Week Ahead: Earnings Could Keep the Bulls Running
Published: Friday, 16 Oct 2009
8:42 PM ET Text Size
By: Patti Domm
Executive Editor
Corporate earnings will trump almost everything for the stock market in the coming week.
A string of better-than-expected third quarter earnings reports have helped fuel the stock market rally, taking the Dow above 10,000 for the first time in a year.
About half the Dow 30 and a quarter of the S&P 500 report in the week ahead. Analysts expect the majority of these companies to continue to beat expectations.
Traders are also watching the dollar, which continues to weaken as stocks and other risk assets move higher. They are also keeping an eye on the quick boil in oil prices, which moved sharply higher in the past week and are beginning to make some investors cautious.
"Basically, the market has gone up on proof of earnings, so after this earnings season, there's not going to be another catalyst before earnings early next year," said Binky Chadha, chief U.S. equities strategist at Deutsche Bank.
"It's the second quarter of sequential top line growth, and we also should have the third quarter of bottom line growth. In the fourth quarter, year on year earnings will be positive because Q4 of '08 was so bad...Q4 earnings should mark the end of the earnings recession," he said.
Of the 61 S&P companies that reported so far, 79 percent have reported better than expected earnings. Chadha said, however, companies are also beating on the top line, and as of Thursday, 65.5 of a smaller sampling had better than expected sales results.
Chadha, like a number of strategists, believes the stock market is set to move higher, for now. But he also thinks it will take a breather after the earnings season. He expects the S&P to reach 1125 by the end of the earnings season but it could pull back into the year end, reaching a level of about 1075, close to its current level. His target for the end of next year is 1260.
http://www.cnbc.com/id/33351707/
Wednesday 21 October 2009
Power from wind
Wind Farms: eleven UK sites marked for development
Eleven sites around the English, Scottish and Welsh coastline have been earmarked as suitable to house ranks of giant wind turbines.
By Paul Eccleston
Published: 10:34PM BST 04 Jun 2008
It is the latest phase of an ambitious scheme to meet more of the UK's energy needs from natural and sustainable sources.
The government is committed to obtaining 20 per cent of all its energy from renewables by 2020 and offshore wind power has been identified as the key factor in reaching the target.
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The UK is about to overtake Denmark as the world's largest generator of wind power and within five years we will be able to obtain as much power from wind as we do from nuclear plants.
Announcing the potential new sites the Crown Estate - which is responsible for managing the sea bed - said it will play a much bigger part in getting wind farms up and running in time to meet the 2020 deadline.
It will meet up to 50 per cent of the start up costs of new farms by helping developers get through complicated planning processes and with sourcing suitable turbines and getting them hooked up to the electricity grid.
Bidding for the new sites - round three of a long-term plan to increase the number of offshore wind farms - will begin almost immediately and contracts could be signed as early as next year.
If all the new farms are built it will more than triple the 8GW of power being developed offshore under rounds one and two of the scheme to 25GW and 33GW by 2020 which would be enough to theoretically provide enough power for every home in Britain.
Rob Hastings, the Crown Estate's director of marine estates, said "We recognise that the 2020 EU renewable energy target is a major challenge for the UK. It will demand a strategic vision, combining innovation in technology and energy infrastructure with sympathy for environmental concerns.
In partnership with wind farm developers, we will need to establish the best location for wind farms within the programme and gain consensus with key stakeholders to deliver each scheme. :
"We need to be sensitive to other marine users and conservation interests, and we have to deliver all this in the context of worldwide competition and a limited supply of new wind turbines.
Energy Minister Malcolm Wicks said wind power would help tackle two of the big challenges facing the country - climate change and energy security.
"The expansion of wind energy is already a real success story for the UK. We will shortly become the leading country in the world in terms of the number of wind farms operating offshore," he said.
"The Government is aware of the costs and supply challenges facing the industry and it's hoped the Crown Estate's investment and leasing programme for round three will provide developers with confidence to make investments much earlier on, like signing grid connection agreements or ordering turbines."
Maria McCaffery, Chief Executive of the industry body British Wind Energy Authority, said: "This is fantastic news for the UK wind industry, with Britain's seas now officially opened for business. This announcement has brought delivery of the 2020 renewable energy targets a great deal closer".
She added: "Wind energy is no longer a minority pursuit. With nearly half a gigawatt already installed and a further 8GW of schemes in the pipeline we are now a mainstream energy supplier."
The head of Greenpeace UK's climate campaign Robin Oakley said: "Offshore wind is a 21st century, frontier technology that can deliver clean electricity to every home in Britain and secure our energy supplies for years to come. Our country could be the Saudi Arabia of offshore wind - and John Hutton knows it.
Instead, he's lost in a nuclear fantasy and flatly refuses to introduce the policies that have delivered huge economic benefits for Germany and Spain, who now lead the world in renewable energy. Britain is sitting on a treasure chest of green collar jobs and clean, renewable energy - now we need to unlock it."
http://www.telegraph.co.uk/news/uknews/2075531/Wind-Farms-eleven-UK-sites-marked-for-development.html
Eleven sites around the English, Scottish and Welsh coastline have been earmarked as suitable to house ranks of giant wind turbines.
By Paul Eccleston
Published: 10:34PM BST 04 Jun 2008
It is the latest phase of an ambitious scheme to meet more of the UK's energy needs from natural and sustainable sources.
The government is committed to obtaining 20 per cent of all its energy from renewables by 2020 and offshore wind power has been identified as the key factor in reaching the target.
Related Articles
Offshore UK wind farm sites announced
Crown Estate did not tell locals about huge off-shore windfarm
World's largest wind farm scrapped in financial downturn
Wind farms could supply planet's power
Climate Change Act: Now the world faces its biggest ever bill
The UK is about to overtake Denmark as the world's largest generator of wind power and within five years we will be able to obtain as much power from wind as we do from nuclear plants.
Announcing the potential new sites the Crown Estate - which is responsible for managing the sea bed - said it will play a much bigger part in getting wind farms up and running in time to meet the 2020 deadline.
It will meet up to 50 per cent of the start up costs of new farms by helping developers get through complicated planning processes and with sourcing suitable turbines and getting them hooked up to the electricity grid.
Bidding for the new sites - round three of a long-term plan to increase the number of offshore wind farms - will begin almost immediately and contracts could be signed as early as next year.
If all the new farms are built it will more than triple the 8GW of power being developed offshore under rounds one and two of the scheme to 25GW and 33GW by 2020 which would be enough to theoretically provide enough power for every home in Britain.
Rob Hastings, the Crown Estate's director of marine estates, said "We recognise that the 2020 EU renewable energy target is a major challenge for the UK. It will demand a strategic vision, combining innovation in technology and energy infrastructure with sympathy for environmental concerns.
In partnership with wind farm developers, we will need to establish the best location for wind farms within the programme and gain consensus with key stakeholders to deliver each scheme. :
"We need to be sensitive to other marine users and conservation interests, and we have to deliver all this in the context of worldwide competition and a limited supply of new wind turbines.
Energy Minister Malcolm Wicks said wind power would help tackle two of the big challenges facing the country - climate change and energy security.
"The expansion of wind energy is already a real success story for the UK. We will shortly become the leading country in the world in terms of the number of wind farms operating offshore," he said.
"The Government is aware of the costs and supply challenges facing the industry and it's hoped the Crown Estate's investment and leasing programme for round three will provide developers with confidence to make investments much earlier on, like signing grid connection agreements or ordering turbines."
Maria McCaffery, Chief Executive of the industry body British Wind Energy Authority, said: "This is fantastic news for the UK wind industry, with Britain's seas now officially opened for business. This announcement has brought delivery of the 2020 renewable energy targets a great deal closer".
She added: "Wind energy is no longer a minority pursuit. With nearly half a gigawatt already installed and a further 8GW of schemes in the pipeline we are now a mainstream energy supplier."
The head of Greenpeace UK's climate campaign Robin Oakley said: "Offshore wind is a 21st century, frontier technology that can deliver clean electricity to every home in Britain and secure our energy supplies for years to come. Our country could be the Saudi Arabia of offshore wind - and John Hutton knows it.
Instead, he's lost in a nuclear fantasy and flatly refuses to introduce the policies that have delivered huge economic benefits for Germany and Spain, who now lead the world in renewable energy. Britain is sitting on a treasure chest of green collar jobs and clean, renewable energy - now we need to unlock it."
http://www.telegraph.co.uk/news/uknews/2075531/Wind-Farms-eleven-UK-sites-marked-for-development.html
The Qataris profiting handsomely for taking the risk
Qataris bank £615m profit on rescue of Barclays
One of Barclays' Middle Eastern saviours has bagged a £615m cash profit from its £1.75bn gamble on the bank's recovery last year.
By Philip Aldrick, Banking Editor
Published: 8:51PM BST 20 Oct 2009
Comments 1 | Comment on this article
Towering profit: Qatar's sovereign wealth fund has banked £615m in a year from its investment in Barclays Photo: Ian Jones Qatar Holdings, the country's sovereign wealth fund, on Tuesday cashed in half of the £1.5bn of warrants it received in return for supporting last October's £7bn rescue fund-raising to keep the lender out of UK Government hands.
The warrants, which Qatar exercised at 197.775p a share, were sold in the market at 360p, realising a £615m cash profit for the Middle Eastern investor.
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UKFI rules out quick sale of bank sharesQatar is sitting on a £615m paper profit for the other half of the warrants it holds and a further £690m profit on the £500m of shares acquired at 153.276p. It has also been paid £175m in interest for the £1.25bn of reserve capital instruments that formed the bulk of the deal.
In total, Qatar has made a £2.14bn cash and paper profit on its £1.75bn investment in just one year.
Qatar was one of three Middle Eastern investors that came to Barclays' rescue after UK institutions shunned management attempts to raise capital when Lloyds Banking Group and Royal Bank of Scotland were part-nationalised last year. Barclays stayed out of state hands, but it had to offer highly generous terms to the three investors.
Between them, they have made a cash and paper profit of £5.4bn on a combined £5.3bn investment in just one year. His Highness Sheikh Mansour bin Zayed al-Nahyan, a member of the Abu Dhabi royal family, sold £2bn of his investment for a £1.45bn profit in June but has retained £1.5bn of warrants that are currently £1.2bn in profit.
Challenger, a vehicle owned by the Qatari royal family, is sitting on a £410m paper profit and has earned £25m in interest on its investment.
Credit Suisse placed Qatar's shares at an average of 360p largely with UK institutions.
Analysts pointed out that Barclays' shareholders were offered the chance to support the bank but declined and are now paying more than twice as much for the stock.
They were also given the opportunity at the time of the rescue refinancing to buy £1.5bn of manadatory convertible notes that switched into shares in June at 153.276p, under the same terms as the Middle Eastern investors. Only £1.25bn was taken up.
"They missed an opportunity and the Qataris are profiting handsomely for taking the risk," one analyst said
Qatar stressed that it remained "a long-term strategic shareholder in Barclays". It continues to be the bank's largest shareholder with a 7.1pc stake, diluted from 7.4pc due to the issue of 379m new shares as a result of the warrants being exercised.
John Varley, Barclays chief executive said the placing "will further broaden the base of our share register" and added: "Qatar is our largest shareholder and a key partner of the Barclays group."
The deal will also improve Barclays' core tier one ratio, the key measure of financial strength, from 8.8pc in June to roughly 8.95pc. The boost came about because Qatar had to pay the bank £750m for the new shares before selling them at a profit.
Bringing the Middle East investors on to the share register was highly controversial last year. The price paid was significantly more than what it would have cost to raise similar funds from the Government and the speed of the deal meant shareholders were not given first refusal on the deal, as is best practice.
However, the strategy of remaining independent has proved a success. Barclays shares have recovered from around 200p to 363¾p, down 18.3p yesterday due to the dilutive effect of the deal, while RBS shares have fallen from 66p to 46.58p and Lloyds from around 200p to 91.35p in the same period.
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6390133/Qataris-bank-615m-profit-on-rescue-of-Barclays.html
One of Barclays' Middle Eastern saviours has bagged a £615m cash profit from its £1.75bn gamble on the bank's recovery last year.
By Philip Aldrick, Banking Editor
Published: 8:51PM BST 20 Oct 2009
Comments 1 | Comment on this article
Towering profit: Qatar's sovereign wealth fund has banked £615m in a year from its investment in Barclays Photo: Ian Jones Qatar Holdings, the country's sovereign wealth fund, on Tuesday cashed in half of the £1.5bn of warrants it received in return for supporting last October's £7bn rescue fund-raising to keep the lender out of UK Government hands.
The warrants, which Qatar exercised at 197.775p a share, were sold in the market at 360p, realising a £615m cash profit for the Middle Eastern investor.
Related Articles
Sainsbury's rises on renewed talk of bid by Qatari Investment Authority
Abu Dhabi sheikh cashes in Barclays stake for £1.5bn profit
Barclays shares surge on iShare sale hope
Staveley bags herself a late stocking filler
Standard Chartered share price fall triggers capital review
UKFI rules out quick sale of bank sharesQatar is sitting on a £615m paper profit for the other half of the warrants it holds and a further £690m profit on the £500m of shares acquired at 153.276p. It has also been paid £175m in interest for the £1.25bn of reserve capital instruments that formed the bulk of the deal.
In total, Qatar has made a £2.14bn cash and paper profit on its £1.75bn investment in just one year.
Qatar was one of three Middle Eastern investors that came to Barclays' rescue after UK institutions shunned management attempts to raise capital when Lloyds Banking Group and Royal Bank of Scotland were part-nationalised last year. Barclays stayed out of state hands, but it had to offer highly generous terms to the three investors.
Between them, they have made a cash and paper profit of £5.4bn on a combined £5.3bn investment in just one year. His Highness Sheikh Mansour bin Zayed al-Nahyan, a member of the Abu Dhabi royal family, sold £2bn of his investment for a £1.45bn profit in June but has retained £1.5bn of warrants that are currently £1.2bn in profit.
Challenger, a vehicle owned by the Qatari royal family, is sitting on a £410m paper profit and has earned £25m in interest on its investment.
Credit Suisse placed Qatar's shares at an average of 360p largely with UK institutions.
Analysts pointed out that Barclays' shareholders were offered the chance to support the bank but declined and are now paying more than twice as much for the stock.
They were also given the opportunity at the time of the rescue refinancing to buy £1.5bn of manadatory convertible notes that switched into shares in June at 153.276p, under the same terms as the Middle Eastern investors. Only £1.25bn was taken up.
"They missed an opportunity and the Qataris are profiting handsomely for taking the risk," one analyst said
Qatar stressed that it remained "a long-term strategic shareholder in Barclays". It continues to be the bank's largest shareholder with a 7.1pc stake, diluted from 7.4pc due to the issue of 379m new shares as a result of the warrants being exercised.
John Varley, Barclays chief executive said the placing "will further broaden the base of our share register" and added: "Qatar is our largest shareholder and a key partner of the Barclays group."
The deal will also improve Barclays' core tier one ratio, the key measure of financial strength, from 8.8pc in June to roughly 8.95pc. The boost came about because Qatar had to pay the bank £750m for the new shares before selling them at a profit.
Bringing the Middle East investors on to the share register was highly controversial last year. The price paid was significantly more than what it would have cost to raise similar funds from the Government and the speed of the deal meant shareholders were not given first refusal on the deal, as is best practice.
However, the strategy of remaining independent has proved a success. Barclays shares have recovered from around 200p to 363¾p, down 18.3p yesterday due to the dilutive effect of the deal, while RBS shares have fallen from 66p to 46.58p and Lloyds from around 200p to 91.35p in the same period.
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/6390133/Qataris-bank-615m-profit-on-rescue-of-Barclays.html
Return of high oil prices threatens real damage
Return of high oil prices threatens real damage
By Jeremy Warner Economics Last updated: October 20th, 2009
Interest rates at close to zero are driving the price of virtually everything else wild, so it should come as little surprise to see oil back above twelve month highs. OK, so it is still a long way from the crucifying $140 a barrel it reached in the summer of last year, but prices have nearly doubled so far this year and at more than $80 a barrel, they are again high enough to cause real economic damage.
By common agreement, it was the collapse of Lehman Brothers which plunged the world into deep recession, and no doubt the destruction of confidence in the banking system was a major cause. But what’s often over looked is the role played by high energy prices. These had reached crippling levels by the summer of 2008, and were causing real damage to industry and business. American consumers took one look at prices at the pumps and collectively decided to stop spending. This collapse in consumer and business confidence preceded the Lehman debacle.
The world economy is said to be a great deal less vulnerable to high oil prices than it was 30 or 40 years ago, but they still self evidently have the power to shock. Most post war recessions have been preceded by a spike in the oil price. So to see the price back at elevated levels (see accompanying chart) before a proper economic recovery has even taken hold is a cause for some concern.
Having peaked in the summer of last year at over $140 a barrel, the oil price then plunged. But now it is back up to over $80.
In part, today’s relatively high price is merely a function of dollar weakness. Abdallah El-Badri, Secretary General of OPEC, insists that there is no shortage of oil. The rally to more than $80 a barrel is driven by higher equity prices, the sliding dollar and speculation”, he told Bloomberg News.
There are plainly fundamental forces at work too. Emerging market economies, particularly those of China and India, are once more booming. Yet I suspect the main mischief is again speculation. With interest rates at close to zero, you cannot get a return on cash right now, so money is being poured into riskier assets, including commodities and oil.
An interesting article in the Financial Times this morning puts the near term upward pressure on oil prices down to heavy trading in options contracts ahead of the year end. Quite a lot of this activity is driven by forward hedging for real economy clients. But there is also a significant amount which is purely speculative in nature.
Is it right that speculators should once more be putting the health of the world economy at risk? Speculation, it is often said, only reflects underlying realities. The speculator only makes money if his bets mirror the real economy pressures of supply and demand. Maybe, but cheap money in the quantities now being provided by central bankers and governments creates distortions which stand to upset these delicate balances.
If the price gets back to $100 or more, a double dip recession in advanced economies would seem a virtual certainty. They are all still too fragile to be able to tolerate such a rise in costs.
Tags: Abdall El-Badri, banking crisis, Lehman Brothers, oil, oil price spikes, OPEC, recession, speculation
http://blogs.telegraph.co.uk/finance/jeremywarner/100001422/return-of-high-oil-prices-threatens-real-damage/?utm_source=Telegraph.co.uk&utm_medium=TD_oil&utm_campaign=Finance2110
By Jeremy Warner Economics Last updated: October 20th, 2009
Interest rates at close to zero are driving the price of virtually everything else wild, so it should come as little surprise to see oil back above twelve month highs. OK, so it is still a long way from the crucifying $140 a barrel it reached in the summer of last year, but prices have nearly doubled so far this year and at more than $80 a barrel, they are again high enough to cause real economic damage.
By common agreement, it was the collapse of Lehman Brothers which plunged the world into deep recession, and no doubt the destruction of confidence in the banking system was a major cause. But what’s often over looked is the role played by high energy prices. These had reached crippling levels by the summer of 2008, and were causing real damage to industry and business. American consumers took one look at prices at the pumps and collectively decided to stop spending. This collapse in consumer and business confidence preceded the Lehman debacle.
The world economy is said to be a great deal less vulnerable to high oil prices than it was 30 or 40 years ago, but they still self evidently have the power to shock. Most post war recessions have been preceded by a spike in the oil price. So to see the price back at elevated levels (see accompanying chart) before a proper economic recovery has even taken hold is a cause for some concern.
Having peaked in the summer of last year at over $140 a barrel, the oil price then plunged. But now it is back up to over $80.
In part, today’s relatively high price is merely a function of dollar weakness. Abdallah El-Badri, Secretary General of OPEC, insists that there is no shortage of oil. The rally to more than $80 a barrel is driven by higher equity prices, the sliding dollar and speculation”, he told Bloomberg News.
There are plainly fundamental forces at work too. Emerging market economies, particularly those of China and India, are once more booming. Yet I suspect the main mischief is again speculation. With interest rates at close to zero, you cannot get a return on cash right now, so money is being poured into riskier assets, including commodities and oil.
An interesting article in the Financial Times this morning puts the near term upward pressure on oil prices down to heavy trading in options contracts ahead of the year end. Quite a lot of this activity is driven by forward hedging for real economy clients. But there is also a significant amount which is purely speculative in nature.
Is it right that speculators should once more be putting the health of the world economy at risk? Speculation, it is often said, only reflects underlying realities. The speculator only makes money if his bets mirror the real economy pressures of supply and demand. Maybe, but cheap money in the quantities now being provided by central bankers and governments creates distortions which stand to upset these delicate balances.
If the price gets back to $100 or more, a double dip recession in advanced economies would seem a virtual certainty. They are all still too fragile to be able to tolerate such a rise in costs.
Tags: Abdall El-Badri, banking crisis, Lehman Brothers, oil, oil price spikes, OPEC, recession, speculation
http://blogs.telegraph.co.uk/finance/jeremywarner/100001422/return-of-high-oil-prices-threatens-real-damage/?utm_source=Telegraph.co.uk&utm_medium=TD_oil&utm_campaign=Finance2110
Former Big Bear Turns Baby Bull
Former Big Bear Turns Baby Bull
Posted By:Lee Brodie
Topics:Consumers | Economy (U.S.) | Recession | Stock Market | Stock Picks
It seems even the most bearish market mavens can’t fight the bullish momentum in this stock market. Wait until you find out who’s now a buyer of stocks.
Richard Bernstein, the former Merrill Lynch chief investment strategist, and one of the biggest bears we know is changing his tune.
People like me have underestimated the rebound, Bernstein says. What’s made him a believer?
You might remember the last time Bernstein was on Fast Money he told the traders – at the foundation of the stock market and the recovery is jobs. The market can’t sustain itself unless people are bringing home the bacon.
And although the unemployment rate continues to rise Bernstein is more focused on initial jobless claims which he and many others consider a leading indicator. And that number has started to decline.
In fact, when they were reported last week new jobless claims dropped to the lowest level since January. And that trend combined with low inflation likely means Americans will regain their appetite for spending.
Another way of saying that is – the economy is slowly getting better. “if you believe in the recovery this is the prime time to be a value investor.”
What’s the trade?
Bernstein says the best value are in junky names. “The companies that you’d hate to own tend to perform the best. In almost every industry go for lower quality companies."
Huh?
"In 1991 - a time period that was similar to now - 'C' and 'D' rated stocks by S&P went up 90% that year and continued to outperform for 4 years after that," he says.
Why?
"As the economy continues to improve investors shift from focussing on the balance sheet to focussing on the income statement and cash flow. And the junkiest companies have the greatest operating leverage so their cash flow just explodes," he says.
Although Bernstein doesn't reveal names he does says "consumer cyclical stocks probably have strong upside potential.
"History shows that as long as initial jobless claims trend downward the performance of consumer discretionary stocks [XLY 28.35 -0.30 (-1.05%) ] trend up," he concludes.
http://www.cnbc.com/id/33397834
Posted By:Lee Brodie
Topics:Consumers | Economy (U.S.) | Recession | Stock Market | Stock Picks
It seems even the most bearish market mavens can’t fight the bullish momentum in this stock market. Wait until you find out who’s now a buyer of stocks.
Richard Bernstein, the former Merrill Lynch chief investment strategist, and one of the biggest bears we know is changing his tune.
People like me have underestimated the rebound, Bernstein says. What’s made him a believer?
You might remember the last time Bernstein was on Fast Money he told the traders – at the foundation of the stock market and the recovery is jobs. The market can’t sustain itself unless people are bringing home the bacon.
And although the unemployment rate continues to rise Bernstein is more focused on initial jobless claims which he and many others consider a leading indicator. And that number has started to decline.
In fact, when they were reported last week new jobless claims dropped to the lowest level since January. And that trend combined with low inflation likely means Americans will regain their appetite for spending.
Another way of saying that is – the economy is slowly getting better. “if you believe in the recovery this is the prime time to be a value investor.”
What’s the trade?
Bernstein says the best value are in junky names. “The companies that you’d hate to own tend to perform the best. In almost every industry go for lower quality companies."
Huh?
"In 1991 - a time period that was similar to now - 'C' and 'D' rated stocks by S&P went up 90% that year and continued to outperform for 4 years after that," he says.
Why?
"As the economy continues to improve investors shift from focussing on the balance sheet to focussing on the income statement and cash flow. And the junkiest companies have the greatest operating leverage so their cash flow just explodes," he says.
Although Bernstein doesn't reveal names he does says "consumer cyclical stocks probably have strong upside potential.
"History shows that as long as initial jobless claims trend downward the performance of consumer discretionary stocks [XLY 28.35 -0.30 (-1.05%) ] trend up," he concludes.
http://www.cnbc.com/id/33397834
Improving Global Economy Shows Up in Earnings
Improving Global Economy Shows Up in Earnings
Published: Tuesday, 20 Oct 2009 | 9:27 AM ET Text Size By: Bob Pisani
CNBC Reporter
Topline beats take back seat to positive 2010 commentary. Six big names beat earnings estimates: Apple [AAPL 198.76 8.90 (+4.69%) ], Coke, Pfizer, United Technologies and Caterpillar all beat on the bottom line.
But something's different this time: a higher percentage are beating on the topline as well. Apple did. Even Dupont, Pfizer and UTX did.
What is different this time is that the big multinationals have reaped the benefits of an improving overseas market, along with the weaker dollar.
The improving global economy is showing up in several of today's comments.
Caterpillar's Jim Owens:
1) "the third quarter marked the low point for Caterpillar sales and revenues"
2) "we are seeing encouraging signs that indicate a recovery may be underway"
3) 2010: "we've already started planning for an upturn"
Elsewhere:
1) futures dropped at 8:30 AM ET as September Housing Starts and Permits were below expectations.
2) Caterpillar [CAT 59.61 1.76 (+3.04%) ] up 6 percent pre-open, came in at $0.64, way above the $0.06 expected. Sales were not a blowout: $7.3 billion vs. $7.49 billion consensus.
The bull consensus seems to be playing out: Q2-Q3 may indeed be the trough for production, and with inventories lean even a small improvement in orders will help the top and bottom line.
2010 preliminary guidance of an increase of 10 to 25 percent for sales is also a positive surprise.
3) UTX [UTX 65.34 -0.10 (-0.15%) ] at $1.14 beat by $0.02, and while revenues were a tad better than consensus cost cutting was the major factor in the beat. CEO Louis Chenevert said orders had "stabilized."
4) DuPont [DD Loading... () ] beat consensus by two cents and talked about improving demand across key markets. Here's an interesting stat: profit is up 11 percent, but top line dropped 18.3 percent. They narrowed their earnings outlook for the year...it now expects earnings of $1.95 to $2.05 per share versus previous estimate of $1.70 - $2.10.
5) Strong earnings from Texas Instruments [TXN 23.66 0.14 (+0.6%) ], as well as earlier strong report from Intel [INTC 20.18 -0.23 (-1.13%) ] and Apple should keep the semiconductors going. The SMH (Semiconductor HOLDR, the main ETF-type instrument professionals use to trade semis) has been strong all year, bottomed earlier than the S&P 500, and has had a stronger recovery in the past year.
6) Coca-Cola [KO 54.06 -0.73 (-1.33%) ] topped Street estimates by a penny. The soft drink maker says higher sales volume and cost cuts helped pop Q3 profits. Sales by volume rose 2%.
7) Pfizer [PFE 17.93 -0.05 (-0.28%) ] also beat the Street. The drug maker came in at $0.51 for Q3 excluding items vs. estimate of $0.48. Aggressive cost-cutting helped offset the negative foreign exchange and competition from cheaper generics.
http://www.cnbc.com/id/33395059
Published: Tuesday, 20 Oct 2009 | 9:27 AM ET Text Size By: Bob Pisani
CNBC Reporter
Topline beats take back seat to positive 2010 commentary. Six big names beat earnings estimates: Apple [AAPL 198.76 8.90 (+4.69%) ], Coke, Pfizer, United Technologies and Caterpillar all beat on the bottom line.
But something's different this time: a higher percentage are beating on the topline as well. Apple did. Even Dupont, Pfizer and UTX did.
What is different this time is that the big multinationals have reaped the benefits of an improving overseas market, along with the weaker dollar.
The improving global economy is showing up in several of today's comments.
Caterpillar's Jim Owens:
1) "the third quarter marked the low point for Caterpillar sales and revenues"
2) "we are seeing encouraging signs that indicate a recovery may be underway"
3) 2010: "we've already started planning for an upturn"
Elsewhere:
1) futures dropped at 8:30 AM ET as September Housing Starts and Permits were below expectations.
2) Caterpillar [CAT 59.61 1.76 (+3.04%) ] up 6 percent pre-open, came in at $0.64, way above the $0.06 expected. Sales were not a blowout: $7.3 billion vs. $7.49 billion consensus.
The bull consensus seems to be playing out: Q2-Q3 may indeed be the trough for production, and with inventories lean even a small improvement in orders will help the top and bottom line.
2010 preliminary guidance of an increase of 10 to 25 percent for sales is also a positive surprise.
3) UTX [UTX 65.34 -0.10 (-0.15%) ] at $1.14 beat by $0.02, and while revenues were a tad better than consensus cost cutting was the major factor in the beat. CEO Louis Chenevert said orders had "stabilized."
4) DuPont [DD Loading... () ] beat consensus by two cents and talked about improving demand across key markets. Here's an interesting stat: profit is up 11 percent, but top line dropped 18.3 percent. They narrowed their earnings outlook for the year...it now expects earnings of $1.95 to $2.05 per share versus previous estimate of $1.70 - $2.10.
5) Strong earnings from Texas Instruments [TXN 23.66 0.14 (+0.6%) ], as well as earlier strong report from Intel [INTC 20.18 -0.23 (-1.13%) ] and Apple should keep the semiconductors going. The SMH (Semiconductor HOLDR, the main ETF-type instrument professionals use to trade semis) has been strong all year, bottomed earlier than the S&P 500, and has had a stronger recovery in the past year.
6) Coca-Cola [KO 54.06 -0.73 (-1.33%) ] topped Street estimates by a penny. The soft drink maker says higher sales volume and cost cuts helped pop Q3 profits. Sales by volume rose 2%.
7) Pfizer [PFE 17.93 -0.05 (-0.28%) ] also beat the Street. The drug maker came in at $0.51 for Q3 excluding items vs. estimate of $0.48. Aggressive cost-cutting helped offset the negative foreign exchange and competition from cheaper generics.
http://www.cnbc.com/id/33395059
Market rebound continues confound analysts
BEHIND THE MONEY: Analysts Give Companies Easy Earnings Ride
Posted By:John Melloy
Topics:Recession
Earnings
Stock Market
Stock Picks
Companies:Goldman Sachs Group Inc.
Caterpillar Inc
There was a great Monty Python sketch called the "Twit Olympics" where one of the events entailed jumping over a row of matchbooks. Perhaps that's what we should rename this earnings season after looking at the parade of earnings beats this morning, which follow the incredible estimate-pounding performance so far this season.
For example, Caterpillar [CAT 59.61 1.76 (+3.04%) ] reported a profit of 64 cents a share, compared to the Thomson Reuters consensus estimate of 6 cents a share. Were Caterpillar analysts asleep at the switch? Maybe, because despite a 60 percent jump in Caterpillar shares in the quarter, they didn't raise their forecast one iota, according to Birinyi & Associates.
CATERPILLAR INC(CAT)
59.61 1.76 (+3.04%%)
NYSE
It seems that was the trend for the whole market too. As the S&P 500 [.SPX 1091.06 -6.85 (-0.62%) ] surged 15 percent in the third quarter, analysts kept lowering their earnings estimates for the period.
They expected a 21% drop in earnings for the quarter on July 1 and bumped that down to a 25% decline by the time the quarter ended, with the biggest downward revisions coming in the financial, industrial and energy sectors, according to Thomson Reuters. The biggest surprises we've seen so far have come from those sectors in Goldman Sachs [GS 184.89 -0.61 (-0.33%) ] last week and Caterpillar today.
Jon Najarian, co-founder of Optionmonster.com, said this makes sense because since analysts set the bar so low, the so-called whisper numbers out there are much higher this reporting season then he can last remember.
The Fast Money traders keep bringing up on our conference calls how one concern of theirs is that the momentum of this market rebound continues to confound credible strategists they follow, such as Doug Kass, President of Seabreeze Partners and T2 Partners' Whitney Tilson, that have called for its end. Maybe this relentless rally is puzzling because the numbers it's based upon aren't as good as they appear.
Posted By:John Melloy
Topics:Recession
Earnings
Stock Market
Stock Picks
Companies:Goldman Sachs Group Inc.
Caterpillar Inc
There was a great Monty Python sketch called the "Twit Olympics" where one of the events entailed jumping over a row of matchbooks. Perhaps that's what we should rename this earnings season after looking at the parade of earnings beats this morning, which follow the incredible estimate-pounding performance so far this season.
For example, Caterpillar [CAT 59.61 1.76 (+3.04%) ] reported a profit of 64 cents a share, compared to the Thomson Reuters consensus estimate of 6 cents a share. Were Caterpillar analysts asleep at the switch? Maybe, because despite a 60 percent jump in Caterpillar shares in the quarter, they didn't raise their forecast one iota, according to Birinyi & Associates.
CATERPILLAR INC(CAT)
59.61 1.76 (+3.04%%)
NYSE
It seems that was the trend for the whole market too. As the S&P 500 [.SPX 1091.06 -6.85 (-0.62%) ] surged 15 percent in the third quarter, analysts kept lowering their earnings estimates for the period.
Jon Najarian, co-founder of Optionmonster.com, said this makes sense because since analysts set the bar so low, the so-called whisper numbers out there are much higher this reporting season then he can last remember.
The Fast Money traders keep bringing up on our conference calls how one concern of theirs is that the momentum of this market rebound continues to confound credible strategists they follow, such as Doug Kass, President of Seabreeze Partners and T2 Partners' Whitney Tilson, that have called for its end. Maybe this relentless rally is puzzling because the numbers it's based upon aren't as good as they appear.
U.S. stocks, buoyed by optimism for an economic recovery, are instead poised to fall.
Hedge fund manager Tilson doubled bets vs stocks
Wed Oct 14, 2009 2:35pm EDT
NEW YORK, Oct 14 (Reuters) - Whitney Tilson, manager of hedge fund T2 Partners LLC, said on Wednesday he has doubled his bets that U.S. stocks, buoyed by optimism for an economic recovery, are instead poised to fall.
"We've doubled our short book from 30 percent to 60 percent and we've trimmed our long book from 120 percent to about 90 percent," Tilson said in an interview with Reuters.
Tilson predicted stocks would give back gains even as the Dow Jones Industrial Average .DJI briefly climbed above the psychologically important 10,000 level early Wednesday afternoon -- part of a stunning rebound for markets that were dominated by fear as recently as March.
"Investors have now gone from being too pessimistic to too optimistic in general," he said.
But Tilson said the Dow touching 10,000 does not translate into the real economy. He predicted that banks, particularly small and regional lenders, would be hobbled by loan losses for up to five years.
"Investors are thinking that the losses are going to start to diminish fairly quickly over the next year or two, and our best guess is that losses remain very high for the next couple of years," he said. (Reporting by Jennifer Ablan and Joseph A. Giannone, editing by Leslie Gevirtz)
http://www.reuters.com/article/bankruptcyNews/idUSWEN467420091014
Wed Oct 14, 2009 2:35pm EDT
NEW YORK, Oct 14 (Reuters) - Whitney Tilson, manager of hedge fund T2 Partners LLC, said on Wednesday he has doubled his bets that U.S. stocks, buoyed by optimism for an economic recovery, are instead poised to fall.
"We've doubled our short book from 30 percent to 60 percent and we've trimmed our long book from 120 percent to about 90 percent," Tilson said in an interview with Reuters.
Tilson predicted stocks would give back gains even as the Dow Jones Industrial Average .DJI briefly climbed above the psychologically important 10,000 level early Wednesday afternoon -- part of a stunning rebound for markets that were dominated by fear as recently as March.
"Investors have now gone from being too pessimistic to too optimistic in general," he said.
But Tilson said the Dow touching 10,000 does not translate into the real economy. He predicted that banks, particularly small and regional lenders, would be hobbled by loan losses for up to five years.
"Investors are thinking that the losses are going to start to diminish fairly quickly over the next year or two, and our best guess is that losses remain very high for the next couple of years," he said. (Reporting by Jennifer Ablan and Joseph A. Giannone, editing by Leslie Gevirtz)
http://www.reuters.com/article/bankruptcyNews/idUSWEN467420091014
Investors Are Getting Overly Enthusiastic
Wednesday, 16 Sep 2009
Investors Are Getting Overly Enthusiastic, Says Tilson
Posted By:Lee Brodie
Topics:Employment | Housing | Stock Market | Stock Picks
Companies:Berkshire Hathaway Inc. | Regions Financial Corp | Zions Bancorporation
All this week Fast Money is speaking with the handful of investors who saw the Wall Street crisis coming.
Whitney Tilson, the founder of T2 Partners, is widely known for predicting the mortgage meltdown. What does he see down the road from here?
He’s still bearish, very bearish.
"I'm worried that investors are getting overly enthusiastic. They see a couple of month-to-month sequential home price increases, (and they get excited). We saw the exact same thing a year ago. Don't get faked out by the seasonality."
"We think home prices have another year to go before they bottom and that's going to impact any stock that has exposure to the housing sector."
His outlook comes in stark contrast to what we've been hearing from countless market mavens and even Fed Chief Ben Bernanke who all seem to agree the recession is over.
The Wild Card
Although it appears the economy is improving, unemployment is not and Tilson thinks jobs are the wildcard that could derail the whole kit and kiboodle.
When people lose their jobs they’re able to hang on for a while. They may not pay credit cards but try and keep up with the mortgage. But after a while it become impossible to pay the mortgage.
"What happens to underwater homeowners when they're underwater? Do they walk away from their homes if its economically rational to do so?"
Tilson is betting they do.
As a result Tilson predicts that mortgage defaults are about to skyrocket— the same with consumer loans. In fact, the damage Tilson forecasts is kind of scary.
“There are probably going to be $700 billion of losses in total over the next 8 years and we’ve only seen a few billion of it because those loans haven’t reset,” he tells the traders.
Also Tilson fully expects trouble in commercial real estate. In a past interview he told the desk that "the reason it hasn’t suffered badly so far is that they’re dealing with interest only loans with 5 and 10 year re-sets. Borrowers have been able to make interest payments. It’s upon re-set that they probably won’t be able to refinance."
What’s the trade?
I'd look at regional banks. 50% of their assets are in commercial real estate which is just starting to tip over. I'd short the weaker players such as Regions [RF 5.83 0.13 (+2.28%) ] and Zions [ZION 17.23 -1.10 (-6%) ].
And in case you're wondering, Tilson's largest long position is Berkshire Hathaway [BRK.A 100270.00 --- UNCH (0) ].
What do you think? We want to know.
Do you think a massive number of mortgages and consumer loans are about to default because of rising unemployment?
Vote:
1. Yes, people can't keep up.
2. No, most people have jobs and that won't change.
http://www.reuters.com/article/bankruptcyNews/idUSWEN467420091014
Investors Are Getting Overly Enthusiastic, Says Tilson
Posted By:Lee Brodie
Topics:Employment | Housing | Stock Market | Stock Picks
Companies:Berkshire Hathaway Inc. | Regions Financial Corp | Zions Bancorporation
All this week Fast Money is speaking with the handful of investors who saw the Wall Street crisis coming.
Whitney Tilson, the founder of T2 Partners, is widely known for predicting the mortgage meltdown. What does he see down the road from here?
He’s still bearish, very bearish.
"I'm worried that investors are getting overly enthusiastic. They see a couple of month-to-month sequential home price increases, (and they get excited). We saw the exact same thing a year ago. Don't get faked out by the seasonality."
"We think home prices have another year to go before they bottom and that's going to impact any stock that has exposure to the housing sector."
His outlook comes in stark contrast to what we've been hearing from countless market mavens and even Fed Chief Ben Bernanke who all seem to agree the recession is over.
The Wild Card
Although it appears the economy is improving, unemployment is not and Tilson thinks jobs are the wildcard that could derail the whole kit and kiboodle.
When people lose their jobs they’re able to hang on for a while. They may not pay credit cards but try and keep up with the mortgage. But after a while it become impossible to pay the mortgage.
"What happens to underwater homeowners when they're underwater? Do they walk away from their homes if its economically rational to do so?"
Tilson is betting they do.
As a result Tilson predicts that mortgage defaults are about to skyrocket— the same with consumer loans. In fact, the damage Tilson forecasts is kind of scary.
“There are probably going to be $700 billion of losses in total over the next 8 years and we’ve only seen a few billion of it because those loans haven’t reset,” he tells the traders.
Also Tilson fully expects trouble in commercial real estate. In a past interview he told the desk that "the reason it hasn’t suffered badly so far is that they’re dealing with interest only loans with 5 and 10 year re-sets. Borrowers have been able to make interest payments. It’s upon re-set that they probably won’t be able to refinance."
What’s the trade?
I'd look at regional banks. 50% of their assets are in commercial real estate which is just starting to tip over. I'd short the weaker players such as Regions [RF 5.83 0.13 (+2.28%) ] and Zions [ZION 17.23 -1.10 (-6%) ].
And in case you're wondering, Tilson's largest long position is Berkshire Hathaway [BRK.A 100270.00 --- UNCH (0) ].
What do you think? We want to know.
Do you think a massive number of mortgages and consumer loans are about to default because of rising unemployment?
Vote:
1. Yes, people can't keep up.
2. No, most people have jobs and that won't change.
http://www.reuters.com/article/bankruptcyNews/idUSWEN467420091014
Diversifying your investment overseas
Which country/countries to invest in?
Take your pick: Vietnam, China, Indonesia, Thailand, Singapore, Hong Kong, Australia, US or UK.
Consider the 3 drivers in any stock markets:
1. Re-rating by analysts
2. Currency strengthening
3. Earnings re-rating
Take your pick: Vietnam, China, Indonesia, Thailand, Singapore, Hong Kong, Australia, US or UK.
Consider the 3 drivers in any stock markets:
1. Re-rating by analysts
2. Currency strengthening
3. Earnings re-rating
Tuesday 20 October 2009
There is intelligent speculation as there is intelligent investing.
April 14, 2009
Wellcare Group – An Intelligent Speculation?
Filed under: From the co-founders — Tags: Marcelo Lima, WCG, Wellcare Group — Jane Scottsdale @ 1:11 pm
Common stock investing is inherently risky, and those risks cannot be divorced from the rewards that come with them. Often, it isn’t easy to separate the speculative from the investment component of a common stock commitment. On this topic, Ben Graham, author of the classic The Intelligent Investor, has written most clearly:
Outright speculation is neither illegal, immoral, nor (for most people) fattening to the pocketbook. More than that, some speculation is necessary and unavoidable, for in many common-stock situations there are substantial possibilities of both profit and loss, and the risks therein must be assumed by someone. There is intelligent speculation as there is intelligent investing. But there are many ways in which speculation may be unintelligent. Of these the foremost are:
(1) speculating when you think you are investing;
(2) speculating seriously instead of as a pastime, when you lack proper knowledge and skill for it; and
(3) risking more money in speculation than you can afford to lose.
With that caveat, here’s Wellcare Group (WCG), a stock that has a reasonable chance of going higher once its legal problems are resolved and its earnings normalized. As such, it may present an intelligent speculation.
First, a quick background. Wellcare is a healthcare management organization focused on Medicare and Medicaid, government-run entitlement programs for the elderly and low-income population. It has over 2.5 million members enrolled in its programs nationwide, with a large portion of them in Florida.
Its stock hovered around $120 per share when in October 2007 about 200 FBI agents raided its Tampa campus. The stock collapsed to $40, wiping out $3.3bn in shareholder value. The uncertainty was large; there was no official word of what the FBI raid was for, although newspaper reports stated that one of Wellcare’s subsidiaries had overbilled the government by $35m. In this context, the share price collapse was wildly overdone.
A quick resolution of the problem didn’t happen. Instead, the company went “dark,” not filing its quarterly and yearly financial statements and risking stock exchange delisting for its non-compliance. Periodic SEC filings kept shareholders apprised of the slow progress, but it wasn’t until early 2009 that things became clearer. The company finally filed all of its late financial statements and set a shareholder’s meeting – the first since the FBI raid – for July 30.
Wellcare is well capitalized. As of 12/31/2008, it had about $1.2 billion in cash and $153 million in debt. This debt proved to be another Achilles heel for the stock. When the company reported in 2008 that it was in technical default for not having filed its financial statements, the price dropped precipitously yet again. Fairholme Capital, which owns nearly 20% of the stock, bought a majority of the debt, likely in a move to protect its equity investment.
Throughout this misadventure, the stock has swung wildly, hitting a low of $6.12 in November and $6.23 in March of this year. Yet Wellcare’s core business remains sound, generating substantial free cash flows. The exact number for 2008 involves reversing a goodwill write-down and removing a non-recurring $103m in litigation expenses, but a normalized estimate of $4 in free cash flow per share is probably on the conservative side. While there is significant regulatory uncertainty surrounding its Medicare and Medicaid businesses, at the current price of around $13.80, it’s hard to find a way to lose.
Yet all of these uncertainties – particularly those surrounding the FBI investigation – are still large, which is where the speculative component of this investment comes in. There might be a probability of the government’s penalties being larger than expected. The company is also facing various lawsuits related to its illegal activities, including a class-action lawsuit. Defending against these will cost management’s time and shareholders’ cash.
On the other hand, Wellcare may soon begin conducting conference calls with shareholders and analysts, may soon settle with the government by paying a fine, and may ultimately get sold to a larger competitor, such as UnitedHealth Group. After it fired its disgraced former management, the board brought in Charles Berg, formerly a UnitedHealth executive, Oxford Health Plans CEO and “deal guy.”
With these factors in mind, and taking into account Graham’s three points above, Wellcare may seem like an intelligent speculation after all.
Marcelo P. Lima is a securities analyst. He may be reached at MPL4@cornell.edu
http://blog.valueinvestingcongress.com/2009/04/14/wellcare-group-%e2%80%93-an-intelligent-speculation/
http://blog.valueinvestingcongress.com/?utm_source=VIC&utm_medium=W&utm_campaign=BLOGLA09T
Wellcare Group – An Intelligent Speculation?
Filed under: From the co-founders — Tags: Marcelo Lima, WCG, Wellcare Group — Jane Scottsdale @ 1:11 pm
Common stock investing is inherently risky, and those risks cannot be divorced from the rewards that come with them. Often, it isn’t easy to separate the speculative from the investment component of a common stock commitment. On this topic, Ben Graham, author of the classic The Intelligent Investor, has written most clearly:
Outright speculation is neither illegal, immoral, nor (for most people) fattening to the pocketbook. More than that, some speculation is necessary and unavoidable, for in many common-stock situations there are substantial possibilities of both profit and loss, and the risks therein must be assumed by someone. There is intelligent speculation as there is intelligent investing. But there are many ways in which speculation may be unintelligent. Of these the foremost are:
(1) speculating when you think you are investing;
(2) speculating seriously instead of as a pastime, when you lack proper knowledge and skill for it; and
(3) risking more money in speculation than you can afford to lose.
With that caveat, here’s Wellcare Group (WCG), a stock that has a reasonable chance of going higher once its legal problems are resolved and its earnings normalized. As such, it may present an intelligent speculation.
First, a quick background. Wellcare is a healthcare management organization focused on Medicare and Medicaid, government-run entitlement programs for the elderly and low-income population. It has over 2.5 million members enrolled in its programs nationwide, with a large portion of them in Florida.
Its stock hovered around $120 per share when in October 2007 about 200 FBI agents raided its Tampa campus. The stock collapsed to $40, wiping out $3.3bn in shareholder value. The uncertainty was large; there was no official word of what the FBI raid was for, although newspaper reports stated that one of Wellcare’s subsidiaries had overbilled the government by $35m. In this context, the share price collapse was wildly overdone.
A quick resolution of the problem didn’t happen. Instead, the company went “dark,” not filing its quarterly and yearly financial statements and risking stock exchange delisting for its non-compliance. Periodic SEC filings kept shareholders apprised of the slow progress, but it wasn’t until early 2009 that things became clearer. The company finally filed all of its late financial statements and set a shareholder’s meeting – the first since the FBI raid – for July 30.
Wellcare is well capitalized. As of 12/31/2008, it had about $1.2 billion in cash and $153 million in debt. This debt proved to be another Achilles heel for the stock. When the company reported in 2008 that it was in technical default for not having filed its financial statements, the price dropped precipitously yet again. Fairholme Capital, which owns nearly 20% of the stock, bought a majority of the debt, likely in a move to protect its equity investment.
Throughout this misadventure, the stock has swung wildly, hitting a low of $6.12 in November and $6.23 in March of this year. Yet Wellcare’s core business remains sound, generating substantial free cash flows. The exact number for 2008 involves reversing a goodwill write-down and removing a non-recurring $103m in litigation expenses, but a normalized estimate of $4 in free cash flow per share is probably on the conservative side. While there is significant regulatory uncertainty surrounding its Medicare and Medicaid businesses, at the current price of around $13.80, it’s hard to find a way to lose.
Yet all of these uncertainties – particularly those surrounding the FBI investigation – are still large, which is where the speculative component of this investment comes in. There might be a probability of the government’s penalties being larger than expected. The company is also facing various lawsuits related to its illegal activities, including a class-action lawsuit. Defending against these will cost management’s time and shareholders’ cash.
On the other hand, Wellcare may soon begin conducting conference calls with shareholders and analysts, may soon settle with the government by paying a fine, and may ultimately get sold to a larger competitor, such as UnitedHealth Group. After it fired its disgraced former management, the board brought in Charles Berg, formerly a UnitedHealth executive, Oxford Health Plans CEO and “deal guy.”
With these factors in mind, and taking into account Graham’s three points above, Wellcare may seem like an intelligent speculation after all.
Marcelo P. Lima is a securities analyst. He may be reached at MPL4@cornell.edu
http://blog.valueinvestingcongress.com/2009/04/14/wellcare-group-%e2%80%93-an-intelligent-speculation/
http://blog.valueinvestingcongress.com/?utm_source=VIC&utm_medium=W&utm_campaign=BLOGLA09T
Value Investing Congress 19th - 20th October, 2009
http://www.valueinvestingcongress.com/
An advanced seminar on value investing
How to Decipher Financial Statements, Avoid Value Traps and Pick Investment Winners
MONday MAY 4, 2009
7:30 - 8:00 AM
Registration
8:00 - 10:00 AM
How to Profit From the Mortgage Crisis:
Long Investments
• A beaten-down blue-chip
Case study: American Express
• Growth at a reasonable price (GARP)
and a beaten-down blue-chip
Case studies: Berkshire Hathaway & Wesco
• Out of favor financial
Case study: Resource America
• Distressed Debt
Case study: Subprime mortgage tranche
10:00 - 10:15 AM Break
10:15 - 10:45 AM
How to Not Lose Money in the Mortgage Crisis:
Stocks to Avoid
• Aggressive accounting, inadequate
reserving and the structure of CDOs
Case study: MBIA
10:45 - 11:30 am
Different Types of Value — Part One:
Piggybacking on Activism
• Piggybacking on structural activism
Case study: Wendy’s (Ackman)
• Piggybacking on operational activism
Case study: Wendy’s (Peltz)
• Catalyzing activism
Case study: CNET
11:30 AM - 12:00 Pm
Investor Irrationality and the Current
Market Meltdown
12:00 - 1:00 pm Lunch
1:00 - 3:00 Pm
Different Types of Value — Part Two:
Out of Favor Sectors (Retail/Consumer)
• Beaten down blue chip retailer and
piggybacking on activism
Case study: Target
• Profiting from a liquidation
Case study: Footstar
• Betting on a turnaround under new
leadership (1)
Case study: Borders Group
• Betting on a turnaround under new
leadership (2)
Case study: Wendy’s
3:00 - 3:15 pM Break
3:15 - 4:00 pM
Warning Flags
• Overvaluation
Case study: Netflix
• Overvaluation and unsustainable
business model
Case study: VistaPrint
4:00 - 5:00 pM
Different Types of Value —
Part Three
• An out-of-favor cyclical with too much debt
Case study: Huntsman
• Mispriced options
Case studies: dELiA*s, Ambassadors
International, TravelCenters of America,
PhotoChannel Networks, Proliance
International, General Growth Properties
5:00 - 6:00 pM
Networking Cocktail Reception
http://www.valueinvestingcongress.com/downloads/VICP09_Workshop_Agenda3.pdf
AGENDA
An advanced seminar on value investing
How to Decipher Financial Statements, Avoid Value Traps and Pick Investment Winners
MONday MAY 4, 2009
7:30 - 8:00 AM
Registration
8:00 - 10:00 AM
How to Profit From the Mortgage Crisis:
Long Investments
• A beaten-down blue-chip
Case study: American Express
• Growth at a reasonable price (GARP)
and a beaten-down blue-chip
Case studies: Berkshire Hathaway & Wesco
• Out of favor financial
Case study: Resource America
• Distressed Debt
Case study: Subprime mortgage tranche
10:00 - 10:15 AM Break
10:15 - 10:45 AM
How to Not Lose Money in the Mortgage Crisis:
Stocks to Avoid
• Aggressive accounting, inadequate
reserving and the structure of CDOs
Case study: MBIA
10:45 - 11:30 am
Different Types of Value — Part One:
Piggybacking on Activism
• Piggybacking on structural activism
Case study: Wendy’s (Ackman)
• Piggybacking on operational activism
Case study: Wendy’s (Peltz)
• Catalyzing activism
Case study: CNET
11:30 AM - 12:00 Pm
Investor Irrationality and the Current
Market Meltdown
12:00 - 1:00 pm Lunch
1:00 - 3:00 Pm
Different Types of Value — Part Two:
Out of Favor Sectors (Retail/Consumer)
• Beaten down blue chip retailer and
piggybacking on activism
Case study: Target
• Profiting from a liquidation
Case study: Footstar
• Betting on a turnaround under new
leadership (1)
Case study: Borders Group
• Betting on a turnaround under new
leadership (2)
Case study: Wendy’s
3:00 - 3:15 pM Break
3:15 - 4:00 pM
Warning Flags
• Overvaluation
Case study: Netflix
• Overvaluation and unsustainable
business model
Case study: VistaPrint
4:00 - 5:00 pM
Different Types of Value —
Part Three
• An out-of-favor cyclical with too much debt
Case study: Huntsman
• Mispriced options
Case studies: dELiA*s, Ambassadors
International, TravelCenters of America,
PhotoChannel Networks, Proliance
International, General Growth Properties
5:00 - 6:00 pM
Networking Cocktail Reception
http://www.valueinvestingcongress.com/downloads/VICP09_Workshop_Agenda3.pdf
Most Companies Yet To Disclose Remuneration Levels
October 20, 2009 20:03 PM
Most Companies Yet To Disclose Remuneration Levels, Says Ernst & Young
KUALA LUMPUR, Oct 20 (Bernama) -- Most Malaysian companies have yet to disclose the remuneration level of their executive directors and relate it with performance, according to an international public accounting firm.
Ernst & Young Malaysia, in its 2009 executive and board remuneration report, said though the level of disclosure on remuneration of executive directors increased, there was still a lack of information on the correlation between level of remuneration and company's performance.
Ernst & Young's performance and reward leader for the Far East, Dharma Chandran, said majority of the companies that were assessed did not report on performance measures.
"They tell you what they paid the executives last year and how much they paid remuneration (but) they did not say much in terms of what kind of performance measures that they used, whether revenue, profit or economic values as benchmark," he told a media briefing here Tuesday.
The report was made based on analysis of information in the annual reports of the top 100 companies on Bursa Malaysia's Main Market with the financial years ended 2008 and 2007.
According to the report, only 23 per cent of companies disclosed remuneration details for all individual directors as recommended in the Malaysian Code of Corporate Governance.
Though there was still lack of disclosure, Dharma said the increasing weighting towards variable pay indicated that Malaysian companies were responding to international trends and reviewing their strategies to ensure alignment with their business strategy and shareholder value creation.
However, there was a need for long-term incentives for these executive directors to create long-term values and keep real talent in the company, he said.
Dharma said most Malaysian companies offered short-term incentives based on company's performance rather than long-term incentives to these directors.
"For the remuneration to be balanced, a mixed of short-term and long-term incentives could drive better future for the company," he said.
Short-term incentives are usually in the form of annual bonuses while long-term incentives can be equity- or cash-based programme with a vesting period of more than one year.
Moving forward, total remuneration levels are expected to remain stagnant or assumed downward trend this year as Malaysian companies are still feeling the effects of a weak global economy, the report said.
-- BERNAMA
Most Companies Yet To Disclose Remuneration Levels, Says Ernst & Young
KUALA LUMPUR, Oct 20 (Bernama) -- Most Malaysian companies have yet to disclose the remuneration level of their executive directors and relate it with performance, according to an international public accounting firm.
Ernst & Young Malaysia, in its 2009 executive and board remuneration report, said though the level of disclosure on remuneration of executive directors increased, there was still a lack of information on the correlation between level of remuneration and company's performance.
Ernst & Young's performance and reward leader for the Far East, Dharma Chandran, said majority of the companies that were assessed did not report on performance measures.
"They tell you what they paid the executives last year and how much they paid remuneration (but) they did not say much in terms of what kind of performance measures that they used, whether revenue, profit or economic values as benchmark," he told a media briefing here Tuesday.
The report was made based on analysis of information in the annual reports of the top 100 companies on Bursa Malaysia's Main Market with the financial years ended 2008 and 2007.
According to the report, only 23 per cent of companies disclosed remuneration details for all individual directors as recommended in the Malaysian Code of Corporate Governance.
Though there was still lack of disclosure, Dharma said the increasing weighting towards variable pay indicated that Malaysian companies were responding to international trends and reviewing their strategies to ensure alignment with their business strategy and shareholder value creation.
However, there was a need for long-term incentives for these executive directors to create long-term values and keep real talent in the company, he said.
Dharma said most Malaysian companies offered short-term incentives based on company's performance rather than long-term incentives to these directors.
"For the remuneration to be balanced, a mixed of short-term and long-term incentives could drive better future for the company," he said.
Short-term incentives are usually in the form of annual bonuses while long-term incentives can be equity- or cash-based programme with a vesting period of more than one year.
Moving forward, total remuneration levels are expected to remain stagnant or assumed downward trend this year as Malaysian companies are still feeling the effects of a weak global economy, the report said.
-- BERNAMA
Graham's view of people who trade continuously
"Everyone knows that most people who trade in the market lose money at the end. The peopl,e who persist in trying it are either unintelligent, or willing to lose money for the fun of the game, or gifted with some uncommon and incommunicable talent. In any case, they are not investors."
"Too many clever and experienced people are engaged simultaneously in tryng to outwit one another in the market. The result, we believe, is that all their work and effort 'cancel out', so that ... each conclusion ends up by being no more dependable than the toss of a coin ... the activities of the stock market analysts are the same as the activities of a tournament of bridge expert. Everyone is very brilliant indeed, but scarcely anyone is so superior to the rest as to be certain of winning a prize .... because the analysts communicate freely with each other, it is as if all the contestants in the bridge tournament gathered around and argued with each other what strategy each should use."
"Too many clever and experienced people are engaged simultaneously in tryng to outwit one another in the market. The result, we believe, is that all their work and effort 'cancel out', so that ... each conclusion ends up by being no more dependable than the toss of a coin ... the activities of the stock market analysts are the same as the activities of a tournament of bridge expert. Everyone is very brilliant indeed, but scarcely anyone is so superior to the rest as to be certain of winning a prize .... because the analysts communicate freely with each other, it is as if all the contestants in the bridge tournament gathered around and argued with each other what strategy each should use."
All the clocks have no hands
We are all at a wonderful ball where champagne sparkles in every glass and soft laughter falls upon the summer air. We know, by the rules, that at some moment, terrorists will burst in through the terrace doors, killing many and scattering the survivors. Those who leave early will be saved, but the ball is so splended that no one wants to leave while there is still time. Everyone wants to enjoy one more dance and sip one more glass of champagne. So everyone keeps asking: "What time is it? What time is it?" We look around and find that all the clocks have no hands.
Final answer to stock values
There is no such thing as a final answer to stock values. A dozen experts will arrive at twelve different conclusions - Gerald Loeb
The barriers to success are psychological rather than physical.
What can an individual investor do?
Though it is believed that investment can be a very profitable field, it is only profitable to those who are strong of will and are prepared to work at it. There is no simple way to get rich quick in the stock market.
The barriers to success are psychological rather than physical. Psychological barriers are so much harder to cross for so few of us can bear the thought of not being part of a crowd.
Here are the words of advice from Dreman in his book Psychology and the Stockmarket.
".... the best chance an investor has is to stand apart from popular thinking. He must be willing to forego the thrill of being in unison with the market, in agreement with the expert opinion and with the exciting, seemingly surefire ideas currently in vogue.... This is no small sacrifice. To own the 'right' stocks in a rising market is a heady experience. There is a wonderful blend of monetary gain and ego satisfaction in being right in a popular manner.
Man is a social animal. To succeed, the investor has to be able to withstand the tremendous pressure leading to conformity... (he) will face a continuing flow of negative feedback from the market, from experts and from groups of people whom he respects. The reader may feel a little like the patient whose doctor has advised him to give up sex for this health. Some of us might just prefer to die happy."
Though it is believed that investment can be a very profitable field, it is only profitable to those who are strong of will and are prepared to work at it. There is no simple way to get rich quick in the stock market.
The barriers to success are psychological rather than physical. Psychological barriers are so much harder to cross for so few of us can bear the thought of not being part of a crowd.
Here are the words of advice from Dreman in his book Psychology and the Stockmarket.
".... the best chance an investor has is to stand apart from popular thinking. He must be willing to forego the thrill of being in unison with the market, in agreement with the expert opinion and with the exciting, seemingly surefire ideas currently in vogue.... This is no small sacrifice. To own the 'right' stocks in a rising market is a heady experience. There is a wonderful blend of monetary gain and ego satisfaction in being right in a popular manner.
Man is a social animal. To succeed, the investor has to be able to withstand the tremendous pressure leading to conformity... (he) will face a continuing flow of negative feedback from the market, from experts and from groups of people whom he respects. The reader may feel a little like the patient whose doctor has advised him to give up sex for this health. Some of us might just prefer to die happy."
Bulls versus Bears
"Only own those rare stocks whose earnings yield over the next few years will be much higher than the bond yields against which stock valuations must compete." Kenneth Fisher, son of Philip Fisher. Just like his father, the young Fisher is a conservative investor.
"When the earnings yield on stocks is very low relative to bond yields, stocks will fall. "
"No one can precisely 'time' the market. As PEs moved up from levels that were historically cheap to a range somewhat above long-term norms, pocket some of your equity profits now and build up your cash reserves to the 10%, then 15% and then 20% level."
"As the dream merchants continue to drive prices higher rapidly, raise more cash."
"The near term nod still goes to the bulls. Firstly, both Newton and experience have shown that a body in motion continues in motion until stopped by something more formidable than anything one can see at present. Second, there is simply too much liquidity in the world with no better place to flow."
"The market has only recently gotten carried away, and it can still correct these excesses in a mild, orderly fashion."
"When the earnings yield on stocks is very low relative to bond yields, stocks will fall. "
"No one can precisely 'time' the market. As PEs moved up from levels that were historically cheap to a range somewhat above long-term norms, pocket some of your equity profits now and build up your cash reserves to the 10%, then 15% and then 20% level."
"As the dream merchants continue to drive prices higher rapidly, raise more cash."
"The near term nod still goes to the bulls. Firstly, both Newton and experience have shown that a body in motion continues in motion until stopped by something more formidable than anything one can see at present. Second, there is simply too much liquidity in the world with no better place to flow."
"The market has only recently gotten carried away, and it can still correct these excesses in a mild, orderly fashion."
Hong Leong group in focus
Hong Leong group in focus
Written by Joseph Chin
Tuesday, 20 October 2009 13:23
KUALA LUMPUR: Shares of several companies in the Hong Leong group topped the gainers list at the midday break on Tuesday, Oct 20 while the broader market was mixed
Hong Leong Industries rose 34 sen to RM4.50, Hong Leong Financial Group 31 sen to RM6.49 and Hong Leong Bank 16 sen to RM7.41. Cement maker Tasek-PA gained 26 sen to RM3.50 but Tasek shares fell seven sen to RM3.73.
Written by Joseph Chin
Tuesday, 20 October 2009 13:23
KUALA LUMPUR: Shares of several companies in the Hong Leong group topped the gainers list at the midday break on Tuesday, Oct 20 while the broader market was mixed
Hong Leong Industries rose 34 sen to RM4.50, Hong Leong Financial Group 31 sen to RM6.49 and Hong Leong Bank 16 sen to RM7.41. Cement maker Tasek-PA gained 26 sen to RM3.50 but Tasek shares fell seven sen to RM3.73.
Singapore fund exits KFCH
Singapore fund exits KFCH
Tags: Arisaig Asean Fund Ltd | Lembaga Tabung Haji | QSR Brands Bhd
Written by Financial Daily
Tuesday, 20 October 2009 11:00
KUALA LUMPUR: Singapore-based Arisaig Asean Fund Ltd has exited KFC Holdings (Malaysia) Bhd after it sold all its 6.89% stake or 13.65 million shares last Thursday.
A filing with Bursa Malaysia showed the fund sold the shares in a married deal for an undisclosed price. The buyer of the stake was not revealed.
Arisaig Asean Fund was the third largest shareholder in KFCH and the share price had performed well in recent months. KFCH closed at RM7.50 on that day. Analysts said Arisaig Asean Fund had been reducing its stakes in several Malaysian companies to meet redemptions.
The single largest shareholder in KFCH is QSR BRANDS BHD [] which owns 50.25% or 99.63 million shares. The second largest shareholder is Lembaga Tabung Haji with 24.87% or 49.31 million shares. KFCH yesterday closed 50 sen higher at RM8, the highest since Nov 13, 2007.
This article appeared in The Edge Financial Daily, October 20, 2009.
Tags: Arisaig Asean Fund Ltd | Lembaga Tabung Haji | QSR Brands Bhd
Written by Financial Daily
Tuesday, 20 October 2009 11:00
KUALA LUMPUR: Singapore-based Arisaig Asean Fund Ltd has exited KFC Holdings (Malaysia) Bhd after it sold all its 6.89% stake or 13.65 million shares last Thursday.
A filing with Bursa Malaysia showed the fund sold the shares in a married deal for an undisclosed price. The buyer of the stake was not revealed.
Arisaig Asean Fund was the third largest shareholder in KFCH and the share price had performed well in recent months. KFCH closed at RM7.50 on that day. Analysts said Arisaig Asean Fund had been reducing its stakes in several Malaysian companies to meet redemptions.
The single largest shareholder in KFCH is QSR BRANDS BHD [] which owns 50.25% or 99.63 million shares. The second largest shareholder is Lembaga Tabung Haji with 24.87% or 49.31 million shares. KFCH yesterday closed 50 sen higher at RM8, the highest since Nov 13, 2007.
This article appeared in The Edge Financial Daily, October 20, 2009.
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