Seeking Alpha

Home Page RSS Syndication from SeekingAlpha.com Hickey and Walters (Bespoke) submit:

While the last year has been a period where practically all stocks, regardless of style or size, have risen, some stocks have risen more than others. Small caps (Russell 2000) have risen 95%, while large caps (S&P 500) are up a relatively modest 68.5%. This trend, however, is anything but a recent one. Small caps have essentially been outperforming large caps for the last decade. The chart below shows the ratio of the S&P 500 divided by the price of the Russell 2000. When the line is rising, large caps are outperforming small caps, and when the line is declining, small caps are outperforming.

Based on the relationship between the S&P 500 and the Russell 2000, relative performance between large and small cap stocks follows long-term cyclical trends. As shown in the chart below, periods of outperformance and underperformance by either category are measured in years rather than months. Even with the typical cycle lasting several years, though, the current cycle has been the longest of them all. After peaking out in 1999, large caps have been consistently underperforming small caps for ten years and counting. When it ends is anyone's guess, but it's hard not to argue that large caps are at least due for their day in the sun. (Click to enlarge)

Complete Story » Reggie Middleton submits:

I am in the process of finishing up my Sovereign Debt Crisis series with a massive global model of the interconnected relationships between sovereign nations. In the building of this model, the team and I came to the conclusion that many pundits are truly underestimating the lose-lose situation that the eurozone, CEE and the UK are in. I went to lengths to demonstrate the interconnectedness of banks and the risk of global financial contagion that they pose. See this excerpt from "The Coming Pan-European Sovereign Debt Crisis":

Sovereign Risk Alpha: The Banks Are Bigger Than Many of the Sovereigns (Click charts to enlarge)

Complete Story » Michael Comeau submits:

The Apple (AAPL) vs. Adobe (ADBE) flash war has been heating up for quite some time now, but the rivalry may run a heck of a lot deeper than you think.

Adobe is best known for Photoshop, the defacto standard in photo and image editing software - and if my calculations are correct, Apple would like to kill it.

Complete Story » Jeff Borack submits:

Life Partners Holdings Inc. (LPHI) was recently the “idea of the week” on Sumzero.com, a website I like to use for networking and to find new investment ideas. I decided to take a look at LPHI, and I was pleasantly surprised to find that the business model resembles Deckers (DECK), a business I love. They both operate with zero debt and have solid EBIT margins, meaning the bottom line shouldn’t be too volatile and there’s almost zero bankruptcy risk. But more importantly, both companies are growing at a spectacular rate despite negligible reinvestment. They take the money they earn each year and either pay a dividend, repurchase shares, or put cash in the bank.

LPHI’s capital expenditure in the LTM was $400k, compared to cash flow from operations of $26.5 million and net income of $30.5 million. This is typical. However, they have managed to grow revenue at a CAGR of 56.2% since 2002, and EPS at a CAGR of 56.0% since 2003. Is this sustainable? Absolutely not. Is LPHI most likely undervalued at 10.6x earnings with a 5% dividend yield? I think so.

Complete Story » Marc Chandler submits:

The US stock markets bottomed on March 6, 2009. It is surprising to see what has really taken place over the past year. We looked at the performance in local currency terms to keep a cleaner read.

Among the G5 equity markets, the US S&P 500 was the clear winner, advancing 68.4%. Both the German Dax and the UK FTSE were up almost 60% (59.2% and 58.0%, respectively). France and Japan trailed (55% and 49%, respectively). However, if the universe were expanded slightly to include the G7, Italy's FTSE MIB Index takes first place with a 77% increase. Canada's TSE rose 57.7%, in the neighborhood of Germany and the UK, and better than the another "commodity" country bourse--S&P/ASX200 in Australia--which has risen almost 53%.

Complete Story » Dividend Inc. submits: While champagne glasses are being raised to celebrate the nearly 62% increase in the Dow Jones Industrial Average over the bottom that was reached on March 9, 2009, we’d like to outline some of our worst performing research recommendations. We’re not surprised at the markets' rise - as outlined in our article on SeekingAlpha.com titled “The Importance of Market Perspective” - our only concern now is how much further the market can go before a mild decline of 30% or so.As you may know, even in the worst environment for stock investing (during 2008) we still made recommendations for investors to look out for as new investment opportunities. Of the 15 companies that we recommended in 2008, only five under-performed. However, anyone who actually put money in these five stocks might have lost a large portion of their assets if they didn’t sell early enough.First on the list is Mine Safety Appliance (MSA), which fell 61.93% from the Research Recommendation date to the lowest point on March 9, 2009. Almost as soon as we made the recommendation the stock fell to $35 a share from $41.61. The stock moderated for a couple of months until it finally collapsed in early October. MSA discontinued its policy of increasing its dividend every year, which is a warning sign for the future outlook on earnings. Adjusted for dividend payments, MSA is in the lose column to the tune of –32.19%. (Click charts to enlarge) Next on our list is Masco Corp. (MAS). MAS also took an incredible dip right after our recommendation, falling from $19.43 all the way down to $14.00. After a rise all the way back to the recommendation level of around $19, MAS made the amazing march down 81.27% to the March 9, 2009 low. Because MAS is in the home improvement and building industry, it stands to reason that the stock would fall as much as it did. Not surprisingly, MAS cut its dividend, which for the New Low Observer teams means sell the stock and watch what develops from the sideline. Adjusted for dividend payments, MAS is in the lose column to the tune of –15.41% since the initial recommendation. The next stock is Illinois Tool Works (ITW) which was a stock that was handled in the most irresponsible manner on our part. After recommending the stock on April 2, 2008 at $50.34, we were able to watch the stock exceed a gain of 9% in less than 2 months but didn’t put in a sell recommendation. Given what we knew about the market conditions at the time, we should have been more vigilant about the movement of this stock. Subsequent to our recommendation of ITW the company’s stock fell by as much as 49.15% at its worst and has discontinued its record of dividend increases. Adjusted for dividend payments since the recommendation date, ITW is in the lose column by –2.14%. American National Insurance (ANAT), one of my favorite insurance companies, has had an astounding run since our recommendation. ANAT initially rose 15% after our recommendation, which was great. However, we didn’t adhere to our rule of taking exceptional gains in a short period of time. The price to pay for this error was to watch ANAT fall a gut wrenching 67.87% to the low of March 9, 2009. Even more astounding was the rise from the bottom, however, we cannot take any credit for the rise that has taken place since. ANAT has discontinued its record of increasing its dividend every year. One claim that can be made is that since our recommendation date, ANAT has risen by 14.97% when adjusted for dividend payments. Finally, our recommendation of Nucor (NUE) fell by 47.75% at the lowest point on November 20, 2008. NUE later cut its dividend and has an adjusted lose of –2.97% since our initial recommendation. It should be pointed out that our policy is to make Investment Observations at a time when we think a stock should be investigated as a potential investment opportunity. Our hope is that after the recommendation/observation the stock price will be lower than when we first pointed out the stock. If you review our 2008 Transaction Overview, you will see that we did carry a few of these stocks in our portfolio with varying results. Despite the fact that these companies cut or did not increase their dividends we will continue to follow these stocks as former Dividend Achievers.Disclosure: No Positions
Complete Story » ETF Database submits:

On the one year anniversary of the market bottom, most major markets finished the day flat. Financial stocks were mostly higher after rumors surfaced out of D.C. that the government would ban short-sales on companies in which the government owned a stake. This rumor helped to send financial firms such as AIG and Fannie Mae (FNM) and Freddie Mac (FRE) higher. Meanwhile, most commodities were lower as a stronger dollar weighed on precious metals and sent oil down more than $1.60 in Tuesday trading.

The ETFdb 60 Index inched up 1.03 points, or 0.1%, to close at 1,041.44 on the day. In moderate trading, winners outnumbered losers by nearly two-to-one. The ETFdb 60 is now up 0.7% on the year.

Complete Story » Oilprice.com submits:

A year ago this week the S&P 500 hit its nefarious 666 level. Since that historic day, we have enjoyed a 68% appreciation in equities from their depressionary low. Not only has the bounce caused a chorus of perma-bulls to claim the worst of the recession is behind us, but also to declare that the bull market is here to stay.

But the cacophonies from those pundits who are now categorizing the move off the lows as a long lasting trend are overlooking an important point: a viable and sustainable bull market can only exist if the underlying economy, and especially the consumer, also enjoys the same healthy condition.

Complete Story » Jason Schwarz submits:

So here we are. Apple is at all time highs. The stock is up another $5 today. The Apple/QQQQ slingshot trade has generated huge returns. We're waiting to sell until Apple moves against the market to the downside. But what is really going on here? This stock action certainly isn't happening because mainstream
investors decided they wanted to buy in last Friday. This isn't
investing 101. This is advanced hedge fund action so let's make an
effort to understand things from their point of view.

This run is happening because of Norway. About a month ago, some third
party Apple reseller decided to put a link on their website to allow
customers to pre-order the iPad. They had to shut it down because the
demand was overwhelming. We all know that Steve Jobs worries just as
much about marketing as he does about the products themselves. At the
end of the day, nobody actually needs an iPhone or an iPad in the same
way that nobody needs an In-N-Out Burger or a Tito's Taco. The
atmosphere of standing in line to get your favorite product is very
important.

Complete Story » Ralph Shell submits:

One of the financial papers this morning featured a survey of currency preferences by hedge fund managers. Since this survey was taken between Feb. 11 and Feb.22, the opinions seem more like recent history than hot news. The dollar was the most favored currency by hedge fund managers, at that time, but why should this be a featured story 20 to 30 days later? We have the echoes of past preferences making headlines today.

The latest commitment of traders report gives us data through March 6th. In that report, the large specs traders, probably almost all funds, had cast a decisive vote against the pound. Large specs were long 14,218 contracts and short 85,008 contracts, for a total net short of 70,790 contracts. Each futures contract is £62,500, so not exactly chump change. On Friday the pound had a decent rally, making it all the way back to 1.5164, and then selling off into the close to 1.5132. The open interest of Friday went down 7500 contracts on a little short covering rally. Monday gave us a rally that failed. We printed 1.5193 and then sold off, closing lower. What is interesting, however, is that the open interest soared 21.023 contracts higher on Monday, 14% of the total open interest.

Complete Story » Hickey and Walters (Bespoke) submit:

The Russell 1,000 is up 71.12% since March 9th, 2009. The average stock in the index is up 128%. Of the 947 Russell 1,000 stocks that were around last year at this time, 928 are up since then, while a whopping 412 are up more than 100%. For the shock statistic of the day, there are 24 stocks in the index that are up more than 500% since 3/9/09, while just 19 are down! Below are the 42 stocks in the index that are up more than 400% over the last year. As shown, TRW Automotive (TRW) is up the most, rallying from $1.52 to $27.76 for a gain of 1,726.32%. Genworth Financial (GNW) comes in a close second with a gain of 1,713.19%. The other three Russell 1,000 stocks that are up more than 1,000% are Dendreon (DNDN), Office Depot (ODP), and Las Vegas Sands (LVS).

Complete Story » RetailSails submits:

Retail sales were relatively strong this past week, as dry weather and warming temperatures across much of the country spurred markedly higher customer traffic compared to a year ago. The first week of March is notoriously light on volume and retailers continue to benefit from easy year-over-year comparisons, but nonetheless results show that the positive momentum we have seen since September continues.

Complete Story » Hickey and Walters (Bespoke) submit:

The stock market is up about 65% since the 3/9/09 low, but oil has actually outperformed stocks over this time period with a gain of 72.64%. Below we highlight the performance of ten major commodities over the last year. As shown, copper is up the most with a gain of 108%, while orange juice ranks second with a gain of 101%. Of the three main precious metals, platinum is up the most at 50%, followed by silver at +33.73%, and then gold at +22.16%. Even natural gas is up since the March 9th, 2009 low with a gain of 16%. Wheat and corn are the only commodities shown that are down over the last year. Corn is down 11%, while wheat is down 18.27%.

click to enlarge

Complete Story » R. Scott Raynovich submits:

Cisco (CSCO) succeeded in generating an enormous amount of hype for today's announcement of a new core router, and was able to raise the level of interest to a crescendo.

The bottom line is that this is an impressive and important upgrade of Cisco's core router product, but it was not "revolutionary," as billed by Cisco and many press mavens. It is, in fact, an important upgrade in capacity to reinforce Cisco's market position as the leader in core routing technology.

Complete Story » Ironman at Political Calculations submits:

According to documents filed with the SEC in February 2010, 2009 marked another grim milestone in the accelerating decline of the New York Times (NYT). Having already seen its weekday circulation drop below one million for the first time in decades earlier in the year, we can now confirm that the New York Times has now lost more than half its Sunday circulation in its home 31-county market in New York since its circulation levels last peaked in 1993.

The table below, taken from the New York Times' SEC filings for its annual reports from 1993 through 2009 for its Sunday circulation data provides the hard data presented visually in the chart above.

Complete Story » Brendan Wagner submits:

There were some interesting lines in Monday's speech by Greek Prime Minister George Papandreou. While speaking at the Brookings Institution, he laid out new austerity plan to reign in spending, while also stressing the importance of the trans-Atlantic bond the US and Greece share.

He did, however, spend an inordinate amount of time ranting about the swaps market. Oh, not the interest rate swaps that Greece used to hide its deficit, but the credit default swaps that bondholders buy to protect against defaulting Greek debt. To be fair, the PM made a great point in suggesting that those who do not own the underlying debt should not be profiting from spiking credit default swaps, but the point he misses is that they're irrelevant to the underlying issues. Namely that Greece overspent thanks to an artificially low cost of credit.

Complete Story » Richard Shaw (QVM Group) submits:

The volume of share trading for key index funds is going down while the price is going up. Should we say the smart money is quietly accumulating shares, or should we say that the smart money is on the sidelines while the dumb money pushes prices higher?

TrimTabs reported that mutual fund cash positions are very low at about 3.6% after an unusual reduction in cash positions in the past month. When mutual fund managers unload cash, markets generally go up.

Complete Story » David White submits:

The SPY ETF is overbought. See the 3 month chart below.

click to enlarge

A variety of indicators show that the SPY is currently overbought. They do not definitively say it will go down, but they do indicate that that is a likely happenstance. This is especially true in a the troubled and choppy market that we have seen for the last several months. There are support points at approx. $110 and $106. I tend to think the $106 value is a likely goal, but one should not ignore any good support point. Naturally these are not the only two possibilities.

Complete Story » Marc Chandler submits:

The IMF's COFER data is the most authoritative source on the currency allocation of central bank reserves. It is updated at the end of every quarter for the preceding quarter. At the end of December 2009, Q3 data was released, and at the end of this month, Q4 data will be published.

Recall that in Q3 0'9, the dollar's share of allocated reserves slipped to 61.6% from 62.8%. The euro's share rose to 27.7% from 27.4%. Sterling and the yen's share together was little changed at 7.5%. The "other" category - which would include the Australian and Canadian dollars, for example - rose to 2.9% from 2.2%.

Complete Story » Reggie Middleton submits:

Homegrown credit risks look to come back home to roost. I am actually shocked the following development didn't get more traction in the mainstream media. The recent announcement by the Chinese finance ministry to nullify all guarantees for local governments for loans taken by their financing vehicles, and its plan to issue rules banning all future guarantees by local governments (see Bloomberg article), fuels (even further) our concerns about credit risks on such loans.

The primary concern is that most of these were non-recourse loans to provinces, municipalities and counties through shell companies, known as Urban Development Investment Corporations (UDIC). Some went to fund projects backed by assets, such as commercial real estate, others to projects with future cash flows such as subways and toll roads. Still others are social in nature and backed only by an implicit guarantee of the City/Provincial Investment Holding Corporation (CIHC).

Complete Story » Hickey and Walters (Bespoke) submit:

For those interested, below we provide a table highlighting the performance of key ETFs across all asset classes over the last month, 6 months, and year. Over the last year, just three ETFs shown are down -- Natural Gas (UNG) at -48%, 7-10 Year Treasuries (IEF) at -4%, and 20+ Year Treasuries (TLT) at -13%. The best performing ETF shown over the last year has been Russia (RSX) with a gain of 175%. India (INP) ranks second with a gain of 165%, and the Financial sector ETF (XLF) ranks third with a gain of 144%. Also worth noting is that the S&P 500 equalweight ETF (RSP) is up 102% over the past year, while the cap-weighted S&P 500 ETF (SPY) is up just 68%.

click to enlarge

Complete Story » Marc Chandler submits:

Along with other emerging market currencies, the Turkish lira is under pressure. In addition to broader risk aversion, Turkey-specific developments are also undermining the lira.

At the end of last week, Turkey reported that its CPI rose to 10.1% in February form 8.2% in January. This, coupled with evidence that an economic recovery is gaining traction, has renewed ideas that the central bank should hike rates before too long, even if not at the next meeting on March 18th. The base rate stands at 6.5%.

Complete Story »

The Kroger Co. (KR)

Q4 2009 Earnings Call

March 9, 2010 10:00 am ET

Complete Story » Market Blog submits:

By David Berman

I would hardly want to go on the record as being an apologist for bloated executive compensation, especially when said compensation is out of line with shareholder value. But it seems to me that Brett Arends’ takedown of Jeffrey Immelt misses the point.

Complete Story » Brooks McFeely submits:

4:34 PM, Mar 9, 2010 --

• NYSE up 1 (0.02%) to 7,294.02.
• DJIA up 12 (0.1%) to 10,564.
• S&P 500 up 2 (0.3%) to 1,140.
• Nasdaq up 8 (0.4%) to 2,341.

GLOBAL SENTIMENT

Complete Story » FINalternatives submits:

Hedge funds posted mixed, if broadly positive, returns in February, according to the Credit Suisse/Tremont Hedge Fund Index.

That index rose an estimated 0.87% last month. Combined with its 0.17% return in January, the index is up 1.04% in 2010.

Complete Story » FINalternatives submits:

JPMorgan Chase (JPM) has reclaimed its throne as the largest hedge fund manager in the U.S. as the biggest hedge funds in the country nearly doubled their assets in 2009.

JPMorgan Chase—which includes Highbridge Capital Management—now manages $50.4 billion, more than 50% more than at the beginning of last year, according to the biannual AR Billion Dollar Club survey. That was enough for the Wall Street giant to retake the top spot from Bridgewater Associates, which grew by 17.84% in the second half of last year to reach $43.6 billion.

Complete Story » Trader Mark submits:

I won't get into all the dogmatic arguments that surround the massive income disparity in the US; we've discussed them in many other pieces. We must understand, however, that "it is what it is" and Wall Street has entire theses built around it [Sep 7, 2009: Citigroup - America; A Modern Day Plutonomy]

According to new Internal Revenue Service data announced last week, income inequality in the U.S. is at its worst since the 1920s (before the Great Depression). The top percentile of wealthy Americans earned 21.2% of all income in 2005, up from 19% in 2004, while the bottom 50% of wage earners earned 12.8% that year, down from 13.4% a year earlier.

Complete Story » Dr. Stephen Leeb submits:With so much spin these days, it's important to pay closer attention to what people do rather than what they say. Case in point: George Soros' recent behavior regarding gold. A couple of weeks back, the hedge fund manager made headlines by suggesting gold was in a bubble – implying that investors should lighten up on their gold holdings. Naturally, that brought gold prices down a bit. This morning, however, we read that Soros has decided to buy $75 million worth of shares in NovaGold Resources (NG). NovaGold, you will recall, is one of our favorite junior gold development picks. It's not in production yet, but it owns some very large gold and copper deposits in North America. If we're right about the direction of gold and commodity prices, this stock could deliver some very big returns over the next few years. Nor is this Soros' first purchase of Nova stock. His company previously bought some 3.5 million shares. We doubt Soros would be loading up on junior gold shares if he really believed gold prices were headed lower. Besides, Soros is not the only savvy investor who has shown an interest in Nova Gold. John Paulson, for instance, recently acquired a $100 million stake in Nova. Paulson has been arguably the most successful hedge fund operator over the past 10 years. He made billions by betting against the housing market in 2007-8, and had a prior record of annual gains in the high teens. In a previous update, we mentioned Thomas Kaplan, another of Nova's owners who has made billions investing in commodities. ASA Limited (ASA), one of the best-managed gold funds, is also an investor. In a world filled with risk, gold remains an outstanding investment. While large mining companies like Goldcorp (GG) and Barrick Gold (ABX), or closed-end fund ASA should be anchors in any gold portfolio, you could see multiple baggers from a compelling junior such as Nova Gold. Speaking of commodities... This weekend we dusted off our statistics reference books and did some analysis of U.S. oil demand. We were particularly curious to know if Americans have been conserving oil over the past 10 years while prices have been rising. We expected to discover that conservation was happening, since overall oil demand is less than it was 10 years ago, despite low but positive growth. Turns out we were wrong. According to the analysis we did, it takes economic growth above 2% a year to create a rise in oil demand. In other words, our analysis suggested a developed nation like the U.S. can grow by less than 2% without using more oil. So the drop in oil demand probably reflects subdued economic growth rather than conservation. For example, in 1983, the 10-year average economic growth was higher than it is today. Yet oil demand fell much more sharply. In other words, Americans still have not gotten the message when it comes to conservation. And this brings us to some recent economic statistics which suggest our situation looks a little brighter than we previously thought. Ironically, one of the most positive signs has been a recent pick-up in oil demand. While demand is nowhere near its high point, we have seen a 5% rise off its low. That, along with other data, suggests economic growth continues to be positive and may continue in the 3% area for the next quarter or two. Of course, a likely effect of this growth is that oil prices will continue to rise. Barring some accident, oil could return to the $100 a barrel level by June. Triple-digit oil might raise fears of a repeat of 2008, but we doubt it will come to that. The Federal Reserve governors are unlikely to try to restrain the price of oil again with tight monetary policy. They learned their lesson last time. The good news for investors like us is that we can pick up shares in the most promising oil companies right now at dirt-cheap prices. Most of the major drillers are trading for less than 10X earnings, yet they have growth prospects of 15-20% a year. Some of the best buys include the two top deepwater drillers, Transocean (RIG) and Diamond Offshore (DO), which trade at single-digit multiples and are vital cogs in developing major conventional oil finds, including those off Brazil. Over the next five years growth for each should exceed 15 percent. Noble (NE), which has a P/E of less than 7 also offers compelling value. Frankly, we don't quite understand why these stocks are so cheap. It looks like investors are either assuming a severe recession is in the offing or that someone is about to discover another Saudi Arabia-sized field of cheap oil. Nothing else would make oil prices drop. But neither of these alternatives is very likely. One other energy stock we have discussed recently is Schlumberger (SLB). Compared to the others, this stock is not nearly so cheap. Nonetheless, Schlumberger's growth rate should easily exceed 15% a year – likely faster than any other large cap company. Its recent acquisition of Smith International (SII) makes this company the only one-stop shopping option in the oil service sector. With wells getting deeper and harder to find, big oil producers want a service company they can rely on. Schlumberger will probably be the company of choice for any big oil project going forward. We're also fairly bullish on energy producers as well as integrated plays. Big names such as Chevron (CVX) and ConocoPhilips (COP) – probably the best way of playing natural gas in the U.S. - stand out. The only one we're not as keen on is Exxon (XOM). We don't think its merger with XTO Energy (XTO) was particularly favorable. Judging by the price action in the stock, we're not the only ones who think so. We also believe getting tertiary natural gas from shale formations will prove much more difficult that expected, especially considering that such operations require large amounts of increasingly scarce resources such as water in addition to other environmental concerns.
Complete Story »

Tasty Baking Company (TSTY)

Q4 2009 Earnings Call

March 9, 2010 11:00 am ET

Complete Story »