Consumer Conifidence hit a 4 year high in March. Ignoring higher gas prices and instablility in Iraq, Consumer optimism focused on the increase in US jobs and
overall improvement in the US business climate.
Thursday, March 30, 2006
Google hits the S&P index on March 31. The internet search company is selling 5.3m shares of Class A stock to meet the extra demand created by Google's listing to the S& P 500 index. This is Google's 3rd offering and according to the press release
Proceeds from the offering will be used for general corporate purposes, including working capital and capital expenditures, and possible acquisitions of complementary businesses, technologies or other assets. Google will replace Burlington Resources Inc. in the closely watched index tomorrow. Burlington Resources Inc., a major oil producer based in Houston, is being acquired by ConocoPhillips Inc.
The sale is a move that would take Google reserves of cash and marketable securities to more than $10bn.
Posted by Jack Miller at 3/30/2006 12:36:00 PM
The world discovers the value of the World’s #1 retail company. Although the US contributes 80% of Walmartsales, WMT increased its international business 18% last year with international profits at $3 billion.
Operating in 44 countries, with 2,276 stores outside of the U.S., (3700 in the US) WMT reported $56.3 billion in overseas sales for 2005. WMT is not only building stores around the world, but distribution centers to receive and process store goods. These centers are 10 times the local stores. China has several distribution centers to supply the countries 56 stores and. Wal-Martplans to hire 150,000 people in China over the next five years, to accommodate it’s plans for major store expansion. WMT power lies not only in its product distribution, but in its influence over employees and it’s markets. Retail Forward, Inc. has predicted that Wal-Martwill top $500 billion by 2010. That will translate into more power and more countries.
Some Facts on WMT according to MSN Money:
--Revenue in year ended Jan. 31: $312.43 billion, making it the world's largest retailer
--Profit: $11.23 billion.
_ More than 5,700 stores, including Wal-Mart and Sam's Club warehouses.
_ About 1.7 million employees, whom the company calls "associates."
_ Headquarters: Bentonville, Ark.
_ History: The first Wal-MartDiscount City opened in 1962, although founder Sam M. Walton had operated variety stores going back to 1945 in Arkansas. The first Sam's Club opened in 1984, and the first Super center, combining groceries and merchandise, opened in 1988. Since 1992, the company has ventured overseas, including Mexico, Canada, Argentina, Brazil, Germany and the United Kingdom.
Posted by Jack Miller at 3/30/2006 11:50:00 AM
Thursday, March 23, 2006
Legacy Airlines Are Ready For Take-Off - Forbes.com
Forbes reports that Goldman Sachs Analyst, Glenn Engel, has bumped his earnings estimates for several airlines. The article is a bit twisted. It starts with a headline about legacy carriers, follows with a report of stronger than expected earnings for AMR , CAL, LCC and NWAC but then goes on to suggest that domestic revenues is where the action is.
I strongly disagree with the point about domestic prospects relative to international prospects. The action in today's market is a direct result of extremely strong international trade and therefore growth in international traffic. It is the re-deployment of assets to international venues that is dragging the domestic market along for the ride. Carriers such as DAL have cut domestic routes to add to international routes. Company after company, including Siemens and Dell have recently announced expansions in India or China. The airline traffic growth action is in international flights.
Sure, the move of assets to international routes does add to the competition. The Continental growth in transatlantic revenues was in the area of 22% last quarter! After three relatively slow years, orders for new planes set a record last year. These planes will be delivered in 2008. A much larger portion than normal will be delivered to the Asian market.
Engel raised his 2006 and 2007 estimates for CAL, to $1.70 and $3.55 respectively. The 2006 bump was 21%. In my opinion both estimates will prove to be low; it is simply hard to appreciate the difference in revenues from planes with a few empty seats to planes with no empty seats. The price of all seats is more if all seats are projected to be full. Another way of saying this is that in the short to intermediate term, the fare set for any particular flight has absolutely nothing to do with the cost of providing the service but has 100% to do with the demand for the service.
So far, in the month of March, CAL, is operating at an unprecedented load of over 80%! To achieve a load factor of 80%, an airline has to fly a large majority of its flights with zero empty seats. Having operated an ocean front beach rental business for 20 years, I know what happens to prices when occupancy is very tight. Unfortunately for the internet shopper, the give-aways disappear. For the past 18 months or so, CAL, has joined the other carriers in regular fare increases. Even after 19 price increases, the seats are full. Expect fare hikes to continue. It may sound Machiavellian but if all seats continue to be full, then the airline is not charging enough.
The Standard and Poors estimate set last December tops the Engel estimate by 14 cents in 2006. Furthermore, S&P reports that during the "good times" in the airline business, airlines can easily trade at 21 times projected earnings. Using Engel's lower numbers, 21 times gives one price targets on CAL, of $35.70 in 2006 and $74 in 2007! S&P has a 2006 price target of $37.
This morning, Express Jet showed up at the top of the list on our Stock of the Week value screen. The stock was a big winner today. However, I asked Sandra to pull the recommendation because I believe the action is truly in the international markets. Domestic revenues will rise but frequent flyers generally want to accumulate their miles where they can be used internationally. Express Jetis too dependent on the good graces of CAL, and other international players for my taste.
My regular readers already know that I am a fan of Ken Fisher. I used Ken Fisherphilosophy when I rode the Nextel bucking bronco from $3 to $25 dollars and I am using it now on this fantastic CAL, "Ken FisherBucking Bronco" ride. Ken says that if you can find an economic situation where you have the minority opinion and where you know you are right, then you can make a pile of money. It is with some sadness that I witness the perception starting to turn.
Just a short time ago, the "talking heads" were willing to boldly state that one should never own an airline stock. Recently the boldness has started to fade. For example, Pat Dorsey with Morningstar, recently stated that airline stocks should not be part of your long term holdings, he would not touch the stocks but he believes the cyclical move could last awhile. With my first grand daughter due today and with the pressures generated when one is closing and selling a business, I have missed most of the recent Mad Money shows. Therefore, I do not know if Jim Cramer has capitulated yet. Never-the-less, it is clear that attitudes are starting to change. The press about airlines is still very negative with talk about everything from fuel prices to bird flu, but more and more one sees articles about better earnings forecast. Even the positive articles about improved earnings tend to "blame" the earnings on gimmicks such as charging more for the emergency exit seats.
The good news is that these stocks, AMR and CAL, in particular, still have a long way to go. Institutions still own about 95% of all shares outstanding and there are substantial short positions in each stock. There are imperfect arbitrages involved in some of short positions. I have not studied the exact nature of this but from the SEC statements one can see that there are convertible securities involved. The projected dilution from conversions are offset by reductions in interest costs. It appears that some of the short positions are naked or at least skimpily dressed with option hedges.
I plan to invest aggressively in these stocks until the public ownership rises to 25% or more. This will require a lot of positive press. It is hard for many investors to average up. The almost Pavlovic response of most investors is to want to sell when they buy a stock for $7 and it trades in a couple of years at $28, most investors would not even make it to $28. My friends and family accounts added shares last September at $9 odd, last October at $11 odd, at $17 odd in November or December and at $21 and $23 odd in January and February. The most recent purchase were made today. We expect to be adding shares next year at $50 or more. The shares purchased at $7 are wonderful and we can only wish we had had the money to buy more but the thing to do now is to buy as many as is reasonable at today's prices.
This morning, we added to our Yahoo position (we believe Yahoo , Google, EBAY and MSFT. are going to virtually take over the telephone business). So, while we are not a one trick pony, we do like CAL. John Maynard Keynes once said that perfect diversification is equal to zero profit. We are loaded with CAL, and AMR and are enjoying a wonderful bucking bronco ride. We are holding on for dear life and enjoying every moment.
Posted by Jack Miller at 3/23/2006 11:43:00 PM
A few readers have asked if we are still buyers and the answer is YES!
Take a look at the CAL web site (from the link above) and you will see that the month to date consolidated load though March 22 is 80.5%. This number includes the "back haul flights"! The last time planes were flying with so many seats full was in 1946! New capacity is insufficient to meet new demand at current prices!
After adjusting for any possible splits, it is plausible to believe CAL and AMR are on the way to $170 per share in less than three years. One of the reasons the gains can be so large is because the "perception to reality" spread is "inverted" but it is gradually starting to roll over.
I have recently corresponded regularly with the travel columnist in a major newspaper. He, like many others, is convinced that the airline business is a "bad business". This bias leads him to ignore or to even mis-state the facts. He makes statements such as, "Even the management at CAL does not expect to make a profit in 2006". My reading is that management does not expect to make a profit the first quarter, but then the first quarter is always a weak quarter. CAL is followed by 8 analyst who have an average 2006 earnings projection of $1.84. Earnings announcements to be made around mid April will cause these analyst to increase their forecast.
Having written many times before about the exponential increases in revenues that are resulting from the multiplication of higher fares times more seats sold, I will not go into the details here. However, the following list is all one needs to know about the current environment for investing in CAL or AMR:
1. Annual operating costs have been cut by a billion dollars or more at each of these airlines in the past few years.
2. The "New Global Economy" has dramatically increased the demand for international travel.
3. Carriers have made 20 or more price adjustments in the past year and fares will continue to climb as new planes are not being built as fast as the demand growth.
Here are a few of the supplemental details you might feel the "need to know".
1. "Low cost carriers" such as Southwest Airlines, do not own the rights to fly to international locations in competition with CAL or AMR.
2. Legacy carriers have very high fixed costs but after revenues exceeds costs almost all of incremental revenues flow to the bottom line.
3. In addition to the very high operating leverage, these airlines have very high financial leverage. Which means there is dramatic room for additional cost reductions as debt is paid down.
4. Cash flows are growing rapidly which will allow refinancing or payoff of the higher cost dept.
5. Many low fare coach seats are being replaced with high fare business and first class seats. The demand from the business traveler is for the wider seats and the decrease in supply of coach seats is driving those fares higher.
6. Transatlantic growth of 22% is pulling planes away from domestic routes. Total industry capacity is flat to down while total demand is up.
7. The older fuel hog planes are being retired or converted to freight planes (have you seen the FedEx traffic growth?). Further reducing seats available.
8. CAL and AMR have seen increasing freight business. New computer tracking of packages has helped. CAL has renewed and added significant international mail hauling business.
9. Bankrupted carriers such as DAL and NWAC are scaling back capacity.
10. Buy these bucking broncos and you will likely make serious money over the next three years.
Posted by Jack Miller at 3/23/2006 09:26:00 AM
In recent weeks, it has been announced that Google Basewill be used by several major retailers in Europe to sort and display their wares. The article linked above shows how ubiquitous Google Baseis going to become.
The idea is that when one searches through the "normal" Google Search Box, one will occasionally be offered drop down boxes to "define" the search. In the example given, a search for homes for sale might bring back a drop down list for locations or for listing type.
Multiple listing services have frustrated many folks by trying to "hoard the info". I have personally been frustrated in trying to keep track of properties for sale or properties that have sold in Myrtle Beach SC.
Those with property for sale will be foolish not to list properties on Google Base. MLS should export all listing summaries to Google Base. As should many other information data bases.
The process can be automated. Thus, the effort to reach thousands of potential customers can be minimal. Like my old friend, Jim Brinkley has often said, in business, economics always wins; another way of saying that if you build a better mouse-trap the world will beat a path to your door.
Google Basesearch boxes are going to start showing up more and more often. Many other exciting advances are being made almost daily. Recently, Yahoo added VoIP to its instant messaging service, EBAY added text message bill pay and Google. added Google Finance. All of these are competitive products that will grow a huge audience. Google Basemay prove to be the most important of them all.
Posted by Jack Miller at 3/23/2006 08:33:00 AM
Wednesday, March 22, 2006
With 4th quarter reports in,Gamestop achieved record sales, increased our gross margins, even though very low margin hardware sales grew by almost 5% as a percentage of sales, and kept our expenses well under control, even as 792 new stores were added at a record pace. Net earnings for the year surpassed $100 million leaving astron balance sheet on the table with $400 million in cash with operating cash flows for the year came at approximately $283 million.
In 2006, Gamestop expects to open approximately 400 more new stores. Gamestop currently has a 21% market share on all new video game products sold in the US and is now doing business in 14 countries outside the US; with 866 international stores.
According to COO, Dan DeMateo, sales for handheld systems in 2006 are expected to double over 2005.
CFO Dave Carlson reported that he expects to have at least a 25 % growth rate in 2006 with the largest comp in the fourth quarter when the PS3 and Nintendo revolution launch.
Posted by Jack Miller at 3/22/2006 02:31:00 PM
The data for online sales for Cyber Monday (the Monday after Thanksgiving showed Ebay with the most traffic, but Walmart (111%), Target (73%) and Best Buy (61%) had the strongest online sales growth. Although Amazon came in at a 34% increase the dramatic advance of WMT, TGT and BBY should be enough to shake up marketing discussions.
Posted by Jack Miller at 3/22/2006 02:12:00 PM
Tuesday, March 21, 2006
A few months ago, I unloaded many of my (family and friends) Google shares. The price above $400 did seem relatively rich and some of these shares had been owned from day one. The average gain on shares sold was around 180%. The move out of Googlehas worked out incredibly well as the CAL shares purchased with the Google money have more than doubled. We continue to hold our CAL but in several of the accounts we are using margin power to reacquire the Google shares. Why?
The reason is that the Google potential is still huge. Google Financeis one more illustration that Google can add services that will be adopted quickly by millions if not billions of consumers and that will offer Google future revenue streams.
Most folks do not have a clue as to the computing power, transmission bandwidth and storage capacity that Google is making available to all comers, "free of charge". In addition to offering unlimited storage and computing, Google provides software structured for the convenient use of consumers without the hassles of traditional software. The Microsoft Office system is a great system but only a small fraction of the computing power is used by the average owner. Every day I spend more and more of my time using Google services.
One of the services that I crave is Google Calendar. I have wasted countless hours on the MSFT Office Calendar. On more than one occasion, our office has used the MSFT calendar to schedule resources and appointments. We always find that we spent more time setting up and maintaining the servers and systems than would have been required by sticking with a manual system.
Google maintains the servers. Individuals, small businesses and even medium sized businesses and organizations will gradually find that they don't need IT departments. Google has only just begun to find ways to serve the public.
GoogleFinance is nothing more than a subset of Google News. It is just a focus of business news around a search box designed for stocks. On my cell phone, I find that Googleworks closely with CBS MarketWatch. Google Financeseems to be more open to links from all over. CBS MarketWatch. has done a great job of building revenue streams off financial information. Google is now in a prime location to assist CBS MarketWatch. and others in helping consumers find the products that are available. Of course, Google should pick up a few paid clicks while providing this service.
The bottom line here is Google Financeis a good service that will add to Google's growing click revenue.
Posted by Jack Miller at 3/21/2006 04:22:00 PM
Google Finance exhibits Google's strength through connection.
Built entirely on licensed data and links to external sources some ot the things you can expect to find on Google Finance are interactive charts with historical prices and volumnes, links to related news stories and portfolio tracking. In addition to links to external data through Reuters and Morningstar, Google will link to blogs and google groups for stock related discussions. I found the stock information page to be thorough, user friendly, specific, and up to date. When searching for particular information on a company, Google Finance offers charts, summaries, facts, financial details, and links to discussion groups and other resources. This new resource will quickly become a tool for the novice and expereinced investors.Wikipedia will offer information "About the Company" and Options information will be given through Marketwatch. Yahoo Finance is onboard offering comparison charts and research.
Goggle's got the bases loaded with a Grand Slam hitter at the plate. We've been preaching it for years,"GO GOOGLE, GO!"
For more information:
Red Herring: Business Technology
Posted by Jack Miller at 3/21/2006 11:04:00 AM
Monday, March 20, 2006
The Stock of the Week is Oil-Dri (ODC) located in Chicago, which develops, manufactures and markets sorbent products for use in a variety of applications.
Oil-Dri announced record second quarter sales If you areready to make your portfolio purr? Oil-Dri may be one to absorb. See this and more Stocks of the Week on our website.
Posted by Jack Miller at 3/20/2006 02:50:00 PM
Wednesday, March 15, 2006
All the big internet companies, including Amazon, Yahoo, MSFT, EBAY and Google are developing MEGA COMPUTER NETWORKS. Storage space on personal computers is about to become your personal back up space. You will not really even need to use it.
The link above takes you to the description of the new Amazon service; unlimited secure storage. Google offers unlimited storage space for the current price of "free". The world of computing is changing rapidly. Google in particular offers programs that make the old way just that.
Why pay for a word processor? The new Google word processor is a superior product because it is designed for collaboration across the internet. A letter or any document can be posted, edited by anyone who is granted permission and stored for all members of the organization to recall at any later date.
The convergence of systems is moving forward. Everything from Skype Me buttons on EBAY to video downloads from many a maker available from internet providers.
We are now in the consumer wins phase. Consumers will see more and more services available and the costs will be very reasonable. Content owners are fighting hard to maintain their "semi-oligopolies" but there is going to be a lot of "stuff" available. It will be made available by the MEGA COMPUTER NETWORK PROVIDERS.
Posted by Jack Miller at 3/15/2006 08:55:00 PM
Thursday, March 09, 2006
Last year, Apex sold more DVD players and recorders in the United States than any other company but Sony. Apex's success illustrates the emergence of ultracheap electronics brands, which began to appear on shelves at Wal-Mart, Target, companies consumers feel will take care of them. Apex,like moset electronic firms, has ties to Chinese companies which force competitors to slash prices of their lower-end products.
Yet millions of shoppers find the low prices hard to ignore, buying brands they've never heard of based on price alone.
Electronics are becoming more affordable overall: with the price of DVD players plunging 75 percent over the past six years.
Another Chinese firm making a go in America is Haier's air conditioners and refrigerators. Haier's dominates Target's appliance aisles, and produce more than 300,000 refrigerators a year at its three-year-old South Carolina plant, among the first built by a Chinese company in the US
Posted by Jack Miller at 3/09/2006 12:51:00 PM
CHINA BOOSTS TECHNOLOGY EXPORTS TO US: The value of high-tech merchandise - everything from semiconductors to large appliances - shipped to the US from China rose 32 percent from 2000 to 2002, a trend experts expect to continue. The value of such merchandise shipped from Mexico and Japan, the second- and third-biggest exporters of technology to the United States, fell 8 percent and 40 percent, respectively. In 1993, China's high-tech sales to the US stood at about $4 billion, compared with Japan's $38.6 billion.
Posted by Jack Miller at 3/09/2006 12:46:00 PM
According to an article by Smartmoney.com Yahoo's (YHOO) $1.63 billion acquisition of online-marketing specialist Overture Services last week, put paid search into serious business. This excerpt further comments that, "since most Web surfers use search engines such as Yahoo free of charge, dot-coms are constantly looking for ways to monetize all of that traffic. That's the logic behind paid search: Advertisers pay every time a search-engine user clicks on a sponsored link. Privately held Google, the sector's king, performed 32% of the searches in May, according to comScore Networks, an Internet market-research firm, and has more than 100,000 advertisers. Ask Jeeves has a deal to put the links of Google's advertisers on its sites. The two companies split any revenue generated.
Still, with Yahoo aiming to take on Google in the paid-search arena, and with Microsoft (MSFT) expected to add search capabilities to its next version of Windows, the competition in the space is fierce. Ask Jeeves, the fifth-largest searcher with just 3% of the market, raises the question, how much longer can the free search continue? "
Tech stocks are ready to ride--
Grab your saddle and jump on the bull!
Posted by Jack Miller at 3/09/2006 12:34:00 PM
Microsoft Corp unveiled it's mysterious, Project Origami, today at CeBIT, the annual technology trade show. A computer that's about the size of a large paperback book but runs a full version of the Windows XP operating system, this ultra compact 2 1/2 pound wireless PC offers a full computer minus the keyboard. It uses a 7 inch screen that responds to the tap of a finger
Here come new possibilities for PC use!
Posted by Jack Miller at 3/09/2006 12:04:00 PM
Natural Alternative International (NAII) offers a wide range of innovative nutritional products. With talk about health savings and flex spending accounts to support supplements Natural Alternative International is a company we wanted to include in our Stock of the Week PortfolioCheck out Kupskey's research and see if Natural Alternative International is a stock you want to include in your portfolio.
Posted by Jack Miller at 3/09/2006 11:47:00 AM
Thursday, March 02, 2006
After decades of discussion, British Petroleum, ExxonMobil
and ConocoPhillips have reached a tentative agreement (pending
approval by Alaska’s state legislature) to build a $20 billion
natural gas pipeline from the north slope to Canada, after which
it would be funneled to Chicago for distribution nationwide. But
the project wouldn’t be completed until 2012-2014 at the earliest
40% of global imports are from emerging markets and this
percentage is growing. This is a good thing.
The Intangible Economy
Emerging Market Analysis
Financial Times Commentary
Posted by Jack Miller at 3/02/2006 11:56:00 AM
Investments in airlines have been our top perfomers returning 200% over purchase. With load factors and the price of airline tickets on the rise as well as the increase in international travel, we expect these to continue to rise. Other top performers in our Stock of the Week Portfolio
After the airlines, US Gypsum is our best performer. US Gypsum which manufactures and distributes building materials returned 4th quarter net sales up 14% in its secon consecutive year of record shipments. In our Stock of the Week Portfolio, we have increase 159% since purchase.
The next top performer in our portfolio is Zones. Netting 2 million during the 4th quarter, Zones closed 2005 with its 4th consecutive year of earnings growth. Zones is a direct seller of hardware, software and accessories. In the Stock of the Week Portfolio
Zones has given us a 79 % return.
AIRM Air Methods Corporation which provides air emergency transport services in 15 states, has given us growth of 78% and Jewette Cameron, which reported annual increases of 60%, has given us a 54% increase in our Stock of the Week Portfolio.
Check out these an other individual stocks to see if you want to add any of these to your personal stock portfolios.
Ride the Bull!
Posted by Jack Miller at 3/02/2006 11:29:00 AM
Roanoke Electric Steel(RESC) is this weeks stock pick. (RESC) and its wholly-owned subsidiaries manufacture and market steel products from scrap metal primarily extracted from junked automobiles.
On January 5th, Roanoke Electrick Steel stock rose after the steel company reported 10% growth in 4th Qtr. earnings.
Are you prepared to “steel” some profit on their performance? Check out this and other Stocks of the Week to see if they are right for your portfolio.
Posted by Jack Miller at 3/02/2006 09:29:00 AM