Buzz Bits: Dow Inches Higher, Nasdaq Closes Lower
Your daily Buzz highlights...
Earnings Report - MV News
Flashback! - Bill Meehan - 2:41 PM
This day in market history...
- Closing levels 7 years ago
- DJIA: 11,007.25
- Naz: 2,526.39
- S&P 500: 1,340.3
- Crude: 18.57
- Gold: 278.00
This day in Minyanville history...
- In '04, Prof. Miller wrote Biotech investor's Macro Market Conundrum
In other news...
- In 1963, The Rolling Stones produced their first recordings, including Come On and I Wanna Be Loved.
What gives? - Vitaliy Katsenelson - 2:08 PM
Home Depot (HD) announced that it will be buying EnerBank, an industrial bank which will allow the company to promote the bank's services to contractors in its US stores.
Interestingly, Wal-Mart's (WMT) similar ambitions to own an industrial bank (one very similar to EnterBank) are being viciously fought by the banking industry in what has become a highly politicized event.
Next Fed day let's open the markets at 2:00 pm - Fil Zucchi - 12:42 PM
- 50 bps. and done? An interesting idea from a smart Minyan. It would destroy whatever is left of the spring housing market.
- We are seeing call buying in the homies. Makes sense if you trade faster than you blink.
- The chippies (SOX) are at pretty important support. Directionally speaking the SMH June calls don't look terribly expensive.
- Fido shed 7.4M shares of Whole Foods (WFMI) according to a fresh off the presses filing.
- In a CNBC interview earlier this morning a futures trader suggested that the gold trade is pretty crowded with teen traders turned gold experts. When that trade ends will high beta names be the beneficiaries?
- The other side of homies call buying.
Position in SMH, homebuilders gold, WFMI
A word about the potential of peak earnings and tough comparisons top come…… - Bennet Sedacca - 12:05 PM
With the majority of the companies in the S&P500 having reported, we find ourselves with what I would consider an astounding 15% year over year increase of earnings growth. Why do I, pray tell, find this astounding? Well, I have had accounting 101, not to mention having been around a while.
Here is how the math usually works in profits and profit margins. S&P500 corporations, due to productivity gains of recent years, among other things (like questionable accounting, but that is for another day). The question I have is the following. If you combine record margins, spiking commodity prices across the board and increasing interest rates across the curve and economic growth around 3.5%, how on Earth do we end up with 15% earnings growth? Personally, I am perplexed by it. And I don't LIKE BEING PERPLEXED.
I would have thought that corporations would truly struggle as everything they buy skyrocketing in price and labor costs rising near 4%, there is no way I expected that sort of earnings growth. Can it be explained by stock buybacks? Perhaps, but something smells a little rotten to me.
It also smells like peak earnings to me, as sooner or later the cost increases and rate increases will 'creep' into earnings. So is it possible that comparisons will get tougher? You betcha. Is it possible we are looking at peak earnings? Yep. And for those of you not old enough to know this little tidbit, generally speaking, it makes most sense to buy during trough earnings and sell at peak earnings. Just some thoughts from someone that has been through many cycles.
General Malaise - Kevin Depew - 10:56 AM
In addition to the ex dividend and difficult borrow for GM today noted by Professor Succo, some of GM's strength may be technical related.
Dorsey Wright this morning noted the PnF breakout yesterday for the stock, a double top followed by a spread triple top. That is the first buy signal for GM (using a default PnF scale of 1-point per box above $20) for GM since December 2003.
I believe the stock actually has room to 35 in this counter-trend bounce before the downtrend reasserts itself. Going back to 2000, the stock has had five similar moves counter-trend moves before the larger trend has reasserted itself.
Further Color on McDonald's Comps - Brian Gilmartin - 10:40 AM
Yesterday, McDonald's (MCD) report pretty good April '06 comps, but the real surprise was Europe's +9.3% increase in April, the best comp in terms of region, and the best European comp since Feb '04's 7.7%. (See the attached spreadsheet.)
Another interesting angle to MCD's found in their q1 '06 10-q filed yesterday: "However, as a perspective, assuming no change in cost structure, a 1% point increase in US comp's would increase annual earnings per share by 2 cents. Similarly an increase of 1% in Europe's comparable sales would increase annual earnings per share by 1.5 cents." (see page 9 of the q1 '06 10-Q.)
My read of this is that MCD's is a little more leveraged to the Europe store base, and the strong European comp bodes well for q2 '06.
To be fair, as you can see from the comp table, last April '05's European comp was weak, a negative 0.07%, as is May '05's comp.
MCD's is another boring stock in client portfolios: trading at under 10(x) cash from operations (MCD's generated $3.90 per share in cash from ops as of q1 '06), as the company returns its significant cash generation to shareholders via share repurchases and increased dividends, the risk reward continues to be attractive.
Position in MCD
THIS CONTENT IS FOR EDUCATIONAL PURPOSES AND IS NOT INTENDED AS ADVICE.
Minyanville contributors may trade securities that are discussed on the site, both before and after the articles are published and/or may have a position in such securities for either personal or firm account(s). Minyanville contributors will indicate whether he or the firm has a position in stocks or other securities in any of the companies he discusses in an article. He will not disclose his or the firm's ownership of any securities issued by companies that are not discussed in an article. The disclosures will be accurate as of the time of publication of an article and may change at any time thereafter without notice to the reader.
The information on this website reflects an analysis of market conditions by Minyanville contributors and should not be interpreted as or deemed to be a recommendation to any investor or category of investors to purchase, sell or hold any security. Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Minyanville contributors will not respond to requests for individual and specific investment advice.
The views expressed on this website are solely those of the writers whose articles appear on this site and do not necessarily reflect the views of the Fund or of any other person except where expressly indicated.
Copyright 2006 Minyanville Publishing and Multimedia, LLC. All Rights Reserved.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter