Posts tagged Buffett
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.
First of all, apologies for the fuckawful headline pun, but some days you simply have to play the cards you are dealt. That said, the market was quiet today as it digested marginal macro news and even more marginal earnings news while it continues to wait for next week’s QE2 which promises to be a worse proposed sequel than Amistad II: The Return Trip Home.
On the QE2 front, New York Fed President and voting member of the FOMC William “Dollar Bill” Dudley got his college on today at Cornell University (known as the Harvard of Ithaca, NY) where in a speech he said “The Fed cannot wave a magic wand and make the problems remaining from the preceding period of excess vanish immediately.” He then explained “For the millionth time, we’re not magicians, we’re fucking witch doctors so we don’t waive magic wands, we dance around fires and chant incantations to the great Jobu. Come on people, that’s Wiccan 101 shit for you.”
Dudley went on to say that QE2 would be unwarranted unless “the economic outlook were to evolve in a way that made me more confident we would see better outcomes for both employment and inflation before too long.“ And with that, Money McBags can see why some teabaggers want the Fed to be shut down since evolution is a myth and thus the economy can’t evolve, it can only intelligently design itself to something better and do you trust these people to design anything intelligently?
As far as tangible macro news, consumer confidence rose slightly last month off of an unsurprisingly downwardly revised number and still remains near record lows as most consumers are only confident that the economy is getting worse than Bob Guccione‘s lungs (and Money McBags tips his jimmy hat to the great media mogul). Digging in to the number shows that the “jobs hard to get” index rose to 46.1% from 45.8%, the “jobs plentiful” index slipped to 3.5% from 3.8%, and the “jobs you’re never going to get again” index rose to “oh fuck I’m screwed.”
In other macro news, the Case Schiller index weakened, in what Money McBags calls the “no shit Sherlock” fact of the day. While the index rose 1.7% y/y which was below analyst guesses of 2.1%, it fell .2% sequentially or .3% on a seasonally adjusted basis. But here is what Money McBags loves most about the data, per the NY Times “S.& P. announced earlier this year that the unadjusted numbers were a more reliable indicator.” So riddle Money McBags this Mr. Case, Mr. Schiller, and Standard and fucking Poor’s, if the seasonally adjusted numbers are a worse indicator than the non-seasonally adjusted numbers, WHY THE FUCK DO YOU BOTHER ADJUSTING THEM? That is more mind boggling than the fact that they just now stopped making the Sony Walkman.
Seriously, why take shitty, dated, questionable data in the first place, and manipulate that data to make it even more worthless? It’s like whatever the opposite of putting lipstick on a pig is (perhaps putting Rosie O’Donnell in a bikini or Alan Greenspan on CNBC?). So while the adjustment didn’t matter this month, making data worse and then presenting that data as relevant can be more misleading than something called naked table building (which apparently involves no nudity, but plenty of wood), so why it is done is more perplexing to Money McBags than anything involving Randy Quaid.
One other piece of interesting news is that Warren Buffett, the original inspiration for the hit show Sister Wives, picked a successor to run the investment side of Berkshire Hathaway, a company that never saw a bail out it couldn’t manipulate. The successor is a 39 year old named Todd Combs (and we’re told he’s no relation to Sean “Puffy” Combs) who won the competition to be the next curmudgeon after blowing Buffett away with his financial stock selections, his refusal to tip more than 13% for subpar service, and his stunning closing statement in the debate part of the competition where he vociferously argued the affirmative side of “Dodd was Graham’s bitch.”
Internationally, Standard and Poor’s raised their outlook for Britain to AAA after running in to Lucy Pinder in a Heathrow bathroom. In addition to the ratings upgrade (though Money McBags cares what S&P rates Great Britain about as much as he cares what Stevie Wonder rates a fireworks show), Britain saw GDP expand by 0.8% from the previous quarter which was double analyst guesses and a result of the first dentist opening up shop in the country.
In the market, F posted their 6th consecutive profitable Q, announced they will be paying down debt, and then reiterated that GM and Chrysler are a bunch of ass hats. In WTF earnings of the day, Coach and Royal Caribbean Cruises both shot up 10%+ after putting up strong quarters in a signal that either the economy is not as weak as Money McBags thinks, or well, simply WTF? Elsewhere, steel makers were all down today as US Steel warned that demand was slowing, prices were falling, costs were rising, and no one is building shit anymore. And finally investment banking losses at UBS drove the stock down as revenue dropped in fixed income, currencies, commodities, and everything else people are no longer trading as they flock to gold while the market dances to beat of the algorithm of the night.
In small cap news, HSTM announced their Q yesterday and remember Money McBags talked about this stock a while ago as being cheap until it ran up in to the mid $6s and now is no longer such a great buy but still has some potential (kind of like Neve Campbell). As for their quarter, revenue was up ~18% to $16.6MM, operating income was up 57% to $1.7MM, and yes EPS was down by $.01 to $.04 because their tax valuation ran out so unlike last year, they had to pay Uncle Sam like the rest of us (well, that is all of us but Wesley Snipes). That said, their 53% tax rate seems exorbitant but it is what it is. The Q was essentially flat sequentially with gross profit margins down ~300bps to 62% and operating margins down to ~10% from 14% due to a pick up in Sales and Marketing costs which could be related to their SimVentures JV. With the quarter being more of he same, is there anything we should do with this company other than file it away for a rainy day selloff?
Well, updated guidance is for 12% to 14% growth for this year and with only one Q left, that means that revenue in Q4 will essentially be flat with the previous 2 Qs and up 11% y/y. Hold on, Money McBags is going to type more but he has to let out a big fucking YAWNNNNN, Ok, that’s better. Now guidance for operating income is for 30% growth and the tax rate to be ~45% which gets us to ~$.16 eps for the year and ~$.03 for next Q due to costs increasing a bit due to a SimVentures JV. So again, pretty fucking pedestrian, no matter what Craig-Hallum has to say with their bizzaro 8 year DCF model.
So look, lets say their learning segment keeps growing, they sign up some more hospitals, and maybe they get something out of SimVentures (which Money McBags understands less than Charlie Sheen understands moderation, but whatever), and they are able to push growth to 20% next year. If we use a 65% gross profit margin, juice up operating expenses to ~$9MM a Q, and tack on a 45% tax rate, we’re at ~$.30 in earnings per share, so the company is at >20x that which just seems too expensive. Yeah they have ~$1 per share of cash on the balance sheet and no debt so that is nice, but it does less for Money McBags than Minnie Driver.
So on superficial numbers, Money McBags isn’t changing his opinion that HSTM seems at best fairly valued, though most likely a bit expensive. That said, it is a nice little company that seems like it might have a competitive advantage in a growing market so if you can figure out how they can accelerate growth (maybe through SimVentures, maybe through more partnerships like they have with the American Nurses Association, or maybe by changing their whole business model to just selling taint tickles from Carmella Bing), perhaps Money McBags’ numbers are too low. If management is out there, shoot Money McBags an email at firstname.lastname@example.org and lets talk.
6/2/10 Midafternoon Report: Market runs in the late afternoon as it attempts to get home in time for Oprah
It was a relatively quiet day in the market today which is more of a rarity than a downward sloping supply curve, a funny Adam Sandler movie, or a bad picture of Olivia Munn. The market was up though as pending home sales shot through the roof, of course now someone will have to go back and fix the fucking roof so the buyers won’t back out, but those are just details. Home sales rocketed up 6% but the government first time home buyers tax credit ended in April so sales were likely more pulled forward than a lottery winner’s payout or the keg tap at David Hasselhoff’s house at breakfast. So while it is exciting that pending home sales went up, it’s way too early to suck each other’s dicks about it (though if you’re Alice Eve and it’s Money McBags dick, then it is never too early, or too often) as next month’s sales should be down appreciably, like Steven Rattner’s reputation or the mood at a suicide prevention hotline going away party. In other real estate news, mortgage applications fell for the 4th consecutive week and if you read the fucking analysis in the sentence directly before this, you will know why. And in the latest job report by some outplacement firm called Challenger, job cuts were just as bad as last month though 65% better than last year, so welcome to your new normal.
Also, Mr. Buffett went to Washington to meet with all of his GS cronies, I mean the federal government. Money McBags needs to stop getting those two confused. Buffett spoke to the Financial Crisis Inquiry Commission, or as it’s more commonly known as “Huh?” after being subpoenaed to testify about the ratings agencies and their utter failure to do anythng but suck at their jobs like a one legged long jumper. While Buffett has been selling his shares of MCO, he is still their largest shareholder so his testimony was about as unbiased as Joe Francis testifying about age of consent laws. Honestly, Money McBags finds it strange that the FCIC would give a shit what Buffett has to say about the ratings agencies since he’s not going to talk down his own book. It makes less sense than the Laffer Curve or Jennifer Connelly‘s acting career. And guess what? Buffett defended these assclowns who failed miserably at their jobs and served as bottom bitches for investment banks to manipulate the markets. To quote a CNBC article, Buffett said ratings agencies “”were wrong like everyone else” due to a widespread “bubble mentality” that believed housing prices couldn’t crash”. Wow. So let me get this straight, the ratings agencies who are paid NOT TO BE WRONG like everyone else because they are the SUPPOSED EXPERTS, fucked up just like everyone else. So riddle me this Mr. Oracle of Omaha, why the fuck would anyone pay these “experts” if they are providing the same information or reaching the same conclusions as everyone fucking else? WHAT THE FUCK ARE THEY EXPERTS IN? This is more perplexing than the fact that neither of the participants of Stocking-Huang wedding was stocking a “huang.” Money McBags knows Buffett needs to keep MCO stock propped up so he can sell it, but there is absolutely zero reason for these ratings agencies to exist, at least under the current incentive system which is more screwed up than Tiger Woods’ kids are going to be.
In international news, Japan’s Prime Minister Yukio Hatoyama resigned to spend more time cultivating his Pokemon collection. His term was the shortest by a Japanese Prime Minister since1994 when Mothra swooped down and carried then Prime Minister Tsutomu Hata back to Infant Island. With asian markets already more jittery than a nanny at Roman Polanski’s house, a change in Japanese leadership brings more uncertainty than Jamie Lee Curtis’ true gender. Japan has been mired in a decades long economic crisis stemming from a real estate bubble, low rates, and sites like the NSFW spankwire.com distributing their main export of bukakke films for free. Investors now must worry about how the new regime will handle the world’s largest public debt while securing investor confidence in Japanese issued bonds. Finally, european banks are moving money overnight to Europe’s Central Bank at a record pace as they grow more fearful of write-downs and bad loans. Euro-zone banks are doing this as they apparently view counter party risk to be more dangerous than political support from John Edwards. Now look, Money McBags is no genius (though he is likely whatever is just one notch below genius), but if banks would rather earn fewer bps on overnight funds because they are worried about lending to other banks who may have lending problems, what does that say about their own fucking balance sheets? When Money McBags sees a CEO selling company stock, he stays away from that company and when he sees banks scared shitless of lending to other banks, he stays the fuck away from that financial system. It’s like a canary in a coal mine or a turd in a punchbowl of turds.
In stock news, energy companies are rallying after being down 18% due to the Gulf oil spill and due to people realizing that their cars don’t run on wind, the sun, or Heidi Montag’s implants. Ford is moving up as well, as both GM and Ford reported stronger sales than analysts guessed. Ford’s sales rose 22%, besting analyst guesses of 16% and GM sales rose 17%, besting analyst guesses of 6%. Driving the sales increases was the fact that people no longer care about driving shitty cars. With gas prices having hovered around $3 for a year and a half, SUVs are once again becoming popular buys with sales of Chevy’s Equinox tripling and GM’s Edge moving up 43%. This just proves that people are shorter sighted than Mr. Magoo without his glasses and are only setting themselves up for more pain when the gas market is remanipulated upwards. Finally, a UBS analyst who had a neutral on JPM for 5 years finally upgraded them to a buy. Money McBags would like to applaud this analyst who stuck to his guns despite JPM being the best run large cap consumer bank in the industry. For his next trick, the UBS analyst is going to pick up technology companies and slap a hold on AAPL until they can finally show the Street that the iPod is more than a trend.
In small cap news, CTGX is flying today despite no news and average volume. Money McBags has talked about CTGX many times on When Genius Prevailed and still believes they can earn ~$.75 in 2011 when electronic medical records take off. That would be 50% growth and the company is now trading at 11x that so it is still very cheap if you don’t mind owning an illiquid company that is short term highly levered to IBM. Meanwhile, crappy casino operator ISLE announced earnings today and beat analyst guesses despite profit falling to $.15 per share from $.45 per share in last years’ fiscal quarter as Red came up on the roulette wheel more times than they expected. Revenue was down 6% to $287MM but still beat analyst guesses of $260MM and those same analysts expected a $.08 loss per share for the simple reason that ISLE’s casino’s are more run down than Madonna’s vagina and also smell a heck of a lot worse. The company managed to trim out $12MM of operating expenses for fiscal 2010 and for the fiscal year, they earned $175MM of EBITDA but they have only $90MM of cash and $1,200MM of debt which means they are trading at ~9x EV/EBITDA which is not that cheap for a debt ridden company relying on consumer spend (though to be fair, gambling consumer spend is inelastic to some degree, like Joan River’s nose). The company isn’t currently burning through cash and has a $300MM line, but they have casinos in every city to which you would never want to travel (Biloxi, Davenport, Natchez, etc.) and their properties tend to be the most run down casinos in those run down towns. Today is basically a classic short squeeze and Money McBags would avoid this stock like he avoids hitting on 16 when the dealer is showing a 4 and avoids betting on “don’t come” in a craps game or a movie involving Hannah Hilton‘s face.
5/3/10 Midafternoon Report: Consumer spending up as sales of moral hazard increase (though to be fair it does come in blue this season)
Stocks are off to the races again today and the good news is that the market is seemingly being ridden by Calvin Borel. Sending the market up is that Greece is once again set to be bailed out, Warren Buffet was out defending Goldman Sachs, and people are spending more than they earn. Hold on a second on that last one. Now look, Money McBags is no historian (though he knows the difference between Dred Scott and Avy Scott, knows that neither tea nor pot was involved in the Teapot Dome scandal, and knows that the War of 1812 not only ended in 1815 and thus is a bit of a misnomer but also ushered in the “Era of Good Feelings” where bipartisanship was shunned and taint tickling Tuesdays swept the nation), but spending more than one earns is what got us in to this whole fucking recession. Anyone remember the popular sport from the mid 2000s called flipping fucking houses? Well it caused the economy to be flipped as people just borrowed the fuck out of shit because banks were able to package all of those crappy loans and sell them to yield hog investors who wanted those extra 10bps of interest income. The point is, consumers not managing their personal balance sheets with eyes on the future (though if their eyes were on Katie Price, Money McBags can almost forgive them) is a recipe for fucking disaster which we just learned, oh I don’t know, 24 months ago. Ugh. To highlight the shortsightedness of consumers, consumer spending was up today, but it grew twice as fast as incomes grew. And if you do the math on that (and remember, math likes to be done in the reverse cowgirl position), that means savings declined, which again, is exactly what got us in to this mess. American people apparently just like buying shit and then whining about it when they lose their jobs and can’t afford to pay their too expensive mortgage or their maxed out credit card bills. This is a nation of infants and if they don’t figure it out soon, Money McBags is going to go door to door with Jeremy Grantham and the pinheaded Suze Orman and he and Jeremy will take turns buggering Ms. Orman and her inflated FICO until people understand having money saved for retirement is more important than buying a new Shake Weight. Rant over.
In other macro news, manufacturing grew at its fastest pace since 2004 as the ISM’s factory index rose to 60.4 which was inline with analyst guesses. The growth was driven by new equipment orders and increased production of default notices. Also new construction was up modestly, but the fact that it was up at all has Bulls giddier than Peter North’s son on take your kid to work day. What drove new construction was public construction which was up 2.3% and state and local government construction which was up 2.5% as new line dividers were constructed to keep the crowds at the unemployment office running smoothly.
Internationally, Greece is getting a 110B bailout in euros over a three year period, until tomorrow when Angela Merkel’s cold feet and colder heart once again change her mind. To get the bailout, Greece has to instill a 30B austerity plan, cut their debt, and promise to tell native born son Yanni to shut the fuck up. Even with the bailout, Greece’s debt is estimated to rise to 140% of GDP in 2014 which is a whole lot of souvlaki they can’t afford. The bailout may be giving investors a day to breathe a bit easier but with the amount of debt Greece is going to have to repay and the cuts to their publc spending, the country is now facing real threats of deflation and the first potential revolt since Alexander Ypsilantis led the Filiki Eteria.
In the markets today, Warren Buffett was out defending Goldman because, well because he owns a fuckload of GS preferred so you know, he has to defend his fucking book. Buffett defending Goldman is about as much of an endorsement as Michael Brown defending the hurricane Katrina response, Jerome Kerveil defending his trading, or Tara Reid defending plastic surgery. So big fucking yawn there. In other market news, United and Continental announced a $3B merger. The deal was actually consummated a month ago but was held up due to weather (feel free to steal that one Jay Leno). And Apple annonuced they sold over 1MM iPads thanks to them coming installed with Diora Baird wallpaper. Lastly, semiconductor sales were up 4.6% in March as PC and smartphone sales continue to rise and inventories climb back to normal levels. Money McBags is longer the technology/smartphone trend than Lexington Steele is before a scene with the lovely Lisa Ann.
In small cap news, Money McBags bought TMRK close to the open today in the mid $7.30s. He has talked about TMRK many times (starting on 1/4/10) and finally pulled the trigger for no particular reason and he has no idea why it is up so much today other than the fact that Money McBags is a market mover. Money McBags is feeling better about TMRK after they raised $50MM last week which should give them enough growth capital and they are still trading at a discount to larger peers. TMRK has a competitive advantage in that they have a lot of government business (~22% of revenue) and they are in a market growing 20% a year with some big players (Amazon, Google) who are clearly going to be looking for acquisition targets to consolidate the space. TMRK is trading ~9x 2011 EV/EBITDA estimates but that is lower than where EQIX bought SDXC and not only that, but VMware who is the leading software developer in this space (and portfolio holding of Money McBags) has a nice sized investment in TMRK. If VMware doesn’t know this space better than 99.7% of the world, than Money McBags will eat a giant shit sandwich with extra diarrhea. Now Money McBags doesn’t expect this stock to rocket up any time soon as they are still going to have lumpy quarters and are still investing in building out data centers, but cloud computing growth is more real than Pam Anderson‘s tits (though perhaps that is a low bar) so TMRK should continue to be in a fragmented multi-year growth industry. In other small cap news, NTRI reports tonight and Money McBags is very curious to see what happens to their advertising spend. If you remember, two months ago Money McBags broke down NTRI‘s craptastic guidance which was so bad it caused investors to throw up for days and thus more effectively lose weight than using NTRI products. The company is still trading ~7x EV/EBITDA which is pretty cheap for a solid cash generator and nice business model when they aren’t fucking up their advertising strategy. Money McBags has no idea what NTRI’s Q is going to look like but it is worth paying attention to tonight because the stock should be more volatile tomorrow than Mike Tyson after missing a week of his medication and having some of his pigeons stolen. This could be a good entry point (though still not as good of an entry point as Jessica Alba’s derriere), so pay attention to earnings.
2/12/2010 Pre-Market Report: China tired of Greece stealing headlines, raises reserve rate to try to be January’s Economist centerfold, promises to show their Shanghai if selected
It’s a travel day for Money McBags so we’ll get to the market news early. The big story which should give pause to the market (and by pause, I mean send it into a bit of a downward hissy fit like someone at Fox News after trying to spell USA without a teleprompter) is that China is raising their bank reserve requirement once again in order to put a damper on growth. China has been fueling the global recovery as they not only provide cheap, flimsy, and lead ridden goods for the world, but they are growing internally faster than a metastasizing anal fissure. This is the second time in month China is raising this reserve rate in their attempt to show the world that they are not fucking around and will try to avoid Greenspan’s folly.
Also likely to send the market down today is Europe’s recovery being more stagnant than Demond Wilson‘s acting career. GDP rose .1% in Europe which was only slightly below the .3% estimate but traders will likely overreact because volatilty to them is like spinach to Popeye or like Amanda Seyfried to Money McBag’s “popping eye” (and yes that is a very bad euphemism, but you get for what you pay). This slow down in Europe’s economy could not come at a worse time as markets are still trying to figure out when/how the EU intends to bail out Greece. It’s like the EU has hired the underpants gnomes to solve the potential debt crisis. Step 1: Hint that you will bail out Greece. Step 3: Recover. Unfortunately, those people with actual working cerebral cortexes (Which rules out the delightful Carrie Prejean and the guy who invented Nuts ‘n Gum) understand that there has to be a more substanial plan (and as an aside is the plural of cortex, cortexes or corti? Can someone exhume William Safire and get a ruling on this? Money McBags is not always a cunning linguist). Money McBags is sure that the EU will come to Greece’s aid, because the Euro is not going anywhere, so until then, traders will just have their fun by continuing to bring volatility to the market.
There’s not a lot of stock news yet but Berkshire Hathaway will be entering the S&P 500 today which should nudge it up a bit higher and maybe even cause Warren Buffet to take off his trifocals, pull up his breeches, tighten his cravat and gingerly smile before going back to his game of whist. In small caps, EHTH announced their quarter and revenue was a bit light on application growth struggles. EHTH is an interesting name in that they provide a network for people who do not have employee sponsored health care to get health insurance. The company should be booming right now with so many people signing up for Cobra that GI Joe may get slaughtered (and yes, that was an unfunny and terrible joke). EHTH has had a solid balance sheet, great ROEs, and a terrific business model, but Money McBags is a bit confused as to why they haven’t been able to see stronger growth and if they are not booming in this environment, when will they? Money McBags has not had a chance to go through their quarter yet or listen to their call, but will be surprised if they don’t sell off today.
Enjoy the weekend.
1/27/10 Midday Report: In bid to increase approval ratings, Obama to unveil Apple Tablet at State of the Union address as a panacea for US budget problems
The market continues to limp it’s way down as investors await tonight’s State of the Union address where President Obama is likely to whip out his small business tax breaks and smack them against a non-defense discretionary spending budget freeze. This budget freeze supposedly applies to 17% of the Federal budget and will have enough loopholes in it to make it less well-followed than the failed reality TV series: Federal Reserve Bank Governor Idol (though Sandra Pianalto yelling at Chuck Evans for leaving the toilet seat up in the house was must see TV). It does likely mean that the president won’t be getting the X-Box he asked for for his birthday as times are tough. In addition to Obama going after the budget tonight, Apple is set to finally release their new tablet which has techies more excited than they were for the release of Avatar, extra-strength Accutane, or Olivia Munn’s Princess Leia photos. Honestly, Money McBags has not seen anything this eagerly anticipated since the release of those vapidly redundant Harry Potter books or Hanna Hilton’s first girl on girl scene (and Money McBags gave that two bums up). The tablet is supposed to be so awesome that it is said to have cured Steve Jobs’ cancer and to run on the tears of baby unicorns. And finally, the FOMC is meeting today with Bernanke expected to keep rates at their current 0 to 25bps or what we in the business call “free.”
While the market awaits that news, there were some macro-reports that came out which highlight the worries people are starting to get about the economy. New home sales fell in December by 7.6% and were short of expectations as analysts expected sales to rise (and I believe this now makes analysts’ incorrect prediction of the simple 50-50 guess at the direction of home sales statistically significant at the 95% level, so they’ve got that going for them). Home sales were down as a result of the government tax breaks drying up and the forgotten fact that no one has any money. Plus as the job market is more frozen than an Alaskan’s nuts after a midnight skinny dip in Lake Chilkoot (and yes that is really the name of Lake in Alaska), people simply aren’t moving.
In world news, Greece teeters on bankruptcy causing investors to stock up on credit default swaps of sovereign debt and all the tzatziki sauce on which they can get their hands. Greece is trying to remedy the situation by pawning off 25B of Euro bonds to China as well as stadium naming rights to the Parthenon, and the Golden Fleece. The flight to quality and away from sovereign debt like Greece has caused one month treasuries to have a negative yield for the first time since March of last year which is about as good of an omen for the stock market as stairs are for Stephen Hawking.
Berkshire Hathaway’s B shares are shooting up today like a young Drew Barrymore as word is they will be added to the S&P 500 index after their acquisition of BNI. Also, Toyota announced they will be shutting down production on eight lines of cars which make up 57% of their 2009 sales due to problems with the accelerator pedals seemingly caused by something called a friction lever. A friction lever joke is way too easy for Money McBags but this bears watching as the street wonders if Toyota has started to slack on their quality which has been their competitive advantage. In other stock news, YHOO turned a profit despite a 4% drop in year over year revenue. Revenue was up 10% sequentially and management said they see search revenue stabilizing so any investor who wants to own a portfolio of market laggards, now is your time to buy.
As for small cap stocks, ZAGG once again continues to trade down making Money McBags’ bet on 12/31/09 seem even better as it was likely risk free. So just remember, betting against Money McBags is like challenging Greg Oden to a cock off (very NSFW or actually anyone, but the news needs reporting), you can’t possibly win. And SMCI put up a huge quarter. Now SMCI basically makes custom servers and server solutions for businesses, usually being the first to market with new INTC chips, hence the Nehalem release has been driving new business for them. They just put up $.22 of earning per share on $182MM of revenue (up 42% y/y), easily beating analyst estimates of $.17 and $160MM. The company also gave above street guidance of $.18 to $.21 eps for next Q and $180MM of revenue in what is typically a down quarter for the industry. SMCI is an extremely well run little niche company with $82MM of cash on their balance sheet and no debt. They have a competitive advantage in that they are small and nimble (like Speedy Gonzales or the slightly smaller and more nimble, Shawn Johnson) and therefore can be first to market and customize at the same time. The company may be peaking but on the call management said they could get back to 30% growth rates as the end of the year should be good for them with AMD and INTC introducing new products. Estimates for fiscal 2011 are for around $1.10 and they are currently trading at 13 or so times that not including their cash after today’s run up. This should be a cyclical company and this may be the top of the cycle as they have just strung together some very good quarters so Money McBags would not be buying today as the easy money has likely been made. That said, this really is a quality company and has proven over time that they are good at what they do and well managed. Should there be a dip, this is definitely a company to accumulate but either way it is worth doing your own research here as they could continue to outperform.
1/5/10 Midday Report: After 330 years, stock market proves Isaac Newton wrong: Gravity, schmavity. What goes down, must keep going up
The market continues it’s latest rally despite at best mixed news today. The biggest news is that pending home sales dropped more than Dolly Parton‘s boobs have in the past 5 years (and for the record, she now calls them “anklets”). The 16% drop was more than the expectation of a 2% drop after a 3.7% gain last month. Of course the gain last month was due to the first time home buyer tax credit which stimulated the existing home sales market like Simona Halep once stimulated the WTA. The number today should not be shocking as when there are incentives for something, and then those incentives go away, that behavior does not always remain when it comes to a non-reflex behavior like Economics. You hear that Pavlov? You can keep ringing that bell, but I know there is no tax-incentive in the dish, so stop fucking with me and get me my $5k deduction while I lick my balls some more. On second thought, I’m just gonna keep doing this, so you can get me the deduction later. Arf. Therefore, it is not surprising that the initial sell-off in the morning based on this news has reversed.
The one real effect of the news though was the dollar falling again as optimism that the Fed will raise rates sooner rather than later is beginning to wane, like Alan Greenspan’s misguided influence. This thought was reitirated yesterday at The Boar’s Nest by Fed Governor and Bo and Luke’s long lost and full chromosome having cousin, the lovely Elizabeth Duke. Ms. Duke was quoted as saying: “In the current environment, the FOMC continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” So perhaps Greenspan’s influence isn’t waning afterall, ugh. Duke then went on to say, “to quote my good friend Roscoe P. Coltrane, in time, the economy will be “Good, Good, Good.“”
In market news, Ford has reached it’s highest price since 2005 as traders anticipate Ford’s December sales numbers which are being released today. A strong number will be very positive for the economy because if people are buying Ford’s shitty cars, they will likely buy anything and thus discretionary spend will be back. Finally, Kraft upped their offer to buy Cadbury to the tune of issuing 370MM new shares in the proposed take over. This has drawn the ire of Warren Buffett who owns a 9.4% stake in Kraft. Buffet argued that issuing shares will dilute the already cheap Kraft stock at a price $6ish below where Kraft bought shares back themselves in 2007, will give Kraft a “blank check” to renegotiate the deal higher whenever they want, and will make him really really angry to the point that he will go to his room and not come out or talk to anyone until the company rejects the plan. The 78 year old Buffett was then heard to complain about those damn kids on his lawn, CBS’s decision to take Matlock off the air, and the fact that dames no longer have yams like Eleanor Powell.