Notes from Barron’s from 3/3/14 – pick up a hard copy or read on line for the complete stories. Below is a very brief review of some notes of interest.
UP AND DOWN WALL STREET
“The broad economic and financial environment today is very similar to that of the second half of the 1990s, when the equity bull market turned parabolic,” wrote Chen Zhao of BCA Research. Social network stocks are trading at 12-13 times sales and the Nasdaq Internet ETF PNQI trades at 52x earnings. But Zhao thinks “there are increasing odds that the US stock market will march to a much bubblier environment.”
STREETWISE
Russell 2000 is at 1.3 times sales versus a historical mean of .9x. Hottest small stock this year is Intercept Pharmaceuticls (ICPT), up 501%.
Michael Harnett of Bank of America Merrill Lynch says “the bull market is likely to end with greed, talk of new paradigms, a soaring US dollar, and the moment when the short end of the US yield curve becomes unhinged.”
REVIEW
DJ30 +1.36% to 16,321.71
SP500 +1.26% to 1,859.45
The Chinese Yuan dropped 1.5%, the biggest downward movement since the currency stopped being pegged to the dollar in 2005. Interbank rates are on the rise in China and the notional amount of credit-default swaps on China’s debt rose sharply, a signal of increased stress.
4th quarter GDP was revised down to 2.4% from 3.2%.
Housing prices were up 11.3% in 2013 to pace the largest gain since 2005.
A major Bitcoin exchange, Mt. Gox, went out of business, with big losses for clients.
Economic indicators for last week (from Barron’s and other sources)
DATE DAY STATISTIC ESTIMATE ACTUAL LAST MN
|
02/24/14 |
M |
DALLAS FED | 3 |
0.3 |
3.8 |
|
02/25/14 |
T |
FEBRUARY CONSUMER CONFIDENCE | 80.1 |
78.1 |
79.4 |
|
02/25/14 |
T |
House Price Index | 0.3 |
0.8 |
0.9 |
|
02/25/14 |
T |
Richmond Fed | 5 |
-6 |
12 |
|
02/26/14 |
W |
JANUARY NEW HOME SALES | 400K |
468k |
414K |
|
02/27/14 |
TH |
JANUARY DURABLE GOODS x Transp | -1.05% |
1% |
-1.90% |
|
02/28/14 |
F |
Q4 GDP PRELIMINARY | 2.50% |
2.40% |
3.20% |
|
02/28/14 |
F |
FEBRUARY CHICAGO PMI | 57 |
59.8 |
59.6 |
|
02/28/14 |
F |
FEBRUARY MICHIGAN SENTIMENT | 81.2 |
81.6 |
81.2 |
|
02/28/14 |
F |
PERSONAL CONSUMPTION | 2.9 |
2.6 |
3.3 |
PREVIEW
|
DAY |
EVENT |
CONSENSUS |
ACTUAL |
LAST PERIOD |
|
M |
JANUARY PERSONAL INCOME |
0.20% |
0.00% |
|
|
M |
JANUARY PERSONAL SPENDING |
0.10% |
0.40% |
|
|
M |
JANUARY CONTRUCTION SPENDING |
-0.30% |
0.10% |
|
|
M |
FEBRUARY ISM MANUFACTURING |
51.5 |
51.3 |
|
|
TH |
Q4 PRODUCTIVITY |
2.50% |
3.20% |
|
|
TH |
JANUARY FACTORY ORDERS |
0.30% |
-1.50% |
|
|
F |
FEBRUARY NON FARM PAYROLLS |
145,000 |
113,000 | |
|
F |
FEBRUARY UNEMPLOYMENT RATE |
6.60% |
6.60% |
|
|
F |
JANUARY CONSUMER CREDIT |
$14B |
$18.8B |
FOLLOW-UP
BKS is priced at about $19 and sells for 3x projected EBITDA versus 7 for most retailers. BKS has $5 net cash.
VERIZON HAS THE EDGE IN THE WIRELESS WARS
The stock yields 4.5% with a payout ratio of 60%. Revenue growth should be about 4% with an 11% eps increase. PE on 2014 earnings is 13.6.
FRIED CHICKEN, SEAFOOD PIZZA, AND HUMBLE PIE
YUM – mainly an international play. 31% of profits from the US. Price is $73.79 which is 17.9x 2015 earnings, less than the 50% it normally commands over the SP p/e (which is 14.3). 2% yield.
AN EXCEPTIONAL OIL PLAY
ATW should be 40% higher per the article. Most of their rigs are on contract through 2015 so not as much exposure to day rates, which have been dropping. ATW is more efficient than RIG or RDC. 7.3x forward earnings. Waqar Syed from Goldman Sachs see the stock at $65 in the next couple of years, currently priced at $47.
FLOWER POWER
FTD was spun out of United Online in November. Priced at $31.25. has a 10% free cash flow yield. Adam Strauss of Pekin Singer Strauss figures the stock has an intrinsic value in the high 40s. EPS should jump 40% from $2.14 this year to $3.01 in 2015 if capital allocation plans include buybacks. Should earn $1.96 for 2013. High barriers to entry. But Amazon launched a flower service last year. Not covered by any major Wall Street firm.
STILL IN LOVE WITH REAL ESTATE…AND MORE
An interview with Martin Cohen and Robert Steers
Cohen says the big mistake is looking for yield. What matters is the sustainability of the dividend and the growth rate.
Steers is avoiding defensive property types like health-care REITs. They want to be more cyclical and growth oriented.
Hotel markets fundamentals are currently strong.
They like SPG and PLD.