Posts tagged australia
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.
The market tanked at the end of the session like Money McBags’ day which has caused today’s column to be late, short, and in need of one more read through, but it is what it is. You see, Money McBags was cranking away at his terminal, busily breaking down the news, perusing 10Ks for cheap stocks, and most importantly scouring the interweb for just the right picture of Kelly Brook, when life got in the way and he was called out to the cruel cruel world to fix some dumb shit. With dumb shit marginally fixed, Money McBags is drained of his energy and thus will be publishing his halfway done column today. It ain’t Shakespeare or Fante, but luckily it also isn’t Santelli, Colmes, or Bartiromo, and so it goes…
New claims for unemployment came out today and they were down 19k, or 15k, depending on if you want to use the number reported last week as your baseline or the “revised/manipulated” number released today. Last week new claims were 472k and this week claims were supposedly down 19k to 457k. Once again, if you do the math you get an equal sign more confused than Helen Keller’s dogs (because how the fuck would they know to sit, stay, or roll over when every command sounded like “arhgahgaha.”). Analysts guessed new claims would come in at 460k, so they were close enough that one might be deluded in to thinking their regression models actually regress to something believable and that this week’s close call was not just luck caused by a random fluctuation, but Money McBags knows better and knows that those models have no clothes (though he is usually in favor of clothes-less models). Either way, the job market remains more challenged than a bus driver in El Salvador or a color blind synesthiac. 4.55MM people remain on traditional unemployment, another 5.3MM remain on extended unemployment, and another 10MM remain on no employment and must subsist off the heat generated from their dying hopes and dreams. Luckily there was news out today that was portrayed as slightly positive with durable goods orders excluding transportation (and durable goods are anything expected to last for 3+ years like cars, machinery, and Savannah Stern‘s chest) rising by .9% after a .8% decrease in April bringing orders slightly above where they were in March. So in honor of tonight’s NBA Draft and the great Derrick Coleman, “whoop-de-dam-do.” Additionally, orders for non-defense capital goods excluding aircraft, rose by 2.1% which gives a bit of confidence to the markets that businesses will still be operating in a month.
Internationally, Greek default swaps reached record highs as common sense creeps back in to the market. Eventually Greece isn’t going to be able to roll over their debt so we can either make like math doesn’t exist and time doesn’t move linearly (Einstein’s relativity be damned) and live in a happy world where Greece can function in perpetuity despite a debt level so fuck awful that even Stephen Baldwin laughs at it, or we can just buy the fuck out of Greek CDS and get our fiddles ready so we can pull a Nero when Athens burns. In other international news, Australia elected their first female prime minister in Julia Gillard who was born in Wales, is a lawyer by trade, and though never married, dates a male hairdresser which I believe makes him a well trimmed beard. Gillard promises to work with mining companies and be tough on spending to keep Australia’s economy from going down under (eat your heart out on that one Jay Leno).
In earnings news, Nike just did it, well that is if “it” is missing analyst guesses of revenues. NKE profit was up 53% which was inline with guesses but revenues of $5.08B were up only 4% (ex. currency flucutations) and missed analyst guesses of $5.15B. Orders were up 9% though and the company did earn $1.04 per share so while the stock sold off ~4% today, it’s not like they totally shit the bed or perhaps more appropriately, it’s not like they shit on the cold floor in the corner of the room where 20 sweat shop workers sleep on the hour they have off in between shifts of sewing fucking swooshes on canvas sneakers. In other earnings news, Discover found their way to a strong quarter with profit up 14% thanks to improving credit trends, increased customer spend, and the House financial reform bill not having been passed yet. Charge-offs were up year over year to 8% from 7.5% but down sequentially from 8.5% so depending on what trend you want to use, card users are acting better or worse.
In small cap news today KIRK was down ~7% today and as Money McBags said yesterday, he thinks this is a good entry point (though not as good of an entry point as the gap in Jessica Hart’s teef). That said, Money McBags refuses to catch falling knives and this stock is clearly falling as investors take profits on shit that has gone up as the market now falls, so wait for this to settle before jumping in as fundamentally it remains as strong as Money McBags’ belief in truth, honesty, and Hayley Atwell.
2/16/10 Midnight Report: Commodities rise as NBC giving out medals to anyone who will watch the Winter Olympics
Money McBags is on the road this week like Jack Kerouac (though without the gay sex, pot smoking, acid dropping, and melodious run on sentences). As a result of Money McBags’ travels, daily updates may be shorter and sparser than Vern Troyer at a Mensa convention or blow jobs to a married man as the years go by. That said, the markets are still open and even though this is a short week (and Money McBags poured some out yesterday for all the dead presidents, except for Andrew Johnson, he can eat a shit sandwich with an extra helping of “fuck you”), we still need to make profits, so while the updates may be more sporadic than a bulimic’s bowel movements, they will be here, so continue to check in during the day for updates. And if any of you have any ideas you’d like Money McBags to analyze, put them in the comments section and they will be tended to with the utmost care and proficiency.
As for the markets, the US was off on Monday but the rest of the world was open for business and markets were largely up led by commodities and Asia which has been rallying like Burt Reynolds in the 1980s (you know, when he was banging a still hot Loni Anderson and drawing the fuck out of some charades on Win, Lose or Draw). Asia was up for the 5th time in 6 days likely causing Jim Chanos’ erection to point due North as he can now short China at higher prices. Australian companies continued to put up good earnings as their second biggest lender, Westpac (unrelated to their second biggest rear ender, Fudgepac), saw a drop in defaults while profits rose by 33%. Australia’s economy continues to be healthier than an organic sprout sandwich with a side of extra bland at a Whole Foods or Carmen Kinsley’s ample backside.
And speaking of Whole Foods, they report today and the big question is what their organic growth will be like (bad and easy pun completely intended). Money McBags loves him some quality ingredients, but do people really need to pay a 50% premium for organic green beans? More to the point could those people even tell you what the difference between organic and regular food is other than Oprah said it’s better? Money McBags is willing to bet his high functioning sigmoid colon that the average WFMI shopper couldn’t tell you the difference between Carrot Top and a carrot top (the key difference being a carrot top is green, and funnier) and remains largely skeptical of most things organic, wondering how long WFMI can ride this trend especially as unemployment stays high and people get poor. That said, Money McBags would not be surprised by WFMI putting up a Kashi-tastic quarter even with reduced traffic due to all of the Prius recalls because the organic trend is still stronger than Tom Arnold’s breath after he went down on Roseanne in the late 1980s to get his career started or Money McBags’ feelings for that Heidi Montag train wreck’s new boobs. That said, unless WFMI raises estimates for 2010 to $1.70, Money McBags is going to stay away because there is no need for this company to trade at greater than 18x.
The market is bouncing back today even though it is a relatively quiet day news wise (though not as quiet as a Lindsay Lohan straight to video movie premier or a Trappist monk game of hide and seek). Pending home sales in the US rose 1% after falling 16% last month thanks to renewed tax credits and something called math. Sure the 1% rise is good, but it is still down 15% from October, so let’s not break open the bottles of Dom and tins of beluga just yet. The biggest problem with home sales is that frictional unemployment has dropped the frictional and is just plain old unemployment. People are no longer moving between jobs and thus moving to new houses because, to close the transitive logic, there are no jobs. Also, Paul Volcker is supposed to testify in front of the Senate Banking Committee today where the 82 year old will rant about proprietary trading at banks, how he used to walk 2 miles up hill both ways to get to school, and then wonder why none of the dames look like Clara Bow anymore. The banking industry awaits Lord Volcker’s testimony like a necrophiliac awaits the cremation of a loved one.
In global macro news, Australia held their interest rates flat which was somewhat of a surprise since their economy is healthier than a vial of Jack LaLanne‘s urine (and that is for my older readers, but I can assure you young’ens out there that there is nothing on this planet healthier than the dickwater of the workout guru Mr. LaLanne who even at the age of 96 still can still rip a man’s heart out with his pinky finger). For those sheltered Americans out there, Australia is more than just boomerangs, crocodiles, and Miranda Kerr and Patsy Kensit pillow fights (though if it were just Miranda Kerr-Patty Kensit pillow fights, that would be sufficient). For the past several years Australia has benefitted from being close enough to China to supply it with natural resources out the wazzou while serving as a middleman in the shipping/trade business. Additonally, their banks missed out on the opportunity to cut up packages of mortgages and sell them for additional yield by inflating the mortgage market through lending money to speculators who bought and then sold houses to other speculators who couldn’t afford the houses in what is known now as the subprime vicious circle (and the circle was even more vicious than a daisy chain at an overeaters anonymous meeting). The point being, Australia has had a robust economy during this downturn and thus Australia holding their rates is a bit of a good sign that inflation is not running away, but it is more likely just a pause in their monetary rate hikes
As for stocks, Lexmark put up a huge quarter tripling earnings to $.76 a share and giving guidance for next Q of $.80, thus besting the $.62 earnings per share estimates. The printer maker also beat revenue projections and attributed their success to strong customer demand and the fact that HP makes such shitty printers. UPS also saw profits triple, yet their topline was down 2.5% and their CFO said the first quarter ”will be the most challenging of the year.” He then said it will be more challenging than the time they tried to ship a plane full of angry circus bears who hadn’t eaten in a week. However, the CEO said “It looks like this recession is finally over,” so I guess there’s nothing to see here.
In small cap news, ARTG was upgraded or maintained at strong buy today by most analysts on the street even though they chose to dilute shareholders yesterday like ice cubes in a Makers Mark at an overpriced NYC bar. Money McBags addressed this in yesterday’s Midday Report and its comments section, but ARTG has plenty of cash on their balance sheet so the capital raise is likely for a big acquisition and thus investors need have confidence in ARTG’s management team’s ability to negotiate and integrate a large deal before they become shareholders. Estimates are for around $.20 earnings for 2010 but $.25 could be reasonable so the stock isn’t expensive (nor extremely cheap) at 16x to 20x earnings. COOL is up 5% today as investors perhaps forgot the assrapingly bad Q they recently put up (here were Money McBags thoughts) though this should give shorts a better entry point. And TSYS was initiated as a buy by JP Morgan and a $12 price target and this is a company Money McBags has followed off and on for a while and used to own. They basically provide licenses for text messaging to carriers, location based services (like E911), and satcom solutions for the government. You really only need to know that text messaging is still growing 100% a year (TSYS powered almost 2B messages a day last year, which is fuckload of teenagers saying “cu l8r”) and they provide gateways for carriers to be able send these volumes of text messages. These licenses are sold as a step function so the company’s revenues haven’t scaled lockstep with the exponential growth of text messaging, plus there is competition and the pricing keeps coming down. That said, they did recently get a new deal with Verizon and their government business has been a solid performer. Estimates are for TSYS to earn $80MM of EBITDA in 2010 and they are currently trading at around 6.5x EV/EBITA. That is very cheap for a company that can still grow 20%+ (though the growth rate has been declining and that is not all organic growth). Today may be a good entry point though as the stock has been trading down and earnings are in two days so the JP Morgan analyst would not want to release a glowing report of the company two days before earnings were he/she not confident in the numbers. Now look, Money McBags is prone to mocking analysts like Adam Sandler is prone to starring in bad movies and Alexis Texas is prone to having to try on many pairs of jeans until she finds a pair to properly fit her best asset, so having faith in this JP Morgan analyst is a bit hypocritcial (though not as hypocritical as Larry Craig’s gay rights (wide) voting stance), but the timing of the report should be a signal that TSYS’s Q will be good or else the JP Morgan analyst is a complete dope (and unfortunately we can’t rule that out, so let’s say a 25% chance because JP Morgan is mildly reputable). It may be worth picking up some shares for at worst a trade. Money McBags does not own TSYS right now but may buy some before earnings after he does some more digging. If any of you have done work recently on TSYS, feel free to share with the rest of us, and if any of you have Hayley Atwell‘s phone number, feel free to share that too.