Posts tagged IMF
With market news quieter than a prisoner’s dilemma that actually reaches a Pareto efficient Nash equilibrium, and even quieter than the “Free Bernie Madoff” campaign, Money McBags had time to ponder some of biggest questions of the day.
He wondered why there wasn’t more flashing in the flash crash? Why they give out degrees for a “science” that doesn’t work in the real world (or why they don’t just change the name to “Theoretical Economics,” redundancies be damned)? How new claims for unemployment can be trending at ~1.6MM a month and yet the B(L)S data from the (No) Labor Department shows private sector jobs flattish? And why life expectancy in the US has slipped (though this one is easy to answer as it is mostly the result of people having watched one of those Real Housewives of whereever shows and developed brain aneurysms from something called “punching oneself in the face”)? There is just little going on until the new year so feel free to ignore Money McBags’ daily commentary and instead guess NSFW muffs to your heart’s content.
That said, there was a bit of macro news out yesterday as The Conference Board’s leading economic indicators jumped 1.1% in November as those leading indicators apparently include “buying shit you can’t afford,” “odds of more stimulus,” and “Jennifer Lawrence‘s movie career.” The jump did represent the biggest rise since March, was the fifth straight monthly gain, and means absolutely nothing to Money McBags since he doesn’t trust anything that comes from a source focused on something called “business intelligence.”
The only other bit of US news was that the compromise tax cut bill, or as its better known as, “business as usual” (because the only thing compromised was integrity and the fate of the middle class) went to Obama so he could put his George W. Bush on it (who knew that “change we could believe in” consisted solely of organic vegetables at the dinner table?). The bill includes $801B of tax breaks for the rich so they can not spend even more money that they have sitting in money market funds and $57B in extended unemployment so 45 year old people who got laid off can afford Spaghetti-Os instead of just cock flavored soup. The bill received bipartisan support (apparently it liked other bills of the same gender) and showed that whether Democrat or Republican, rich people hate taxes and prefer short-term gratification to foreplay.
Internationally, Moody’s cut Ireland’s credit rating by five notches from something called Aa2 to Baa1 and warned it could further downgrade it to Baadfuckingidea. Money McBags doesn’t know what is more absurd, Moody’s rating system or that anyone would give a fuck about it. But hey, blinding insight like “the Irish government’s financial strength could decline further if economic growth were to be weaker than currently projected or the cost of stabilizing the banking system turn out to be higher than currently forecast,” provides a valuable tool for the market (the tool of course being the analyst who wrote that). But it wasn’t just Moody’s who changed their farcical, nonsensical, and cockposterous ratings of Ireland as the IMF cut their forecast for Ireland saying the Irish economy could sag worse than Zara Phillips’ boobs and could lead to a more significant threat of contagion than sharing a toilet seat with Paris Hilton. The IMF now expects Ireland’s economy to grow only 0.9% in 2011, which is down from their previous 2.3% estimate and any downward deviation could lead to a default more epic than than Winter Pierzina’s cleavage.
The big news in the market was earnings, earnings, and more fucking earnings. Honestly, Money McBags is starting to question his bearish stance as companies plow through lowered expectations thanks to emerging markets and, well, see that is the part that confuses Money McBags, With greater than 15% real unemployment, is it possible that the other 85% of the people can spend enough to make up for that gap thanks to more stimulus and an outright denial of the harm of a spiraling deficit? Money McBags is more confused by this than he was to learn that frogs can pee out foreign objects (though the real question is what were the frogs doing to get those objects in there?). He is starting to wonder what if the shit never hits the proverbial fan? He is actively rethinking this, though more actively rethinking this.
Anyway, in terms of earnings Oracle was up 5% after sales of new software foretold a good Q. The company earned $.51 per share which beat analyst guesses of $.46 per share as sales of new software climbed 21% to $2B (thanks to likely using the brilliant new non-profit sales model) which beat their guidance of 6% to 16% growth. Elsewhere, RIMM had stronger sales and profit than analysts guessed and grew top line 40% which is amazing seeing as how they are now 4th in the mobile device market after the iPhone, Goog’s Android, and the pocket rocket. RIMM also raised revenue guidance for next Q from a consensus $5.46B to the higher $5.5B to $5.7B as they expect a strong holiday season once iPhones sell out.
In other earnings news, Assenter (known more formally as Accenture) shot up after a 20% rise in earnings and after they raised their full year revenue guidance to 8% to 11% growth thanks to surging demand for Power Point slides by companies who need materials to make sure their shredders are working properly. BMO bought MI for a 34% premium because apparently they don’t teach US geography in Canada and the Bank of Montreal thought Wisconsin was New York’s 6th borough. Finally, AZN was down ~6% as the approval of their blood thinner drug Brilinta, was delayed again as the drug was deemed not to be brilliant (see how easy it is to write a stupid Jay Leno monologue joke. How late night talk shows don’t hire Money McBags is more of a mystery than why you would want to flash the amish).
In small cap news, not much happened today as Money McBags spent hours scratching his head over how WGO can trade at 40x earnings (though the head scratching could have just been crabs). Money McBags broke WGO down yesterday and showed they are at a ~$.40 EPS run rate and to make sure he isn’t crazy (well, technically Money McBags may be a bit out there, but he is talking specifically about WGO), he skimmed some sell side reports today on WGO just for shit and giggles (and it was mostly giggles from reading that shit) to see if the Street has any fucking explanation for WGO’s valuation.
The analyst from C has WGO’s top line growing 17% in 2011 and 6% in 2012 with earnings per share of $.50 and $.58 respectively. So those don’t seem too far out of the ballpark, but this is the part that makes Money McBags’ taint hair stand on end. Guess what multiple this highly paid C analyst named Gregory Badishkanian puts on a company not even guessed to grow 20%? 16x EV/EBITDA. Wow. Money McBags wouldn’t pay 16x EV/EBITDA for anything unless it was growing a fuckload faster than 17% for 1 year and could lick his balls from across the room (shout out to Dice). So using that 16x EV/EBITDA multiple on 2012 EBITDA, Mr. Badisnotgonnaworkherenaymore gets to a $17 price. Unfucking real. Oh yeah, and he arrives at that multiple by saying WGO has traded in a range of 5.5x to 99.9x (though not 100x, because it is important to not round that last .1). Wow. You know when it likely traded at 99.9x? When it was going to zero in the recession as they didn’t have any fucking EBITDA, in fact it was trading at cockfinity times back then so why not use that as a range? Is this what they teach at CFA school these days (and yes Money McBags is a CFA charterholder, but don’t hold that against him)?
Now the Robert Baird analyst, and he’s likely at Robert Baird because C wasn’t hiring (which is a bit like having to be driven to school because the short bus was too full, but whatever), has 2011 EPS at $.54 and 2012 at $.68, so slightly more positive than our delusional friend at C and has revenue growing at 19% a year despite backlog being down 50%, dealers being back to fully stocked (he even assumes that from now on dealer orders will be only for replenishment), and people not needing to drop an assload of money on a fucking motor home.
That said, his valuation is based on Money McBags’ favorite piece of mental masturbation (other than anything in the MILF section of the NSFW Spankwire.com), a DCF model. Unfortunately the model was not attached to the note, but Money McBags is sure the perpetual growth estimates were perfectly reasonable (and yes that is sarcasm) since the terminal valuation only determines like 80% of the DCF’s value. Anyway, the Baird guy’s DCF tells him WGO is worth $16 or 24x his 2012 EPS and if he thinks WGO can grow 19% a year, that is at least only ~25% too high.
So the C analyst uses a ridonkulous multiple on low growth, and the Baird analyst uses witchcraft on high growth which translates to a slightly more reasonable multiple. Even if you wanted to use fiscal 2012 as your baseline and even if you thought WGO would grow 19% a year, at most you’d put an 18x on that so even using the most optimistic numbers, the stock is ~20% overvalued. Either way, it all makes less sense to Money McBags than celibacy or tramp stamps and he is happy to short here and wait this one out because time and logic are on his side (though he’d prefer if Carla Ossa were on his front).
Anyway, enjoy your weekend.
A flurry of buyouts, headline-y good macro news (just don’t read the “not so” fine print), and the Fed promising to print enough dollars to make everyone a millionaire as Bernanke mimics the First Citiwide Change Bank “volume” strategy, caused investors to celebrate in the morning by doing the Dougie. However, the market slipped end of day as common sense eventually kicked in as the economy is nowhere near out of the woods (though if it is Evan Rachel Wood the economy is in, then by all means, it should feel free not to get out of it). Given the uncertainty, investors could walk out on the market at any minute, like Charles Rangel in an ethics committee hearing, so trade your positions wisely (especially if your position is a reverse cowgirl).
In macro news today, retail sales posted their biggest gain in 7 months as they were up 1.2% sequentially, 7.3% y/y, and a shitload % beyond reason. That said, there were two really interesting things about the number.
1. The 1.2% increase exceeded even the highest guess of all 74 analysts surveyed by Bloomberg in the latest edition of “Guess Your Luck” where economists try to fit their outdated models to the Commerce Department’s random data number generator in hopes of avoiding the dreaded Whammy. As always, Money McBags’ point is that if the data were following any forecastable pattern, then in a normal Gaussian world it would generally fall somewhere in the middle of “expert” guesses (while in a normal Seussian world it would generally fall near a fox wearing socks fixing clocks munching box) but since it was higher than EVERY SINGLE GUESS, something is more wrong here than the theory of luminiferous aether or whatever happened to Bruce Jenner’s face.
2. While the headline number looked good (though nowhere near this good), this is what Money McBags refers to as a shemale number because while the top might have been attractive, in digging down we bumped in to something that wasn’t what it appeared to be or what we hoped to find (unless we were Eddie Murphy). See, the beat was driven by autos and gasoline, so if we strip that shit out of the numbers and just view what the Fed looks at which is core retail sales, we see that core retail sales were only up .2% or as it’s better known: “a rounding error.” Motor vehicle and parts purchases were up 5%, likely driven by people purchasing new crank shafts to fix their 15 year old cars since they can’t afford new ones and gas sales were up .8% likely driven by OPEC needing a new cot for the extra concubine they decided to order.
So netting out the non-core retail numbers, we see that a 1% increase in spend on books and hobbies (since staycations are the new vacations and Jim Davis’ latest Garfield book just hit the stores) and a .7% increase in clothes purchases were offset by a .7% drop in sales of electronics and a .7% drop in sales of furniture. Those numbers don’t seem healthy to Money McBags since electronics are as discretionary as it gets and furniture is obviously intertwined with home sales, so excuse Money McBags as he scratches his head over people finding these numbers positive.
In other macro news, business inventories rose .9% as companies continue to stock up on new locks and deadbolts in anticipation of the next round of layoffs. With businesses now holding 1.27 months of inventory, a cooling is likely to come in the next few months which will be about as good for GDP as hubris was for Amelia Earhart or refusing to carry the one was for Enron. Also, manufacturing in the New York region unexpectedly contracted in November (of course what it contracted was herpes from being so close to the Jersey Shore) for the first time in more than a year thanks to slow sales of “Yankees 2010 World Champions” paraphernalia. The Federal Reserve Bank of New York’s general economic index fell to minus 11.1 from 15.7 with anything below zero showing contraction (while anything below Jasmine Dustin likely showing expansion). Making the numbers worse was that new factory orders slumped to minus 24.4 and unfortunately extra batting practice and praying to Jobu might not help them break out of that slump.
Elsewhere in the US a bunch of Republicans are calling out Bernanke as Indiana Rep. Mike Pence argues “printing money is no substitute for pro-growth fiscal policy.” While Money McBags doesn’t necessarily disagree, he finds it hard to give a shit about the opinions of anyone who doesn’t believe in evolution. And speaking of opinions about which Money McBags doesn’t give a shit, Alan Greenspan said this weekend that high deficits could crush the bond market, but then again, caring what Alan Greenspan says about the economy is like caring what George Custer said about war strategy or Magic Johnson says about safe sex, so a big fucking yawn.
Internationally, Europe may be coming to the aid of Ireland even though Ireland continues to play hard to get while not realizing it has less leverage than Kahagendra Thapa Magar on a seesaw opposite one of Gabourey Sidibe‘s salivating mandibles. The Irish government continues to insist that it doesn’t need financial aid, it can present a credible austerity budget, and it has enough money to finance its operations through spring of next year while the EU continues to insist that Ireland should shut the fuck up and do what it is told. With the IMF perhaps stepping in here, it looks like its time for Portugal to come on down to see if the Price is Right for their upcoming bail out (and remember to have your debt spayed or neutered).
Finally, Japan’s GDP grew at an annualized rate of 3.9% as a result of their stimulus and a new line of Hello Kitty urinal targets being introduced. With incentives for the purchase of fuel-efficient cars and energy-saving appliances (such as solar powered wet vacs to clean up after all of the bukkake films) having ended in September, GDP will surely slow in the next few quarters.
In the market buy outs were the news as Caterpillar hopes buying something called Bucyrus for $7.6B will allow it to metamorphosize in to a different company while EMC is paying $2.25B (or what is known to Money McBags as a weekend in the champagne room at his local Rick’s Cabaret) to acquire Isilon. In other M&A news, BHP told Potash to eat a fat dick and rescinded their buy out offer and instead will restart its $4.2B share buyback program.
Elsewhere, AAPL said that on Tuesday they will have an announcement that “you’ll never forget” so either they have coaxed Hanna Hilton out of retirement or have developed an app to let users bid on OPEN reservations using PCLN while having NFLX stream in the background which will surely push the stock to a billionty. Rumors are that the announcement will involve the Beatles portfolio of music being available on iTunes which would be awesome if this were 1964.
In earnings news, Lowe’s put up a disappointing Q and said revenue was weaker than expected and lowered full year guidance. CEO Rob Niblock said “Ongoing uncertainty in employment and housing continues to pressure our industry…” and then added “You do read the fucking news, right?”
In small cap news TSTC was up 23% on a good Q and this is precisely the type of small cap company over which Money McBags salivates. It is growing rapidly, trading at a way too cheap multiple, completely underfollowed by the street, and potentially set for another movement up off of good earnings. That said, it also has the three things Money McBags avoids in a company, it is Chinese so he can’t do real due diligence on it, it has a shitawful balance sheet, and its technology is less understandable than anyone who broke up with Jessica Simpson. Money McBags is only mentioning them to highlight the difference between investing and gambling (and see, that’s funny because it is all gambling).
About a year and a half ago, when Money McBags still worked for the man, TSTC came in to his fund’s office for a meeting and the sheer awesomeness of it still lingers like the mellifluous scent of a game worn Reggie Jackson uniform. Not only did the CEO bring what appeared to be a concubine under the guise of “personal secretary” (and Money McBags is not joking as this personal secretary was not allowed to look at anyone or talk to anyone), but the CEO also spoke almost no English and brought with him a Director of IR or CFO (Money McBags doesn’t remember his title) who had been with the company for less than a week. So basically every time Money McBags asked a question, the CFO guy would apparently explain it incorrectly and the CEO would jump in but since he spoke English about as well Moses Malone, the whole thing was comlpetely incomprehensible. It was absolutely bizarre and Money McBags just decided to stay the fuck away because he understood less about the company after the meeting than he did before it, and frankly wasn’t quite sure if he was on an episode of CNBC’s version of Punk’d (and if CNBC ever does a version of Punk’d, they should have an episode where they tell John Merriwether that his fund is actually successful).
So the point is, even though the company is ridonkulously cheap (if one can understood exactly what their technology does) as it is trading at <7x full year eps and growing at 80%, there is just too much unknown (like how they plan on managing receivables and when Faye Reagan‘s next movie comes out) to bother. If this were an American company, Money McBags would be all over it because in a few phone calls he could talk to someone who generally understood the company but given that it is impossible for him to do any real research on a tiny Chinese company without being in China or speaking the language, he is going to continue to pass on this like he passes on network TV, decorum, and 19th Century romance novels.
**Editor’s note: Money McBags knows this headline sucked, but he already used “Retail Stales” and spent way too long trying to think of something better. So feel free to write in your own, you won’t hurt Money McBags’ feelings
7/29/10 Midevening Report: Fed warns deflation may be coming, investors run to buy protection as they don’t know who deflation slept with last
Oh shit. While most people have been spending their time worrying about the Fed printing up some inflation, Fed Bank of St. Louis President James “Jimmie B” Bullard got his academic on today and dropped some deflation all up in this bitch.
And Jimmie B aint be one of those lame ass non-voting members of the FOMC like Fed Bank of Minnesota President Narayana Kocherlakota whose last name sounds like a hella nasty venereal disease one would catch from a night with Paris Hilton (and for the record, being a Fed Bank President and yet not getting to vote as part of the FOMC is like being the fat cheerleader on the bottom of a pyramid or a bachelor party designated driver). The point is Jimmie B knows the secret handshake, he drinks the juice, and his opinion matters so when he axes everyone if they know anything about some deflation and shit, people better start listening.
The deflationary concerns stem from a “provocative” paper Jimmie B wrote (provocative in the sense that it took a full three pages to put readers to sleep instead of the usual two, though to be fair, page one was a full picture of Katie Cleary dressed as a regression model, so whatever) in which he argued that the Fed needs to stop all of this extended period low interest rate bullshit and get their quantitative ease on by buying some debt instruments longer dated than Velveeta cheese or Betty White‘s vulva. Not only that, but Jimmie B warned that if we continue this low rate poilicy, we’re going to end up like Japan and be stuck in a long term no growth economy while living in constant fear of attacks from large fire breathing monsters like godzilla or Roseanne Barr. So goodbye inflation (for now), hello deflation. Money McBags is sure you’ll both lead to hyperinflation eventually but until then, enjoy the soup.
In other US macro news, new claims for unemployment fell by 11k to 457k, or by 7k if you use the non upwardly adjusted initial number released last week of 464k (Money McBags guessed that it would be upwardly revised to 470k, but it was only revised up 468k so good for the (No) Labor Department to only mildly be fudging the numbers). Analyst guesses were for initital claims to come in at 459k, so in theory the data was slightly better than guesses until a week from today when initial claims are revised upward to 460k+. The point is, the data isn’t just hard to believe, but there is absolutley no way economists/analysts/The Great Gazoo can make any kind of relevant guess as to what the numbers will be since their regression models are all calibrated with data from the past 70 years or whatever, when the world wasn’t as connected, volatile, and fat tailed. All one can say is that people keep losing jobs which is more challenging for a recovery than geography is for Caitlin Upton or a high five is from Verne Troyer.
Internationally, the IMF got its panties all up in a bunch about China’s trade surplus which may balloon as big as LeBron James’ ego or Sheyla Hershey‘s shirt if China doesn’t try to support domestic comsumption by letting its currency float The report would not have been published had the IMF not removed a footnote saying how they calculated the undervaluation of China’s currency and of course if the report had not been published, no one would have cared, not even the IMF’s mom.
In the market, earnings were more mixed than the reviews for Kelly Brook‘s new movie Piranha 3-D (with reviews ranging from awful to boobalicious). Sony had a strong quarter and swung back to a profit thanks to operational efficiencies, strength in emerging markets, and sales of flat screen TVs, Playstation 3, and a bunch of other shit which people can surprisingly still afford. The stock was up 7% on the day as analysts had guessed Sony would report an operating loss which shows that even Japanese analysts suck at their jobs. Other companies putting up good Qs included Radio Shack, thanks to sales of the iPhone and the four people who remembered the company was still in business, and Visa, though Visa sold off on the day as analysts were quick to cut forecasts when V’s CEO warned of new government regulation likely causing the debit market to “undergo changes” not unlike a pre-vagina’d Jamie Lee-Curtis.
That said, there were many companies that shit the proverbial bed today (and not any kind of shit, but an indian food, Jack Daniels, and Slim Jim shit). Both Nvidia and Symantec fell ~10% after they cut guidance for Q2 citing weak consumer demand which turned their semis flaccid. Kellogs was not great as they missed analyst guesses and cut their full year projections as apparently too many people were leggo-ing their eggos with waffle sales hurting the company’s margins. Kelloggs was also hurt by a $.10 per share charge as they had to recall a fuckton of cereal boxes last month after customer complained of the boxes smelling too much like wax and end of the night stripper, but even exlcuding that charge, eps of $.89 still missed analyst guesses of $.94 eps. Finally Colgate dropped nearly 7% despite beating guesses and maintaining guidance as they warned currency devaluation in Venezuela will have a bigger impact than they initially estimated. Venezuelan currency continues to struggle after home grown Stefania Fernandez won the Miss Universe pageant and decided to leave the country to travel the world.
In small cap news, a Money McBags favorite QCOR put up a good Q and shot up 23 fucking percent on the day. Holy fuck did that thing rise and Money McBags was expecting a lackluster quarter at best, so fuck him. Money McBags has broken QCOR down numerous times on WGP so if you want to understand it better, put it in the search box (and if you want to understand divnity better, put it in Alice Eve‘s box).
As for the Q, net revenue was up12% from last year to $28.3MM and eps came in at $.14. Money McBags’ revenue estimate was pretty much right on but he had assumed $1MM higher operating costs and thus he was expecting $.13 in eps. That said, the key driver of revenue was once again MS sales of Achtar which grew 145% y/y and 32% sequentially. This drug is such a fucking hit with a demand curve more inelastic than the demand for Lucy Pinder‘s curves, that QCOR should raise the price of achtar again (and that is funny because they already raised to around 1 bazillion percent to ~$23k a vial). The company now has ~$100MM cash which they are going to continue to deploy for buybacks and most importantly they announced they are going to double the size of their sales force to better attack the nephrology market where they have just started making headway.
So here is the deal, the nephrology market could be bigger than both the IS and the MS market for QCOR becuase patients need 9 to 10 vials of achtar over the course of six months to treat NS. Anyway, these are some interesting tidbits from the call:
1. With only the equivalent of 1 rep selling to the nephrology market last Q, QCOR manged to get 4 new prescriptions. With 9 to 10 vials needed for NS patients, that is equivalent to ~$200k in net revenue for each nephrology prescription so those 4 new cases sold by effectively one full time person, should net $800k in revenue for the company. As they say in France, “not fucking bad at all.”
2. They are now going to go from 38 reps to 77 reps to be able to call on more nephrology doctors and to be able to increase the chances of someone getting drunk at the company holiday party and taking their shirt off.
3. Within the next couple of quarters, several papers on the effectiveness of Achtar will be coming out in medical journals with titles like “An Achtar a day will keep the pissing of blood away,” “Achtar: Fucking focal segmental glomerulosclerosis in the ass,” and simply, “Nephrotic Syndrome This!”
4. Out of the 8k nephrologists, fewer than 400 have written prescriptions for Achtar as QCOR hasn’t had the sales force or the published medical data to reach the rest of the doctors. Both of those are coming soon.
5. MS is now 50% of their revenue with IS at ~40%, NS ~5%, and everything else 5%.
6. Olivia Munn is still hot.
7. They are no longer going to waste their time trying to use their $100MM in cash on acquiring another drug and will just focus all of their time on Achtar. Money McBags brought this up before as a curious strategy by the management team as he didn’t understand why they would be fucking around trying to buy some do shit other drug if their growth opportunity was as good as they said it was. Now he is pleasantly pleased that they have decided to forego an acquisition and instead use their cash for buybacks, building a sales force, and one hell of a night out at their local Rick’s Cabaret.
8. The PDUFA date for IS being put on label for achtar is 9/11 which if approved, will finally allow QCOR to market to IS doctors.
Anyway, the news of a doubling of the sales force caused the stock to rocket today but Money McBags guesses a bunch of that was short covering because small stocks don’t move that quickly without some shorts puking out shares faster than an Olsen twin pukes out last night’s dinner. That said, how do we value this company going forward? They said costs will be up by ~$2MM in Q3 and $3MM in Q4 as they double the sales force and Money McBags doesn’t think that sales force will really be affective until Q1 of next year. So if Money McBags leaves IS flat for the rest of the year, grows MS by 20% in each of the next 2Qs sequentially, leaves NS as nothing, and adds the extra costs, he gets another $.32 in eps for the second half of the year or $.56 eps total in 2010.
But of course, who gives a shit about 2010 because it is 2011 where this company could start seeing even stronger growth. So if Money McBags takes 2010, grows IS by 10% (if Money McBags interpreted the CEO correctly, that business could grow 20% to 30% if the FDA allows them to put IS on label in September, so 10% growth seems like a decent enough way to discount that happening) and then grows the non-IS business by 30% (MS has been growing by 100% + y/y, but the law of large numbers and the ramp from nothing is going to have to catch up with them soon enough and NS is still so small that we’ll ignore it for now even with the ramped sales force), then he gets ~$.78 eps for next year.
Of course that completely discounts NS doing anything even with an expanded sales force which seems way too harsh as in ~6 to 8 quarters MS has gone from nothing to 1/2 of the business, but Money McBags is trying not to get too excited as they only sold 11 vials for NS 2 Qs ago and 4 this last Q. So we’ll take ~$.80 as a reasonable low end base line for 2011 and the stock is trading for ~13x that plus the ~$1.50 in cash.
That said, if NS takes off, this company easily earns more than $1 in 2012 and you can buy that kind of growth right now for 10x plus the cash which is almost as cheap as a an autographed Dick Pole. So look to buy on a pull back, and yes, this is the 1000x time Money McBags has said that and this stock has yet to pull back so time the trade as you please. Just remember, Money McBags first started writing about this stock in December when it was ~$5, so hopefully you all did your work and bought in and are now enjoying the fruits of your labor.
The market jolted up on unemployment news this morning before remembering it had already gone up yesterday and thus quickly settled in like an environmentally friendly squatter in Al Gore’s mansion. The big macro news is that new claims for unemployment dropped to 454k or some number higher than that depending on how much the (No) Labor Department manipulates/readjusts numbers next week. Money McBags is not a betting man (unless there is money to be won or young ladies to impress) but he is willing to wager that next week we learn that new claims for this week should have actually been 459k. Anyway, claims were down by 21k, unless you use the number the (No) Labor Department released last week of 472k (not the 475k they redjusted it to this week) and in that case claims were down 18k (though when this week’s number gets manipulated up to ~459k, this week’s drop will go down in the books as only a 13k drop, but whatever). Regardless of what the number actually was, it likely beat analyst guesses of 460k which would be great if 450k+ new unemployment claims didn’t signal an economy less healthy than a Grilled Cheese Burger Melt topped with a spread of Crisco and Pam Anderson’s hepatitis.
To be frank (and if Money McBags is going to be frank, he only hopes it is the awesomely named Frank AllCock and not Frank Stallone), the high unemployment rate and the inability of the global economy to bounce out of this is more confusing to Money McBags than a condom is to Shawn Kemp or the definition of securities fraud is to SEC promoted Meaghan Chung. Money McBags understands there are unkowns, half-knowns, and can’t-knows in a dynamic global economy, but there are 15k+ PhDs of economics in just the US alone so either all of them are complete idiots or that degree is more worthless than the smallest Vietnamese dong. Seriously, how can we have all of these people who trained for years on this one specific topic not have any fucking answers?
For fucksake, a solar powered plane just flew for 26 consecutive hours and while Money McBags is not a heliologist (though he ardently studies Page 3 of The Sun), he is pretty sure for many of those hours the sun wasn’t even fucking out. So let me get this straight. The human race can build something that goes 28k feet in the air and flies around for 26 hours, powered by nothing but the sun and will continue to fly when there is no fucking sun, and yet we can’t figure out how to find jobs for 20MM people? WTF? Money McBags is officially announcing the death of the entire field of Economics until one of the 15k+ US PhDs can figure something the fuck out. What other discipline awards titles for studying theories that don’t work and coming up with hypotheses that can’t be proved? Just think about it. The profession of an economist is a more worthless calling than an Amish computer camp instructor or Heidi Montag‘s singing instructor. Anyway, the economy continues to struggle and economists continue to watch it melt as they are more helpless than a dyslexic trying to use a calculator set for reverse polish notation (as opposed to reverse polish cowboy).
In other US news, retailers announced same store sales and results were mixed despite discounts, warm weather, and a flurry of unconventional sales efforts including Sam’s Cub making small business loans, Office Depot selling items for a penny, and Hot Topic giving away free canwiches with every purchase of a Twilight t-shirt. The Gap led the disappointments with flat sales compared to guesses of up 3.4% as apparently the late 1990s are officially over.
Internationally, the IMF raised their growth forecast from none to none +1, or 4.2% to 4.6% for 2010, whichever you prefer best. They also warned that risks of a calamity have increased faster than the popularity of the high school girl who puts out first and that growth will slow at the end of this year and next year. To quote the release:
“In the near term, the main risk is an escalation of financial stress and contagion, prompted by rising concern over sovereign risk, this could lead to additional increases in funding costs and weaker bank balance sheets, and hence to tighter lending conditions, declining business and consumer confidence, and abrupt changes in exchange rates.”
So no biggie, right? Sign me up for the 4.6% revised upwards growth, nothing to see here. Unfortunately the IMF was not so positive on US growth prospects estimating that growth will fall short of 3% annually for at least the next five years and urged the US to raise taxes, cut spending, and give Alice Eve her own 24 hour cable channel.
Also internationally, the ECB and the Bank of England held rates at historic lows in order to allow already toxic banks to continue to not lend to people and Greece approved a pension overhaul which will raise the retirement age to 65 from birth, will calculate retirement benefits on average pay rather than highest pay, and will cut annual vacation days from 365 to 340.
In US stock news GPS has a bit more than a gap in their strategy (one may call it a hole more gaping than whatever is in the Octomom’s pants) as it is plunging like Lara Bingle’s neckline. As mentioned earlier, their same store sales disapointed with Old Navy posting flat comps, Banana Republic up 6% after a 20% down in the year ago quarter, and The Gap seeing same store sales drop 3% on top of a 10% down comp. Wow, that is so bad that not even Johnnie Cochran would have defended it. Finally, tax preparer HRB was down ~7% to a 9 year low due to the surprising resignation of their CEO who claims he is about to get a CEO job at a bigger company and HRB should just write-off the losses anyway.
In small cap stocks, news is light today as investors wait for earnings and try not to panic sell everything as they think about the challenges of the economy and the illiquidity of most of these names. LHCG had its second strong day in a row after getting clobbered last week on news that competitors AFAM and AMED were being investigated for false medicare claims. Money McBags broke them down for you last week and thinks it is an ok entry point right now if you need some healthcare exposure. They are in a growing market, offer a superior service, and are relatively cheap for their growth. Sure they don’t have control over the majorty of their pricing, sure they are a roll up story, and sure these companies have been dicier than a night in the Baghdad Hilton Suites, but people aren’t getting any younger or healthier and hospitals aren’t getting any bigger. So if you want a way to play the “we’re all getting old and sick and can’t pay for it” trend, this is a company to do that with and at a reasonable mulitple.