Posts tagged BIDU
Fuck yeah was it on today as the cry of “1400 or Bust!” rang through the trading pits (and if it is Melissa Archer’s bust, well, then Money McBags may have to be rooting with his shorts) like other momentous rallying cries such as “The British are coming,” “Remember the Alamo,” and “Who Let the Dogs Out.” That’s right. despite 2MM people protesting in the streets of Egypt demanding that Mubarak let their people earn dough as Egyptians have grown sick and tired of being poor, sick and tired of seeing food prices rise, and sick and tired of having to root for the Pistons (whoops, that’s Detroit, but Egypt-Detroit, potato-potahto. Actually, it’s probably safer to walk the streets of Cairo than Detroit and with much less hobo smell), the market rallied as if it had downed a case of Four Loko spiked with ample amounts of Red Bull and Charlie Sheen’s urine.
With global unrest now a catalyst for the market to go up in the bizarro ponzeconomy™ in which we live where fundamentals have been trumped by regression analysis on historical time periods that look nothing like today’s period, regularly scheduled government bond purchases inflate paper portfolios more than Timothy Geithner’s ego or Lacy Banghard‘s bra, and crossing one’s fingers and hoping it doesn’t hurt is the leading investment strategy, Money McBags guesses all one can do is buy the dip, buy the rip, and buy everything with more beta than a blue chip. Just be ready to get the fuck out before the tattered curtain is peeled back exposing this run up for the Fed induced manipulation it has really been.
Anyway, other than a sovereign nation with touch points to the global energy supply imploding (though not nearly as important these touch points), macro news was rather quiet today. The ISM’s manufacturing report showed that factory activity in the US rose to 60.8 last month which was up from 58.5 in December and was higher than even the highest analyst guess of 59.5 as analysts thought they were playing by the rules of The Price is Right and thus going over would cause them to lose (though what they would lose other than their credibility Money McBags doesn’t know, and yes that is funny because they have no credibility). Money McBags just loves to point out when shit like this happens because in theory with 78 analysts guessing (which should be a large enough sample size), the actual number should be somewhere within the normal curve of guesses, but this result wasn’t even within a fat-tailed standard deviation of the mean which means (pun intended) that those models are either fucked (and if there will be any model fucking, Money McBags hopes that Marissa Miller will be involved) or the measurement is fucked, or more likely, both. The most interesting part of the data though was that the pricing index went from 72.5 to 81.5 and it’s a good thing that Bernanke said inflation is not a problem, because otherwise Money McBags would be more nervous than if he had gotten mouthy with Julie Schenecker (and yes that is sarcasm).
The only other macro news was that construction spending fell to its lowest level in a decade, and if that doesn’t scream recovery then Money McBags’ name isn’t Money McBags (hmmmm). Construction spend fell by 2.5% which was worse than analyst guesses of a .1% rise, once again outside of the entire range of guesses, and about as healthy for the economy as a cancer sandwich with an extra topping of AIDS and Mickey Rourke’s taint. While every sector was down, the biggest drop came in federal construction which fell 12% as the government moved its funds to more pertinent ventures like producing food stamps and new rims for Joe Biden’s Camaro.
In the market, earnings were mostly positive as UPS delivered a solid Q and beat estimates thanks to package volume rising 1.7% which was the result of business picking up and better use of the Maxtender. EPS was up 44% to $1.08, which beat analyst guesses of $1.05, and full year forecasts for eps were a range of $4.12 to $4.35 which would be ~20% growth, ahead of analyst guesses, and a result of strong orders for the Tila Tequila sex tape to be shipped overnight.
Elsewhere, Pfizer was up 5% after a good Q and an announcement that they will slash their R&D budget in 2012, buyback an additional $5B in shares, and try to produce drugs that treat only patients not using a medicaid discount. And finally, Baidu searched for and found a ginormous quarter as their their profit tripled and their market share in China rose to ~73% as inflation pushes up more than just currency.
In small cap news, everything was up including KITD which closed up ~6% a day after their strange set of acquisitions which Money McBags broke down in great detail yesterday. Speaking of Money McBags’ breakdowns (other than the mental one he is currently having over the death of the only positive thing he had in his life, NSFW muff guessing. He’d say more about this but right now the wound is too fresh and his pole is at half mast as a way to mourn), when he analyzed CRUS’ Q last week, he erroneously said they weren’t supplying chips to the iPad which was just flat out wrong. Shit, it was a fucking douchewad mistake, but Money McBags simply missed the iPad product breakdown a few months ago and he hadn’t gone back through the latest delightful presentation on the CRUS investor page (and note to readers, their presentation is actually a really good introduction to the company for new investors because the CEO has a voice over on all of the slides so you’re not just looking at out of context data, but you are hearing about it as well).
Anyway, if Money McBags read and listened correctly, CRUS currently has 5 custom ICs they sell to Apple so that does damper his bullishness a bit as he thought getting in to the iPad would be a step function up for them (which it likely was, but now we’re still on that step). The important question is whether Malene Espensen will ever return Money McBags’ overtures, but the relevant question is can CRUS get more than 5 ICs in to Apple products to get that next leg of audio growth (perhaps their third leg if you will, after the smartphone and the tablet). Regardless, Money McBasgs thinks CRUS is a company that is working right now because they sell a product to the company that is currently dominating the world (like selling gold chains to MR. T in 1984) so they should continue to have success but they are no longer stupid cheap and need find new areas of growth.
Finally, Money McBags was set to break down NEI’s Q today, but he got busy doing other shit and is now more tired than his dick jokes. He went through their Q, updated his model, and found just the right picture of Danica Thrall, but he simply doesn’t have the time right now to give it the write-up it deserves. He will shoot to have this tomorrow, but the basic story is he thinks there is ~10% downside now and 100% upside but it is 90% likely to just do nothing as it’s not what Money McBags would call a high quality company with any kind of disruptive technology, They are a little do shit services company that is winning bigger deals as they compete on price and they might be about to hit some strong growth which was foreshadowed by the expansion of their manufacturing in to Europe. So nothing about Money McBags’s thesis has changed, but he’ll hopefully get to the details tomorrow. Also, watch for SFLY earnings tomorrow. This company has been rocketing the fuck up and looks to be just cockposterously overvalued. Money McBags has never liked this name but he hasn’t paid much attention to them in a couple of years, so he really has no opinion going in to earnings. His gut tells him they are going to have a big Q (because everything else has) but with the way they are priced, a miss should cause a big sell off, like Pam Anderson‘s career once she turned 35. So the name should be volatile either way and Money McBags is curious to dig in because if they miss, it could be a good short candidate.
The market was mixed today as fears of currency wars formed the yin to earnings beats’ yang (or the teeth to earnings beats’ hummer if you will) and with macro data more non-existent than Mel Gibson’s career, there wasn’t much for the Street to manipulate. That said, a number of US officials were in the spotlight today sharing their views on the economy.
First of all, Tim Geithner wrote a letter to fellow finance ministers at the G20 meetings (though unclear if it was SWAK) where he urged countries to keep their current account balances below 4% of GDP and stay the fuck off of his front lawn. The idea was Geithner’s way of trying to find a backdoor solution (other than more lube or an extra pillow to bite) to try to avoid the wave of global currency manipulation, especially with the dollars’ upcoming plunge with QE2 on the way. Unfortunately, his suggestion was met with a more tepid response than Jaleel White‘s comeback as countries with large trade surpluses like Germany and Japan don’t want to be held to any kind of hard targets.
Elsewhere, the president of the Fed Bank of Dallas, the honorable Dick Fisher (which sounds like the name of an Atlantis cruise ship) told Bloomberg that the Fed needs to be mindful of the impact that their decisions have on the dollar while also maintaining that no decisions have been formally made about more quantitative easing. He then informed the interviewer that he had to go as his unicorn was impatiently waiting outside to take him back to the land of “you’re so fucking gullible.”
In addition to Dick Fisher getting a bit flaccid on QE2, noted Fed turd in the punch bowl Thomas “T. Ho” Hoenig got his gangsta on and told an audience in Albequerque, New Mexico that the Fed needs to be wary of excess liquidity because it can fuck a market worse than he fucks his bottom bitch. T Ho opined “My experience tells me that if you wait until you’re absolutely certain that everything is fine, you waited too long” and followed with “My experience also tells me that “no” don’t always mean “no,” and most Fed Bankers ain’t shit but hoes and tricks. You hear that Benny?”
And kind readers, on Wednesday (also known as hump day or as we call it in the offices of the award winning When Genius Prevailed, Spankwire.com day) you should recall that Money McBags commented on the fantastic returns the government made on their bank and insurance TARP spend. Well today, data was out about the toxic mortgages the Treasury has been buying and the data is even fucking better. The Treasury so far has had a 36% return on their purchases of toxic mortgages in their Public-Private Investment Program (PPIP) which gives Money McBags’ newly established party, Bail Outs Get Us Savings (BOGUS for short), even more fucking street cred. Money McBags’ new party boasts the greatest idea for the government to get out of debt since hyperinflation and selling pet rocks.
What Money McBags proposes to do is to first cut off all unemployment insurance thus killing mortgage payments, strangling consumer spend, and crippling companies. Then he will tax the shit out of exports in order to make US businesses even less competitive. While this all sounds as dumb as giving a shit about finding a more humane way to kill chickens or an episode of “Are You Smarter than a Christine O’Donnell Supporter” (where the questions will range from “name a current Senator,” to “the First Amendment calls for the separation of Church and State per the Supreme Court’s ruling: True or definitely true?,” to “name a color that rhymes with nurple?”), but stick with Money McBags here for a second. Using the current fiscal system that relies on borrowing from China, increasing the spiraling debt, and “printing money” to continually add juice to the market, the country is destined to continue to flounder as that has proven to be more of a losing strategy than challenging George Michael to a game of gay chicken.
So what Money McBags is proposing is for the government to do what it does best: Step one: Ruin the economy. And we’re not going beat around the bush about it this time, we’re going all out. No financial regulation, no safety nets, and the fewer documents the better. Step 2. Bail companies the fuck out. Step 3. Profit. It’s much more sensible than stealing underpants and as we’ve seen from the TARP and PPIP returns, it works a fuckload better as well.
Sure it might not do much for main street in the short term (or the long term), and sure there is a little something called moral hazard, and yeah the FNM and FRE bail outs may cost taxpayers $300B which outweigh the gains from the other bailouts, but those are just shortsighted details. Come on, we’re talking about a 35% fucking return on troubled assets and an 8% return on bailed out banks. So suck on that Warren Buffett. Those type of earnings can put plenty of pork on the table so next time you go to vote, don’t vote for the status quo, vote “none of the above” and write in Money McBags from the BOGUS party as he promises to restore prosperity one bailed out company at a time. That said, Money McBags could use some help on his campaign slogans, he is deciding between: “Bail outs we can believe in,” “To let interest accrue and transfer it too,” or “Ma Ma, where’s the law? Gone to bail outs ha ha ha.”
In stock news, AMZN was up after the company beat guesses yesterday and analysts upgraded the stock from “really fucking overvalued” to “really fucking overvalued but you should buy even more of it.” The company grew top line 39% as sales of the Kindle continue to rise as Americans grow tired of having to lug both People magazine and US Weekly around on their staycations.
Elsewhere BIDU jumped ~5% after another strong quarter as Chinese people increasingly search the fuck out of shit. AXP charged off by ~2% as even though they beat analyst guesses thanks to a huge reserve release (where they followed the rest of the financial sector’s lead in manipulating earnings on weak revenues and now won’t be ready for the next round of defaults). That said, the stock traded down as investors worry about the anti-trust suit filed by the federal government against the company for what Money McBags is told is technically being called: “running your network like a bunch of douchnozzles.” Finally, Schlumberger served up some turdburgers to anyone who was short the company by rising ~5% on the strength of a solid Q (and yeah, that joked sucked, but you got anything better for Schlumberger?).
In small cap news, EPAY put up a nice Q and Money McBags pointed out this interesting little company when he broke down their last Q a few months ago and they are up ~20% since then. In their fiscal Q1 release today, revenue was up 15% to ~$42MM driven by a 39% rise in subscription and transaction revenue to ~$11MM (and to get that kind of growth, they must have been selling subscriptions to walking walking tours of NY or India Reynolds’ vagina). Core net income was up 26% yielding $.27 eps which was up $.03 sequentially on basically flat sequential growth so they are getting some operating leverage. Cash was up by ~$14MM to $135MM and they continue to have no debt with $24MM of FCF in the last 12 months. So all pretty fucking nice.
That said, their guidance was a bit underwhelming with revenue for $172MM to $175MM for the fiscal year (which was up a bit from last Q) and eps ~$1.02 which is down from the $1.20 Money McBags triangulated from their 20% net income growth guidance last Q (though to be fair, he even questioned that calc last Q before saying ~$1.11 sounded more reasonable). They also claimed eps will be down sequentially next Q because they will be paying a higher tax rate (so Money McBags recommends they do what GOOG did by shifting revenue overseas to avoid paying taxes in strategies known to lawyers as the “Double Irish” and the “Dutch Sandwich” which are probably more lucrative than either “Irish goggles” or a “Dutch milkshake” but only half the fun). So the company should earn ~$1.00 to $1.10 on the high end but is basically forecasting the next 4Qs to look exactly like the previous 2Qs, which is fine, but less interesting than youth league soccer or watching ants hump (unless one of the ants has a huge coxa).
Anyway, the company was very cheap and now it is about fairly priced for its growth (or lack of) by trading at ~17x guidance though they do have ~$4.25 of cash per share on the balance sheet so ex. that they are trading ~13x fiscal year guidance. It’s not a horrible name to own because they still have three areas of growth including: 1. General market dynamics as the payment industry continues to move away from paper and to electronic payments. 2. The Paymode network they acquired from BAC is just starting to gain steam which would be very nice upside if they can sign some more big banks (and on the call they said “We are also in active discussions with several new bank partners who could potentially adapt and resell the Paymode-X platform,” so that is pretty positive). and 3. they are going to make an acquisition with their excess cash.
That said, the fact that this company may make a large acquisition worries Money McBags a bit and makes it almost impossible to value their business because it’s not clear what their balance sheet or earnings will look like after a deal (though hopefully it won’t look like this). So Money McBags is fine-ish if you want to own this company, because there is potential upside, that said, he’s not sure when that upside hits, and there are some risks (especially as banks are their biggest customers and bank spend could be fucked any day now). So do with EPAY what you will but their longer term outlook should be reasonable (unless they fuck up an acquisition).
4/29/10 Midday Report: HP thinks it bought a rosy PALM, no word on whether they will also buy her five sisters
The rally is back on thanks to solid earnings, Greece likely getting bailed out again (for now), and the FED reaffirming their promise to keep rates low until the next bubble. Not only that, but new claims for unemployment were down by 11k which was just shy of analyst guesses and just shy of asking Kristen Bell out on a date. In financial news, Republicans voted to finally allow debate on financial reform because somehow the good of the country became more important than the search for birth certificates, reigning in wide stances, and understanding what about tea bagging is so appealing to Sarah Palin. Money McBags hopes there will be real reform like you know, requiring reserves to be held on insurance contracts more commonly known as CDS, limiting the size of financial institutions, and closing down the ratings agencies whose business models incent them to do the opposite of give unbiased ratings and who sucked at their jobs like a blind skeet shooter or a fluff girl on the set of a Sabrina Johnson record breaking film. While there is no doubt Wall Street will eventually find the loopholes in any regulation because greed is a dish best served with caviar, Dom Perignon, and peach cobbler (the first definition of course) and that shit ain’t cheap, at least the government can make it a bit harder. Money McBags is all for the Volcker rule, for hedge fund regulation, and for derivatives regulation even if the last one may cause Warren Buffett like a millisecond of a sleepless night on his mattress made of gold and the tears of baby bald eagles. The SEC’s new found ballsac is refreshing and Money McBags hopes they are serious about regulating the markets and watching porn instead of just watching porn (unless it is first time lesbian porn, and then Money McBags understands).
Internationally, Greek is getting some drachma again as the IMF promised to raise their bailout funds from 45B euros to 120B over 3 years. However, as part of the stipulation for getting funding, Greece is going to have to put in place stricter austerity plans and better track and report their finances by allowing the IMF to inspect their “cash boxes” once a year on the island of Lesbos. Greek Prime Minister George Papandreou was said to have started negotiating with labor unions to cut two of their fourteen monthly salaries, to institute higher value added taxes, and to require they work longer than three hour work weeks. The real question is whether German Chancellor Angela Merkel stops being a sour kraut and agrees to help with the bailout or if she continues to waffle in hopes of maintaining support in Germany to propel her party to victory in the upcoming North Rhine-Westphalia election. That’s right, Merkel is letting Greece, Europe, and the global markets dangle in the wind because of some do shit election in a country that isn’t going to even exist should Europe go bankrupt. Angela, be a good girl and come listen to Money McBags. I know it is fiscally irresponsible to continue with the steroidal Wimpy strategy of getting a hamburger today and paying for ten of them on Tuesday, I know you want to stay in power (though Germans fighting for power scares the gifelte fish out of Money McBags), but sometimes you have to do stupid stuff for the greater fucking good. Yeah, Greece acted less fiscally responsible than Stephen Baldwin or a homeless crack addict on pay day, but as the great Zeno Cosini once said “complete freedom consists of being able to do what you like, provided you also do something you like less.” So fucking lend Greece the damn money already and enjoy the freedom to have a European economy. Now go get me a Kreppel but go light on the powdered sugar because Money McBags hates getting that shit on his fingers.
In stock news earnings were so jizztastic that the market is now expecting octuplets. But before we even get to earnings, HP is buying PALM for $1.2B in a move that had been rumored for weeks. Money McBags gets why HP did it as PALM has a good ass operating system and HPQ has the means to try to make it work with better hardware and distribution, but going after AAPL and Blackberry and GOOG is kind of like buying Dr. Pepper and trying to take on KO and PEP or thinking you can beat Lisa Ann and Alexis Texas in a nice ass contest relying on only the Butt Blaster and not implants. The handset market is more fully penetrated than Bridget the Midget in a tryst with Lexington Steele so sure you might get a little market share with HP behind a Pre-type phone/operating system, but $1.2B seems like a lot to pay for a company that was dying. Anyway, in other stock news MOT put up a quarter that beat on the bottom line thanks to aggressive cost cutting which did away with lobster thermidor Thursdays in the executive cafe. Mobile phone shipments fell 43% despite the rise in smartphone sales but the company’s guidance of $.07 to $.09 eps next Q was well ahead of analyst guesses of $.03 eps. BIDU also put up a ridonkulous quarter as chinese people apparently searched for more than just their freedom. Their profit was up 165% and BIDU’s market share in China rose by 600bps to 64% thanks to GOOG’s exit from the chinese market and thanks to Olivia Munn’s new billboard which was posted online. Other companies that beat earnings include V, HOT, FSLR, and anyone who sold anything anywhere over the last three months.
In small cap news CRUS continues to run while Money McBags’ largest small cap holding KITD is breaking out like Cameron Diaz’s face after a pepperoni pizza. Money McBags has blogged about this so many times that he is risking being more repetitive than a stutterer reading a tongue twister, so he will spare you the details (just use the search function on When Genius Prevails), but this stock is easily worth $20. They had a call the other day about the $50MM capital raise they just did and basically said it is a war chest to help them fend off Brightcove for acquisitions as Brightcove is going public, any deal they make will be immediately accretive and between 5% and 15% of revenue, they are still targeting 60% organic growth, and world domination is only months aways. Ok, that last one was made up but the point is the video asset management space is more fragmented than J Howard Marshall’s beneficiaries and KITD is in a strong position to help roll it up while putting on it’s nicest Sunday dress to appeal to buyers (and yes, KITD will be acquired in the next 1-3 years, that is the play). And it’s still not too late to get in. Money McBags has purchased three times and if you look at the archives, the first time was at ~$10 so hopefully you’re all doing well on this too. In other small cap news, another Money McBags holding, CTGX, put up a decent Q the other day. Money McBags broke down CTGX on 2/22/10 so read the full analysis there but the story is they are basically a shitty IT services/staffing outsourcing business with a growing health care IT focus and a specialty in installing electronic medical records. It’s a bit like Y2K IT firms in 2000 in that there is a specific event (hospitals moving to EMR) that will last a finite time (though probably 3 to 7 years starting in 2011), but there are only a few firms who can do this and CTGX is the lowest priced one with the best service. In this last quarter they finally saw revenue growth after a number of down quarters due to business spend going away in the recession like an 18 year old wanna be actress’ dignity on her first casting couch. Revenue was up 5%, operating income was up 28%, operating margin increased to 3.9%, and eps was $.11. No real surprises but a nice sold quarter and that is all we’re playing for right now. Just keep ticking along until hospitals spend their stimulus money and seek out IT professionals to give them the MANDATED EMR systems (and yes, caps were intentional because hospitals are required to have EMR systems up by 2015). The best news is that they said they closed a significant multi-year deal with a large physician practice for EMR, EMR proposal activity is accelerating, and “the first portion of the $19 billion in federal stimulus funds allocated to EMRs has been released to help states advance EMR projects.” Guidance was raised a bit for 2010 to 15% topline growth and EPS between $.47 and $.55, but if you go back and read Money McBags’ archives, you’ll know that 2010 is irrelevant. It is not until 2011 that EMR will hit for them and as those projects have greater than 10% margins and bring in $2MM to $3MM of revenue per year, it is not inconceivable that CTGX can earn an incremental ~$.25 per share in 2011 from EMR and thus if they just hold their main business steady (though it should increase if businesses start spending again), they could earn $.75 and thus are only trading at ~11.5x that despite the possibility for >50% growth. It’s still early for this stock but now is the time to get in before it takes off.
2/10/10 Midday Report: Bernanke’s statement stuns meteorologists, causes it to rain on market’s parade in the middle of a snowstorm
The big news moving the market down today was the statement from Ben Bernanke about the FED’s future policy plans. Bernanke was supposed to testify in front of the House Financial Services Committee but the snow storm in Washington caused the hearing to be postponed giving Barney Frank more time to make snow angels and less time to suck at his job. Bernanke did release his full statement which serves to make Crime and Punishment read like a fucking Dr. Seuss book (I will kill her with an axe, I will kill her with hot wax. It will be an act of enormous enormance! No rational performer’s performed this performance!). I’m not saying it was boring to read, but Ambien is said to be suing Bernanke’s statement for patent infringement. However, since Money McBags is here to serve the people, he made it through the whole statement and can sum it up in fourteen words: “We did a bunch of shit, now we are going to try other shit.” The important parts are that eventually rates will rise (duh), though not in the immediate future, and in the meantime, the FED will investigate other ways to control interest rates and bank lending, such as paying banks interest on reserve balances held at the FED. Below are Bernanke’s actual words on this (no jokes, real information):
“By increasing the interest rate on reserves, the Federal Reserve will be able to put significant upward pressure on all short-term interest rates, as banks will not supply short-term funds to the money markets at rates significantly below what they can earn by holding reserves at the Federal Reserve Banks. Actual and prospective increases in short-term interest rates will be reflected in turn in longer- term interest rates and in financial conditions more generally”
The FED has also been developing a number of additional tools to use to reduce the large quantity of reserves held by the banking system. Those tools include offering term deposits, selling securities, and using reverse repos and their more deliciously effective cousin, the reverse cowboy.
In macro news, the US trade deficit increased, widening to $40B as both exports and imports increased. However, the rise in the dollar over the last couple of months may be hurting export growth in a classic Catch-22 situation, like mark to market accounting for bank balance sheets in a declining asset economy or finding Gia Carangi in your bed in 1985 and not having any condoms. While the trade gap was driven to some degree by a larger quantity of petroleum being imported, and while a 3% growth in exports is still growth, the US needs exports to take off like a young Milton Friedman in the mid 1940s in the University of Chicago Economics department where he proved the hypothesis that chicks dig rising permanent income (generally speaking).
Internationally, China’s exports grew 21% while imports grew 85%. Container companies were said to have raised their shipping rates as export growth is causing steel containers to become more scarce in China than Andrew Johnson supporters in 1867 or female smurfs. The export growth in China has increased the calls to unpeg the renminbi and let it float to reflect its actual value, of course if it were up to Money McBags, he would just peg all currency to the the Vietnamese Dong (and yes, learning that Vietnam’s currency is named the dong was pure comic gold for Money McBags, like whe he ran in to Tiger Wang on linkedin. Of course it does make Money McBags wonder if Lexington Steele would be the richest man in Vietnam due to the amount of dong he carries. Thanks, and don’t forget to tip the waitress, though not too much because she has a bit of vertigo).
And we can’t forget about Greece where civil servants went on strike and walked off the job for 24 hours thus shutting down airports, hospitals, and schools, in their attempt to become Camden, New Jersey. The EU’s bailout will force the country to freeze salaries, raise the retirement age, and require citizens to purchase deodorant. But it’s nice to see the workers protesting these cuts becuase I am sure they didn’t receive any benefits from the enormous amount of debt taken on by the Greek government (and yes that was sarcasm).
In stock news, The New York Times had a quarter that beat expectations but the company continues to run a declining and outdated business. Their newspaper advertising revenue was down 17%, slightly better than the 30% decline from the first three quarters of the year, but still about as good as Emo Phillips hosting a Def Comedy Jam remake or Jennifer Love Hewitt’s ass. New director of strategy, Phil Von Werescrewed, said “we expect the newspaper advertising revenue to level out any quarter now, unfortunately that level is going to be zero, so we’re actively looking at new ways to be profitable, like shutting down, or restarting out dauggerotype business.” In comparison to the Times’ 1940′s business, BIDU announced first quarter revenues to be above estimates as they gained advertising dollars from Google’s potential pull out of China (which would make GOOG the most famous thing to pull out of Chyna since Triple H).
In small cap news, DFZ continues to rise after their huge Q which Money McBags broke down for you yesterday. Money McBags did have a chance to go through their call last night and it all sounded pretty good. They did say they expect to be unprofitable for the next six months which is consistent with previous years as the first six months of the calendar year is mostly replacement and replenishment business (hence their desire to make an acquisition to counter the seasonality of the slipper business). However, they did guide for slight revenue growth, though to be somewhat offset by an increase in marketing, but gross margins should be over 40% for the year, operating margins between 10% and 12%, and they are having no input pricing issues in China. The company has earned $.95 so far this year, so let’s just call it $.90 in total for the fiscal year assuming a loss of $.05 in the next two quarters (though Money McBags thinks they might actually earn a profit with international sales increasing and the Dearfoam brand getting increased marketing, but whatever). They are now trading at 11x this number which is for the fiscal year ending in June (so not even really forward earnings). That is a ridiculously low multiple for a cheap growing company with a solid balance sheet. Money McBags thinks this is at a minimum at $12 stock but could easily see $15 if they continue to execute.
1/13/10 Midday Report: Google threatens to pull out of China, claims “not properly protected,” but does offer to finish on China’s back
With macro news today apparently scarcer than free speech in Chinese search engines or free standing buildings in Haiti (too soon?), the big news moving the market is Google’s threat to leave China after China left the toilet seat up one too many times and refused to take out the trash. Google’s panties are currently in a bunch (and honestly, this is why Money McBags suggests young ladies wear thongs) over sophisticated cyber attacks on the company and human rights advocates originating from somewhere in China (and investigators may want to start by looking in the offices of a certain chinese internet company that rhymes with Shmaidu). Google issued a statement claiming they now know “it is China pretending to be the Nigerian Prince, and we will not fall for that again. Though we would like our $1k back.” GOOG’s threat to leave China (where they have 33% market share) has shares of BIDU soaring like the price of tequila on Cinco de Mayo. BIDU is the #1 internet search provider in China with about 2/3 of the market so GOOG’s potential exit should turn them into a monopoly, or as the Chinese call it, government. Estimates are that GOOG may lose $600MM in annual revenue by leaving China, which isn’t much considering they had $22B in revenue last year, but as China is a potential larger area of growth than the front of Lexington Steele’s pants, a departure could have longer term implications. The guess here is that a sell-off in GOOG will create a good buying opportunity for long term investors as GOOG and China will find a way to get back together and once again enjoy candlelight dinners over hot bowls of the famous Chinese delicacy, Cream of Sum Yung Gai.
In other market news, bank CEOs are sitting in front of congress and letting congress have their way with them like starry eyed young ladies in a Bangbus video. No word on whether when the questioning is over, banking CEOs will be allowed to switch seats with the congressmen and ask them the same pointed questions about their pitiful job performance. The highlight of the day has been Morgan Stanley CEO John Mack claiming “Many firms were too highly leveraged,” which is a bit like OJ saying the knife was too sharp or Ken Lay claiming some accounting rules were too vague. There has also been a bit of disagreement with Goldman Sachs CEO Lloyd “Big Tank” Blankfein claiming mark to market accounting helped them avoid some of the pitfalls while new BAC CEO Brian Moynihan correctly pointed out that mark to market accounting exacerbated the downfall. Marking illiquid securities to a crumbling market where clearing prices were non-existent or less steeped in reality than Bernie Madoff’s profits, and then requiring reserves to be raised to fill in these fictitious book value declines is the most underreported non-sensical catch-22 of the entire market collapse. It made less sense than a Thomas Pynchon novel or raisinets (seriously, chocolate covered raisins? Why not just piss on the chocolate too?).
In stock news, Kraft raised their outlook and simply claimed “umm guys, haven’t you seen all of the fucking fat people in this country? You know we make Oreos, right?” while financials have bounced around today with analysts on the street now saying investment banking profits may not be so outsized this quarter as fixed income revenues fell with decreased volatility. This has caused Goldman to dial up the White House on their special diamond encrusted phone and tell them to “freak everyone out again, daddy needs the new Apple Tablet when it comes out.”
Finally, Money McBags wrote about EBIX in this space just a few short days ago. In his write-up, he mentioned his concerns about the company: “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” and yet said he was willing to overlook those issues as the company remained cheap. Well my friends, Money McBags has lost his appetite for EBIX. After reading CFRA’s scathing short report citing EBIX’s changing of auditors, accounting irregularities, and potentially misleading topline growth, Money McBags just doesn’t want to be involved and is trading out of his position. While CFRA could be wrong, Money McBags has no edge on this company and does not want to get into a “he said-she said” with a company in which he already expressed some real concerns. One could stay long EBIX and hedge it with long-dated out of the money puts, but one could also walk around town with no pants screaming “free lunch,” so one could do many different things. If the company is operating as they say they are, EBIX is a phenomenal buy, but Money McBags prefers to invest in companies in which he can be more confident (and yes, Money McBags owns RICK which is always one champagne room hummer away from massive litigation, so he realizes the potential folly of his previous statement). So do your own research, but be aware that Money McBags is no longer involved in EBIX. It could be a great buy here as short stories can create unheard of buying opportunities, like a 2007 Ashley Dupre, but you need to have more confidence than Money McBags currently does.