Posts tagged NTRI
Once again investors came out in full force to buy the fucking dip on Friday after learning that Qaddafi’s men opened fire on protesters in Tripoli in Moammar’s shoot first, shoot later negotiations policy, GDP was revised down to “QE3 is coming,” gold rose to over $1,400 an ounce once again making Flavor Flav’s teeth the most expensive commodity in the world, and the US government threatens to shut down while individual states bust unions (and if it is this Union’s bust, then Money McBags approves) and teachers across the country get pinkslipped (while others slip pink). So once again cognitive dissonance reigns like Peter the Great in 18th century Russia or like Ms. San Antonio (only without eating so many tacos).
With Saudi Arabia promising to pump out enough oil to support both lost Libyan production and an even better Oil Rumble, and with consumer sentiment rising in everything but how the consumer sentiment number is calculated (Money McBags will guess lovingly and with a fuckload of goal seeking and hard coding), investors ignored every other bit of common sense, toggled away from Kate Upton’s twitter pics, and jumped back in to the market faster than Charlie Sheen jumps back in to a bottle of vodka (or Capri Anderson‘s rectum).
Anyway, Money McBags thought he would try a gimmick for Friday’s wrap-up because all writers need to find new tricks (especially ones like Money McBags as he writes as if he is trying to put his round peg through Karissa Shannon‘s spare hole). So in honor of Sunday’s Oscars, Money McBags thought he would equate each news item of the day to a best picture nominee simply because he needs a challenge.
Inception goes to consumer sentiment hitting its highest level in 3 years because clearly consumers must be dreaming of something other than the declining buying power of the dollar and the shitawful ponzeconomy™ if they really feel confident about anything other than their savings being fucked (and see, that’s funny because most of them have no savings). The Thomson Reuters/University of Michigan/Vivid Video survey on consumer sentiment came in at 77.5 which was up from 74.2 in January and the highest since January 2008 which was right when the last guy on the Street knew that bank balance sheets were more fictitious than a Dr. Boris Sachakov hemorrhoid removal, so um, look out below. The number was above the median forecast of 75.3, above the early February reading of 75.1, and above Money McBags’ sentiment of “you have to be kidding me” because the only times Money McBags has been less confident in the consumer was during the Beanie Baby phase and when Garth Brooks went platinum. Consumers reported “significant” labor market improvements, judged their personal finances more favorably than at any other time in the past three years, and insisted that redneck is a religion.
True Grit goes to GDP which keeps trying to tough it out despite being more fucked than David Wu’s political career. GDP for Q4 was revised down to 2.8% annual growth, below 3.2% guesses, and well below the 5% needed to lower the 9% unemployment rate without just clerically adjusting the labor force participation rate down again (Money McBags’ “Fuck Off” strategy), but hey, just buy the fucking dip. The slower growth was driven by deeper spending cuts by state and local governments who continue to suffer from lower tax revenues and reality.
Toy Story 3 goes to the Ben Bernanke who is treating M2 as if it is Monopoly money as the money supply not only grows faster than Cameron Diaz on the awesomeness scale but is more correlated to the rise in the S&P than tinnitus is correlated to attending a Black Eyed Peas concert. But hey, Money McBags guesses we will learn the hard way that Zimbabwe isn’t just for lovers (lovers of AIDS that is).
The Kids Are Alright goes to the state of Wisconsin whose teachers have missed work to protest cuts to their health care benefits and collective bargaining rights as a union which has caused senate Democrats to flee the state to avoid voting as it is always best to run from bullies. Teacher protests give kids more time to stay at home, fire up the playstation, and plan the next rainbow party, which is alright with Money McBags.
The King’s Speech goes to Libyan dictator Moammar Qaddafi who got up in the center of Tripoli on Friday and threatened to make his country a living hell and kill those who oppose him. When protesters heard this, they rejoiced, claiming a living hell would be three steps up from Libya’s current living situation which is so bad it has been compared to having to french kiss Kathy Griffin‘s sphincter.
Winter’s Bone goes to Winter Pierzina as who wouldn’t want to giver her a bone? And, yes, that has nothing to do with the economy or the market, but it is very important to confirm.
The Fighter goes to all of the protesters in the Middle East and Northern Africa who are tired of some asshole despotic ruler continually oppressing them and are now striving to become that asshole ruler to be able to oppress the factions they hate. How these Middle East protests have not spooked the market more is a question for which Money McBags is seeking an answer (though he is pretty sure the answer isn’t pussy furry).
Black Swan goes to AIG who in a black swan event shit on the global economy a few short years ago as their derivatives book of credit default swaps (which had a one in bazillion chance of blowing up according to the douchenozzles who were writing that shit and whose bonuses relied on writing it, but nothing to see there) found itself in the Gaussian curve’s fat tail and blew the fuck up as insuring something without actually putting aside the money in case that thing you are insuring gets fucked is as dumb of a business as ZAGG or a Wilford Brimley tongue kissing booth. But it gets even better because in an even bigger black swan event, this fucking company is still in business somehow (because apparently criminal actions don’t get punished in the US if you have a good lawyer and are on the government’s payroll) and on Friday they put up a big Q but sold off as investors raised concerns over AIG’s huge property insurance business, its aircraft leasing unit, and how the fuck they can actually trust a company that came within a Verne Troyer nut hair of blowing up the world. Money McBags isn’t saying AIG is a shitty company, he’s saying they are a fucking shitty company.
127 Hours goes to every company that had earnings or analyst ratings changes on Friday because in 127 hours (or 3 to be more precise) no one will remember and the stocks will trade on new speculation (and by new speculation, Money McBags means the Fed’s continued capital injection). In earnings on Friday, Salesforce.com apparently sold the fuck out of some forces beating earnings guesses and raising full year guidance as cloud computing remains hotter than Tulip sales in the Netherlands in the 1600s or two lip sales in Eliot Spitzer’s hotel rooms in the 2000s. In other earnings news, ADSK saw profits rise 23% on a 16% increase in revenues and the company is now up 45% for the year as more people use their autocad software to design the cardboard boxes in to which they have moved.
In other company news, FSLR was down 6% despite higher profits as the solar panel maker burned investors by forecasting weaker sales this year and warned it would cut prices to compensate for the end of solar subsidies in Europe. That said, a flurry of analysts raised their price targets on the stock because lowered sales forecasts didn’t effect their hardcoded models. Finally WFC climbed after Goldman raised its rating on the stock to “buy” from “neutral” after the analyst was told he hadn’t published anything on WFC in a while and needed to drum up some trading flow.
The Social Network goes to NTRI, as the company tries to help people lose weight and become more social (and yes, it is a stretch giving them The Social Network but unfortunately Cash For Chunkers 2 somehow slipped through the Academy’s nominations), who put up an assrific quarter (and not a regular ass, but a swamp ass) and traded down 30%. Wow. They dropped further than Cloris Leachman’s boobs and it was a result of Weight Watchers absolutely killing them with the new “points plus” program (and remember, Money McBags will soon be instituting his own “points plus tits” program on the award winning When Genius Prevailed), awful pricing, and a complete swing and a miss with a new strategic plan. Money McBags has written about this company many times as they have a great business model and brand equity, but as for management’s execution, well Money McBags is all for it.
As for Q4, revenue was down ~16%, though gross margin was up ~250bps to 56.5% and they managed to cut marketing costs by ~$9MM so they still earned a sort of reasonable $.25 per share and had ~$17MM of EBIDTA. So that is marginally ok, but what fucking killed them is their guidance as they gave full year 2011 eps guidance of $.40 to $.50 after earning $1.22 per share in 2010 so fuck you very much. Basically, by losing out on new customers in Q4 and with January new customer starts down 30%, they lose the compounding effect of having those customers continue on and that pretty much sinks the year. They say they’ve recovered in February with new customers starts up 20% because they ditched their new and improved failed strategy (though the only thing it seemed to improve is short interest and cash burn) and cut prices (so bye bye margins), but when a company says: “it is clear that we need new product offerings and new sales channels to re-energize top-line growth going forward, and to that end we plan to invest in new product development efforts in 2011,” usually you want to pull out faster than if you were boning the Octomom without a condom.
So do we put our value hats on and buy here? Hmmm. First of all, you all know Money McBags likes value investing and catching falling knives as much as he likes Jane Austen novels or cuddling, but given this company’s business model which can quickly generate a ton of cash, it is tempting to bottom feed here (though Money McBags would rather feed on this bottom), especially with their ~5% dividend yield which they should be able to pay from cash generated this year (unless they continue to make worse business decisions than Stephen Baldwin). That said, this management team has been truly awful, no really, they have destroyed more value than HD porn (because honestly, one doesn’t need to see every single herpe). They fucked up their promotion with WMT a few quarters ago and now they spent who knows how much money on a quantitative study to better target customers, implemented that study, and saw new business decline at least 30%, so perhaps they shouldn’t have hired Madoff consulting to run that quant study.
They are still trading at >30x the midpoint of their guidance, no longer have that great of a balance sheet with only ~$10MM net cash, and on an EBITDA basis, if you add back ~$11MM depreciation, ~$9MM of stock comp and other non-cash charges, and ~$6MM of taxes, you get a guess of~$50MM of EBIDTA for 2011 and the company is trading at ~7x that which is not really cheap considering REVENUE IS GOING TO DECLINE THIS YEAR FOR THE SECOND YEAR IN A ROW (guidance is for >$400MM, and they had $510MM of revenue in 2010 and $524MM in 2009). If anything, this is still a short because valuation is out of line, Weight Watchers is eating their lunch (and puking it back up later to stay fit), their product is too expensive and actually, pretty shitty, and their margins are going to get crunched as food prices rise and they discount more. So while there may be a brief dead cat bounce, Money McBags would short into that. That said, if an activist management team comes in to take over, Money McBags would be happy to buy in to this company because they have a ton of leverage if they can remember how to exploit their brand equity. Fat people aren’t going anywhere, and they are always going to be hungry, so this company has every advantage if they can just get back to their roots.
The market rallied today as election booths underflowed with discontented voters, unemployed workers looking for a warm place to hang out during the day, and douchey hipsters who thought the lines were for the Apple store.
Apparently the Republicans are going to win back the House and thus have 1/4 of the decision making bodies in the US (the others of course being the Senate, the Executive Office, and Marisa Miller because Money McBags would do whatever her body decides) which is somehow a good thing even though their policies are what got us to where we are in the first place. So hoooooooooooofuckingray. Instead of the party who can’t get us out of this mess having all of the power, they can now share part of it with the party who got us in to this mess as the clusterfuck of bad ideas and incompetence will continue. So Rally fucking on.
To use a terrible analogy, it’s like when Bo and Luke Duke came back to the Dukes of Hazzard after their contract dispute led their gay cousins to take over for a season. While it might have been a marginal improvement, the show still fucking sucked and all anyone wanted to see was Daisy Duke anyway, so who fucking cared whose turn it was to drive the racist car. And that is like this election because no matter who wins, the economy will still suck and all anyone wants to see is real economic growth (and Daisy Duke), so who fucking cares which unoriginal, solution-less dickbag drives the figurative legislative car.
Hopefully you all did the sensible thing and voted for “None of The Above” and wrote in Money McBags of the BOGUS party (Bail Outs Get Us Savings) who will finally take this farce of an economic non-strategy all the way. Money McBags spent at least half the day writing his acceptance address (and the other half googling Cintia Dicker‘s address) and promises to return this country to fiscal prosperity through destroying it and building it back up with more bail outs, more TARP, and especially more PPIP (though what else would one pee?).
As for macro news, it was more non-existent than people who have read all of Middlemarch or Art Laffer’s credibility. The story remains QE2 and it will be very interesting to see how the market digests the size of it (perhaps they will ask Peter North’s co-stars for advice) because there still remains a lack of consensus as to how much the Fed will ease. Of course the silliest part of all of this (even sillier than this trend of giving up showering and deodorant and way the fuck sillier than suing Mcdonald’s for being fat), is that the prospect of QE2 has rallied the market when the whole reason for QE2 is that the economy is more fucked than Capri Anderson after an eight ball in Charlie Sheen’s hotel room. So while QE2 is somehow the panacea for the dying economy (just like QE1 was, and TARP was, and everything else that has led to cyclically low 2% GDP growth (until the 2% is revised lower) was), the market is acting like that panacea has already cured the disease when in fact it may exacerbate the disease like Mentos in a Diet Coke bottle. This is as confusing to Money McBags as men who look like lesbians and ergodic theory so as the market rallies, he is left scratching his head in amazement (or perhaps it just scabies).
Internationally, Australia and India both raised rates as their economies continue to be healthier than Gabourey Sidibe‘s appetite after skipping both first and second breakfasts. China’s unquenchable thirst (perhaps caused by too much soy sauce) for natural resources has helped drive Australia’s economy higher and as a result of the rate increase and Bernanke’s folly, the AUD reached its 28 year high last night achieving parity with the US dollar. Money McBags is now counting down the days until the dollar is no longer worth even a dong, which will be bad news for the Key West Vietnamese population.
Also, something to be aware of as your EPV etf drops faster than Abe Vigoda‘s balls in a steam room and that is that Spain’s 2nd largest bank is looking to Turkey for growth by buying a 25% stake in Turkish bank Garanti. Now look, Money McBags is well aware of the benefits of Turkey’s growing population, its youthful demographics, the the way it perfectly complements cranberry sauce, but something strikes Money McBags as being a bit fucked up when that is where Spain is turning to for growth. First of all, it means Spain realizes it is fucked for a long time and that is about as good for Europe as Lillian McEwen’s memoir will be for Clarence Thomas. But secondly, BBVA stretching for growth here opens up all kinds of risks because whenever Money McBags hears of a financial services company trying to buy growth, so many red flags go flying up that you would think he was part of a semaphorist circle jerk. So while Europe is running right now, be very very careful.
In the market today, PFE had what Money McBags calls a a Jennifer Lopez Q as they put up a good bottom line but a weak top line. The company sold off ~1% as their revenue was below analyst guesses thanks to a stronger dollar and Lipitor sales falling by 11% due to increased competition from generics and fat people being unable to afford to eat as much. Also in the health care space, MHS put up a good Q and rose ~9% as they were able to grow their business and maintain margins which the Street thought would be less likely than Paul Krugman exhibiting modesty (or common sense) or Money McBags caring which of the Bernaola twins was tickling his taint.
Elsewhere, MA put up a nice Q and rose ~5% as eps of $3.94 grew 15% and beat analyst guesses of $3.54 as consumers max out their 1% cash back credit cards in order to earn income (like that is any stupider than continually borrowing from China?). ADM got cropped on as profits dropped due to weak grain merchandising margins and CLX tumbled by ~4% after the conglomerate posted disappointing earnings and lowered full year numbers as apparently all 800 of their categories sucked.
In small cap news, NTRI cut some dead weight by lowering costs and rose ~9% as they raised full year guidance. Money McBags has talked about this name many times here as they have plenty of leverage in their model but management has executed worse than a San Diego TV station’s news cast. Money McBags hopes to break down their Q in more detail if he gets time later in the week but with revenue down 4%, he isn’t itching to buy any. Also, ININ released their Q3 after their pre-announcement the other week and shot up ~9%. Remember, Money McBags broke them down the other week and pointed them out as an interesting company and told readers to listen to their call to see if they discussed what this new leg of growth was (Money McBags would call it a third leg of growth, but that would be way too easy). Money McBags also hopes to get to their call later in the week but they did mention that their cloud-based communications orders are seeing strong increases.
Which of course brings us to TMRK. If Money McBags were to write a ballad for TMRK, it would be called “To all the small cap companies he has loved before” because TMRK exhibits many of the traits he looks for in a small growing company. They are in the early stages of a huge multi-year growth market that continues to consolidate, they have a niche advantage (for now) with government business because Uncle Sam wants his servers the fuck out of Washington in case one of those Al Qaeda fucks gets on the loose (and by colocating their shit down in TMRK’s Miami centers, the government’s data is hella safe because even Al Qaeda loves them some South Beach), their revenues should continue to grow 20%+, and fund managers have been sitting on their hands on this one waiting for it to take off so they can jump in like lemmings (seriously, over the past 4 to 5 months Money McBags has spoken with 3 to 4 fund managers who all said they like the name, but are tired of it never moving. Well guess what motherfuckers, it’s moving now. And Money McBags means motherfuckers in the nicest way since he’d be happy to do some one off due diligence for you, or even perform at your kids’ upcoming bar mitzvah, for a few shekels).
The only things that worry Money McBags about this company are the debt and the fact that they have no earnings (and Money McBags rarely buys a company with no earnings (you hear that SPRT?) but they have solid EBITDA and cash flows) but the CFO said he expects positive EPS to hit in fiscal 2012 and this was fiscal Q2 2011, so in the next 4ish Qs.
As for this Q, revenue was up 22% to ~$85MM, EBITDA was up ~28% to ~$23MM, and guidance was raised from $345MM to $350MM on the top line to $350MM to $353MM with the low end of EBITDA guidance increased by a nut hair to $100MM to $102MM. But the most exciting part of this business, the sizzle to their steak or the rust to their trombone if you will, is that their cloud computing revenue was up another 15% sequentially to a $30MM annual run rate. So sure it is <10% of their top line, but Money McBags is more convinced that cloud computing is the way of the future than he is that the market is structurally broken or that Molly Sims is hot. So this is the little growth engine that in time can propel this kind of boring colocation company to new heights.
The company is now trading ~11.5x 2011 fiscal year EBIDTA guidance which is not cheap and around where take-outs have been happening but as Money McBags said, this is a long-term play, kind of like the Indian outsourcers 10-15 years ago or Jennifer Lawrence. So as long as valuation doesn’t go haywire, Money McBags could give a shit if it is trading at 9x EV/EBITDA or 13x EV/EBITDA because he fully expects EBITDA to keep growing in the double digits for several years so this is a company he just kind of lets sit there and in five+ year he’ll collect his profits (that is if we still have an economy).
The market took a breather today from its run up last week that was driven by misinterpreted news, false hope, and probably a bunch of fat fingers. Today, the big fear is that the Euro bank stress tests were not as stringent as they should have been, a fact so obvious at the time that even your humble dick joke writer and market analyzer Money McBags told you so (and when Money McBags accepts his Pulitzer, he will be sure to thank all of you in addition to the lovely Sara Varone for the inspiration, though probably not in that order). Only about a month and change too late, the Wall Street Journal (showing why newspapers have jumped the shark) is reporting today what we all knew back then (well, that is all of us who don’t accept headlines at face value, even if they are as heartfelt as this one). As Money McBags said many weeks ago:
“The stress tests failed to analyze whether banks could withstand a debt default by any European country and neglected to look at the entirety of banks’ balance sheets (which is a bit like asking a female out on date but forgetting to check for an Adam’s Apple) including completely leaving out any government bonds being held to maturity which is only the fucking majority of the sovereign debt held, so that makes as much sense as trying to diagnose rectal cancer with a broken thermometer and a loving touch.”
And sure enough, investors all have their panties in a bunch today (which would be fine if investors looked like this, instead of this) because of exactly that problem (though why it is just surfacing now is more of a mystery to Money McBags than dark matter or that Hannah Montana thing). Per the WSJ, during the Euro bank stress tests, banks reporting of sovereign debt holdings varied by the nebulous definition from the Committee of European Banking Supervisors (known more familiarly as CEBS pronounced “See BS”) with some banks not reporting holdings of subsidiaries, some banks not reporting trading portfolios, and some banks simply slapping their holdings on the tables and exclaiming “stress test this.”
There were differences in such simple things as gross and net (and really, how fucked up is any kind of measurement where “gross” has different interpretations? Other than however you may interpret “gross” if you dare to google “blue waffle.” How about instead of “gross”, the CEBS just says “put every fucking liability you could possibly have down, including off balance sheet conduits, CDS exposure, and drinking problems), whether to include short positions or not, and if Greek debt counted as sovereign since Greece is not likely to remain a sovereign nation for long. The point is, there is a lot of murky shit and inter-EU exposure on EU bank balance sheets and it will only take one credit default (2 to 1 odds on Greece, 8 to 1 on Spain, and 12 to 1 on this Wayne Rooney guy who may already be morally bankrupt, of which Money McBags highly approves) for shit to fall like dominoes or any TV show Ted McGinley touches and if it does, look out below.
Other than European banks fibbing on their stress tests, there wasn’t much macro news today except for rumors of more stimulus for the US economy, this time including a $200B business tax break for new investment, $50B for infrastructure spend, and a roll of $20s to help support college education. The proposed write-off for capital investment, will allow businesses to deduct from their taxes through 2011 the full value of new equipment purchased, such as computers, utility generators, and office equipment. The hope is that this will spur spending on capital goods and serve as an incentive for businesses to start spending the cash they have been hoarding (though if the government really wanted to get companies to spend on capital goods, they would have Jennifer Pershing in charge of deliveries, especially if businesses require all deliveries to be in the rear).
In the market, financials led the way down as if they had been hit by a bale of hay while Oracle rose 5%+ on news that they had lured former HP CEO Mark Hurd to serve as Co-President after relenting to his demands to have Cinemax streamed in to his office. Of course HP is now suing Oracle for hiring the guy they fired citing that it puts HP’s trade secrets (like how to build shitty computers and shittier printers) at risk. Finally Barclay’s was down 5%+ after naming a new CEO and continuing to suck at banking.
In small cap news today, NLS ran up 10% after suckering (Money McBags means convincing) their largest shareholder to buy $5MM worth of debt. You all may remember the debate Money McBags had with a loyal reader in the comments section about NLS months ago when it was trading 20%+ above where it is today and Money McBags was very skeptical at the time of it having much value (which in fact it didn’t). With incomes falling and food rationing happening, people no longer need to work out to lose weight (they especially don’t need to pay a couple grand for a Nautilus machine that just winds up as an expensive clothes hanger anyway). While Money McBags did pimp NTRI as an interesting company to dive in to (no doubt like their consumers dive in to a chocolate cake), their management has executed about as well as the Ohio state prison system so for a play on fat people you might be forced to look at MED (and something about this company makes Money McBags feel uneasier than Roman Polanaski’s kids’ babysitter) or WTW about which Money McBags has spent less time analyzing than a chubby chaser has spent analyzing an Olsen twin.
Tomorrow Money McBags will hopefully have time for a deeper dive in to a small cap name. He’s been busy lately trying to figure out how to increase traffic to the award winning When Genius Prevailed (though readership continues to grow by whatever is slightly less than exponentially but slightly more than flat) in his quest to hit 1MM readers (and as usual, he is almost there give or take 1MM). So if you’re one of Money McBags’ many readers (and if you’ve read this far, you probably are, or perhaps you’re just waiting for this), tell a friend, tell a relative, but most importantly, tell Alice Eve because Money McBags would like to devote his full attention to this and keep it free (just think about the $ you all pay the sellside, or for newsletters, or for magazines when Money McBags gives you better shit than that on a daily basis). And if you’re on the buyside, Money McBags is available for consulting on small cap names (he will even leave out the dick jokes), deciphering macro data, or performing at Bar Mitzvahs (he can do a terrific version of Hava Nagila and is known to put the “rah” in torah). If you’re on the sellside, seeing as how Money McBags fucks your business in the ass every day and actually provides real research, you’re welcome to show some initiative and buy his services or just keep sucking at your jobs while Money McBags builds a better mousetrap.
The market ran faster today than Roman Polanski going to get his keys to pick the baby sitter up because the manufacturing sector grew at its slowest pace since December, private construction spend dipped for the second month in a row, and Ben Bernanke said shit still sucks out there. So rally fucking on like Donkey Kong having his way with the princess, only if the princess had tainted his banana wth AIDS.
With the market rallying on macro news that was about as positive as a RuPaul pregnancy test, Money McBags is left to wonder what he is missing, how much the market would rally if there were actually something positive going on in the economy (like maybe either the second derivative of released data positively increasing or the unemployment rate decreasing and not just from a declining labor force participation rate), and how he overlooked this delightful NSFW Alice Eve scene which has caused his Oscar to stand and applaud. Money McBags is not quite sure how to interpret the market moving in opposition to macro data, as the language of giberrish wasn’t on the rosetta stone the last time he checked, but he hopes those of you buying in to this capitualting market are careful.
As for macro news, Benny B warned us that “we have a considerable way to go to achieve full recovery in our economy, and many Americans are still grappling with unemployment, foreclosure, and lost savings, in addition to the angst and nausea they feel every time they look at the deficit and realize their kids may be more fucked than Stephen Hawking in a duel.” Ok, perhaps that last bit was made up but, whatever. Bennie B did get slightly positive by saying he fully expects consumer spend to pick up in the next few quarters as wages rise, business demand picks up, and the US finally figures out what to do with all of the underwear they stole.
Money McBags is a bit skeptical of Bennie B’s claims since unemployment remains more stagnant than the Terri Moulton Horman for “Stepmother of the Year” campaign or jokes here on the great When Genius Prevailed so it’s not clear where these rising wages are going to come from unless it’s from laying more people off and then giving those still employed a bit of the saved salary, which of course would do nothing for overall consumer demand. But hey, when Bennie B gets his Fed on, the market listens (to the parts it wants to hear).
In other macro news, the ISM came out with their numbers for July and the manufacturing sector grew at its slowest pace this year, but luckily, the 55.5 number was better than the 54.2 analyst had guessed so rally on my friends. It was the third straight month (and the month was so straight it even got it up for a Kathy Najimy-Rachel Ray threesome) of slower growth but remember, readings above 50 still signal expansion, so apparently there is nothing to see here (except for new orders dropping to their lowest level in over a year, production slowing down, and Kagney Linn Karter).
In the final bit of macro news, construction spending rose .1% as increased investment in public projects (perhaps maybe a bridge to somewhere) offset the 15th straight monthly decline in private nonresidential construction and the .8% decline in private homebuilding (which included growth from the Greenspanville‘s being erected across the country, and yes, Money McBags said erected). Yowsa. As usual, last month’s new construction was revised downward from a .2% drop to a 1% drop as part of the government’s “hold the shock and hope for no awe” strategy, so this month’s .1% decline should be labeled as “wishful thinking.”
Internationally, China’s manufacturing sector cooled further as the government tries to reign in reckless speculation on real estate and ben wa balls. The official purchasing managers’ index fell to a 17 month low of 51.2 from 52.1, a separate PMI released today by HSBC and Markit Economics showed a drop to 49.4 from 50.4, and a third reading of PMI from the desk of Sum Dum Gai simply took the average of the two. China’s ec0nomy slowing down is actually favorable as it has been growing at a rate less sustainable than a conversation involving only eye contact with Christina Hendricks so having it moderate a bit and perhaps not inflate to a bubble like every other emerged economy would be beneficial for all involved.
Driving the market today was the European banking sector thanks to HSBC putting down its fag, rolling up its sleves, and earning the fuck out of some profits. The bank doubled its profits to $7B despite revenue growth declining by 7%, operating expenses increasing by 9%, and no one having any fucking money. Profits rose as losses on bad loans tumbled to $7.5B, just over half of last year’s losses, and were the result of bad loans rolling off the books and the bank not lending anyone any money. BNP Paribas also put up a good Q, with the French bank’s profits rising due to credit getting better and having Laetita Casta on call to help coax out customer deposits. Just like in the US, bank profitablity seems to be rising across the globe despite declining revenues as credit is improving. That said, credit can only drive earnings for so long until the banks are going to have to start lending to people again to drive revenue and thus the vicious cycle will begin anew.
In other market news, Blackberry is not just losing market share to the iPhone but now the UAE said they will cut RIMM’s data service like the dirty infidel that it is. The UAE cited security concerns over RIMM’s reliance on encrypted emails which make it easier for criminals to operate and harder for the government to watch that stupid fucking video of the double rainbow that everyone seems to be emailing around. Not since Peter Chung anointed himself King has there been an international email controversy like this and it does not augur well for RIMM’s jobs overseas going forward as other countries like Saudi Arabia are also thinking about taking steps to ban Blackberry’s mobile services.
Finally, KO got an upgrade today from JP Morgan on the strength of the company’s emerging markets and having read Money McBags’ columns about the solid brand equity overseas the company enjoys. An article in Baron’s also pimped KO today, saying it could rise by at least 10% in the next year because of North American markets and because it still tastes better than water. And last but not least, Corning was up nearly 6% on news that it’s 50 year old Gorilla glass could be the next bazillion dollar product for flat screens and touch screens as it is 2 to 3 times stronger than regular glass, half the thickness, and sells for only a few bananas. The lighter, sturdier glass should cut down on shipping costs and scratched screens while also being easier to clean after one gets done with a chat roulette session.
In small cap news, everything was up. Money McBags is short on time today but he wants to highlight KIRK which remains too fucking cheap even though it was up strong today. Money McBags broke KIRK down a little over month ago saying its low end market focus (midwestern/southeastern housewives who love tchotchkes more than Joanie loves Chachi), growth through the downturn (and now they are going to be opening stores instead of closing them), and valuation (it is now trading ~9x to 10x eps estimates not including the $3.50 per share of cash on the balance sheet) make it almost as attractive as Diora Baird, and nothing has changed since then except for John Kyl’s stand on the 14th Amendment. The other interesting small cap name is NTRI who traded down big on Friday after what Money McBags thought was an OKish quarter. He has to go through it in more detail and while he wouldn’t be a buyer of the stock until their management team actually performs (they are 0 for the last bazillion quarters, rounding up to the nearest bazillion), they pay a nice yield, have a terrific cost structure, and are in a growing (pun intended) market. It’s worth keeping on a watch list for when/if they can figure out how to start accelerating their growth rates (Money McBags votes for getting Nicole Eggert as a spokeswoman, but that’s just him).
The market had trouble finding a direction for most of the day as news is thin and the summer is beginning so most volume is moving to the Hamptons where portfolio managers can sip on lemonade, listen to yacht rock, and denigrate the poor all while ignoring the economic data which has been so lackluster that it is in line for its own NBC prime time sitcom (tentatively titled: Just Dilute Me!). There was one bit of macro data released today which was about as encouraging as the letter “L” is to Jackie Chan on a read through script and helped send the market tumbling end of day. Purchases of existing homes fell last month and somehow analysts are surprised about that since reading comprehension is not one of their strong suits and thus they missed the part about the government tax credit running out and sales being pulled forward like Eddy Curry’s pay check. Home sales dropped 2.2% from last month despite near record low mortgage rates and falling prices and are now starting to roll over and play dead like a trained circus dog or Brittany Murphy. The best part is that the National Association of Realtors is blaming part of the drop on a processing delay which is holding up 180k mortgages as apparently the red “Rejected” stamp has run out of ink. Analysts guessed sales would be up 5.5% to 6.12MM homes which was such a close guess that it only missed by a nut hair, that is if the nut hair belonged to a brontosaurus, and not any brontosaurus, but a brontosauros with elephantitis of the nuts. But hey, maybe the 180k “processing” hold up was real (though something smells fishier about it than Paris Hilton‘s penis flytrap after pissing out a Long John Silver’s fish taco platter with extra tartar sauce because Money McBags doesn’t remember hearing about any processing holdups when 7MM+ mortgages, or 25%+ more than last month, were being processed monthly in 2005, but whatever). Anyway, if we assume the hold up was real and add the 180k home sales that were delayed due to “processing” to the monthly figures, exisiting home sales would have been up .8% which is still way fucking short of the 5.5% increase analysts guessed. And making it even worse is that analysts used a lower number to build their forecasts as last month’s sales were just readjusted upwards to the 579k number so analysts were actually forecasting greater than 6% growth. Money McBags hasn’t seen a miss this bad since Men Who Stare at Goats (and really, that movie was so fucking awful Money McBags wanted to stare in to the fucking sun so his retinas would burn and thus he wouldn’t have to watch the whole movie) or any economics paper released by Art Laffer. With the expiration of the government tax credit, the real question is if home sales are merely taking a breather after an artifically pulled forward sales surge or if the housing market is about to take another dip and send the economy back to it’s bad place.
In international news, Britain released a new emergency budget which includes an additional 17B Euro of budget cuts (25B Euro in total, or about what Money McBags would pay Britain for a chance to have Lucy Pinder and Nikkala Stott star in his personal home movie “The Mystery of Bonehenge”). The cuts are aimed at stricter rules for what qualifies someone to get disability pay (simply listening to Madonna’s music will no longer be considered a disability, though listening to it and liking it will remain a sign of real impairment as only the auditorily challenged can bear that shit), a freezing of welfare benefits, an increase in the value added tax from 17.5% to 20%, a new tax on banks, and the biggest revenue generator will be a fine levied on those with crooked teeth. In other international news, the yuan fell back a bit after yesterday’s rise as the Chinese government is determined not to let it appreciate too quickly for fear of losing a large part of their manipulated competitive advantage. Chinese state owned banks are now buying up dollars to either prevent a rapid yuan appreciation or to have more worthless paper to burn to keep warm when fiat currencies fail and the world reinstitutes the barter system.
In stock news, Walgreens announced a crappier than expected quarter and is trading down as if it spilled 1B tons of oil in to the Gulf. The stock was down 7% after revenues rose 6% and earnings came in at ~$.53 taking out one-time charges which was $.04 below analyst estimates. Speaking of Gulf oil spills, BP was down another ~3% today because it still has not hit zero (and yes, Money McBags is going to use that same joke every day until BP is actually at zero which will be sometime between tomorrow and when investors get their heads out of their asses). And finally, AAPL is up today because in direct opposition to BP, it hasn’t reached infinity yet. AAPL’s price target was raised by Deutsche Bank to $375 based on their new iPhone 4 release, the continued strong sales of the iPad, and a need to publish research to get portfolio managers to trade with Deutsche Bank.
In small cap news, WGO sold off hard on no news that Money McBags could find other than perhaps people realizing that paying more than 30x for a company in a declining industry with an expensive discretionary consumer product and a fleet of cheaper alternatives, is probably not the best thing to own. Shit, Money McBags would rather own NTZ which might be the worst idea for a business right now (high end furniture in Europe), worse than even selling ice to eskimos, unfunny jokes to Jay Leno, or panties to Britney Spears. The difference between NTZ and WGO of course is that NTZ is trading like it is a stupid fucking business while WGO is trading like it is selling super powered iPhones which give off pheremones to attract Aubrey O’Day rather than $100k gas guzzling unnecessary RVs. After last Q, Money McBags hesitantly raised his WGO top end target to $9 from $7.50, so there is still plenty of room for the stock to go down. In other small cap news NTRI has continued to try to make a run. Money McBags wrote about them after thier last Q and they remain a very interesting watch list name as the company has a ton of earnings power, trades like a momentum name, and just put up a quarter of positive new customer growth which fuels their sales. It’s still a bit early for this company as they keep fucking up their ad spend and their affiliate program sucked a donkey dick (which was certainly pleasurable for Eeyore, yet did nothing for investors) to the tune of a $3MM charge last Q, so management clearly needs to figure out how to better execute (perhaps they should ask the state of Utah for ideas) but it’s trading inline-ish with peers, has a nice dividend, and if they can put up a good next Q should have significant upside. The only problem is Money McBags doesn’t have a lot of faith that next Q will be good and he doesn’t gamble (unless he is in Las Vegas, Atlantic City, his apartment, the car, etc..), so he is not going to buy. Money McBags prefers more certainty than he has for NTRI right now so while it has a number of things going right, Money McBags would still just be guessing at their next Q. One data point is good, two are better, three is a trend, and four is time to think about selling. We’re at the first data point now, so do your due dilligence.
5/4/10 Midafternoon Report: Monty Python to rewrite script as somebody expects the Spanish Inquisition
Timberrrrrrrrrrrrrrrrrrrrrrrrrrrrr. The market is trading down as if Europe is going to go bankrupt like John Edward’s morals or like investors think it will give them AIDS (which means Magic Johnson is happily buying today since he can’t be infected again). The news continues to be fears that even with austerity measures and a bailout, Greece is going to be more fucked than Custer at the Battle of Little Bighorn or Houston after the Houston 620. As a result, the dollar is at its one year high against the euro, though to be fair, part of that high is because 90% of dollars have traces of cocaine on them. Adding fear to Greece’s impending doom is worry that the debt contagion is spreading to the other crappy European countries about which no one cares (you hear that Liechtenstein with your alps, tax haven, and policy of neutrality?). Spain is once again worrying the markets as Spanish banks are proving to be weaker than the force carried by W and Z bosons or Tiger Wood’s “sexual addiction” excuse. Apparently two banks in Northern Spain were supposed to merge but that is now some sort of power struggle to see who gets to be in charge of the crappy loans which sounds a bit like Dustin Hoffman and Warren Beatty arguing over who gets the marketing rights to Ishtar. Along with bank issues, the country’s current unemployment rate is over 20% and considering they have like a 15 hour work week, that is fucking shocking. Spanish Prime Minister Jose Luis Rodriguez Gonzalez Ramirez Guerrero Zapatero is shocked by the speculation that his country may be facing worse fiscal problems and claimed his country has “strong solvency” and the possibilty of needing a bailout is “complete madness” before he asked reporters if they’d like to buy an unfinished church and promised he’d make them a deal, even throwing in a Shake Weight for free. The market is scared today with Europe’s debt crisis pulling a Coleman Silk and spooking investors but we were due for some consolidation so as long as you hold names you are comfortable with, don’t panic.
In US macro news, pending home sales rose 5.3% which beat guesses and reached a 5 month high. As always, this increase was driven by tax breaks for new home buyers and cardboard boxes now being included in reported home sales numbers. Also, factory orders jumped 1.3% in March and were up 3.1% when excluding transportation orders which is the biggest surge in 5 years since the great home redecoration bubble of 2005. The US macro news continues to be encouraging but we still need to see unemployment decline until we will start feeling giddier than Amanda Carrier‘s bowflex.
In stock news, everything is down so this could be a buying opportunity for real companies. Unfortunately, SIRI isn’t one of them despite putting up a quarter where they actually earned a $.01 per share profit. SIRI’s business model is more flawed than Amy Winehouse’s face or supply side economics. With the prevalence of iPods, podcasts, internet radio, and Brooklyn Decker (not clear what Brooklyn Decker has to do with this, but she is hot), there is absolutely no reason to pay for radio unless you are a fan of the great Howard Stern and when Stern retires at the end of the year, Sirius will be deader than Larry Craig’s political career. Money McBags would rather be subject to 24 hours of Celine Dion’s music while watching re-runs of Friends and having his anus waxed than go long SIRI. In other news, MRK and PFE both had good quarters as untemployed people still need to stay medicated to stave off depression, anxiety attacks, and the stench from Paris Hilton‘s vagina.
In small cap news, Money McBags is getting absolutely obliterated like Alf Landon in the 1936 election (perhaps he shouldn’t have eaten all of those cats) or Carmella Bing in Sodom 4. CRUS is getting pounded, though it has run up so much that momentum investors are likely just taking profits. This is true of most of Money McBags’ names but he is holding steady as he believes in their stories and they are not overvalued (except for maybe VMW which is a bit overvalued, but whatever). Yesterday Money McBags told all of you to watch NTRI’s Q last night and they are up 20%+ after putting up moderately better numbers than the street was expecting yet giving what Money McBags thinks is pretty good guidance. For the Q, NTRI earned $.15 per share on revenue of $159MM of revenue but they had $8MM of potential one-time marketing expenses so absent those, they would have earned closer to $.28 per share. While revenue was basically flat with last year, new customers were up 11% and new customer revenue was up 14% due to a mix shift back to more expensive products. New customers basically drive this business as they help with reactivation as recency of dropping out plays a big role in getting people to rejoin plus the weak new customer additions from the past two quarters have hurt their regular program revenues. The bad news was that their Walmart/Walgreen’s/Sam’s club retail promotions bombed worse than Michael Richards on Showtime at the Apollo. The roll out of those programs cost them $3MM in marketing expense which won’t be repeated again and was part of the $8MM excess marketing spend. Of course that other $5MM came from higher ad rates so it’s not clear how much of those are really temporary vs. a shift in demand for ads and thus persistently higher rates. The company guided to $1.02-$1.12 eps for the year and $.33-$.36 eps for next Q with moderate topline growth so they are banking on marketing spend going back down to ~29% of sales while their gross margin and op ex improvements maintaining. They are trading at ~20x that with their 20% run up today and are still pretty cheap on an EBITDA basis. They earned ~$70MM EBITDA last year but with their guidance they should slightly exceed that so call it $75MM. With $90MM cash and no debt, they now have an EV of $600MM and thus are <9x EV/EBITDA on 2010 earnings. That’s about inline with peers but pretty cheap for their cash flow business model. The stock is still 33% below its high from the beginning of the year which means they have 50% more to go to get back to where the market thought they should be valued if growth was to come back. The point is, strong growth isn’t quite here yet but they are starting to get trickling sequential growth and adding that to operating improvements gives you a stock with the potential that is now reasonably priced for a static environment. But the thing is, we know there are a ton of fat people in this country so programs like this are always going to be in demand until society stops shunning bulimia. NTRI’s diabetic targeted product is continuing to grow and apparently hiring the once delicious Angie Everhart has spiked up sales to their women’s segment. Money McBags is going to let the shorts cover today but may be buying tomorrow when this thing settles. There is plenty of room to move up while downside seems limited, that said, the stock is near fairly valued if you think their weight loss products will only have moderate growth.
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.
4/15/10 Midday Report: Tax day causes 53% of the US population to be pissed, other 47% pissed every day about being broke
Oh shit, just when the economy was looking better than a threesome with Hayley Atwell and Alice Eve, new jobless claims for last week rose for the second week in a row and economists didn’t have Easter to blame this time. Well, actually they did, as a government analyst once again warned that the numbers could be skewed since Easter falls on a different day each year. Wow, really? You’re going with that excuse again? Umm, if Money McBags is correct the numbers are seasonally fucking adjusted and since calendars have existed since shortly after the fucking neanderthals were exterminated (which was caused by too much contaminated dinosaur meat since those smallbrained fuckers never learned how to fucking use fire), shouldn’t that seasonal adjustment adjust for Easter? Seriously, it’s not like the day it fell on surprised anyone last year or this year (well, except for maybe Amy Winehouse or the hippocamus-ly challenged), so that excuse is lamer than Spectacular Bid or Boy Meets World reruns. Claims rose by 24k to 484k which is the highest since late February and the highest since the Great Walmart Lockout of 2006. There are still over 10MM people receiving some kind of unemployment benefit and since those benefits don’t include being tucked in by Ashley Dupree (very NSFW, but required viewing), that’s not good. In other macro news, defaults doubled in the government’s loan modification program which is weird to think that people who couldn’t afford mortgage payments still can’t, even at lower rates. It’s like being surprised that a kleptomaniac might want to steal again after being released from jail or that Tiger Woods is likely boning skanks again despite going to the laughable sex therapy (by the way, it’s not called “sex addiction,” it’s called “having a penis”). In positive news, manufacturing production in the US gained as output of factories rose .9% with companies building back inventory while the Empire State manufacturing report demolished expectations. The survey came in at 32%, well above the expected 24%, and Money McBags has no idea what that means other than beating expectations is good and at least New Yorkers have something to cheer themselves up about while watching the Mets.
Internationally, Greece is back in the news again trying to screw up something good we all had going with the markets. It’s like we’d been asking the markets out for 2 years, finally got her to come to dinner, got her home, and as we were about to inspect her large Sharpe ratios, the ruphies wore off. So thank you Greece for scaring the markets again with your rising interest rate spread. Of course there is more of a chance of the Laffer Curve being right than there is of Greece going bankrupt, so Money McBags will be buying at any big market dislocation caused by rumors of our Hellenic friends going to take a ride on the river Styx (though if they go to Styx, they should give a big “domo arigato” to Hades).
Also interntationally, China’s economy is surging like William the Conqueror’s popularity among the French in 1066. GDP was up 11.9% from last year which is more bubble-icious than Gonzo Grape. Not only that, but investment in real estate was up 35.1% and housing prices were up 11.7% in March alone. Wow. China is definitely hitting on all cylinders and their economy is busting out more than Lina Li thanks to the ginormous government stimulus, the artificially deflated currency value, and the accelerating population growth.
In stock news GOOG is running up in to earnings since, you know, they are fucking GOOG. Money McBags should have bought more but it is already an outsized position for him so he’ll root for the best with their earnings report and likely buy any dip. UPS pre-reported their earnings today and grew profit by 37%. They earned $.71 per share, well above analyst guesses of $.58, and upped their full year EPS guidance from $2.70-$3.05 to $3.05-$3.30. Wow. Apparently people really want to ship some shit that can’t be attached in an e-mail. This is a huge signal to the strength of a business rebound. International shipping was up 18% and while US shipping volumes were up less than 1%, it was the first growth in US shipping in two years. So yeah, it is barely up from a much lower base, but this is how things start out. A very encouraging quarter from UPS.
In small cap news, NTRI is starting to run and Money McBags has broken their business down a number of times here. They are cheap but operational issues keep Money McBags from owning this stock. Also, MLNK is trying to rally back from a huge sell off after missing their quarter. Money McBags has analyzed the fuck out of this company but it is ridonkulously cheap on an EV/EBITDA basis, trading at ~4x with a bigger cash cushion than Jennifer Lopez’s ass cushion. This is a small holding of Money McBags and he is currently down ~10% on it but is thinking about nibbling at some more. The biggest issue is that their excuse for missing the quarter made less sense than Kathy Griffin’s career as HP is their biggest customer and was up 10%, yet MLNK’s sales were down 9% even including revenue from an acquisition. It is more head scratching than crabs as to why their revenues performed so poorly and why their guidance was down as the global economy and the consumer are picking up so this company should be seeing revenue growth off of such depressed numbers. That said, the stock has started acting better, so it is worth watching.
3/5/10 Midafternoon Report: With Oscars approaching, the market is “Up” as economists “Blind Side”d by fewer job losses while strength of recovery remains “Up in the Air”
The market is running again as a result of the jobs report and inertia. According to the (No)Labor Department, the economy lost 36k jobs in February while the unemployment rate stayed steady (and for those cunning linuists or Nabokov fans, that is back to back anagrams) at 9.7%. This was better than the estimates of 68k job losses but is not a definitive enough number (like 42) to give investors a real read on the direction of the economy. However, beating estimates is all that matters even though we know estimates are inherrently flawed like a supermodel with a hairy ass. Some economists partially blamed snowstorms for the job losses, while others blamed companies for wanting to be profitable. The (No)Labor Department chimed in and said job losses from snowstorms were unquantifiable like the square root of a negative number (imaginary numbers be damned), the number of one night stands by Paris Hilton, or how many licks it takes to get to the center of a tootsie pop.
In international markets, the Greeks are still protesting their loss of free lunches (and if those lunches were chicken gyros with a dollop of tzatzki sauce, who can blame them?) but now they are rioting in the street causing police to employ Greek helmets for protection. German Chancellor Angela Merkel pulled herself away from the daily German scat film break to say she feels Greece has done enough to cut their deficit which has made the market guess as to whether the EU will continue to provide support. This was not helped by Germany’s economic minister Rainer Bruederle who tried to “rainer” on Greece’s parade (and since it has been sunny in Greece today, it was quite a golden shower) by saying Germany “does not intend to give a cent” to Greece. Of course Money McBags isn’t falling for that sleight of language, knowing that Greece wants euros and not cents, so it was only an idle threat by Herr Bruederle. Also, some guy named Jean-Claude Juncker (and one can only hope he isn’t a bond sales man because Juncker bonds would be a name almost as unfortunate as if Mary Turdy sold bottled water, hence Turdy Water) who heads a group of euro-area finance ministers is soothing the market by saying “We’re telling financial markets: Look out, we’re not abandoning Greece.” Money McBags has been saying all along that Greece isn’t going anywhere (well unless the Anatolian plate keeps moving westward) and the EU will be there to bail them out regardless. This Greek default hysteria has been a more overblown news story than Tiger Wood’s love of filth or anything having to do with tea baggers that doesn’t involve Kim Kardashian.
In stock news, Apple has announced that April 3rd will be the launch of their unfortunately named iPad (no word on when their super powered iPad, to be known as the Max-iPad, will come out to sop up sales) while financials continue to shoot up like Robert Downey Jr. in the 1990s. The market is in full blast off mode as the economy is not getting worse today, just getting sideways.
In small stock news, everything is fucking up so good on you for owning anything that is publicly traded. Money McBags promised to take a look at NTRI the other day after their craptastic guidance and he has finally had a chance to go through their call. The stock is down 50% in the past 3 months after a massive rally on expected sales improvement. Unfortunately, performance has not accelerated as hoped as investors remember that fat people are fucking lazy and thus are not apt to sign up for dieting even if they feel that the economy is getting better (though to be fair, NTRI costs less than actually buying groceries, but the up front costs are prohibitive for some). NTRI’s Q was actually not too bad. Without one time charges they earned $.18 on a shrinking sales decline of only 7%. These numbers were better than estimates with the company also earning $14.5MM of EBITDA in the Q and a delicious $69MM of EBITDA for the year. The stock traded down though as their guidance for Q1 was so far below estimates that estimates needed an electron microscope to see it. The company said that ad rates in Q1 have gone up by 50% to 100% in some cases as companies come back into the advertising market and drive up prices for everyone. They guided to $.10 to $.13 for Q1 eps and analysts were estimating $.54 eps. That is a bigger let down than for a gold digger who married into the Madoff family. Not only is that guidance bad, but they said earnings will be negatively impacted by around $.17 in the Q with 60% of it coming from the marketing spend uptick and 40% coming from sunk costs to build out their retail channel. So even if we add back those one time charges, guidance would have been around $.30 or still way fucking below estimates. Revenue guidance is for around $155MM which is only 10% below expectations but the company said their retail sales partnerships other than Costco (Walmart, Walgreens, Old Country Buffet) posted disappointing and immaterial results. While Nutri System D (geared towards diabetics) performed well and they saw new customers sign-ups flat and not down for the first time in over two years, their profitability crumbled like a Taco Bell Chalupa in the hands of one of their target customers. Look, I’m no Norman Einstein but if you want to sell shit to fat people, why not sell some fucking Oreos instead of diets? Really. It’s like trying to sell an agoraphobic Super Bowl tickets instead of indoor furniture. Either way, the company is back down to where it was in October before the anticipation of better things to come. That said, if we step back for a second and look at the company, it’s actually not a terrible buy right now. Earnings guidance is basically flat with the midpoint being $1.07 for the year, so it is trading at 15x that. NTRI has a 4.5% dividend yield and spits out a ton of cash. The company is trading at an EV/EBITDA of around 6x last year’s EBITDA and with guidance for 2010 in the same range, the multiple should be the same. Sure they have not grown in a while (while pseudo competitors like MED are growing like weeds on anabolic steroids), and sure they are facing huge headwinds and uncertainties with more expensive marketing costs and their retail sales programs belly flopping from the high dive, but the time to buy companies with decent track records, good returns, and solid balance sheets, is when every one fucking hates them. NTRI has fixed some of their operations and still has solid brand equity and remains profitable. It may be too early to get in to this, but it is worth keeping on your radar as this country will remain chock full o’ fat people and thus there will always be potential customers (though if I were NTRI, I would partner like fuck with insurance providers and businesses as a way to get employees to lose weight and thus get premiums and high risk patients down). Anyway, do your own research here but more than anything, enjoy the weekend.
The big news spooking the market today is Obama’s unknown plan to try to regulate banks. He is now said to be giving former Fed Chairman Paul Volcker the keys to palace and Volcker is rumored to be getting all Glass-Steagall on bankers’s asses telling them they can’t trade financial securities using their own deposits. Money McBags is usually for the free market (especially if that free market specializes in foie gras or taint cleanings), but large financials firms need to be regulated. They have too much sway over the global economy, like Rasputin had over the Tsaritsa Alexandra or ugly chicks have over former President Bill Clinton.
The other news moving the market today is that China’s GDP rose the fastest it has in two years as it grew 10.7% thanks in part to their ability to make really cheap shit and therefore have consumers need to continually replace said really cheap shit when it breaks/tears/poisons them. Q4 economic growth was driven by a $586B stimulus package, subsidies for consumer purchases, a credit-fueled investment boom, and buy one get one free happy endings at local Shanghai massage parlors. The strong growth in China has investors worrying that the Chinese government will finally try to slow down their lending to avoid more of a bubble than they have already created, which in turn will dampen the global economic recovery.
In US macro news, first time claims for unemployment rose last week by 36k to 482k defying analyst expectations for a 4k drop. Money McBags is not going to harp on analysts for getting the number wrong as he knows it’s not easy to guess at a number that can be anywhere from 0 to 300MM, but guys (and gals), can we at least get the fucking direction right? You have a 50-50 chance on that one which is slightly better than your odds of not contracting herpes from shaking Tiger Woods’ hands, so can we do a little better? Luckily an economist for the U.S. Labor Department (or as it is soon to be renamed, the U.S. Non-Labor Department or simply You’re Fucked) cleared everything up by claiming that last week’s numbers were higher than expected in part because the Christmas and New Years holidays created a backlog in some states. To quote this brilliant economist: “It is not an economic thing — it is an administrative thing.“ He then went on to explain that the recent market crash also “wasn’t an economic thing, it was a math thing,” John Edwards denials about being some broad’s baby daddy “wasn’t a lying thing, it was a syntax thing,” and for the ladies out there, swallowing after a hummer “isn’t a romantic thing, it is a nutrition thing, so bottoms up” (when of course, we all know it is both). The main point is, whether or not the rise in new unemployment claims was due to an anomalous administrative glitch or more people simply losing their fucking jobs (you know, what the statistic actually measures), there were still at least 450k people who recently filed for unemployment so this economy is about as healthy as Amy Winehouse at an all you can smoke crack bar or a Krispy Kreme donut with extra transfats.
Also, the Philly Fed showed the pace of manufacturing slowed a bit in January as the index fell to 15.2 from 22 and was below the expectations of 17. Apparently a positive number still signals growth so since we have no idea of the impact of the relative values of the arbitrary numbers (how much worse is a 15 than a 17? And about 10% is not likely the correct answer), all we can say is that the Philadelphia area produced some shit, though it was likely all stolen by the residents, so should have minimal economic impact.
In stock news EBAY put up a huge quarter as PayPal revenue was up 28% thanks to an uptick in Nigerian princes needing funds to return to their homelands and reclaim their fortunes, while Starbucks (SBUX) beat analyst estimates by quadrupling profits from a year ago. Same store sales were up 4% proving that overpriced coffee may be a giffen good. The biggest stock news of the day though was Goldman Sachs beating profit estimates by raking in $4.95B in the Q. More surprising than Goldman’s success under the Obama administration was the Streltsys’ profitability during the reign of Ivan the Terrible, the benefits earned by the Imperial Guard during the Napoleonic era, and Haliburton’s favorable business wins during Dick Cheney’s vice-presidency. Goldman’s revenue was mostly inline and their outperformance was caused by putting aside only $16B for bonuses. The pay ratio dropped to 38.5% which means the average worker will be forced to scavenge with only a $500k bonus and with the way the dollar is dropping, that means these poor Goldman employees will only be able to buy one Maybach and 3 nights with Charisma Cappelli (though to be honest, if all 32k employees had 3 nights with young Ms. Cappelli, she may get a little tired, so to those Goldman employees reading this out there, try to be in the first 1k if possible).
As for small stocks, HAFC continues to love it’s long time shareholders as it erupts for the second day in a row on no news. As stated yesterday, TBV is somewhere around $3.60 so this stock has plenty of room to move up, but this is very speculative as Money McBags trusts that TBV number about as much as he trusts politicians, Mexican water, and 35 year old virgins. Also, anything that has recently risen, like RICK, is selling off faster than Rachel Uchitel’s 10 minutes of fame. This is going to present some buying opportunities for the better companies. Over the past several weeks Money McBags has mentioned several companies he thought were solid but had run up a little too much (CRUS, NTRI, TMRK, heck even INTC) so use this sell off wisely to re-evaluate and make some smart decisions like the guy who married Christina Hendricks. Oh yeah, a big shout out to When Genius Prevailed reader Matthew who has nailed NLS like a 19 year old girl in her first Monsters of Cock video. Kudos on that pick.