralston so this bears watching (while this really bears watching, and this bear is watching).
In the market Ann Taylor jumped up 12% after a good Q (and Money McBags just spent 30 minutes trying to write an Ann Taylor joke and all he could come up with is that it is an anagram for “try on anal,” so do with that as you will). Steel manufacturers rose across the board after Steel Dynamics increased their dividend and gave good guidance thanks to strong demand in their rail business and they hope to continue to prove that whoever smelt it, dealt it. Finally AIG was up ~2% after offering to buy back $15.7B in MBS the government took from them during the financial crisis. When asked about the risk, AIG’s CEO reminded investors that if the MBS fail, the government will just re-take them from AIG so the company has less downside than a blumpkin from Maria Fowler because that is what happens once you slide down the slippery slope of moral hazard.
In small cap news, Money McBags favorite SAAS put up a “meh” Q as their growth was a bit shittier than Money McBags had guessed (this is Money McBags’ initial break down of their business, and this is Sarah Shahi), their marketing spend should continue to sink eps as they try to grow faster than Sex.com’s valuation, and their software growth guidance failed to reach prior growth levels (they said growth will get back to 25% to 30% by year end and it was at >40% for the three years prior to this one). Below are the quick positives from the call:
1. Booking revenue grew by 98% on the same number of deals closed, which means they are moving more upmarket than Bree Olson. On the call they said they recently closed two deals with Fortune 500 companies so this is fucking great news, though not as great as finding out that Jessica Biel is now single again. Not only that, but one of their larger deals came from their joint relationship with salesforce.com so if that partnership can continue to be fruitful, that will be jizztastic.
2. Their legacy telephony business is done eating dick. That business should level off or grow from here as >50% of telephony revenue is now coming from their software customers, so that is a marginal positive.
3. They continue growing in Europe and the Philippines and the Philippines has a fuck load of call centers so that is a market they need to penetrate.
4. They have 20 sales people but open recs for another 13-15 more and this is one reason why their marketing spend keeps increasing but Money McBags loves when growing companies expand their salesforces because you need to get the word out to bring in businsess (of course if the word they are getting out is “harder” and they are Jennifer Ellison, then even better).
So what do we do here? Keep holding the fuck on. Seriously, nothing about the story changed and as long as this company can keep growing the software business, there is ~$1 of earnings power here 3 to 4 years out and the company is trading at 3.5x that which is cheaper than sardines in Redondo Beach. The bad news is that in the short term costs are going to be above Money McBags’ expectations and revenues aren’t growing as fast as he would like, so he is taking down his 2011 eps guess from $.17 to $.03, but it sort of doesn’t matter and that is the point. They could easily spend less on marketing and be profitable, but they want to grow faster and bigger than a Victor Conte client so it is what it is. This is a name Money McBags just owns and doesn’t really give a fuck about the day to day or Q to Q because as long as they don’t fuck anything up, this will be more of a long-term winner than Diane Lane‘s husband.
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