Daily Archives: March 10, 2007

Kasriel: Consumer Spending To Tank

From Investment Intelligencer

Kasriel Northern Trust’s Paul Kasriel weighs in on the shrinking supply of U.S. equities (which, at least last year, translated into higher prices) and the outlook for U.S. consumer spending (bad).

According to Kasriel, corporations (and private-equity folks) "retired" a net $548 billion of equity in 2006, a record in both nominal terms and as a percentage of GDP.  (See Daily Global Commentary, March 8, Chart 1).   

Kasriel also remains colorfully bearish about consumer spending trends, noting that the rate at which households are raiding their home-equity piggy-banks is now slowing dramatically (Chart 3).  U.S. households, meanwhile, have been net sellers of equities (Chart 2)–perhaps because they need the cash to finance their current spending habits.  So U.S. stock-market bulls had better hope that U.S. corporations, private-equity firms, and foreign investors continue to scarf up the stocks that U.S. households are jettisoning, or both consumer spending and the stock market are likely to dive.

Posted by Henry Blodget on March 09, 2007

http://www.investmentintelligencer.com/

Posted on: March 10, 2007 – 11:59 am in Economy

When Will the Media Stop Peeing on YouTube?

From Internet Outsider

Gootube1tm_2 Everywhere you turn, you get hit with the latest media obsession: "Was YouTube Worth It?"  "Did Google Overpay for YouTube?" "Was YouTube a Dumb Move?" or some other thesis-expressed-as-a-question headline suggesting that $1.7 billion was a colossal waste of money and that the acquisition has been a huge disappointment.  When will the media get over this?

The facts:

  • For Google, a $1.7 billion acquisition was a tuck-in.  The company traded a mere 1% of its market cap to become the instant global leader in a business growing at hyper-speed.  It could do ten of these acquisitions before its shareholders even noticed.
  • It is irrelevant what "revenue multiple" Google paid for YouTube.  (Today’s latest story, in the NYT, was tied to the apparently shocking discovery that Google paid 100x YouTube revenue.) YouTube was so young it hadn’t even gotten around to generating revenue yet.
  • Even if one massively haircuts YouTube’s traffic numbers, the site’s growth has been–and continues to be–phenomenal. 
  • The debate about whether YouTube will or will not own 100% of the online video market is ridiculous  Who cares if they own 100%?  If they even get 50%, they’ll still dwarf their closest competitor.

Is YouTube guaranteed to have been a brilliant acquisition that will deliver billions to Google’s bottom line?  Of course not.  But if it never contributes a single penny to Google’s bottom line will it have been a devastating, regrettable failure?  Absolutely not.  This isn’t AOL Time Warner we’re talking about.  It isn’t even eBay-Skype.  This was a tiny tuck-in acquisition for a massive global behemoth.  It was a minor risk with a potentially huge payoff that the company was smart to take.

Posted by Henry Blodget on March 09, 2007

http://www.internetoutsider.com/

Posted on: March 10, 2007 – 11:57 am in Internet

Best and Worst Performing Stocks Year to Date

From Ticker Sense

The tables below highlight the best and worst performing stocks in the Russell 3000 over the past 5 days, the past 3 months, and year to date.

1wk309

3mo309

1yr309

http://tickersense.typepad.com/

Posted on: March 10, 2007 – 9:59 am in Research

Analysts’ Most Liked and Most Hated Groups

From Ticker Sense

Whether you like to follow the herd or go against the grain, the following lists should be useful to you.  The first one summarizes the most popular S&P 1500 groups based on the ratings of Wall St. analysts, while the second list highlights the groups that analysts are most negative on.  Groups are sorted based on the net percentage of buy recommendations (gross buys minus gross sells) for the stocks in each group. 

The right most column in each chart shows the stock in each particular group that analysts are the most bullish (highest rated) or bearish (lowest rated) on.  For example, in Construction Materials, which is the most popular group in the S&P 1500, analysts are most bullish on VMC.  In the list of lowest rated groups, real estate is the least favorite, and within that group analysts are the most bearish on IRC.

Which strategy will work best? Buying the groups and stocks which analysts are the most bullish on (following the herd) or buying the groups and stocks which analysts are the most bearish on (against the grain)?  Only time will tell, and a month from now we will calculate the results.

Sp_1500_groups_highest_rated

Lowest_rated_sp_1500_groups 

http://tickersense.typepad.com/

Posted on: March 10, 2007 – 9:57 am in Research

Where Will the S&P 500 be in 30 Days?

From Stock Market Beat

Yesterday we asked readers where they thought the S&P 500 would be 30 days from now.  After 234 votes since yesterday afternoon, 41% believe the S&P 500 will be higher than 1,405 in 30 days.  Thanks to a nice gain in pre-market futures, it looks as if they’re getting a head start.  The next highest vote count, however, came from the bearish camp that believes we’ll be lower than the low made on March 5th.  See results below:

Pollanswer_1

http://tickersense.typepad.com/

Posted on: March 10, 2007 – 9:56 am in Research

This Week on StockHouse March 5 to 9

By Keri Korteling

The annual Prospectors and Developers Association of Canada (PDAC) convention in Toronto provided a lot of fodder for resource investors to mull over. Raw materials stocks moved higher as the markets continued to recover from last week’s sell-off.

StockHouse Executive Editor, Publisher Darin Diehl went to the conference and learned about gold investing and U.S. real estate (http://www.stockhouse.ca/shfn/article.asp?edtID=19413 ) when he spoke with Greg McCoach of the MiningSpeculator.com.

Gold analyst Barry Cooper of CIBC World Markets told investors that the commodities bull market is only in the fifth inning (http://www.stockhouse.ca/shfn/article.asp?edtID=19426), said reporter Sean Mason.

A junior producer that negotiated a smart purchase from Chile’s copper behemoth Codelco could be a cash machine for investors (http://www.stockhouse.ca/shfn/article.asp?edtID=19407 ), said Resourcex Reports’ Doug Hadfield.

This week’s Micro-cap Monday report delves into the history file (http://www.stockhouse.ca/shfn/article.asp?edtID=19406 ) to give readers an update about a diamond play, a gold junior, and a biometric security company.

Macro View of the Micro World furnished a run down of events affecting trade in small-cap stocks during February, and urged caution in the near term because of rising political tensions over Iran’s nuclear enrichment activities (http://www.stockhouse.ca/shfn/article.asp?edtID=19412 ).

Others chimed in with warnings. Jay Matulich, who was this week’s market wizard, said that he sees more trouble ahead for investors (http://www.stockhouse.ca/shfn/article.asp?edtID=19415).

While Matulich and others looked to the recent past to determine market behaviour, Steven Saville examined longer trends (http://www.stockhouse.ca/shfn/article.asp?edtID=19416), and noted that sometimes major structural trends can change market outcomes.

A few new entries from the StockHouse blogosphere were profiled in Editor Keri Korteling’s Best of the Blogs (http://www.stockhouse.ca/shfn/article.asp?edtID=19417).

And the top BullBoards posters and StockHouse features were listed in the StockHouse Top Five (http://www.stockhouse.ca/shfn/article.asp?edtID=19420).

Alternative energy (http://www.stockhouse.ca/shfn/article.asp?edtID=19418 ) has become a new hot sector, but the editors at InstitutionalResearchPartners warned these investments could be as risky as conventional energy plays.

One of the big health stories this week was InterMune’s (NASDAQ: ITMN) withdrawal of its Actimmune drug from late-stage trials, testing its use in idiopathic pulmonary fibrosis. Leon Hamerling and J. Paul examined how this failure piled on the company’s previous missteps (http://www.stockhouse.ca/shfn/article.asp?edtID=19419).

IPOs have been scarce of late on Wall Street, and Jon Ogg reported Thursday’s big Clearwire offering (http://www.stockhouse.ca/shfn/article.asp?edtID=19421 ) was expected to set the tone for the rest of the week (http://www.stockhouse.ca/shfn/article.asp?edtID=19430 ).

Canadian markets regained some ground lost in last week’s sell-off, but ETF Check columnist Don Vialoux said investors may consider selling their Canadian equities ETFs (http://www.stockhouse.ca/shfn/editorial.asp?edtID=19424 ) in March.

Much of the market focus on sub-prime mortgage lenders rested this week on New Century Financial (NASDAQ: NCEN), but the Securities Sleuth reported Fremont General Corporation (NYSE: FMT) was ordered by the U.S. Federal Deposit Insurance Corporation to restrict its sub-prime lending practices (http://www.stockhouse.ca/shfn/editorial.asp?edtID=19425).

Diversification is the key for investors looking to capture some of the growth in emerging markets (http://www.stockhouse.ca/shfn/editorial.asp?edtID=19431 ), said Financially Fit columnist Nancy Zambell.

And John De Goey noted the irony that makes the wisdom of crowds (http://www.stockhouse.ca/shfn/editorial.asp?edtID=19432 ) wrong in financial markets.

Posted on: March 10, 2007 – 9:54 am in Research

Friday’s Top Biotech & Medical Stocks

From Biohealth Investor

Biotechnology

LA JOLLA PHARMA [LJPC] +43.10%
AURIGA LABORATORIES [ARGA.OB] +19.05%
BIONOVO INC [BNVI.OB] +15.76%
VION PHARM INC [VION] +12.58%
RENOVIS INC [RNVS] +8.07%

Diagnostic Substances

NYMOX PHARM CORP [NYMX] +14.45%
GENE LOGIC INC [GLGC] +6.97%
REMOTEMDX INC [RMDX.OB] +5.75%
INTERLEUKIN GENETICS [ILI] +4.58%
COLEY PHARMACEUTICAL [COLY] +4.53%

Read More »

Posted on: March 10, 2007 – 9:52 am in Biotech

IBD Weekly Top Ranked Medical Stocks

From BioHealth Investor

The following list represents the top ten medical stocks ranked according to Earnings Per Share and Relative Strength by Investor’s Business Daily (3/10/07)

scores out of 100 (last week’s rank, change in score):

1(3) Rochester Medical (ROCM) EPS=95 RS=99(+1)
2(2) Wellcare (WCG) EPS=97 RS=97(+1)
3(1) Arrhythmia Research (HRT) EPS=96 RS=96(-3)
4(5) LHC Group (LHCG) EPS=98 RS=94(+3)
5(4) Cynosure (CYNO) EPS=96 RS=93
6(7) Emdeon (HLTH) EPS=99 RS=88(-1)
7(-) Icon PLC (ICLR) EPS=93 RS=93
8(9) Medtox Scientific (MTOX) EPS=99 RS=87
9(10) American Bio Eng (AOB) EPS=88 RS=97
10(6) Immucor (BLUD) EPS=96 RS=86(-4)

http://www.biohealthinvestor.com/

Posted on: March 10, 2007 – 9:49 am in Biotech

TSM: Spinning TSMC Sales

By WIlliam Trent, CFA of Stock Market Beat

Chip giant TSMC reports worst revenue in 20 months | InfoWorld | News | 2007-03-09 | By Dan Nystedt, IDG News Service

Read More »

Posted on: March 10, 2007 – 9:48 am in Research

MIDD: Middleby Earnings Not Middling

By William Trent, CFA of Stock Markte Beat

Small Cap Watch List and Mid Cap Watch List member Middleby Corporation (MIDD) Reports Record Fourth Quarter Results: Financial News – Yahoo! Finance:

Middleby Corporation (NASDAQ:MIDD – News), a leading worldwide manufacturer of restaurant and foodservice cooking equipment, today reported record net sales and earnings for the fourth quarter ended December 30, 2006. Net earnings for the fourth quarter were $11,059,000 or $1.34 per share on net sales of $98,294,000 as compared to the prior year fourth quarter net earnings of $7,233,000 or $0.88 per share on net sales of $76,930,000. Net earnings for the fiscal year ended December 30, 2006 were $42,377,000 or $5.13 per share on net sales of $403,131,000 as compared to net earnings of $32,178,000 or $3.98 per share on net sales of $316,668,000 in the prior year.

We didn’t notice anything too concerning in the financial statements, and the stock is up sharply on the news. The company, which makes commercial cooking equipment used in restaurants, has made several acquisitions over the last couple of years, and these are helping to drive solid growth, and while the multiple is high it does not appear excessive given this growth.

http://www.stockmarketbeat.com/

Posted on: March 10, 2007 – 9:46 am in Earnings

CDWC: CDW’s Average Daily Sales Driven by Acquisition

By William Trent, CFA of Stock Market Beat

After Dell reported a decline and Hewlett Packard, Ingram Micro and Tech Data all showed mid-single-digit gains, one might wonder whether CDW was taking market share after seeing this headline:

CDW’s Average Daily Sales Increase 14.2 Percent in February 2007: Financial News – Yahoo! Finance

CDW Corporation (NASDAQ:CDWC – News), a leading provider of technology products and services to business, government and education, today announced average daily sales for February 2007 were $28.018 million, an increase of 14.2 percent compared to average daily sales of $24.533 million for February 2006. Total sales for February 2007 were $560.4 million, an increase of 14.2 percent compared to total sales of $490.7 million for February 2006. There were 20 billing days in both February 2007 and February 2006.

But not so fast.

As previously announced, CDW completed the acquisition of Berbee Information Networks Corporation on October 11, 2006. February 2006 sales do not include Berbee sales, while February 2007 sales include Berbee sales. Excluding Berbee sales in February 2007, and therefore on a non-GAAP basis, CDW’s average daily sales for February 2007 were $26.080 million compared to average daily sales for February 2006 of $24.533 million and total sales for February 2007 were $521.6 million compared to total sales of $490.7 million for February 2006, both representing an increase of 6.3 percent.

Ah. Mid-single digit growth. Just what we’ve come to expect. Unfortunately our expectations don’t seem to be lining up with those of the market. The consensus growth rate is 14% for the next five years.

http://www.stockmarketbeat.com/

Posted on: March 10, 2007 – 9:45 am in Research

ACN: Accenture’s $1.5 Billion Buyback a Drop in the Bucket

By William Trent, CFA of Stock Market Beat

The board of directors of Large Cap Watch List member Accenture (ACN) approved a $1.5 billion share buyback authorization. The only question we have is: Why so little?

The amount is consistent with the company’s share repurchases in each of the last two years, so the amount was probably already factored into street expectations. The company generated $2.7 billion in cash from operations in its August 2006 fiscal year, and only needed $300 million to invest in new equipment given the knowledge-based (rather than asset-based) nature of its business.

So it would seem the company should be able to afford something more like $2 billion. But even that would cause cash to pile up further on the balance sheet, which already shows a $2.7 billion hoard against virtually no debt. And speaking of debt, maybe they should consider taking some on to recapitalize (use for share repurchases.) It seems like a reasonable value at 9x free cash flow, which by our reckoning values the company as though it will not grow – and the strong cash flow should be sufficient to support a reasonable amount of debt.

The board should certainly be considering all of these options. If they don’t do it, a private equity buyer might.

http://www.stockmarketbeat.com/

Posted on: March 10, 2007 – 9:44 am in Research

NSM: National Semi Says Trough is Behind Us

By William Trent, CFA of Stock Market Beat

UPDATE 2-National Semi profit falls; says trough now past | Reuters.com

National Semi said it expected revenue for its current, fourth fiscal quarter to rise 3 percent to 6 percent from the prior quarter. The Santa Clara, California-based company also saw new orders rise in the quarter, led by bookings from makers of mobile telephones and cellular network equipment, chief executive Brian Halla said.”Almost everybody I talk to sees the same kind of regaining of health of the industry, and most everybody agrees the trough was early in the first quarter,” Halla told Reuters.

To his credit, Halla doesn’t appear to be a perpetual bottom-caller. On the February 25 conference call he said:

We do believe that for us, the bottom of our trough occurred sometime in early January and in fact, if we look at the activity since then, bookings picked up and held up at a consistent rate through the end of the quarter. As a result, we are able to realize a positive book-to-bill for the first time in three quarters.

And in the November conference call he said:

Margin improvement has been a focus we have discussed for a few years at these calls, and now given this current trough where less than 60% of our factories are utilized, the portfolio impact on our margins is starting to speak for itself. And by the way, our short-term goal of hitting 65% gross margin is still on the table.

So he has been fairly consistent in his categorization, which moved over time from “current” to “behind us.” But we’re still afraid that “everyone he talks to” is probably a narrow group of industry optimists. We see inventory continuing to be a problem, particularly given the slowing consumer’s likely impact on the mobile telephone market.

http://www.stockmarketbeat.com/

Posted on: March 10, 2007 – 9:42 am in Semiconductor

Job Growth Slowing Down Fast

By William Trent, CFA of Stock Market Beat

According to Yahoo! News:

The U.S. economy added a modest 97,000 jobs in February, the smallest gain in two years, but job growth in prior months was stronger than first thought and the unemployment rate dropped, the government said on Friday, easing fears over economic weakness.
Adding to a picture of economic resilience, the U.S. trade deficit narrowed slightly more than expected in January to $59.1 billion as U.S. exports hit a record high, a separate report showed.

Addressing the second issue first, the other way to look at the trade deficit improving is that U.S. consumers are buying less. We also, thanks to a weakening dollar, had higher exports – all of which is part of the natural corrective system for economic imbalances such as our trade deficit. But the lower imports certainly jibes with the weak consumer confidence report last week. For some time we have been hearing that the housing woes wouldn’t spread and/or worsen as long as employment remained strong.

So on to the first issue. Is employment strong?

employment.jpg

Total employment is still growing, but the rate of growth has slowed to less than 1.5%. What had looked like a possible acceleration in late 2006 now appears to have been a mirage.

http://www.stockmarketbeat.com/

Posted on: March 10, 2007 – 9:41 am in Economy

ITRI: Itron Lands Big Meter Order

By William Trent, CFA of Stock Market Beat

We’ve already talked about Itron’s (ITRI) plans to grow through acquisition. Now we see an example of their organic growth/

Itron Lands Largest-Ever International SENTINEL(R) Meter Order

Itron (NASDAQ:ITRI) announced today it has received an order from Mexico’s Comisión Federal de Electricidad (CFE), for 25,000 SENTINEL solid-state electricity meters. CFE is Mexico’s largest electric utility – covering the whole of Mexico – with more than 20 million customers and 163 power-generating plants.The agreement represents Itron’s largest-ever international sale of the highly successful SENTINEL meter. Beyond the initial 25,000 meters, CFE also has the option to purchase an additional 37,000 units over the next year.

Make no bones about it: automatic meter reading will be a long-term upgrade cycle, and the fact that a company with a market cap under $2 billion is one of the leaders means a great long-term opportunity for the stock, despite the hiccups they are bound to face along the way.

http://www.stockmarketbeat.com/

Posted on: March 10, 2007 – 9:39 am in Research