Wednesday, October 20, 2010

20 October 2010 Not Another New Book


20 October 2010 Not Another New Book

Be very afraid. I am reading yet another book. Actually I am reading several books at the moment. Baby Let’s Play House about the sexual conquests of Elvis Presley (this guy had more baggage than Louis Vuitton), Empowered: Unleash Your Employees, Energize Your Customers, and Transform Your Business by Josh Bernoff. This is actually (I’m about 27% through it-can you tell I am reading it on my Kindle) a great book about empowering employees to make them brand heroes. I highly recommend this book to anyone responsible for sales, marketing and a bottom line. I am also picking away at the 900 page Christianity: The First Three Thousand Years by Diarmaid MacCulloch. This was given to me by a reader and buddy in England. He had seen a BBC documentary and this was the accompanying book. It made me religious as I thanked God when it came out on the Kindle because the book weighed about 11 pounds. I should be done with this hopefully before the next coming. The book I really wanted to tell you about, (Notice how I did not say “But I Digress”.) is Debunkery: Learn It, Do It, and Profit from It-Seeing Through Wall Street's Money-Killing Myths by Ken Fisher. I had heard him speak a few times on Bloomberg, but have never read any of his books (he has 8 books about the market, is a billionaire who runs an investment fund and writes for Forbes and other financial pubs.) I read about the book in the Journal last week and downloaded it Saturday Night. This is a good read because he puts down several of his earlier books and points out the silly things we do as investors and how to avoid the big mistakes. It’s an easy quick read, but loaded with good stuff. Definitely one for the book shelf.

The Shhhhhhhh Number

I have been involved with a website for about a year now. It is called . They measure investor sentiment and track the whisper numbers of key stocks. Let me explain the whisper number. As I understand it, you have a group of analysts who follow one stock and they come up with an earnings estimate each quarter. The average estimate is published by all the financial journals and websites and blogs. Then you have a key analysts, the one “in the know”, called the AX who might know more about the company than others and they get recognized as the lead analysts on the stock. There will occasionally be the outlier and call an earnings outside of the average range. That number becomes the whisper number. attempts to accumulate those numbers and share them with their paid customers. I usually submit my guesses on their slate of companies they are looking for “whisper numbers’ for. Anyway, here is a recent slate of companies if you want to play along.

PRAXAIR, INC. (PX) Praxair, Inc. engages in the production and distribution of industrial gases primarily in North America, South America, Europe, and Asia. The estimate is $1.20 a share, the whisper number is $1.30. I put my bet in at $1.22 as this is very cyclical and reliant on a robust economy. Also they service the oil industry which was shut down for a while after the BP spill. So we see a small beat.

JDS UNIPHASE CORP (JDSU) JDS Uniphase Corporation provides communications test and measurement solutions, and optical products to telecommunications service providers, cable operators, and network equipment manufacturers. There is no whisper number, the estimate is 16 cents a share and our guess is a miss at 14 cents a share.

CARDINAL HEALTH INC (CAH) Cardinal Health, Inc. provides health care products and services primarily in the United States. The company's Healthcare Supply Chain Services segment distributes branded, private-label medical and laboratory, generic pharmaceutical, healthcare, and consumer products to retail customers, hospitals, and alternate care providers. There is now whipernumber and I can’t even find an estimate. Our guess is 50 cents a share.

CIT GROUP INC. (CIT) Not to be confused with C CIT Group Inc. operates as the holding company for CIT bank that provides commercial financing, leasing products, and other services to small and middle market businesses. The whisper number is 35 cents a share well below the analysts average of 43 cents a share. I am getting wild and crazy and look for a huge beat to 56 cents a share.

You might ask why I go through this exercise if I don’t own the stocks (which I don’t). We go through the iterations because we occasionally will find a good stock or discover a piece of information about a given stock or sector. A good example would be CYBX Cyberonics, Inc., a neuromodulation company, engages in the design, development, manufacture, sale, and marketing of implantable medical devices that provide vagus nerve stimulation (VNS) therapy for the treatment of refractory epilepsy and treatment-resistant depression. We tripped over this stock in August and after quite a bit of homework discovered a 35 dollar stock selling for 22 a share. We got in and mentioned here and are enjoying a 25% gain at the moment (8% realized 17 % unrealized). That is why we do it.

The Scorecard

Last night we pegged the bank formerly know as Wells Fargo WFC (which we no longer own) for a beat at 59 cents a share. The did that and a pence more to come in at 60 cents a share. Will call that a good call. We said ABT Abbot Labs would miss by 5 cents and they did MISS BIG. We were looking for 99 cents a share, they actually came in at 57 cents. We would have thought we’d see a bigger hit to the stock than a 1% drop. Ebay reported today and we will take a win and a loss on that guess. We suggested a miss over all of 2 cents. The estimate was 37 cents and we guessed 35 cents. Once you washed out the non GAP items and one time charges they beat at 40 cents a share. We will take it as win because most of the upside was due to Pay Pal as we called it. We really missed the boat (or should we say plane) when we guessed BA Boeing for a miss of four cents. The reported strong earnings of $1.12 a share and raised 4th quarter guidance (That means the CFO said it was OK for the CEO to say good things.). All in all we got most of it right except the Boeing announcement.

The Crystal Ball

Economically we have the initial jobless claim out tomorrow. Most are looking for a downward trend after last weeks surprise bump. I would agree, but think the drop will more in line with the 13,000 bump we saw last week. Look for a jobless claims number of 449,000.

Earnings wise, we have Union Pacific reporting looking for 1.50 a share. We think that trains a comin, its comin down the track, sorry got carried a way there. It will come in at 1.57 a share. I know a few of you hold CAT Catepillar and feel that they will enjoy some bottom line growth as a result of the deflated dollar. The are hoping for $1.09 a share and we will go along with that. There might be a bit of a beat but not much. T At&T is looking for .55 and they should beat by a nickel. Look for 60 cents a share. AMZN Amazon (we own it) is looking for 48 cents a share. Look for a big beat. We are thinking 61 cents a share. Then you have economic bellwether UPS reporting tomorrow. I got Fed ex wrong a while back, so if I use logic they should miss the 88 cents they are looking for, BUT the book "Debunkery" teaches us not to do what is expected so they will beat by a nickel. Look for 93 cents a share.

We only have a couple of interesting earning items on Friday so let’s get them out of the way. HON Honeywell reports and is looking for 63 cents a share, but before you get my guess, in researching the stock for a feel of where earnings might end up I ran across this headline:

“Why NASA Banned Cabbage, Broccoli From Flight Menus”

I can’t write stuff that funny. Anyway look for a slight beat to 65 cents a share. We also have Verizon looking for 54 cents a share and that should be a miss. 50 cents a share seems to be more in line.

A look in the rear view mirror

Here is a post from 19 October 2009

“IBM is getting whacked pretty good right now as their revenue and profit were disappointing. It did raise its total year earnings expectations. Most of the analysts are saying hold and 12 month target prices are in the 140ish range. I am very close to stopping (118) out. My average cost is 102.61. If I stop out I will wait a bit and get back in. Please protect your gains on this one if you have it.”

We hope you took that suggestion as we have had a long and volatile relationship with Big Blue. You can see the last 12 months here.

We are enjoying a 10% unrealized gain at the moment and have taken profit a couple of times earlier in the year.

It seems as though our President is feeling a little threatened by every one as we come up to election time.

"I don't care what award your here to collect.  Don't ever wear the same suit as me again!"

Salve Lucrum


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