Posts by Jeff Macke
- Jeff Macke at Hot Stock Minute14 hrs ago
Dollar Tree (DLTR) is buying its larger rival Family Dollar (FDO) in a cash and stock deal valued at about $8.5 billion. "This acquisition will extend our reach to lower-income customers and strengthen and diversify our store footprint," Dollar Tree CEO Bob Sasser said in a statement.
Discount chains have been struggling to boost sales as Walmart (WMT) and other retailers invaded their space by offering more items for a buck or less to lure more low-income consumers.
- Jeff Macke at Yahoo Finance17 hrs ago
Over the weekend the New York Times called for the federal government to repeal its ban on marijuana. Though the more conservative among you may consider the left-leaning Times' endorsement to be damning simply given the source, that's a limited view. Legalization of marijuana on a federal basis should be a lay-up bipartisan idea. Consider the numbers:
54% of Americans polled support legalizing pot on a federal level. That's about on par with support for gay marriage with this difference: Republicans are 25% more likely to support pot legalization than gay marriage. In fact, the majority of Republicans under 50 are in favor.
70% of Americans, regardless of party, see dope as less harmful to society than alcohol. That's important but not the right comparable. It's not just liquor that marijuana competes with. It's prescription opioids and anti-anxiety medications.
Amazon.com (AMZN) shares getting hammered today after last night's earnings report. While revenue was broadly in-line with expectations, profit missed the mark badly as Jeff Bezos continues to show no regard for profitability.
The details: Amazon reported a second quarter net loss of $126 million, or 27 cents per share, while the street expected a loss of around 15 cents a share. Operating expenses for the quarter came in at $19.36 billion.
Net sales were reported to be $19.34 billion, up 23% from 2013 second quarter’s figure of $15.7 billion. Revenue closely matched analyst expectations, and basically within the company’s sales guidance range of $18.1 billion and $19.8 billion.
It was a fairly normal quarter right up until the company suggested it would lose between $410 and $810 million in the current quarter. It’s one thing to not sweat profits but quite another to idly project a potential four-fifths of a billion loss with no real explanation. The instant the guidance was issued Amazon shares dropped a quick 5% more after-hours. Nothing that was said over the balance of the call lifted investors’ skepticism.
The jury's out on Janet Yellen as a Fed Chair but if she ran a hedge fund she'd already be out of business. Last week in her semi-annual policy report to Congress, Yellen strayed from macroeconomics into stock picking, suggesting that valuations in social media, real estate and biotech seem extended. If she was worried last week she's gotta be terrified today after a more than 4% run higher in Social Media (SOCL) and Biotech (IBB) ETFs over the last week.
On the upside Yellen probably handled her setback with more stoicism than hedge fund manager Bill Ackman. Ackman got choked up during his three hour, several hundred slide attack on Herbalife (HLF) this week. Ostensibly he was saddened by the way he claims Herbalife targets low-income entrepreneurs, but the fact that shares of Herbalife went up 25% when Ackman failed to "destroy" the company as promised probably didn't help.
Earnings season rolls on and the market is liking what it hears. According to Reuters 70% of the S&P 500 (^GSPC) members reporting so far have beat analyst estimates. Even in the world of Wall Street where estimates are reliably sandbagged, broadly speaking earnings have been solid. At the very least the market seems to like what it hears, based on the Dow (^DJI) and S&P dancing with new all-time highs on a regular basis.
In the attached clip David Lefkowitz of UBS Wealth Management says he’s been impressed. “About 70% of companies are beating earnings and nearly that number are beating on sales as well so these are pretty high quality results,” Lefkowitz points out in the attached clip. ”What’s even more important is the bar wasn’t lowered as much as it normally is heading into earnings.”
- Jeff Macke at Yahoo Finance4 days ago
Facebook (FB) shares are bounding higher this morning after the company posted its fifth straight better-than-expected quarter. The metrics were beyond reproach. Revenues grew 61%, earnings more than doubled. You want "user engagement?" How about this: 829 million people used Facebook every day last quarter. That's 14% of the world. Even if you back out people who have multiple accounts dedicated to catfishing and their dog's inner monologue that's just amazing.
I'm long Facebook shares. Like most people I tend to be biased towards kids, puppies and investments that make me money so you can take all this with a grain of salt. That having been said, you very, very rarely see companies as big as this grow this fast. Two years ago it wasn't clear Facebook would ever make money on mobile ads. Right now it has 17.7% of the market and that's going to grow to 22% this year. Say what you will about mobile ads, I personally despise them, but the market is huge and insanely lucrative.
- Jeff Macke at Yahoo Finance4 days ago
The S&P 500 (^GSPC) hit yet another record on Wednesday propelled by decent earnings from Apple (AAPL) and Pepsi (PEP). For the year the total return of the S&P is approaching 10%. Since the generational lows of March 2009 the benchmark measure of the stock market has gained more than 200%.
If your first reaction to that reminder is to pitch a fit over what stocks “should” be doing you’re missing the point, and probably the rally as well. "Should" isn’t a concept that carries much weight around Wall Street. The market is about absolutes not intent. The key to getting in front of the tape isn’t figuring out what should happen but determining why a rally is taking place. Only after you’ve done that can you decide whether or not you want to get involved.
- Jeff Macke at Yahoo Finance5 days ago
Americans are becoming more discerning consumers. According to a poll from Gallup released this morning a majority of us are switching to generics, using coupons and comparison shopping on and off-line to find the best values. The question is whether this is a reflection of tight economic times or simply a function of 2014 being a particularly uninspiring year when it comes to the arts and products available for purchase.
The economic arguments are well known. Wages are stagnant and more than 1/3 of the potential workforce is simply choosing not to participate in the labor market. But there's something more at play here. We're losing interest in our old amusements.
- Jeff Macke at Yahoo Finance5 days ago
“When you have all this liquidity chasing a fixed number of assets the asset price inflation takes place.” That’s Komal Sri-Kumar rather neatly summarizing the cynic’s take on the last 5 years of the stock market. “It looks as if there is no end to the zero interest rates so the bubble is going to get ever bigger.”
Seems like a perfect system but for the glaring flaw Kumar says has been in place since the inception of easy money on what he calls “Lehman Day,” September 15th 2008. The Fed’s balance sheet has quintupled but the equity markets and other benefits haven’t kept pace. Nature abhors imbalances. Imagine your shins growing to twice the length of your thighs or a tree with branches thicker than the trunk and you get the basic idea of the financial abomination purists see when they look at the Fed’s balance sheet gigantism.
Of course the $4 Trillion question is how this ends when the Fed eases off the gas in October. Kumar has a guess but it’s not going to make bulls happy, particularly those who’ve started eyeballing the next Big Round Number as a target for the Dow Jones Industrial Average.
- Jeff Macke at Yahoo Finance6 days ago
We've had an earnings deluge in the last 20 hours as two consumer growth studs and teo legacy giants all released their quarterly reports. If you know what to look for you already have all the information you need to assess the real condition of the economy. Let's put the pieces together.
First the news from the old guard hot off the wires. Coca-Cola (KO) came in more or less in line. Earnings were uninspiring and case volumes domestically were flat. The company immediately went on the defensive about its executive pay plan. Dead money.
McDonalds (MCD) missed by $0.04. Employee protests, tainted meat in China and beef prices. With their enormous breadth and status it's tempting to see MickeyD and Coke as important "tells" but it's wrong. They are old companies doing what old companies do best these days which is buy back stock and fight activists.