Sunday, October 15, 2017

TLH Market Review 10/15/17

Well I'm sure the pundits will be out in full force this week calling for a crash as we commemorate the 30th anniversary of the greatest stock market crash in history. That day the Dow Jones fell an astounding 22.61%, which would be equivalent to 5,171 points today. Wait, you mean the biggest crash wasn't when stocks fell at the onset of the Great Depression in 1929? Nope. Although that day comes in at a distant 2nd with a 12.82% decline.  It was October 19, 1987 when markets fell a whopping 508 points, and I think it's likely to keep that record forever as modern day circuit breakers shut down the exchanges when large moves occur.

Thursday, September 28, 2017

McCormick Delivers Spicy Q3 2017 Earnings

First of all sorry for the light and sporadic posting lately.  Life has been very busy. But onto earnings from one of my favorite holdings McCormick & Company(MKC)

McCormick reported Q3'17 results with EPS of $0.85 on revenues of $1.18 billion.  It was overall a good quarter when you look at things outside of their RB Foods acquisition. The company is seeing strong growth in all markets, especially their main brands in the US.  The company's industrial EMEA operations saw strong growth on the industrial side as the Giotti acquisition helped contribute 25% to sales growth for the quarter.

The acquisition of Reckitt Benckisers Group Plc's(RB) added 4% to sales growth during the quarter. If you recall a lot of people were worried, myself included, that McCormick might be overpaying for RB's unit that contains French's Mustard, and Franks Red Hot Sauce. Turns out my worries about costs so far are true as the company noted increased expenses in their report.  That's trickling down to their EPS guidance which is basically flat for 2017 at $3.69-$3.73 compared to 2016's $3.69 as the company expects integration costs to shave $0.51 off EPS this year.  I think the company will beat those numbers, but really not by much. Maybe just a penny or two. There were additionally minimal changes to the company's cost saving projection at $105 million, which is in line with what it's projected each of the last few years.

Still the market took this report on an upbeat note and sent the shares soaring higher by 5% on the day as shares crossed the $100 mark for the first time since June



Here is what management had to say

Lawrence E. Kurzius, Chairman, President and CEO, stated, "Our strong third quarter financial results continue our growth momentum and reflect the effectiveness of our strategies and engagement of our employees around the world. We are driving both sales growth and significant productivity improvements resulting in adjusted operating margin expansion. Both our consumer and industrial segments contributed to our constant currency sales growth of 8%. Our consumer segment delivered base and new product sales growth from the year ago period, led by the Americas. Our industrial business delivered excellent sales growth across all regions driven by new products, expanded distribution, and customer intimacy. In addition to our strong base business and new product growth, the acquisitions of RB Foods and Giotti contributed to higher sales as valuable additions to our global portfolio of flavors. Through the third quarter, we have grown year to date sales 6% in constant currency.

Sunday, September 17, 2017

TLH Market Review 9/17/17

"You can have to much of a good thing" - Anonymous

I'm not quite sure a lot of people would agree with that quote above if they glanced at their investment accounts lately.  When the markets keep heading higher who really wants to complain?  Well I'm sure we could find a lot of people on Twitter. On Friday the S&P 500, Dow, and Nasdaq all hit new highs.  A trifecta!  Clearly most people aren't overly concerned about North Korea firing missiles just about every day.

The indexes have piled on

Thursday, September 14, 2017

The Battle of International & American Real Estate

An area not talked about enough is the big disparity in International Real Estate(VNQI), and American Real Estate(VNQ) performance. Below is a chart depicting the performance for the last year.  You can see International based land and bricks are doing better than their American brethren.

Why is that?

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Sunday, September 10, 2017

TLH Market Review - 9/10/17

Well it doesn't seem a couple of hurricanes, missiles, and a Federal Reserve Board missing more than half it's members can slow down the markets.  Well maybe just a little bit.  For our Labor Day shortened week the S&P 500 fell a whopping 8.92 points. That's hardly a heartbeat at this level. Of course that's not to say everything is going great.

  

Thursday, August 31, 2017

United Technology Looks To Buy Rockwell Collins

It wasn't that long ago I pointed out Rockwell Collins(COL) as an interesting company with a stellar performance record. I love doing columns like that, and frankly I need to do more of them.  The company was on my watch list to possibly add in 2018.  That hasn't changed until this supposed deal with United Technology(UTX) is consummated.

Of course seasoned investors know a deal can fall thru for any variety of reasons.  But for now it seems United Technology is considering making an offer around $140/share.  That would value the company at approximately $21 billion. That's a decent premium from where the stock was trading at the beginning of August when it started it's current breakout. If you were lucky enough to buy on August 1st you are potentially sitting on a 29% gain in just one month. That's pretty solid by just about any standard.

Here is a chart depicting the performance of both companies since January 2002.  Rockwell Collins is smashing the already stellar returns of United Technology with a 727% gain during that time compared to United Technology's equally earth shattering gain of 401%.  No wonder why shares of UTX are up on the move. Investors already see how great of an addition this could be for the company.



Tuesday, August 29, 2017

Hain Celestial Earnings

Hain Celestial(HAIN) announced Q4 and fiscal year 2017 earnings today.  The company reported Q4 EPS of exactly $0.00 on revenues of $725 million.  For 2017 the company reported EPS of $0.65 on revenues of $2.85 billion which were down from $2.88 billion in 2016. I'm sure you can see a few problems with these numbers. While the EPS figures don't show it the company did post a modest profit of $313k for Q4 which was largely impacted by it's Tilda plant fire recovery, and ongoing accounting review costs.

But we see even bigger problems and that was revenue has actually gone down, albeit some of it due to currency fluctuations. Looking at the company financials we see they actually have a USA problem. Sales declined -3.5% for the year, which is strikingly odd considering most other companies have been showing better growth at home, than abroad.  With the US portion of Hain's business by far it's largest, it more than offset 13.8% growth in Europe, and 7% growth in Canada.

I think this is more to do with Hain competing on a much larger scale as the natural products category has really exploded the last two years.  The accounting scandal didn't offer any help as it kept management distracted.  I think the company is going to work on righting that ship much faster. They've already announced plans the last year to focus more on the brands it has, and develop better marketing.  Still investors will get impatient if things don't turn around after 12-18 months.

The company provided the following guidance for 2018.

  • Total net sales of $2.967 billion to $3.036 billion, an increase of approximately 4% to 6% as compared to fiscal year 2017.
  • Adjusted EBITDA of $350 million to $375 million, an increase of approximately 27% to 36% as compared to fiscal year 2017.
  • Adjusted earnings per diluted share of $1.63 to $1.80, an increase of approximately 34% to 48% as compared to fiscal year 2017.
I think the sales figures are a bit low.  Not that I think the company is low-balling us, it's just that the company used to grow sales at a 10%+ clip regularly.  I'd really like to see something around 7-8%, but maybe those days are gone for the company.  As for the adjusted numbers I don't pay much attention to that.  I like to follow GAAP which doesn't lend management as much room for playing around.  

Here is what CEO Irwin Simon had to say:

"We are pleased to have achieved sales growth in all of our business segments on a constant currency basis in the fourth quarter, despite an ever changing operating environment for food manufacturers and retailers," said Irwin D. Simon, Founder, President and Chief Executive Officer of Hain Celestial. "Building upon our core platforms and cost savings initiatives, our global team has made significant progress during the year executing on our strategic plan. The business momentum and operational improvements we experienced in the fourth quarter of fiscal 2017 reinforces our confidence in the tremendous opportunities ahead to generate the growth we know we are capable of achieving over the next several years."

Wednesday, August 23, 2017

Saturday, August 19, 2017

TLH Weekly Review 8/19/17

Is it possible the market has awakened from it's seemingly eternal slumber?  That's what just about everyone thinks, and they are already calling for a huge market crash.

I can't say I completely agree the market will crash, but I have been saying and thinking for awhile that the market could really use a pullback. That should help set the market up for it's next uptrend. Small caps had already been struggling more than their larger peers.  That's usually a sign things aren't looking up short term. But like any indicator it's not 100% fool proof.

The S&P 500 had two out of three largest down days so far all year in August.  Is it now beware the Ides of August?  There is a solar eclipse coming on Monday. Eery coincidence.


Still I don't think this bull market is done like everyone else is claiming it should be. Stocks aren't cheap on a historical basis with the S&P 500 trading at a 12 month forward P/E of 17.4 which is above the historical average of 14.0.  That's not a huge premium screaming bubble territory.  Does it mean there's no good values on traditional metrics? For sure. 

All eyes will be on the Fed next week at Jackson Hole. The market has been going all over the place on when the Fed will raise rates next week with most betting 2018 is when we see the next one.  That's possible, but I still don't doubt the Fed will want to stray to far from it's original path. We could see one in December, but I think that would mean we might not see one at all in 2018, or at least til the tail end. 

The portfolio did not have much news. Earnings season is behind us and for the most part it was pretty good. The portfolio has been reeling from it's heavy reliance on tobacco stocks, and the now clear indication the FDA is looking to put the hurt on the industry further.  I think it's a little overblown, but when the government is after stocks in your portfolio you must keep a keen eye on the situation. Altria(MO) has taken it on the chin the most as it's business is entirely focus on the USA.  Even British American Tobacco(BTI) that recently gobbled up former portfolio member Reynolds American has struggled recently as a result.  I'll be looking very closely at the portfolios tobacco allocation for 2018.

Fora moment it looked like our Ishares Nasdaq Biotechnology ETF(IBB) was going to really start breaking out. It hit a high of $329.90 a few weeks ago, but has since floated back down. Don't you just love how the market picks those numbers? It was so close to $330 even. Still the ETF has been a 14% winner this year.  I think the next few years will do quite well. 


That's all for now.  Enjoy a nice weekend and get outdoors!

Friday, August 18, 2017

Amazon Is REALLY Crushing The Competition

Since Amazon(AMZN) went public back on May 15, 1997 it's been one of the most talked about companies nearly everywhere. It's also been surprisingly one of the most successful despite just recently posting quarterly profits.  It's one of those rare instances when traditional valuation metrics cause many investors to miss out on big gains.Even the Oracle of Omaha, Warren Buffet, has mentioned how he missed out big time with Amazon for Berkshire Hathaway(BRK.A) investors.



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Even more mind-boggling is how strong the company's stock performance has been. Since it's IPO the stock is up over 48,851%, and that's with a $100 point drop in the stock the last few weeks. In other words $10k invested at it's IPO price would have turned into $4,885,100.  That'd be enough to throw you right into the top 5% pretty much for life.  



Amazons performance even makes Wal-Marts(WMT) respectable 603% gain during that time period look dismal, and it barely shows up as a blip on the chart.  Meanwhile Macy's(M), and JC Penney(JCP) shareholders which have been struggling mightily to compete the last few years have seen barely any, or in the case of JCP shareholders a complete destruction of their capital.



You never know when disruption is right around the corner.

Sunday, August 6, 2017

TLH Market Review - 8/5/2017

This week was extremely busy with earnings, and the usual economic reports. Because of that I'll only be recapping earnings I haven't address yet from Church & Dwight(CHD), Global Payments(GPN), Cognizant Technology(CTSH), and Universal Corp(UVV).

If you were on Twitter this week(surely following me) you most likely heard that Donald Trump is responsible for all the job growth, and equity market highs.  Ummm no.  Truth is, as many long time readers of this blog know, is that job growth, the economy, and markets have been going up for some time now. Sure equity markets jumped post-election in anticipation of better times ahead.

Wednesday, August 2, 2017

Earnings - Cummins, Emerson Electric, HCP

We received earnings from 3 companies on Tuesday - Cummins(CMI), Emerson Electric(EMR), & HCP(HCP)

Cummins(CMI) reported Q2 EPS of $2.53 per share on revenues up 12% from a year ago to $5.1 billion. The company credited the quarter to stronger demand for trucks and construction equipment in North America and China, and stronger sales to mining, and oil & gas customers.  The company also announced during the quarter the Eaton Cummins Automated Transmission Technologies joint venture. Cummin's and Eaton each own 50 percent of the global joint venture which will design, manufacture, sell and support all future medium-duty and heavy-duty automated transmissions for the commercial vehicle market.

Saturday, July 29, 2017

TLH Market Review & Earnings From Facebook, Altria, Procter & Gamble, MasterCard, Boston Beer, & Praxair

This post will second as my weekly TLH Market Review, and earnings recap for a busy week in our portfolio.

The Federal Reserve had a two day meeting that went pretty much as expected. Interest rates were kept in the 100-125 bps range while the Fed kept it's options open for another rate hike this year.  The market didn't completely buy it. After the meeting participants decided the next meeting with the highest probability of a rate hike switched from December 2017 to March 2018 with 47.5% odds.  That doesn't mean the market is oblivious to it happening this year. Participants are saying there is still a 46.8% chance of a hike before 2017 is in the books.

Thursday, July 27, 2017

Earnings - Wabtec, Hershey's, Paypal, Diageo, AB Inbev

The portfolio has seen a lot of companies report earnings the last few days, and I've been short on time in getting my summary out.  In total 11 of our picks will report this week.

I'll have an update tomorrow with earnings from Facebook, Procter & Gamble, MasterCard, Altria, Praxair, & Boston Beer.

I'll start with the biggest miss first.

Saturday, July 22, 2017

TLH Market Review 7/22/17

"Profits always take care of themselves but losses never do." Jesse L. Livermore

Equity markets have continued to post new highs this year. The S&P 500 has posted 3 weeks in a row of gains.  Meanwhile the Nasdaq had registered 10 days in a row of gains, with a slew of new all time highs this week. The Nasdaq continues to pace this years rally as it's up 18.7% YTD. Over the last year the Nasdaq has put in a 25.25% gain. Impressive! In fact every index is showing solid gains over the last year. That makes it easy to do well in a bull market like this.