Sunday, October 24, 2010
24 October 2010 In one nostril and right out the other.
Recently my wife and I were told that she has a memory like a steel trap. I have the memory of a sieve. Apparently in an effort to process all of the information I get exposed to in a day, a lot of it goes right through. In one ear and out the other.
That observation got me thinking that maybe there is nothing in my head to stop things as they enter my head. I have further evidence that might support this claim. Have you ever used a Neti Pot? I had some friends and current readers tell me about the amazing Neti Pot several years ago. About the same time my wife heard about it and she bought one and used it and had my son use it and even I used it. This weekend I have had a really crummy head cold. If you are not familiar with the Neti Pot, it is a little plastic pot that looks like a Barbie tea pot. You fill it with look warm water and saline solution and stick it up your nose and tilt and pour. It is actual proof I have nothing in my head as the solution flows through my head and comes out the other nostril. Really cool. The Neti pot has its origins in the Hindu culture and has been around about 800 years. If you ever get a nasty head cold, be sure to get a Neti Pot and give a try.
That may be the best advice you get in today’s blog but let’s see what else we can come up with.
This Week in Barron’s
We gave you a heads up about the cloud computing article and that alone is worth picking up this weeks issues. MICHAEL SANTOLI has a great piece this week explaining the strength of this rally. He notes the number and volume of retail investors and the bullishness of the call put option numbers of late. After reading this I was feeling pretty good as we called this a rally on September 9, 2010. The S & P is up almost 12% since then. Not too many other people including Barron’s authors were going as far as to call it a rally until the last week or so. That has me concerned. To Quote Warren Buffet, “Be greedy when others are fearful and fearful when other are greedy.” The positive investor sentiment and slow increase in volume have me a bit attentive. If you have made a profit in the recent 7 week rally, think about taking some profits in anything over that 12% gain. If you have a few beauties over 20%, take a little off the table.
Speaking of Buffet, Andrew Bary does a great article on some of Warren’s Whoopsies. It describes some of his less than stellar choices. Now remember anyone can go to the SEC website and look up Berkshires quarterly holdings and if you compare one quarter to the next, you can see some of his moves in his 13F filings. You can los keep an eye on the 13 D filings for when ever he is changing a position of more than 5% ownership. Bary cites KO, COP, JNJ, PG, WMT and WFC as some less than stellar performers that Buffet holds. I do caution that Berkshire also has vast holding in not publically traded investments. That means his little bucket (about 45Billion) in equities is not his entire fortune. Great article.
Eric Savitz does a great article about AAPL and its never ending hits parade. Kopi Tan took the opposite side of the argument that Santoli took explain what it will take to keep this rally going. He asks a good question when he challenges readers to come up with the next positive surprise that will take this rally higher. Near the highs of the year, the market seems to have valued in decent earnings report, squishy econ numbers and the Democrats giving up several seats in the house and the Senate. He asked what else can Keep it coming. He does lighten up a bit and shows some positive things in the tech sector and consumer staples. I don’t usually take ticker tips from these articles but one worth doing homework on is CCK, Crown Holdings, Inc. engages in the design, manufacture, and sale of packaging products for consumer goods. The company's products include beverage cans and ends, and other packaging products for use by various beverage and beer companies; a range of food cans and ends, including two-and three-piece cans in various shapes and sizes for use by food marketers; and aerosol cans and ends for use by manufacturers of personal care, food, household, and industrial products. In addition, the company produces a range of steel containers for cookies and cakes, tea and coffee, confectionery, giftware, personal care, tobacco, wines, and spirits, as well as non-processed food products. In the industrial market, it manufactures steel containers for paints, coatings, inks, chemical, automotive, and household products. Further, it manufactures and sells canmaking equipment. The company has operations in the Americas, Europe, and the Asia-Pacific. Crown Holdings was founded in 1927 and is headquartered in Philadelphia, Pennsylvania.
Do your homework. I like everything I see except a large debt issue. I want to look at the last 10Q to see haw they explaining the debt. Most target prices are in the 36-38 range giving a decent margin of safety.
Let’s Look Into The Crystal Ball
There are about 34 key earnings reports this week, so I will chunk them like I did last week.
TXN, Texas Instruments reports on Monday and is looking for 69 cents for the quarter. Motely Fool published a less than glowing heads up about the company using Accounts Receivable and DSO (Days Sales Outstanding) metrics to imply a soft quarter for TXN. We do not own it, but read some articles about their exposure to the auto industry, home security and smart phones. I am thinking we could see a slight beat. I am guessing 71 cents a share.
Tuesday we have BMY, Bristol Myers and they are looking for 53 cents a share in earningings. We thinkest a miss. Look for 50 cents a share. Ford is looking for 38 cents a share and I think they will have a blowout. My only caution would be how much advertising they are doing. Let’s call it 48 cents a share if they did not go crazy with their advertising budget.
SIDENOTE-We have seen a lot of earnings report come in short of expectations despite top line growth. Many of these is because these cowponies are back on television, radio, news papers, and social networking promotions. From a linkage point of view that means we should see television networks and other media show improved results. In 2009, we had a nice play with an ETF called PBS. It is an ETF that seeks investment results that correspond generally to the price and yield, before fees and expenses, of an equity index called the Dynamic Media Intellidex. The fund normally invests at least 80% of assets in common stocks of media companies. It may invest at least 90% of assets in common stocks that comprise the Media Intellidex. The Intellidex is comprised of 30 U.S. media companies. It is nondiversified. We rode this from the mid 5s to 8 early in 09. It is selling for 26, and I would look for a 30-32 by Q1 2011. Go to Morningstar and do your homework.
Also on Tuesday, Look for big beat on JCI, Johnson Controls. We do not own it but they are well positioned in the auto market and aerospace market. Yes I was drinking Cramer’s kool aid Friday night, but checked the 10Qs and he is spot on. They are looking for 57 cents and I am guessing 62.
On the economic front we have existing home sales reporting Monday. Keep in mind unemployment did not go up (didn’t really go down either), interest rates did go down, consumer sentiment appears to be going up so what do you think existing home sales are going to do? The consensus says it will go up a shtikl (From the Yiddish Financial dictionary meaning a little bit.) to 4.3 million units. I am feeling more optimistic and will look for 4.45 million units.
From the "Pull My Finger" Gallery
"Pull my finger or I will cut your finger off."