Posts tagged TMRK
1/30/11 Two Day After Report: Protests in Egypt Cause Market to Take It in The Sphinxter
Jan 30th
Holy(land) shit did the market sell off on Friday as civil (or more exactly, uncivil) unrest overran the streets of Egypt like Ben Bernanke overran the Fed’s printing presses or hepatitis C overran Pam Anderson’s liver. Protesters were apparently frustrated by government corruption, economic stagnation, a lack of political freedom, and Ehsan Hatem El-Kirdany‘s refusal to pose for Playboy. Shit Money McBags hasn’t seen rioting like that since OJ Simpson was set free (the first time), Ohio State beat Michigan, or Alf was canceled.
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The Egytian government tried to counter the protesters by ignoring them and hoping they would go away before deciding to just beat the piss out of them and then disconnecting the fucking internet. No really, there was no Facebook, no Angry Birds, and no Spankwire in Egypt so it is no wonder everyone was so fucking pissed off (And a quick digression here in case President Obama or any future Presidents of the United States are reading this. First of all, why the fuck are you reading this? No really? There is nothing better for you to be doing than skimming dick jokes about the market and pictures of Isabeli Fontana? But second, and most importantly, if you ever turn off Money McBags’ internet and thus his access to the market, news, and NSFW muff guessing, he will personally take to the streets and scream anarchy with such force that it will certainly mark the beginning of the devolution. In short, choose your punishments wisely).
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That said, the Egyptian protests were the catalyst to the market selling off on Friday (with the 9%+ unemployment rate, the housing price double dip, and the spiraling debt in the ponzeconomy™ being the promoters in the shitacular chain reaction). Obviously with the Middle East now potentially in more disarray than Josef Fritzl’s dating life, there are a shit ton of concerns over oil reserves and unknown policy changes, and all of that spooked the already inflated market enough to cause it to drop almost 2%. This could be a blip, this could be the start of the correction, or this could just be an opportunity to buy the fucking dip (as opposed to selling the fucking rip), but the market needs a breather (more so than Johnny Carson did) so make sure you are properly hedged.
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As for macro news, Q4 GDP was released and as usual it GDpeed on analyst guesses by rising 3.2% which was below guesses of 3.5%. Inventory build (or unbuild) caused a -3.7% hit to GDP as companies have finally restocked from the downturn and now are all properly stocked (or potentially overstocked) as Money McBags has been pointing out for the last couple of Qs (he has also been pointing this out for the last couple of Qs, so you’re welcome). Surprisingly, the biggest driver of GDP growth was consumer spend which jumped 4.4% due to a strong holiday shopping season and a suspension of reality. Despite this growth, wages and benefits were up only 0.4% in Q4 as Americans get back to their second favorite hobby of spending money they don’t have on shit they don’t need (their first favorite hobby of course being dick flashing).
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The only other piece of macro news was that consumer sentiment fell from 74.5 to 74.2 but it was above analyst guesses of 73.2 and also completely meaningless to Money McBags since as always, the absolute differences between any of those numbers is less clear to him than a urinal is to Tihomir Petrov. The positive was that consumers are expecting more cash due to federal tax cut extensions and a temporary reduction of payroll taxes, the negative is that the extra cash won’t do much as inflation will make the extra dollars more worthless than investing advice from Larry Wilcox or a tampon for Chaz Bono. Some consumers are starting to realize this as one-year inflation expectations edged up to 3.4% from 3.0% in December which was the highest since October 2008, but luckily, according to Ben Bernanke and his magic inflation reader (which works best when he is riding his unicorn to his crystal palace in the land of make believe), inflation is nothing about which to worry.
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In the market, AMZN was down ~7% after their Q4 disappointed and they gave guidance weaker than Troy Aikman’s marriage. While the company had strong topline growth of 36% (the kind of topline growth usually found only in Heidi Montag), it was slightly below guesses and their $.85 eps was below the $.88 eps guessed at by analysts. Of course Money McBags’ favorite part was that management blamed the weather for some of the revenue miss, which is as nonsensical as Fred Hoyle’s Steady State Theory of the Universe of Sofia Vergara ever blaming her boobs for not getting an acting job, because people being stuck at home is exactly the fucking point of AMZN. Anyway, the real reason for the sell off (other than AMZN not really having a competitive advantage and trading at ~50x earnings, which are just minor details, like don’t get too close to a giant fucking stingray, or Amy Winehouse) was that next Q’s operating income guidance is for between $260MM and $385MM which is a fuckload below analyst guesses of $469MM as the company will see declining margins as they invest in new fulfillment centers to aid in growth.
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Elsewhere, F was down ~12% after missing analyst guesses of $.48 eps by $.18 which is a bigger miss than Waterworld. Ford blamed the miss on the costs of launching new vehicles, european operations, and rising commodity costs (but again, inflation is nothing about which to be worried according to the Fed, you know, the guys who missed the entire economic collapse even though it was their only fucking job, so nothing to see here).
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Finally, Monster Worldwide was fired by investors as the stock dropped 25% after the company missed analyst guesses for revenue, earnings, bookings, and anything the fuck else at which analysts guessed. Revenue growth of 20% was not enough as the company missed $.07 eps guesses by $.01 even though this is pretty much the best market this company will ever have. Seriously, barely being able to turn a profit when your business is listing jobs in the midst of a global depression is like barely being able to turn a profit selling crack to Charlie Sheen so if they can’t make it work now, that doesn’t bode well for the future. And the magnitude of the 25% stock price drop shows that this a short favorite which was further highlighted by noted mouth piece and butt buddy of the shorts (but not this short), Herb Greenberg, who regurgitated the thesis his hedge fund cronies likely screamed at him mid-fellatio which is that social networking sites like linkedin, twitter, and tagged may soon make Monster more obsolete than Alan Greenspan’s speaking engagement invitations.
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In small cap news, as mentioned briefly on Thursday, longtime Money McBags favorite TMRK was taken out for $1.4B by Verizon and doing a back of the envelope calculation (Money McBags would do a full on calculation but he is too busy washing the stripper juice off of him from celebrating so much to give a fuck about the numbers), it looks like Verizon is paying ~15x EV/EBITDA which is hella fucking pricey, so a great deal for TMRK. Cloud computing is here to stay so it makes sense that a company like Verizon would overpay for this solid little company with a nice niche market since it is way too expensive to build something like this from the bottom up (though not as expensive as getting this bottom up). So kudos and huzzah if you owned this bitch, and who knows, maybe someone will come in and outbid Verizon, but Money McBags doubts it, that said, it still has $.04 to go to hit the $19 price, so worth hanging on to a piece just in case (though this piece would be better on which to hang).
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Otherwise, pretty much every small cap stock was down including a 6% sell off in KITD, perhaps because of their international exposure and Money McBags will buy more if it drops into the $12s, and a 10%+ drop in NEI. Money McBags bought NEI last week and said it was a really speculative buy with ~20% downside and 100% upside, he just didn’t think the 20% downside would be in two fucking days, but he gets it. Their guidance was underwhelming and there was a ton of profit taking as the market turned. Money McBags will break down their Q sometime next week, likely as soon as his ass stops bleeding from what this company has done to him.
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The only thing that was really up on Friday was EPAY, which Money McBags has written about many times on the award winning When Genius Prevailed and has always thought was an interesting, though slightly confusing name. The reason for the confusion is that they have a shitload of cash (~$144MM) and say they are going to use it for an acquisition so it is just hard as fuck to build any kind of reasonable forecast.
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This Q revenue was up 10% (with services and transaction revenue growing 24%) and they earned $.25 per share of core income after taking out amortization, stock comp, one-time charges, and anything else in GAAP that would irritate the fuck out of the ballwashers at the CFA institute. The Q was pretty much inline with Money McBags’ $1.00 to $1.10 annual eps guess for the company and they are now trading ~22x that but with nearly $5 of cash on the balance sheet. Most encouragingly though was that their book to bill ratio was ~1.5 which bodes well for their continued growth (though not as well as if Doutzen Kroes were offering free blumpkins with every new deal signed, but whatever).
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Nothing about Money McBags’ opinion has changed for EPAY since last Q. They have a nice company, they continue to have reasonable growth, and they have potential upside with their Paymode network, but they are going to buy another company and as it will likely be a large acquisition, one never knows how that will go. If you have a diversified portfolio and are looking for some more long-term beta, this isn’t a bad little name to own because the business is working and the long-term trends of getting rid of paper are in their favor, but it’s not that cheap and Money McBags wouldn’t own it as part of a concentrated portfolio because who the fuck knows on what they are going to spend their cash (perhaps this). Money McBags needs to go through their transcript and if he finds anything interesting, he’ll let you know.
1/27/11 Midnight Report: S&P Touches 1300, 1300 Says it Liked it
Jan 28th
Despite new claims for unemployment putting up the largest weekly increase since September 2005 (and you all remember September 2005, right? Alan Greenspan was still a genius, iPads were still just the truncated spelling of a sanitary napkin, and Kim Kardashian’s vagina was still underwraps (and some guy named Damon Thomas too)), despite Japan being downgraded by S&P due to greater risk of default than Charlie Sheen’s liver, and despite a little bit of happiness being squelched by studies showing breast implants are linked to a rare form of cancer (And no shit, really? You mean to tell Money McBags cutting open your tit and shoving something artificial in there might be a health risk? Shit, what’s next, finding out that eating Twinkies causes obesity or watching CNBC causes dementia?), the market continued to rally as investors buy the fucking rip.
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The S&P flirted with 1,300 today in ways that would make the delightful Lisa Ann seem like a cocktease (and Ms. Ann, Money McBags can be reached at moneymcbags@gmail.com should you ever want to tease anything of his) as it nudged above that psychological support level before closing a Robert Reich nut hair below it at 1299.54. Money McBags doesn’t know what to say anymore as the market races to the next bubble top (as opposed to the next muffin top), he just hopes you all are properly hedged and can get out before cookie crumbles.
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That said, before Money McBags gets to the macro news, he has to go on a bit of a rant today because the Financial Crisis Inquiry Commission released their final report on the global clusterfuck (also known as the ponzeconomy™) and the report was strangely just one sentence: “Everyone acted like a bunch of asshats.” Ok, it was a bit longer than that (probably two sentences claiming that they were asshats and douchelickers) but Money McBags only read the highlights because he is waiting for the book on tape to come out.
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The point is, and what really puts a turd in Money McBags’ punchbowl (or a copy of Pride and Prejudice in his bookcase if you will), is that in a letter to the FCIC, Fed Chariman Ben Bernanke admitted that the Fed just fucking missed the complete collapse of the financial system, no really, he did. But Money McBags guesses that all is forgiven because it’s not like that was their main job. Oh wait, what’s that? That is pretty much their only fucking job? Well fuck Money McBags but at least we fired all of the assholes who fucked up and said things in 2005 like: the economy “might bend but would likely not break” from a large home-price drop, and that the market may rest on “solid fundamentals,” and now say: ” it was hard for many FOMC participants, in the summer of 2005, to ascribe substantial conviction to the proposition that overvaluation in the housing market posed the major systemic risks that we now know it did.” Oh wait, what’s that? The fucking assclowns who said that are the same people who are still running the show? Are you kidding Money McBags? Holy shit. This is more fucking cockposterous than if Exxon rehired Captain Hazelwood and put him in charge of ship safety, neighbors insisted that Roman Polanksi take their RV and drive their babysitter home, or President Obama appointed Michael Jackson’s doctor as Surgeon General. Seriously.
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Look congress/executive branch/Tina Wallman, Money McBags knows that you like to keep all of your chummy buddies at GS happy and he knows you just recycle the same shitty people through the same shitty jobs, but here is DOCUMENTED PROOF that these fuckers MISSED THE ONLY THING THEY HAD TO NOT MISS. Fucking A, you think Faye Reagan would keep getting hired if she always ducked and missed the money shot? Fuck no, because taking it on the chin IS HER JOB. So how the fuck can these guys still be in charge of this shit when they SUCK AT THEIR JOBS? They have already shown that they aren’t capable, so what makes you think they won’t fail again? Sucking at one’s job isn’t a random walk and sometimes past performance is an indicator of future success and the fact that we have LEARNED NOTHING FROM THIS DOWNTURN and are still sucking off the assholes who missed it, is so fucking ridonkulous that it makes Money McBags’ balls hurt just to think about it (which is why he spends his day thinking about this). Rant over.
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Anyway, as for macro news, new claims for unemployment were up to 454k, a jump of 51k and the highest the number has been since October, right before QE2 created all of those jobs, oh wait, what’s that? QE2 wasn’t geared towards creating jobs? It was just supposed to pump up the markets so rich people could have their paper net worth artificially grow and cause them to buy maybe one more tennis bracelet from Tiffany’s for their “babysitter”? Well Money McBags guesses he was misled. Anyway, witch doctors blame the huge jump in new claims on snowstorms because when in doubt just blame an inanimate variable (and the jump was so large that it made Evel Kneivel roll over in his grave and it wasn’t even within a standard deviation of analyst guesses of 405k).
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In other macro news pending home sales rose 2%, which beat analyst guesses of a 1% rise and is now only 5% below last year’s ass awful number. Meanwhile, bookings for durable goods increased bv .5% according to the Commerce Department, or fell by 2.5% if we take out transportation and anything else that might have made the number look shitty. Analysts guessed durable goods would rise 1.5% but in fairness to them, no one cares about this number anyway.
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Internationally, S&P downgraded Japan from “super happy fun times” to “country and western karaoke night.” The ratings agency expressed concerns over Japan’s escalating debt (which is now twice GDP) and their inability to stop Godzilla after all of these years. In their report, S&P said Japan’s government lacks a “coherent strategy” to address the debt, before adding “for fucksake, they don’t even speak in English, so how are we supposed to understand any strategy of theirs?” That said, unlike the PIIGS, most of Japan’s debt is held domestically, so when the Pokemon hits the fan, they will implode rather than explode.
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In the market, a shit ton of companies reported earnings led by NFLX who grew subscribers by 3.1MM and saw their stock price rise 15% which meant shorts like Whitney Tilson once again took it in the pooper (which of course makes NFLX a win-win stock for Mr. Tilson). Profits were up 52%, revenue was up 34%, and gullibility was up 900% as the plethora of free subscribers inflated numbers and caused gross margins to go down from 38% to 34.4%, but luckily for NFLX, that part of the press release was pixelated over. After the quarter, a number of analysts raised their target prices with Cannacord Genuity (formerly Cannacord Adams which, as always, is Canadian for “Roth Capital”) leading the way with a target price of $250, which is only about $1 Billionty too low.
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In other news, 1985′s NFLX, MSFT, proved that you can be too big and fail as despite 5% revenue growth, their profit fell slightly as tablet sales started to eat in to sales of computers as if sales of computers were a cheesecake and tablets were Kirstie Alley. Elsewhere, QCOM shares jumped ~6% after the company put up a good Q and raised its outlook for the year citing the need for mobile phones to have more and better chips to be able to properly display HD porn while users are dropping logs at the office. Also, Motorola’s recently spun off mobility business announced their first Q today and dropped 12% on weak guidance, proving once and for all that you can’t polish a turd.
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Finally, SBUX was flat despite a blow out Q as they announced that higher input prices will start to hurt margins and as a result gave guidance way below Street guesses. When reminded that Bernanke says there is no inflation, SBUX CEO Howard Schultz replied: “Are you talking about the guy who also missed the biggest economic downturn in our lifetime? Or are you talking about Scarlett Bernanke, who is causing my assets to inflate? Either way, they can both go fuck themselves because inflation is here, though if it is Scarlett, then I’d like a window seat for that.”
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In small cap news, holy shit has it been a week for Money McBags and hopefully for you, his loyal readers as well. Last week he mentioned he was looking forward to earnings from KEYN, SMCI, and CRUS and all three crushed it in the last two days with KEYN up ~22%, SMCI up ~6%, and now CRUS up ~19% after they destroyed guidance. And then out of nowhere after hours today, TMRK agreed to sell for a 35%+ premium (and remember Money McBags has been pimping this stock since it was worth ~40% of what it is now). So boo-fucking-yah.
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Before Money McBags breaks CRUS down today, he wanted to let you know that he did buy a tiny bit of NEI today despite their lackluster guidance for next Q. It’s a miniscule position because Money McBags knows he is really just guessing based on stock movement, increased volume, and long-term implications of their expanded manufacturing facility in Europe. For whatever it is worth, people more familiar with the industry than Money McBags (which would include everyone except for perhaps Carrie Prejean and a slice of bacon) keep telling him that they wouldn’t be expanding that facility unless they already had signed deals to increase production. In the low margin business they are in, one simply doesn’t put the cart before the horse so we should see ramping revenue. That said, guidance was for a 20% sequential revenue decline so either they need time to build out that facility, or the people Money McBags has been talking with about the industry are more full of shit than Kirk Douglas’ adult diaper. Money McBags thinks NEI has ~20% downside from here with the potential for 100% upside, so as a small speculative position, it is a risk worth taking.
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As for CRUS, well they CRUShed it. The company grew revenue by 43% (though it was down 5% sequentially) and earned $.34 per share as their audio business which sells chips to AAPL was up 54%. They gave guidance for next Q for revenue to be $91MM ( up 65% y/y but down ~4% sequentially) with gross margins to maintain in the 55% range and operating costs to scale up a bit to ~$32MM or ~$29.5MM non-gaap. Taking their guidance, Money McBags gets to ~$1.30 eps for fiscal 2011 which is exactly where he was on them last Q. The question is, what the fuck does fiscal 2012 look like because revenue has now sequentially stabilized and they remain at the whims of AAPL. Unfortunately, their transcript hadn’t been posted anywhere by the end of the day and Money McBags refuses to listen to conference call as they are more of a time suck than NSFW Muff Guessing without any of the fun. Given that, Money McBags isn’t entirely sure how to forecast their next year.
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If CRUS grows audio revenue 25% and energy drops 10% while operating costs grow 10%, they can earn ~$1.50 per share, so are trading ~15x that, which seems fairly reasonable. That said, if they grow their audio business 50% (and it will grow 70%+ this year) and their energy business is flat, they could earn $2 per share and thus are only trading at ~11x that which would be for ~37% growth. So look, Money McBags has no idea if either of those scenarios are reasonable, he is pulling them so far out of his ass that he thinks he actually pulled out some tongue as well, but it does show that there still might be some upside here.
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Hopefully their transcript will be out tomorrow (because their earnings release had less color than a NSFW Betty White nude photo) and Money McBags will be able to find some information (and hopefully this will be out tomorrow and Money McBags will be able to find some gyration). When CRUS hit $18 several months ago, Money McBags told you to trim and with the run up today, he would be doing the same because for it to appreciate significantly from here, you have to believe the audio business can continue to grow at 30%+ and this cyclical company with one customer can trade at at least a market multiple, even though it may be at the top of the cycle. It is possible, so perhaps they gave some better info on the call.
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Tomorrow, Money McBags hopes to break down NEI’s Q, CRUS’ transcript, TMRK’s sale, and everything that is going on in this picture. He also hopes to have a headline that doesn’t suck.
1/6/11 Midnight Report: Tweeting the Dip
Jan 6th
Money McBags is not going to have a full column tonight as he is burned the fuck out after the last three days of producing more material than Gabourey Sidibe‘s Oscar dress maker while scratching his head over all of the dip buying.
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Instead of a column today, Money McBags hit the twitter and gave snippets of what he would have dick joked about had his Broca’s Area not decided to broke-a down (see, look how awful that pun is). If you don’t follow Money McBags on the twitter (though why wouldn’t you?), below is the shit you missed.
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First the facebook, & now linkedin rumored to be IPOing. Wake MMB when NSFW http://guesshermuff.blogspot.com/ hires bankers
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Money McBags will be back tomorrow to break down the NFP report (which he expects to be a fuckload better than the 175k estimated as it has been telegraphed worse than a morse code message from a parkinson’s sufferer), to shed light on the movers of the day (and hopefully one of those movers will be Rachael Cordingley), and most importantly, and as always, to love some NSFW strangers.
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If any of you have questions, stocks you want Money McBags to look in to, or outtakes from the Natalie Portman-Mila Kunis Black Swan love scene, Money McBags can always be reached at moneymcbags@gmail.com or in the comments section.
11/2/10 Midnight Report: They’re baaaaaaaaaaack!
Nov 3rd
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.
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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.
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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.
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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?).
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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).
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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.
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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.
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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.
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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.
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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.
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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).
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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.
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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.
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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).
9/17/10 Midafternoon Report: Surprisingly strong RIMM job fails to stimulate the market
Sep 17th
Volume was low today and the market was flat on a mundane “quadruple witching” Friday (and it is called that because all kinds of futures contracts and stock options expired today and not because Alan Greenspan’s guest appearance on Charmed was being rerun). The big macro news of the day was that consumer confidence fell from luke warm to colder than Bernie Madoff’s heart while analysts had guessed it would rise in their continued attempt to miss the forest through the trees or the adam’s apple on the reality TV show.
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Consumer confidence registered a devilish 66.6, a drop from last month’s 68.9 (which was so close to 69 that it could taste the cunt hair), and below analyst guesses of 70 which brought the index to its lowest level in over a year. Interesting tidbits from the survey include consumer expectations falling to 59 (lower than the 63 from last month) and the biggest decline in confidence coming from families with >$75k in income as they begin to realize that the glass ceiling is made out of cement and falling faster than Ines Sainz‘s popularity in the Jets lockerroom. The real fear here is that a less confident consumer will spend fewer of their borrowed dollars and thus turn any potential recovery in to the longest bottomed U-shaped recovery in history or what might also be known as an “L.”
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In other macro news, consumer prices were held in check rising only .3% though as always, excluding the things people actually need to buy (like food, gas, and Shake Weights), prices were flat. One question that keeps springing up is “are those real?” while another one is “is the US Economy going to see deflation?” and unfortunately the CPI results don’t give enough information to answer either of those questions definitively (though off the record, the CPI says yes and yes). With debt burdens higher and more dangerous than Manuel Uribe‘s cholesterol, a deflationary environment that lowers wages could crush the working class and send the recession in to a double dip (or a continued dip if you take out the stimulus effects) so it is critical to watch this measure (though more critical to watch this measure).
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Internationally there were rumors of Irish bank Anglo Irish going in to default or needing to have to renegotiate their bonds and that sent spreads on Irish government debt to the highest they have been since the Norman Invasion in 1169 (which Money McBags hears was simply the result of Dermont MacMurrough overhearing a conversation in the kitchen and misinterpreting it). While European markets have had a sharp rebound over the past couple of months, their banking system still remains more fragile than Sarah Palin‘s ego or Betty White’s hip so pay very close attention to the fundamentals of anything European before getting too long that continent.
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The big news of the day though was the technology sector where Oracle proved to be wiser than the market by putting up a huge quarter and RIMM defied all forecasts and proved once you go blackberry, you almost never go back(berry). Oracle’s profit was up 20% thanks to the addition of Sun Microsystem’s hardware sales, the demand for business software, and increased offerings made to Pythia. CEO Larry Ellison talked up the success of bundling Oracle’s software with Sun’s hardware and compared it to other great pairings like peanut butter and chocolate, Astaire and Rogers, and Faye Reagan and anything. With their software license revenue up 25% and ahead of targets, ORCL stock was up ~8% on the day and the company appears to be in nice shape with the addition of Mark Hurd, who coincidentally, has quite an eye for nice (though MILF-y) shapes.
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But it wasn’t just ORCL who outperformed as RIMM put up a huge quarter, growing EPS from $1.03 in last year’s Q to $1.46 in this Q which easily beat analyst guesses of $1.35 and they also guided well above the Street. The company shipped 12.1MM devices which was well above guesses (though more curious to Money McBags than IHOP suing IHOP) but they had only 4.5MM net new subscribers which was below their target. Look, on any type of valuation RIMM looks hella fucking cheap (like Lindsay Lohan after a night of blow) but Money McBags just sees serious threats to their business model as the blackberry is quickly becoming more outdated than dial-up internet service or Cloris Leachman‘s vulva. While RIMM is still the market share leader in the business handset market, they are forecast to lose share for the first time this year as Apple, Google, and MSFT continue to win customers so sure they are cheap, but Money McBags prefers to own industry leaders over industry laggards and with continued international issues surrounding RIMM’s data and privacy, Money McBags would rather be short RIMM than long RIMM. If the company can’t rally after a quarter like that (and it finished down for the day), their future seems bleaker than Jordan van der Sloot’s (though with potentially less assraping).
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In small cap news today, Money McBags favorite TMRK continues their month long rally that has seen them run up ~40%. Money McBags has written about TMRK exhaustively here on the award winning When Genius Prevailed (just throw it in to the search box up top) and it remains one of this favorite long-term names even with the run up as cloud computing is a trend Money McBags believes in more than he believes in sex before marriage and sex after marriage. The stock is no longer ridonkulously cheap and trading near where other companies have been taken out so you might actually want to trim a bit here since the whole market feels like it is ready to go down as if it were auditioning for the lead role in Saturday Night Beaver, but the catalysts remain the same:
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1. Increased outsourcing of IT departments/servers/software/anything unrelated to normal business operations. Companies just don’t need to be in the IT business anymore and one of the easiest ways to cut costs in this slumping economy is simply to outsource all of the non-core business functions like maintaining servers, updating software, and designing TPS cover report sheets.
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2. They already have built out data centers and have a good deal of capacity which makes them attractive to a buyer who might not want to build all of the shit out themselves. The colocation market is one area where buying is definitely better than building.
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3. They have a strong relationship with the government and that revenue is not only stickier than Ashley Dupre‘s hands after a day of work, but should also continue to grow as the government cuts costs.
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This is basically a 5 to 10 year play so you can be cute (perhaps you were expecting this?) and trim a bit here after the run up or just hold on and check back in 5 years when TMRK is appreciably more than it is today and has outperformed the market (that is if it doesn’t get taken out first and if there still is a market).
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Have a good weekend.
8/6/10 Midafternoon Report: Jobs number disappoints again as people ask “Brother, can you spare a dime, and maybe a 401k?”
Aug 6th
The market fell for most of the day before being bizarrely bailed out at the close for no reason other than to seemingly allow Money McBags to write that alliterative phrase. The big news was that the jobs report once again disappointed like the other side of a Goldman CDO deal or Tara Reid’s plastic surgeon. The July jobs report showed the economy lost 131k jobs driven by a 143k decline in temporary census workers, a 59k decline in other government workers, and a 99% decline in hope. The positive spin is that private employers added 71k jobs though that was below the 90k analysts guessed but up from the DOWNWARDLY REVISED June made up number of 31k (and that was DOWNWARDLY REVISED from the bogus 83k number which Money McBags eviscerated last month and means that at least 221k jobs were lost last month, not 125k, but what’s another 100k to the 16.4MM people unemployed?).
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With all of the revisions, the headlines and the numbers are less believable than Lawrence Fishburne ever being up for Father of the Year or the Laffer curve. Rather than trusting the headline, Money McBags once again went to the BLS’ actual press release (and as always the “L” in BLS is silent) to look at the numbers since headline writers and financial analysts treat due diligence as if it were going to give them herpes of the brain (and not regular herpes, but porn star herpes).
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The most interesting thing that Money McBags found is that the fictitious birth/death model, which may be the most famous black box Robert DeNiro has never entered, had little impact on the manipulated numbers. The birth/death model adjustment was only 6k so the 131k reported number was likely at worst 137k. That said, in breaking down the numbers we see that 59k non-census government jobs were lost, and those may or may not have been permanent and may or may not include Maxine Waters’ husbands’ bank auditors, but it is something that has been glossed over by the media. Sure seeing private sector job growth is important, but if it is at the same level as lost government jobs, we’re just robbing Peter to pay Paul or robbing Spitzer to pay Dupre (which actually, wouldn’t be so bad).
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Money McBags did find one discrepancy as the BLS report says that:
“Employment in professional and business services was little changed (-13,000) in July. The number of jobs in temporary help services showed little movement (-6,000) over the month.”
And as you can see in the above chart, Money McBags did not factor in the 6k reduction of temporary jobs, assuming them to have been grouped in with the professional and businesses services (though they weren’t last month), so one might be able to further increase the jobs lost number by 6k, but people care less about 6k more job losses than Economists care about how their ideas work in practice (the answer is not good) or Britney Spears cares about underwear.
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The unemployment rate remained at 9.5% thanks largely to another 350k people simply leaving the labor force (yes, the math is that convoluted) and thus causing that stagnant metric to be more misleading than the movie titled The Banger Sisters. But hey, as long as we keep losing jobs and the unemployment rate only gets better or stays the same, everything is fine. In fact, Money McBags suggests a radical, though more honest strategy, were everyone just leaves the fucking labor force by claiming they don’t want a job and thus the unemployment rate will artificially drop to zero and the government can pat themselves on their filibusters about what a great job they have done. Problem solved, election won.
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Anyway, the real unemployment rate which includes those people who have become more discouraged about finding a job than Sisyphus was pushing that fucking boulder or Heidi Montag’s singing coach was trying to teach her to sing on key, remained unchanged at 16.5%. So the economy remains about as healthy as Dick Cheney’s fictitious heart.
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Internationally, there wasn’t much news today other than that Russia continues to herd themselves some grains as the country faces it’s worst drought since Rasputin’s liver was fully functioning. The ban on exports of grain has caused a global spike in wheat prices and led to a rally among companies specialized in fertilizer (and Money McBags would love to fertilize her).
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In stock news, KFT put up a nice quarter with profit up 13% thanks to their recently acquired Cadbury business which saw gum sales bubble up in Latin America, chocolate sales sweeten in Asia, and loads of soggy biscuit sales metabolize in Europe. Taking out the Cadbury acquisition, sales were up 2.2% but the company moved the low end of their organic growth guidance from 4% to 3% due to aggressive promotions in the US and the fact that people don’t have any money.
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In other market news, AIG annonuced earnings and they either beat, missed, or came in-line with analyst guesses. The company’s financials remain more obfuscated than Caster Semenya’s gender and Money McBags would rather calculate pi to the 1MMth decimal using only a slide rule, a broken abacus, and Abe Vigoda’s nut hairs than analyze an AIG earnings release. The company claims their adjusted net income was $1.2MM on $2.2MM of operating earnings leaving adjusted eps of $1.99 but Money McBags trusts any of those adjustments about as much as he trusts Leprechauns.
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In small cap news, TMRK traded off after a big jump yesterday on it’s quarterly earnings release. Money McBags wrote about TMRK yesterday and thinks it is an attractive long term hold (though not as attractive of a long term hold as Alice Eve), so he certainly likes today’s entry point better than yesterday’s which was likely inflated a bit by short covering. Like he said in his analysis, he is unconcerned by quarterly or even daily fluctuations as this is a core small cap position. QCOR also sold off today before recovering near the end of the day as the market is basically punishing any company that ran up on good earnings. Keep an eye on QCOR as you may get a very attractive entry point (though not as attractive of an entry point as Jenn Sterger‘s mouth).
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In other small cap news, a tiny little company which Money McBags has written about before, FHCO (use the search box for his break out of their last Q and earlier company deep dive), announced their earnings today and the number was so bad that not even an FC2 could prevent it from giving someone AIDS. Revenue was down ~70% in the Q to $1.8MM and operating income was down 99% to $21k leaving the company with a whopping $0.00 eps. Wow. That sounds worse than the melodic stylings of Celine Dion and yet the company was only down ~5% because according to the company 2 big orders simply got pushed back. Whew.
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The good news is that the the company said Q4 is proceeding as expected and that “the two pending orders represent significantly larger quantities than the customers’ most recent previous orders.” So in every thing but practice, the top line should be growing.
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The bad news is that it’s not clear when the delayed orders will actually hit the bottom or top line as management also said “The Company cannot predict when the pending orders will be received or which quarters they will impact.” In addition to saying: “Delays such as these, which are usually due to bureaucratic issues, politics and/or changes in personnel, generally may last from 3-4 weeks to 6 or more months.” Money McBags likes that explanation a fuck load less than if they could have just said “we’ll send those orders out in Q4″ because it highlights that they have about zero control of their sales process as they are dealing with large public sector entities who either have or don’t have the funding. Since they have no idea when these orders will come in, they dropped their operating earnings growth from 30%-40% for 2010 to 10%-20%.
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Again, Money McBags finds this to be an interesting, yet highly bizarre little company that actually has a decent business model and should start seeing some earnings momentum with the switch to the lower cost product. Their gross margins went up from 48% last year to 54% in this Q, though they were down from 58% last Q which Money McBags will assume is the result of underutilized factories due to having orders pushed back, but one should keep an eye on that (one should also keep an eye on Sofia Vergara).
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Anyway, lets assume the company is telling the truth and the delayed orders are some bureaucratic snag because dealing with governments and public sector funding is more of a pain in the ass than a thrombosed hemorrhoid. The company was earning ~$7MM per Q in revenue but on the call they said an order of 12MM units had doubled to 24MM units so there is some growth to the top line. Therefore, let’s say they hit no more delays and can earn ~7.5MM in revenue per Q at a 54% margin with operating costs of ~$2MM (slightly higher than where they have been) and the company still doesn’t paying taxes. With those numbers, the company should earn ~$.28 next fiscal year (excluding any increase from these delayed orders being shipped in 2011) and it’s now trading at ~17x that but they pay a $.05 quarterly dividend (~4% yield) and have a decent enough balance sheet with $3.9MM in cash and no debt (though if orders keep getting pushed out, it will become harder to pay that quarterly dividend).
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Last quarter when the stock was trading >30% above where it is today, Money McBags said “this stock is a bit ahead of itself unless they can continue to grow earnings at 20%+” so he certainly is a lot more interested in the company now than he was then, but the delayed orders do make him nervous enough to not yet take a position in the name (unless that position is reverse cowboy and the name is Sara Jean Underwood), so he’s going to hold off again on this low liquidity stock while the economy gets worse. In theory, they should actually do well in a bad economy because their funding is set, but Money McBags would rather buy it when their delays are fixed and he’s not left wondering if they will have the capacity to make up for the delayed orders while filling their new increased orders. If it gets to <$4, Money McBags will likely take a closer look at buying a position.
Anyway, have a good weekend and remember to tell a friend or 10k about Money McBags and the award winning When Genius Prevailed.
8/5/10 Midevening Report: New claims for unemployment continue to claim the economy still sucks
Aug 5th
The market traded down today like anyone who has ever broken up with the delightful Brooklyn Decker as new claims for unemployment were out and were much worse than analysts had guessed (and not just because analysts suck at their jobs like one-legged kick boxers, but because we’re in a fucking recession). Money McBags hates to sound like a broken record (and not a good broken record like the Houston 500, but a shitty broken record like a scratched Charlie Daniels Band LP that keeps repeating the chorus of that awful Devil Goes Down to Georgia), but the economy is not getting better and employment remains as tenuous as Charles Rangel’s hold on his congressional seat or Rudy Giuliani’s hold on his daughter (though not as tenuous as her hold on some Sephora cosmetics).
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Claims rose by 19k to 479k after being revised upwards last week from 457k to 460k continuing the government’s “Hold the shock and hope for no awe” strategy of consistently revising numbers worse than they were initially announced to have been. Of course Money McBags is on to this charade (which is both bigger than a bread box and even likely bigger than Bree Olson‘s box) and shared his clairvoyance (though he’d rather share clair bidez “flamboyance”) last week by saying: “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+“
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And remember, the market rallied a bit last week when analyst guesses of new claims for unemployment were better than the number reported at the time, and yet now those guesses were actually worse than the real number, so manipulation on.
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As for this week, Analysts actually guessed that claims would drop to 455k and thus they were not only off by a large number, but couldn’t even get the fucking direction right, and yet Wall Street pays these guys a fuckload for their guesses based on models calibrated on outdated data and an inability to use rational thought.
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Not only does the government manipulate the numbers, but now they are manipulating the spin by saying that the jump in new unemployment claims this week suffers from noise due to their trouble adjusting for seasonality as the non-seasonally adjusted number of claims was actually only ~400k. Ok, first of all, fuck seasonality. Really, Money McBags gives a fuck about any kind of adjustment made by anyone unless it is being made by Emilie de Ravin and the adjustment is in Money McBags’ pants. All Money McBags wants is the raw data, he doesn’t want it smoothed, he doesn’t want it altered, and he doesn’t want it augmented like a 50 year old actress. He just wants is to know how many new claims were filed and he can normalize for year over year comparisons and seasonal changes himself.
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Anyway, the point is new jobless claims were fuckawful and will likely be revised to more fuckawful next week, but nothing to see here as the low liquidity of the market keeps the merry go round moving.
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In other macro news, July retail sales trailed guesses for the fourth consecutive month but still grew 3% even with a weak teen sector driven by teens not being able to find part time jobs and not looking for them due to the emergence of rainbow parties among high school students throughout the country. Teen retailers like HOTT, WTSLA, and BKE all had negative same store comps which is made worse because it comes on the heals (which may excite podophiliacs) of last year’s Q being softer than the landing of a Fed Reserve Goldilocks scenario for managing interest rates and avoiding recession (which is also referred to as a “pipe dream”). Retailers are now resorting to increased promotions like $20 jeans, smart phone giveaways, and free Brett Favre dong pictures for all of the ladies. Retailers hope these promotions will help generate back to school sales even if they hurt margins but if teen spending continues to be stunted, you may want to start thinking about shorting the Mall REITs again.
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Internationally, Greece was cleared to get their next round of bailouts following a two week audit by a team from the EU, ECB, IMF, and NAMBLA. The auditors surprisingly didn’t turn to stone when looking at the ugliness of Greece’s books as a result of Greece’s past dionysian lifestyle and they remarked that Greece had made impressive progress in revamping their economy, really grabbing the bull by the horns (though luckily the bull was not the Minotaur). The country is set to receive 9B in euro in the upcoming months which they promise will go to necessary government jobs, paying down other debt in the further ponzi-fication of the world, and continuing to promote the career of Maria Kanellis.
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Also overseas, the ECB and Bank of England are holding rates steadier than a pareto optimal solution. The British central bank voted against more stimulus, choosing not to expand their current package which means Kelly Brook’s upcoming Piranha 3-D will not be shown in English theatres. That said, the President of the ECB, Jean-Claude Trichet, offered positive comments on Europe saying that the bank stress tests from July should give the market confidence and at least they’re not Africa.
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There weren’t many earnings announcements in the market today but Viacom’s profits rose 52% thanks to stronger advertising revenues on their cable channels like MTV which some are calling the Jersey Shore effect as that show has increased viewers to the cable channel as well STDs among its audience. Revenue was flat though as VH1 saw a steep decline in viewers (because really, who wants to watch Chad Ochocinco and Terrell Owens dating shows? Those two are more boring and vapid than lint) and their DVD business struggled (and with streaming videos from NetFlix, the DVD business should be deader than Cloris Leachman).
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Also, noted hedge fund portfolio manager extraordinairre who never saw a CDO he couldn’t have Goldman Sachs manipulate, John Paulson, said he is getting more bearish on the market. He reduced the net long exposure of his funds just in time for last month’s run up showing one can only front run the market for so long.
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In small cap news, Playboy reported a slightly disappointing Q as revenue went down ~10%, income from operations was barely positive, and they still haven’t convinced Christina Hendricks to pose for the magazine. Of course their quarter is largely irrelevant with Hef having made a bid of $5.50 per share to buy out the company which fittingly gives the stock a nice bottom.
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WWE got the smackdown today after their Q2 was seemingly put in a camel clutch and had to tap out. Revenues were flat with last year but eps was down from $.14 to $.08 as a result of a mix shift to lower margin business, logistical issues related to the Icelandic volcano, and people not wanting to watch big dudes wearing skimpy tights and rolling around on the floor with each other. CEO Vince McMahon said the economy has hurt them as well as recent changes in their talent base where injuries have forced them to exhume noted heroes from the past such as Andre the Giant, Big John Studd, and Hulk Hogan.
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Finally, Money McBags has been recommending TMRK for a long time now (no really, put it in the fancy new search box on the much improved When Genius Prevailed and see for yourselves) and they put up a nice Q. Revenue was up 20% to $79MM, EBITDA was up 15% to $19MM, bookings were a record $58MM, and they colocated the fuck out of some shit. They also signed a deal with Verizon that could total $20MM-$25MM annual revenue and said they will start moving internationally by building a data center in Amsterdam which will help the red light district become even more virtual.
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Not only that, but the icing on the cake, or the cum swap at the end of an MFF video if you will, was that their cloud computing business was up 19% sequentially and is now at a $26MM annual run rate. Sure it’s still small and inconsequential, but cloud computing is growing faster than Blue Whale with an overactive pituitary. And it wasn’t just this Q that was good, but TMRK raised 2011 fiscal year revenue guidance to $345MM to $350MM and EBITDA targets $99MM to $102MM.
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So look, Money McBags could go through a whole valuation exercise and guess at numbers for this company but that is all irrelevant. Taking current guidance, TMRK is trading ~10x fiscal 2011 EV/EBITDA which is about where acquisitions have been happening but this isn’t a business Money McBags cares too much about valuation as long as it is reasonable because colocation/cloud computing is a bigger long term trend than reality tv or the death of civility. Given that, this is a company Money McBags would just own and not worry about individual quarters or valuation (unless it gets to be ridiculous) as those short term issues interest Money McBags about as much as condoms interest Levi Johnston.
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The point is, what TMRK does is a cost save for companies who don’t want to waste their fucking time buying hardware and running IT departments if they’re not in the IT department business, which is pretty much every company out there. Afterall, the internet isn’t even free anymore. Virtualization is here, and its only going to get stronger as more people move online and look to cut out the headaches of figuring out what hardware to use, what software to buy, and where to store their porn. TMRK should continue to enjoy success and while Money McBags fully expects the ride to be bumpy, he believes in the big picture story and considers this company a small cap core holding.
7/13/10 Midafternoon Report: The market is AA-ok as Alcoa foils bears
Jul 13th
The market was off to the races today as if it the races were going to feature Usain Bolt taking on Sara Jane Underwood in the 100 meter dash with the loser having to run a lap in the buff. The big news of course was that Alcoa started off the earnings season by destroying analyst guesses of $.12 eps by earning a whopping $.13 per share in the last Q. That’s right, the fact that a whole extra penny (with rounding) is the difference between a down market and an up 2% market makes as much sense as the theory that gravity is an illusion or candwiches.
Making it even more ridiculous is that as ZeroHedge points out, just last month Bloomberg showed consensus analyst guesses of $.16 for AA’s Q. So with analysts lowering their guesses before the quarter, AA is now back to where it was when guesses were for $.16 so the would have been $.03 miss has been mitigated by strategic downgrades. Brilliant stuff. As the late great Kurt Vonnegut would say, “No damn cat, and no damn cradle.” Analysts are now quickly dropping their guesses on companies across the board because they only get paid when the market goes up and with unemployment benefits going away, they need to keep their jobs like Kathy Griffin needs to keep off of HDTV. That said, AA did raise their guidance for aluminum consumption for the year from 10% to 12% and revenue was up 22% despite cratering aluminum prices as a result of demand slowing down and oversupply given that aluminum is the 3rd most prevalent element in the earth, behind only oxygen and whatever medal Mr. T wears around his neck. That said, the declining prices and rising energy costs are hurting overall profitability but with foreclosures up, demand may surge as the recently homeless grab sheet aluminum to build shanty towns to be known to future generations as WhothefucklentthosepeopleallofthatmoneyVilles or for short Goldmanvilles.
In macro news today, the US trade gap widened to 4.8% or $42B, which is the largest since November 2008 and a gap wider than between the antenna on a new Apple iPhone or the gap between Paris Hilton‘s legs on a Sunday morning. Not surprisingly, a trade gap is the exact opposite of what economists had guessed and thus once again proves that “economist” is not a real job, like rap music spell checker. Imports were up 3% thanks to a 12% increase in imports from China which, as pointed out yesterday, was driven by people not having any money and thus only being able to afford the cheap shit made overseas. US exports continued to see strength, which is a bit surprising given the weakness in the Euro last Q, as they were up 2.4% which was their best month since September 2008 when the US instituted buy one get one free Wednesdays for foreign countries.
And finally, the National Federation of Independent Business (known better as NFIB or “irrelevant”) said optimism declined among small businesses by 3.2% in their monthly survey to which no one pays attention to anyway. NFIB’s chief economist William Dunkelberg (who is still smarting from his decision to leave his hosting gig at Small Business Idol to pursue other career opportunities) opined that: “Confidence is lacking and the news out of Washington is discouraging. Until this changes, don’t expect small businesses to start hiring.” He then went and stole an ice cream cone from a little kid, told his wife she looked fat in those jeans, and ordered a ton of coal so he’ll be prepared to adequately fill the stockings of everyone at the NFIB during Christmas time.
Internationally, Moody’s cut Portugal’s debt rating by two whole notches which means absolutely nothing to Money McBags as he cares what Moody’s has to say about rating debt as much as he cares what Art Laffer has to say about tax policy, Jeffrey Dahmer has to say about cuisine, or Mel Gibson has to say about anything. Moody’s dowgrade stems from Portugal’s national debt having risen sharply relative to GDP as a result of stimulus measures and the 168 siesta hour work week. Moody’s also warned that weak growth would weigh on government finances for two or three more years while Portugal warned that weak analysis would weigh on Moody’s finances for eternity. European markets are up on this news as even they realize that Moody’s is worse at their job than a eunuch sperm donor or Alan Greenspan.
In large cap stocks, just about everything was up as we move in to earnings season with INTC, C, BAC, and GOOG to report this week so hopefully analysts already lowered their guesses in order to keep the market moving. One interesting stock to note is AAPL as the company is down after Consumer Reports said it will not recommend the new iPhone 4 due to reception glitches, and Steve Jobs simply being a dick. In their defense, Apple maintains that any cellphone will lose reception if held a certain way, like in a toilet, at the bottom of Lechuguilla Cave, or up Candice Swanepoel‘s well chiseled buttocks (and Money McBags is volunteering to test that theory out) so there is really no big deal. Plus, to fix the problem, AAPL claims all one needs to do is wrap some duct tape around the iPhone where the gap in the antenna is and who doesn’t want a piece of metallic tape draped around their sleek and expensive gadget? It would almost be like fixing a tear in the Mona Lisa by putting a SpongeBob Squarepants band aid over it.
In small cap news, LHCG was down ~6% today after competitor AMED announced a shitactular Q and dropped nearly 25%. Money McBags broke LHCG down the other week after the SEC announced they were investigating AMED and AFAM for potential shadiness in how they were charging medicare for visits that may not ever have happened or visits that were unneeded. Anyway, guesses for AMED were for quarterly earnings of $1.37 per share and today they said that earnings will be closer to $1.12 which makes it almost as big of a miss as the Edsel or Glitter. Money McBags did not hear AMED’s call but it is reported they said that their client base changed and they will need to reevaluate their structure and will hold off on full-year forecasts. Now look, without further color Money McBags isn’t sure how this will affect LHCG because he has no idea what AMED means by their “client base changing” because either they stopped treating sick people (which would seem a silly thing to do for a home fucking healthcare company) or they started treating fewer sick people and thus had fewer home visits (which is a more likely scenario, especially with the SEC all in their business about charging for too many medicare visits). More concerning though is that shareholders have filed a suit against LHCG for an investigation from April into LHCG’s reimbursement procedures, so fuck Money McBags on that one.
The industry makes sense longterm, the cost savings to insurance companies are too great, and home care is simply better, so it remains a good way to play the aging population trend but there is way too much fucking noise right now for an investor without access to industry insiders to get a leg up on the billing practices. As a result, Money McBags would stay the fuck away from this sector even though a few days ago he said LHCG was an interesting longterm buy (and it still remains that way but Money McBags needs more information to be able to make a sensible decision about the SEC investigations). Anyway, with all of this uncertainty, there are easier ways to make money (like TMRK which is a great takeout candidate and is getting a boost with MSFT’s entry into cloud computing ) so keep watching LHCG but you probably want to avoid going long in the short term unless you have better contacts in the industry than Money McBags has. In times of turmoil, money can be made, but to do so, one needs to be confident that they have all of the information, so do your work here carefully.
5/12/10 Midevening Report: Gold hits record high causing a run on Flavor Flav’s teeth
May 12th
The markets were on fucking fire today as investors shook off the historic drop last Thursday, apparently confident that the SEC looking in to the causes of the sell off will yield answers other than the current ones whch include: “Beats me,” “How the fuck should I know,” “and hey look, it’s Enrico Pallazzo!“ The head of the SEC, Mary Schapiro, who in her short time leading the never distinguished agency has already instituted sweeping reform including such things as following up on leads, proactively going after market manipulators, and clamping down on tranny porn at the office, has called last week’s market failure “profoundly disappointing and troubling.” She then added, “I haven’t been this disappointed with anything since Meaghan Chung worked at the SEC or since I bought a slap chop.” Luckily regulators are getting closer to finding out what was wrong with the market by ruling out several potential causes such as erroneous fat finger trades (known here on WGP as Portia De Rossis), unusual trading in P&G stock, hackers, terrorist activity, and Noriel Roubini shouting “Beetle Juice” three times quickly. The SEC has sent out subpoenas to further look into this matter, though they have not said to whom they have sent them, but Mary Schapiro was seen asking Goldman’s CEO if his first name is spelled with one “L” or two. While equities are bouncing back, it is still showering gold in the markets as gold has hit an all-time high which means Mt. T’s neck is now the richest person in America (and he pities the fool who told him all that jewelry was silly). The fact that investors are rushing in to gold is not a good sign for the markets as it signals little faith in currencies and a fear that escalating debt will continue to cause gevernments to run their printing presses more rapidly than drunk Hollywood wannabes run through Paris Hilton‘s panties. Money McBags remains very afraid.
Helping drive the markets up today is that Spain has announced an austerity plan that will involve cutting wages of government employees, reducing public investment spend, and increasing the use of home grown green technologies such as spanish fly. There is real fear that workers may strike throughout the countrty, but economists are fairly certain strikes won’t come to fruition because strikes would cut in to workers’ daily siestas. In addition to Spain making like they are serious about their budget, in much the same way that James McGreevey made like he was serious about Dina Matos, Portugal sold the fuck out of some bonds. Portugal raised 1B euro (though the euro isn’t worth what it used to be) which is a good sign for the markets, though the fact that they need to raise another ~20B by the end of the year is a sign worse than waking up pantsless in a West Hollywood alley with a sore rear end and rainbow colored socks. Joining in on all of the debt lip service in Europe (and Money McBags wishes Faye Reagan would give his growing debt some lip service), is Britain who is instituting budget cuts as unemploymnet spikes to its highest level in 16 years. The new fiscal policies could include a tax on banks, black jeans, and Lucy Pinder downloads. Also, data came out today showing GDP in Europe was up modestly in Q1, growing .2%, or as it’s better known as: a rounding error.
In the US, markets rocketed up thanks to positive forecasts from tech companies who said they expect it to be sunny with a chance of silicon. Tech giants IBM and INTC both gave positive outlooks today with IBM saying they expect to earn at least $20 per share by 2015 which is double their current business and INTC’s CEO saying he expects a double digit percent rise in revenues and earnings. Additionally, MSFT was up today after they said they will offer Microsoft Office free online so the whole world can spend their days dicking around with PowerPoint for no charge. Wow. Technology hasn’t received news this good since Number 5 was found to be alive. Also, the US trade deficit widened to a 15 month high as exports were up 3.2% and imports were up 3.1% For March, the rise in exports reflected increased sales of American farm products, a wide range of heavy machinery, and dollars. The rise in imports was driven by a 26% jump in crude oil shipments (though not nearly as crude as Dice Clay CD shipments).
In small cap stocks, everything rode up like a hand on Alexis Texas‘ ample thighs. CRUS, TMRK, and KITD continue to rally even though Money McBags ditched them for liquidity reasons last week. Money McBags did buy back some KITD today in the $12.90s in anticipation of a good earnings call on Monday. If the market structure is healthy, KITD remains a high upside company. Also, QCOR is holding a conference call this afternoon to discuss the FDA panel’s ruling on Acthar last week where the drug was found to be both less filling and taste great by a panel of experts. The FDA panel voted 22-1 in favor of Acthar’s efficacy in treating IS but there was some concern over how manageable and reversible the complications were. Money McBags is sure QCOR will delve into all of this this afternoon, but on the surface it seems like very positive news since it points to the FDA putting IS on label for Acthar and thus allowing QCOR to market to IS doctors, something they have been unable to do despite being the favored IS treatment. Money McBags promised some analysis today and he has FHCO’s Q on his to do list (though it is much behind Alice Eve and Ashley on his to do list), but time ran short today so tomorrow he will try to hit you up with some micro to go with the macro.
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)
May 3rd
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.
