Posts tagged SFSF
9/2/10 Midevening Report: Investors no longer need toilet paper as economy continues to slide along bottoms
It was a relatively quiet day in the market today as bears picked up their shorts and hoped the bad men would stop pulling their alpha after yesterday’s strong move higher left their portfolios with shrinkage. The big macro news of the day was that new claims for unemployment dropped by 6k to 472k and beat analyst guesses of 475k which would usually be grounds for a market rally, yet 472k new claims for unemployment still signal an economy less healthy than Michael Douglas’ throat (too soon?). The most unsurprising news was that last week’s 473k reported number was revised up to 478k which means the (No) Labor Department continues to fully buy in to the “hold the shock and hope for no awe” strategy. Money McBags is sure Hilda Solis, the lovely Head of the (No) Labor Department, will be able to pull herself away from Mario Lopez (and yes, that picture appears to be real) just long enough to continue to save the numbers from their final bell.
While claims were down moderately, productivity (measured by output per hours worked) fell by 1.8% even as hours worked grew by 3.5% as workers spend more of their days on chatroulette (no doubt trying to find the one girl without a penis) instead of producing whatever it is they are supposed to produce (like cars, houses, and love notes to Karissa Shannon. Dear Karissa, Roses are red, violets are blue, come lie by the beach, and bring your sister too). It was the largest drop in productivity in four years, or since the Kim Kardashian sex tape came out (and Money McBags will assume that when she recently called that cinematic masterpiece “humiliating”, she meant “delicious”) and was inline with recent analyst guesses of a 1.9% contraction but much worse than their initial guesses of a .9% expansion.
Nearly 10MM Americans continue to be unemployed, longterm unemployed, and pissed off unemployed but according to the brilliant insight of some guy named Ethan Harris who is BofA’s Head Economist (and yes, that is like being the guy who drives the clown car or the smartest kid on the short bus, but whatever), the chances of avoiding a double dip recession are pretty good because data can’t get much worse, no really, that is his logic. It’s like saying a patient with the beginning stages AIDS can’t get sicker, because he’s already got AIDS. First of all, Money McBags will start listening to guys who formerly held the post of Chief Economist for Lehman Brothers sometime around the time he starts listening to Bernie Madoff for investment advice, Joseph Hazelwood for sailing advice, or John Edwards for marital advice. But whatever. The point is, data remains bad because maybe WE NEVER REALLY MADE IT OUT OF THE FIRST RECESSION. Ugh. Dr. Harris (and I use that term loosely, like Pam Anderson uses her “charm” loosely), has it ever occurred to you that the bad fucking data signals we’re still in a recession (ex. the stimulus of course) especially with GDP trending to an unmanipulated contraction? It’s like he’s missing the forest through the trees or the other 8 guys around him at the gang bang. But hey, great job at Lehman Brothers Dr. Harris, Money McBags is sure BAC is happy to have you, but please don’t forget to turn the lights out when you leave.
But all was not negative in macro news as retail sales were up 3.3% which was better than analyst guesses of 2.5% and the result of deep discounts, a favorable comp from August last year, and heavy promotions. The biggest winners were Nordstrom up 6.3%, Limited Brands up 8%, and Zumiez up 10%, while the biggest loser was fashion. In other positive macro news, pending home sales rose by 5.2% and analysts had guessed they would fall by 1%. Money McBags has absolutely no way to interpret that number other than that either prices dropped or the boxes being used to ship retail products now count as homes. And finally, orders placed at US factories rose only .1% (and remember in yesterday’s manufacturing report new orders declined) which was slightly below analyst guesses and was driven by a drop in machinery orders and common sense. Either way, none of this macro data matters as the market awaits tomorrow’s jobs report with expectations for ~110k job losses and all the unemployment the government can dole out.
Internationally, the ECB left their benchmark interest rate unchanged while Sweden upped their’s causing initial panic among investors who didn’t realize Sweden isn’t one of the 16 countries in the Eurozone. Sweden’s economy has managed to bounce back quicker than some of their European peers thanks to strong exports, a resurgence in housing, and native Swede Caroline Winberg promoting business growth.
In the market, Burger King was up 25% after PE firm 3G Capital agreed to pay ~$3.3B to acquire them. 3G thinks they can turn the company’s fortunes around for the long term by better streamlining the franchises and by changing Burger King’s name to McDonalds. Also in M&A, DELL finally told HP to talk to the hand and dropped out of the bidding for 3Par, leaving HP’s offer of $33 a share as the winning bid in what was a more tightly contested bidding war than a “win a date with Katie Cassidy” auction. And finally, Allergan is paying a $600MM settlement for what botox did to Jenna Jameson’s face (or something like that).
Finally in small cap news, FIRE continues to rally and Money McBags has not had a chance to dive in to this company yet but they are now back to trading at a ridonkulous multiple thanks to M&A rumors in the security space. It’s an interesting company of which to keep abreast (though not as interesting as Melissa Archer is to keep abreast) as security software becomes more important and they certainly offer what seems to be a nice solution with their business network software running off of the opensource Snort code (whereas Paris Hilton runs off of snort coke). When Money McBags gets time he’d like to do a deeper dive of this company as well as the even more expensive SFSF to discuss if SFSF deserves a 100x earnings multiple (and the short answer is no, the longer answer of course would be noooooooooooo). One other small name that was up 10%+ today is SPRT and Money McBags has mentioned it before but there is something about this name that doesn’t seem right to him (besides the fact that they are not going to have earnings in the next few years). They are basically trying to get consumers to prepay for IT support so when pc owners download too many Cameron Diaz photos or accidentally download the checking account for that Nigerian Prince, SPRT technicians can remotely log in to the computer and clean up any viruses. It’s an interesting proposition, but involves getting consumers to buy a form of insurance they don’t currently buy and at a price on an annual basis that is not far off from just taking the infected computer to the Geek Squad to fix or simple buying a new one. Just some quick thoughts on small cap “S” names today (FIRE is the ticker for Sourcefire) on which Money McBags is ruminating, tomorrow perhaps Money McBags will hit the “T” names (like Taylor or Tyler if he is lucky).
4/20/10 Midday Report: Goldman blows quarter out, then offers to blow SEC Chief of Enforcement Robert Khuzami as part of “settlement”
The markets are modestly higher today despite a blow out quarter by Goldman as other blue chip companies mostly met expectations and meeting expectations after an 80% market rally is like trying to impress Grigori Perelman with long division or Tommy Lee with a Hawaiian Tropic girl. The big news is obviously that Goldman released their quarter today by smacking their CDOs on the table and yelling “Securities fraud this!” They demolished analyst guesses of $4.14 eps by earning $5.59 per share on $3.46B of earnings which was 91% growth. Though to be fair, it is not clear how much fraud and market manipulation analysts had in their models as Excel’s goal seek function isn’t yet equipped to handle that. What’s also amazing is how a company who produces nothing other than writing on paper can earn $3B. Anyway, the quarter was so jizztastic for GS that Lloyd Blankfein is going to spend the rest of the day at the spa getting his nails done so they will now match the drapes in his conference room. But all is not well for Goldman, they still have to deal with the SEC’s lawsuit about how they misled investors (but only on that one CDO, wink wink, and if you believe that, Money McBags not only has a bridge he’d like to sell you but he’ll give you a great deal on it) and in the quarter they lowered their compensation payout from 46% to 43% so all of the traders who have been manipulating the market are now going to have trade down from a hooker a day to one every other day and might have to pass up on the third bottle of Dom at their local Rick’s Cabaret.
There is no macro news out today and the only international news is that Greece’s latest bond offering met strong demand. Of course they had to double the previous yield on these short term bonds to 3.65% which was actually below estimates but still hella expensive for the ponzi scheme George Papandreou is running where he will gladly give you three souvlaki’s and a glass of greek wine tomorrow if you pay him for one today. The IMF is starting to get a bit frisky here and is warning about sovereign debt impeding global growth. Wow Captain Obvious, you think? Next week it is rumored that the IMF will issue warnings that staring directly in to the sun may cause blindness, eating foods high in saturated fats may cause obesity, and getting too close to Paris Hilton may cause herpes.
The real story of the day though is earnings with KO, IBM, and J&J mostly meeting expectations but trading down as the market demands quarters to be cleaner than an OCD sufferer’s closet for stocks to appreciate. KO’s profit rose by 20% to $.80 per share taking out one-time charges while their revenue grew 5% to $7.53B. The eps number beat analyst gueses by $.05 per share while the revenue number disappointed as analysts had guessed they would bring in $7.72B. Driving growth was the international business which was up 5% thanks to Brazil and India where sugary sweetnees is still seen as the cool thing to do while North American sales fell 6% thanks to people avoiding higher end products and wanting their teeth to stay cavity free. Money McBags is actually an owner of KO and bought more last week to get some market exposure from a blue chip stock that hasn’t really participated in the recent rally. Despite weak North America sales, KO isn’t going anywhere and will be a place investors go for safety if the market gets chippy again or if it finally consolidates. IBM’s earnings rose 13%, they beat revenue and EPS guidance, and they raised their forecast for the year to at least $11.20 per share and yet the stock is trading down 2% because their service booking dropped 2% in the quarter, margins were slightly below forecasts, and Chewbacca was a Wookie. Finally, JNJ had a 29% increase in earnings yet lowered their outlook due to recent health care legislation which is the same thing every drug company has done so this is more of a non-event than a Larry King divorce. The stock is flatter than Heidi Montag‘s singing voice or her original chest, so a big fucking yawn here.
In small cap news, SFSF got an upgrade today to buy from an analyst at something called Janney Capital Markets or known better as “Morgan Stanley wasn’t hiring.” The analyst raised SFSF to a buy claiming that the worst for them is likely over and that they should be able to continue to grow bookings at 20%. The company has a decent balance sheet with ~$300MM in cash and no debt though most of that is thanks to a recent follow on offering to give them some powder for future M&A and they are already using some of it to buy Inform for $40MM of cash and stock. The company is in a niche space of selling performance/compensation management software for businesses to evaluate employees, essentially outsourcing and making HR more efficient while relegating the number of smiley face cupcakes employees receive. They sell the software as a service which should yield a better multiple than the traditional software model. That said, this comany still has no earnings and guidance is for at best breakeven this year with revenue growth already in decline and estimated to be 17% for 2010. Money McBags is a bit perplexed by this stock as the valuation assumes a hefty growth rate and analysts seem to be valuing them on the fictitious EV/adjusted FCF and anytime a company is being valued on a non-traditional metric, that usually points to something being fucked up (and in this case the fucked up is the earnings which are less positive than Don Rickles at an ugly convention). The company is up 4% on today’s upgrade but Money McBags thinks the valuation is way ahead of itself especially as the company relies on big deals, hence the rebound in the last half of last year. Money McBags is staying away from this stock for now as it seems too rich despite a decent software offering and being in a market less penetrated than Ellen Degeneres, but it is that market potential that keeps SFSF on his radar.
And don’t forget Money McBags is now testing out twitter, for reals this time.