Sunday, May 29, 2016

TLH Weekly Review


We'll start this weeks review with additional good news in the housing sector.  New home sales hit an annualized(meaning adjusted) rate of 619,000 for April.  The number is 23.8% higher than April 2015(472,000 sales).  Then mid-week we found out pending home sales rose 5.1% from March. Pending home sales aren't as strong of an indicator since people can still back out of the sale, but it does show there is an uptick in activity.  All of this doesn't mean the sector is suddenly better. We still have a long way to go in the housing market. After years of under development it's likely we have hit the point where new houses need to be built just to replace old ones that are no longer useful.
 

Here we have a chart depicting the Case-Schiller index and real residential property prices. Notice the divergence. Clearly there a lot of people with underwater mortgages still. I'll visit this topic in a bit more detail this summer.

Durable goods came in with a strong 3.4% increase, but much of that was due to a huge increase in aircraft orders which can fluctuate widely. Without aircraft orders durable goods came in down 0.8%. That's not really encouraging, but at least it's not negative. 

Q1 GDP was revised up to 0.8% after an initial reading of 0.5%. That's stronger, but still not as strong as it should be.  Based on recent data it's probably reasonable to expect Q2 GDP to be a little stronger than anticipated.  A reading above 2% would be really nice.  Despite many people not feeling like the economy is working for them, it is still growing albeit ever so slow.




The US Dollar saw continued strength. With the possibility of another rate hike in June, international capital has been shifting it's way back into the US.  With negative rates abounds elsewhere it will only make more sense for capital to shift into the US. That is an underlying reason for the recent strength we have seen in equities. International money converted into dollars has to be put to work in stocks, bonds, and real estate.

The equity markets had a higher week, albeit on lower volume as participants took some time off for the holiday weekend. The Nasdaq had a strong week overall. It has under-performed most the year, and is the only index still in negative territory YTD. Now is the time to watch the market and see if it can break above resistance to new highs before making any new adds. we are in a weird position both domestically and internationally. You don't want to be caught buying right before another 5-10% downswing so it's best to stay conservative, and have the ammo ready for bargains when they appear.  Unless I see a name at an extremely attractive price I'm going to wait this out, and let the portfolio do all the heavy lifting for me.

IndexStarted WeekEnded WeekChange% ChangeYTD %
DJIA17500.4617873.22372.762.12.6
Nasdaq4769.564933.50163.943.4-1.5
S&P 5002052.232099.0646.832.32.7
Russell 20001112.061149.4637.403.41.2

That's all for now. Enjoy the long holiday weekend. Remember those who have served our country with the ultimate sacrifice. That's something many of us are not willing to do.  And let us hope in the future others will not have to make the same sacrifice themselves.

No individual stock overviews this week. I'll give a quick summary with my thoughts on Costco & Universal Corp next week.

Wednesday, May 25, 2016

Universal Corp & Costco Earnings

Yesterday Universal Corp(UVV) reported Q4 and FY'16 results. According to the press release Q4 EPS came in at $1.72(up 5%) on revenues up 3% to $804 million. FY'16 EPS came in at $3.92 on revenues of $2.1 billion which were down 7% from FY'15. The shares shot up 3.3% in the market today. The company showed really good cost containment through the year. This is what I expected from the company when I added shares.  I'm trusting these shares to be less volatile, and more dependable than the overall market despite the fact EPS is down from 2015. Additionally I really think the shares popped due to the earnings call where it was mentioned new FDA regulations would not really have an impact on their liquid nicotine business. That's a key area for the company as the regulations have basically ensured a monopoly to products already on the market. Here is what CEO George Freeman had to say.


"Mr. Freeman stated, "I am proud to report that we achieved improved results in fiscal year 2016, after managing through this second year of oversupplied market conditions. As anticipated, we ended the year with strong fourth quarter volumes, primarily driven by later timing of customer shipping orders in Brazil and Asia this year, and the positive change in leaf supply arrangements in our North America segment that we announced last year. We also achieved modest growth in overall volumes for the full fiscal year and improved our margins, and our selling, general, and administrative costs were lower. Our inventories continue to be well-managed, and uncommitted stocks have declined from last year's level, in line with our target. In addition, we returned more than $60 million in dividends to our shareholders during the fiscal year, closed the year with higher cash balances, which will support upcoming seasonal working capital requirements in fiscal year 2017, and preserved our solid financial position.

"As we move into the new fiscal year, global production estimates have continued to decline. Plantings have been reduced in some origins where farmers received lower green leaf prices this fiscal year, and El Nino weather patterns have negatively impacted some crops, particularly in Brazil. Consequently, and due to aggressive green leaf market pricing, our crop purchase levels and sales volumes, as well as third-party processing volumes from that origin, will be lower in fiscal year 2017. However, we expect that Brazilian crop levels and our volumes will recover next season.

"While we believe that total production levels have largely moved into balance with anticipated demand, imbalances in certain leaf quality styles or types remain, and our customers' inventory composition and durations may also impact their near-term demand requirements. We also believe that seasonality will continue to influence our quarterly results, with some carryover crop deliveries expected in the first fiscal quarter of 2017. Although it is still early in the season, we currently anticipate that customer-mandated shipment timing will continue to be weighted toward the second half of the year.

"Although oversupplied markets during the past two fiscal years have been less than optimal, I am pleased with our solid performance demonstrated throughout this period, particularly during fiscal year 2016. We remain excited about our prospects and look forward to continuing our leadership role in the industry, as we work for and with our customers to improve efficiencies in our markets and to provide a sustainable, compliant, and competitively priced product, allowing us to fulfill their needs and to continue to provide value to our shareholders."


Today Costco reported Q3 EPS of $1.24 on revenues of $26.15 billion. Sales growth has been very low as it deals with gasoline price deflation and currency swings. The stock traded up 1.30% today.  I'm not disappointed nor ecstatic with the results as it's a tough environment for retailers, but I think Costco will continue to be stable relative to many of it's peers.  There is a lot of concern over Amazon and online retailing right now so investors are cautious.  From what it appears the underlying business is doing OK. It just seems that gas prices are skewing the results.  The conference call is scheduled for May 26 and I'll be interested in what management has to say. 

Saturday, May 21, 2016

The Long Haul Weekly Review

The markets had a lot of fun this week. Much of it due to the Fed releasing their April meeting minutes. However there were also a lot of economic reports released this week.

 Housing starts came in stronger than the previous month which is a good sign as spring is in full gear. What's crazy to see is how low the number actually is from a historical perspective. From the chart we can see the large volatility in the numbers. I always found it noteworthy the housing craze during the 2000's never saw a break past historical highs.  Stronger housing starts are good for the economy as it entails plenty of labor and materials. With the Fed raising rates I'd like to see how strong this trend can continue. With shale oil fields no longer providing growth the economy will need other sectors to contribute.
Industrial production took a step up to 104.14 from a March reading of 103.46. This is in line with the ISM manufacturing index from a few weeks ago. A lot of this is in reaction to the somewhat weaker dollar. I'm not expecting the number to stay strong now that the dollar appears to be rebounding a bit. As long as growth can remain intact, albeit weaker than normal, I think we'll be OK. It will put the pressure on industrial companies to lower costs(think layoffs and more automation).

 Then we received CPI coming in at 0.4% and core CPI at 0.2%. Let me get this off my chest but Core CPI is kind of worthless in my opinion. The number was strong compared to recent months, but I think a lot of that is attributable to oils strong rally this spring. Either way a lot of people seemed to confuse this number as a reason why the Fed is more likely to increase interest rates this June. That's a partial reason, but according to the Fed minutes CPI is still running below their expectations.

 This all brings us to the Fed minutes where a June rate hike is really on the table.

"Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor market conditions continuing to strengthen, and inflation marking progress toward the Committee's 2.0% objective, then it would likely be appropriate for the Committee to increase the target range for the federal funds rate in June."

Based off that sentence alone it was enough to get people all worked up. There was thrashing, blaming, I told you so's, buying, selling and much more in reaction.  What no one really mentioned is that the Fed has really been saying a lot of different things lately. In December we were to expect 4 rate hikes this year. Then they blamed foreign economies to say that wasn't happening. Then foreign economies were no longer a concern. Then all the sudden data dependency didn't matter and expectations for things to improve were sufficient.  

I can Monday morning quarterback all I want, but the Fed has a really tough job right now. I wouldn't take Janet Yellen's position even if I were qualified for it. But there is a lot going on under the hood that probably isn't even mentioned. The Fed will need to gradually raise rates, and they even said that in the minutes this time.  There is a lot of money riding on their every decision, and not just for Wall Street. Main street has a big stake too in the form of pensions, insurance, as does government, and foreign countries. 



This all led us to a wild week where the S&P started around 2050. Then hit 2070 only to fall 45 points to 2025. Finally it ended up right about where it started. What wasn't mentioned by many folks is how the market actually finished the week higher ever so slightly.  But I thought the prospect of higher interest rates were bad for stocks?  I think we'll find out who is right. 


IndexStarted WeekEnded WeekChange% ChangeYTD %
DJIA17539.7717500.46-39.31-0.20.4
Nasdaq4718.894769.5650.671.1-4.7
S&P 5002047.102052.235.130.30.4
Russell 20001102.301112.069.760.9-2.1

So now let's get to some portfolio news. 

The big news this week was the newest addition to the portfolio Praxair(PX).  Praxair is North America's largest industrial gas company. It's also been around since 1907 which means it knows a thing or two about the long haul. I stated in the buy post I'm not particularly keen with the technical's right now.  If I was more patient maybe I could get a better price in June or July.  That remains to be seen. What I am keen on is the awesome money making machine this company possess'. This year will be a little rough as the company faces currency headwinds like a lot of other large multi-nationals. That's fine with me because even if it takes a few years for the currency situation to turn I'll be given years of opportunity to get shares at a decent price. All the while getting yearly dividend increases.  

Also this week Church & Dwight was the focus of some takeover rumors. Well the rumors ended up being false, and the stock after gapping up came crashing down to earth.  Maybe this will be the trip back down that allows me to get shares under $90 again.  Either way this is a solid company. Just thinking about them makes me want to buy Arm & Hammer baking soda. It does wonders to my weekend pancakes. 

Also on a smaller note IBM announced plans to layoff 14,000 workers. Don't be to alarmed though. The company actually stated they still had 20,000 other positions they were trying to fill.  It's likely most of the cuts will come from areas that sought better efficiency, and cuts from parts of the company where sale declines will be the norm.  Just part of business here and nothing that strikes me as an indicator of things heading south. 

That's all for now 

Cheers!

The Long Haul Investor

Thursday, May 19, 2016

Getting My Oxygen with Praxair

Today I had a limit order hit for Praxair Inc. Praxair  produces, sells, and distributes atmospheric, process, and specialty gases, as well as surface coatings. They are the largest such company in North America. Many people are not familiar with Praxair since they do not really sell products directly to the general public. Instead they sell their products to industrial companies, the aerospace industry, food companies, and hospitals to name a few. The company has been around since 1907 and is based in Connecticut.

The company has seen choppy revenues and income growth the last few years. However I'm willing to look past that. Despite the overall choppiness the company has been able to deliver a net income margin between 13-15% since 2012. The company has seen operating margins between 21-22% since 2012. That's very good overall which I like to see.  The company also has a solid ROE over 28% for 2012-2015 . Also ROC comes in a little over 12% those 3 years. ROA for the last year comes in a bit weak around 8%. The company is also very good at raising dividends. For the last 23 years dividends have been raised. The 10 year average for dividend increases comes to 14.79%. Currently shares have a 2.7% yield. I'm not expecting strong increases like that, but I think 7%/yr going forward is an acceptable rate.

The balance sheet is pretty strong too. The company has a current ratio of 1.60. Total assets and liabilities come to 1.36 and when I back out goodwill & intangibles I get 1.10. The company has increased it's debt lately. Although according to the 2015 annual report the effective interest rate on all debt comes to a paltry 2.3%. The company has been buying back shares with part of the debt, although it's been OK at neutralizing dilution through stock based compensation.  I'm not to concerned with all of this.

The company is well managed and I think the recent under-performance of the company will not continue. The last few years have seen it really lag the S&P 500. The stock isn't really oversold so I'm a bit cautious about this buy.  I didn't buy shares back when they were below $100 which I really regret. Regardless this is an industry that is irreplaceable as without it many companies cannot produce the products they sell to people everyday. So next time you see a Praxair truck on the road, or tank next to a facility think of all the cool things the company helps others accomplish everyday.

I've been wanting to add more blue-chip quality companies to the portfolio and I think this fits the bill. I still have a few other names on my watchlist. I'm also still looking to add more of the names I already own.

Church & Dwight Takeover Speculation

It was reported this morning that Church & Dwight is a takeover target for a larger company including Reckitt Benckiser or Procter & Gamble.  The company denied the rumors so I think there is nothing going on. Although an unsolicited offer is never out of the question from one of its larger rivals. Based off the information I read I'm going to say it's not entirely credible. There was however some interesting action in the stock the last few days.


As you can see Church & Dwight trades relatively stable throughout most days.  However yesterday we can see the stock had a volatile morning which is unusual. The stock moved a bit more than normal overall due to it being a Fed day, so there was above average market volatility. You can also see there was a large spike in volume at the outset.  I'm a bit cynical but it seems plausible to me that someone already knew Wednesday the news report would be released Thursday. Since the initial report came from a foreign source it's hard to speculate on specifics. 

Either way after the company denied the rumors the stock fell back below $100.  I'm partially excited and partially mad about this.  I'm excited because it's a big compliment to have someone buyout a company you hold.  I'm mad because I was hoping the shares would get back below $90 so I could add.  It looks like that may be off the table for longer than I anticipated.  C'est la vie.  

Sunday, May 15, 2016

The Long Haul Weekly Review

The market had a stronger start to the week only to find itself finish on a down note. For the week the S&P 500 lost 0.5% making this the third losing week in a row. I'm not overly concerned for the market as it climbed straight up for 10 weeks from the February lows. So a breather is warranted. Earnings season is pretty much over with as over 90% of companies reporting.


This week was a little light on economic reports. Initial claims for unemployment came in a bit higher than expected this week at 294K vs expectations of 270k. This is on top of the lackluster 160k new jobs reported the week before coupled with a few downward revisions to prior numbers. Also retail sales for April came in with a better than expected 1.3% increase from the prior month, and up 3.0% from April 2015. That's a pretty good number.  Also this time of year many people get their income tax refund checks so let's see if the strength can continue into summer.

What can I say. The job market continues an 8 year trend of absolutely sucking for many people. Although it's evident people with jobs are still looking to spend their money. I think that's proven with Amazon hitting a brand new all time high this week while plenty of other retailers are taken to the woodshed.  If your retail business does not have a special niche it appears the heat is on immensely right now as consumers increasingly buy bargains.  It seems pretty evident when you look at the charts of companies like Macy's, Nordstrom, Dick's, The Buckle, and JC Penney. They are all heading down.  Some companies dodging the Amazon train so far have been Costco Wholesale, Ross Stores,  and TJX Company.

There were a few Fed officials that gave speeches this week.  Some mentioned a June rate hike is not out of the question.  The market seems to disagree, but that does not mean they won't raise rates to everyone's surprise. If they do raise rates I think we can expect to see nothing happen until after the elections.  I still think this will be a gradual and slow shift back to normalization. Although it might be a choppy trend at times.

Here is how the major indexes performed for the week along with the YTD performance.
IndexStarted WeekEnded WeekChange% ChangeYTD %
DJIA17740.6317539.77-200.86-1.10.7
Nasdaq4736.164718.89-17.27-0.4-5.8
S&P 5002057.142047.10-10.04-0.50.2
Russell 20001114.721102.30-12.42-1.1-3.0

For the week we received earnings from WhiteWave Foods, and HCP Inc.  Wabtec boosted it's dividend, and the iShares Biotechnology ETF was added to the portfolio. 

WhiteWave reported a solid Q1 and the shares responded very well.  Back in April during my last add I was a little apprehensive about the purchase. The stock had been getting hammered, and it appeared some of the wind was coming out of the organic food industry sales. Well that fear was smashed this week as WWAV reported sales that were up 14% and increased EPS guidance to $1.42-$1.45. I think my hope that 7% sales growth will be the minimum has been confirmed for now. 

HCP Inc reported numbers that were in line, but also surprised most people with it's announcement to split off the HCR ManorCare operations.  The company has been struggling with this side of the business for the last year. I think it's a great idea for the company to put some space between any of the legal issues it might have with Medicare reimbursements, and allow the company to diversify away into other more lucrative opportunities.  It was a great move and I'm sure that is why shares shot up on earnings day. Good companies always find a way to change and manage themselves well during any struggle. 

Now to the recent add of IBB.  I have to admit I'm slightly giddy about this pick.  I love the profit this industry takes in. I'm grateful to live in a time where I can buy a fund that will give me ownership slices in over 100+ companies for relatively low cost.  I'm not keen to pick any individual name here as this field is a tough one to operate in.  I'm also not savvy with medical science to be confident in choosing a specific company.  I've been looking into other areas of the science and medical industry for a buy.  This is a specialized area where expertise and know how is not easily replicated.  If I can find the right company and the right price I'll be making another new add.  In my opinion public health is another part of the economy more resilient during downturns. No matter what people spend money to keep themselves healthy and alive.  Considering the heavy weight towards tobacco and alcohol maybe some medicine is just what we need here.  

Cheers,
The Long Haul Investor
For the

Wednesday, May 11, 2016

Taking My Medicine With IBB

For a long time I sat on the sidelines thinking about this purchase. All through 2012-2015 I watched as this ETF smashed to new highs seemingly every day.  At one point from 2012 it was up an astonishing 230% compared to the S&P 500's 62%. I finally decided to pull the trigger yesterday and add the iShares Nasdaq Biotechnology ETF(IBB).

There is a reason why I went with the ETF instead of an individual name such as Amgen or Biogen. Which if I was forced to choose an individual name I'd go with one of those. I like the ETF since its two largest holdings are Amgen and Biogen. There are also 187 other companies currently in the fund which offers diversification to help mitigate risk.  Risk is higher in this industry.  I'm not a scientist and I hate doctors. So my expertise in this area is very low, and the commercial viability of new treatments is a risky undertaking to begin with. That being said it's of my opinion that evaluating the financial performance of a company and it's fundamentals in this industry only go so far. Millions of dollars could be spent researching a drug only to have the FDA deny it.  Then there are lawsuits, and the overhang of political whiplash.Warren Buffet is known for buying what he understands. Well I don't understand a lot of this stuff, but I do understand there's a lot of money to be made. So I need to protect myself the best I can in this situation while still affording myself to invest in a good opportunity.

Biotechnology stocks offer a certain type of moneymaking opportunity.  It''s not the most capital light business as R&D costs can be substantial and ongoing.  Yet the best run outfits can realize profit margins north of 30% after everyone is paid.  That's way better than the tobacco industry which is one of my favorites. Better yet the drugs produced are granted monopolies albeit for a limited time.  So a successful drug can make up for 10 bad ones.  Sometimes a single drug can generate billions of dollars in revenue each year. I'm taking this industry over the traditional pharmaceutical industry for a few reasons. Biotech companies are producing drugs that are much different from traditional pharmaceuticals. That gives them a scientific and competitive edge. Additionally these companies are on average better at researching and developing new breakthroughs. The traditional Pharma industry is on whole weaker in this department so I don't want any of that. Just note the fund is only 77% biotech, and includes a 14% weighting towards Pharmaceuticals, 7% towards Life Sciences Tools & services, and fraction of traditional Health Supply companies.

Of course the downside is periodic political pressure regarding  price gouging of patients, insurers, and the government itself.  The regulatory framework is undoubtedly a risk. But the industry has backing behind closed doors due to the many high paying jobs they create. As long as the majority of those jobs stay on our shores I'll think the industry will be able to hold its own against an angry politician. That doesn't mean I'm setting and forgetting this one like normal.  If it looks like the operating landscape will change I'm going to be quick to cut this out of the portfolio.  As I said before I'm not the best at understanding everything in this industry. But I understand when people are sick they increasingly look towards the type of drugs these companies produce to extend or save their lives.

The ETF according to the iShares website currently trades at a P/E of 21.  Not terribly cheap, but much cheaper than it was in 2015.  The shares have seen a fall from $400 to a recent low of $237. Shares are at or near oversold levels on the monthly, weekly, and daily charts so I feel somewhat re-assured by the technicals the downside is limited here. I don't expect this to be a rocket ship back to $400 either. Although over a few years I expect this sector to continue outperforming the market.

Feel free to share your thoughts on this pick!


Tuesday, May 10, 2016

WhiteWave Foods Earnings

Today WhiteWave Foods(WWAV) reported Q1 EPS of $0.24 on revenues up 14% to 1.04 billion. The company saw strong growth across its portfolio of products and especially in the American and European segments. The company updated it's adjusted EPS guidance from $1.38-$1.41 to $1.42-$1.45 for 2016.  The shares are up over 5% this morning. Here is what CEO Greg Engles had to say.

“We are off to a very good start in 2016, delivering results ahead of our expectations with healthy topline growth and operating performance,” said Gregg Engles, chairman and chief executive officer. “Our robust organic constant currency sales growth in the first quarter was driven by strong growth across our legacy platforms in traditional retail outlets, along with increasing contributions from away-from-home channels and our growing international presence. Our Vega and Wallaby acquisitions also continued their robust growth trends, positively impacting our results as well. Our strong start to the year has led us to increase our guidance for full year 2016.”

Monday, May 9, 2016

HCP Inc Earnings

Today HCP Inc reported Q1 FFO of $0.68 on revenues of $640.7 million.  FAD came in at $0.66. The company made a big announcement that it will be spinning off it's HCR ManorCare assets which you can read here. The shares shot up almost 7% today on the news hitting a high of $36.90. Here is the 2016 outlook.

For full year 2016, we expect: FFO per share to range between $2.76 and $2.82; FFO as adjusted per share to range between $2.77 and $2.83; FAD per share to range between $2.65 and $2.71; and EPS to range between $1.80 and $1.86. In addition, we expect 2016 SPP Cash NOI to increase between 1.5% and 2.5%. Excluding HCRMC, we expect 2016 SPP Cash NOI to increase between 2.3% and 3.3%. These estimates do not reflect the potential impact of the spin-off transaction involving our HCRMC real estate portfolio or unannounced future transactions. Refer to the "Projected Future Operations" and "Projected SPP Cash NOI" sections of this release for additional information regarding these estimates.

The HCR ManorCare spinoff is very interesting, and I'm not sure many people saw this coming.  Last year the company announced they were having legal issues with Medicare billing and reimbursements. Secondly they took a $1 billion impairment charge related the company operations and assets.  I think the company was looking to separate itself from these issues and focus on more lucrative opportunities. These assets have been a steady producer for the company over the years, but I think given the current outlook they see better opportunities.  Current shareholders will receive shares in the new company.  I'll have to figure out if I'll keep both, sell one of the companies, or sell both. 

Here is what CEO  Lauralee Martin had to say.

"We believe this transaction gives HCP the ability to re-confirm itself as a blue-chip, innovative and relationship-oriented healthcare REIT. Post spin, HCP will own a stable, private-pay portfolio that has a track record of delivering consistent, attractive returns. HCP will be able to sharpen its focus on high-growth healthcare sectors and, with a cost of capital benefiting from the stability and growth profile of these strong sectors, we will be positioned to achieve accretive new investment growth. The transaction also gives our shareholders ownership of a separate company structured with the tools and flexibility to maximize the value of its assets."

Saturday, May 7, 2016

The Long Haul Weekly Review

"Struggling Gives You Strength" - Ray Dalio 

The markets had a hard time finding traction this week. A nice start on Monday was followed by a few rough days during the week. Then we got a decent recovery at the end. Nonetheless the S&P saw a drop of 0.4% for the week, which makes two down weeks in a row. As Ray Dalio said sometimes we need to struggle to get some strength.  Maybe next week will bring better fortunes.

 This week also saw ISM manufacturing and services data. Manufacturing came in with a number above 50. That was good to see since between October'15-February'16 it was under 50. The strong dollar has a big impact on manufacturing as foreign companies move orders to overseas competitors as American made goods are less price competitive. Since the dollar has moved down lately it seems manufacturing has responded as expected. Services have actually held up pretty well.  We'll have to keep an eye out for any weakness there as it's a much bigger part of the economy. 

Additionally we saw April NFP come in at 160k which was less than the 200k estimated.  That's a weak number. Although the internals showed some strong growth in professional services and finance jobs. That's important and it helps reinforce why we must keep an eye on the services index to make sure the economy still chugs along.  I know a lot of people feel the recession never ended for them. Yet overall as a country we are still growing. It's important to keep that in mind.

For the week the portfolio had 5 picks report earnings. AB InBev, Church & Dwight, Cummin;s, Cognizant Technology, Emerson Electric, and Hain Celestial all reported pretty good results overall.

AB Inbev saw a rather large sales decline of which some is from currency, and the rest from declining volumes.  The American business is becoming very tough. Craft brewers are slowly nipping at the edges. Fortunately BUD has been one of the bigger buyers of craft brewers. Of course they don't make a purchase until the company gets to a size where an acquisition makes sense. I'm not to concerned. The company is a dividend machine. Remember that nice big pay hike a few months ago? I do.

Church & Dwight reported numbers that were pretty good. It's obvious that the company has been a major reason big player Procter & Gamble and Colgate Palmolive have seen much slower than normal sales growth. CHD's steady growth in their detergent business, which is big money at both PG and CL, has been taking up market share. I'm not to concerned with owning both PG and CHD. The idea with both is to get a nice steady dividend with consistent increases, and lower volatility.

The numbers at Cummin's reflected what the company had started to warn about in 2015. Heavy duty trucks in both North American and Asia have really slowed down.  Overall there has been a slowdown in just about ever segment, but not nearly as bad as I thought it was going to be. The preemptive cost cutting measures from last fall are really helping the company maintain good earnings. That's what a well managed company does.

Emerson Electric also posted numbers that weren't really up to its normal self. The company has decent exposure to the energy industry through its Process Management, and Industrial Automation division. The Climate Technology and Commercial/Residential Solutions benefited from underlying trends. None the less post earnings the company slid the remainder of the week. I'm still keeping my eye out for another add.

Hain Celestial saw a big jump after their earnings report. Honestly the company was beaten down.  It's been one of the few food companies around to keep posting healthy revenue gains. Also the company is targeting some cost cutting efforts($100 million), and is even going to sell off some brands that no longer fit within it's strategy.  The company has a long history of making acquisitions.  That's actually good to see as I think the company might have over extended itself with all the SKU's on its books.

Cognizant Technology reported pretty good numbers. Growth continues to come in strong as the company even had to hire 11,000 plus workers during the quarter.  That bodes well for the future. The company lowered it's Q2 guidance, cut its yearly top line just a hair, but then re-affirmed the full fiscal year EPS. I think that made some people scratch their heads at first likely accounting for the early drop in shares. Cooler heads prevailed and the stock ended up very strong.  I'm expecting CTSH to right the ship in a good way this year.

That's all for now. Enjoy the weekend!

Cheers,
The Long Haul Investor.

Friday, May 6, 2016

Cognizant Technology Earnings

Today Cognizant Technology(CTSH) reported Q1 EPS of $0.80(Non-GAAP), and $0.72(GAAP) on revenues up 10% to $3.20 billion.  The company lowered it's Q2 guidance to $0.80-0.82/share, but they kept their full year guidance(Non-GAAP) the same at $3.32-$3.44.  Additionally the company lowered it's revenue outlook at the top end by $200 million so expect between $13.65 - $14.0 billion for the year. The shares initially fell to $56 but have rallied back up to $59+. Here is what CEO Francisco D'Souza had to say.


"Overall, our first quarter results were in line with our expectations and guidance. Client demand for our digital expertise, services and technologies remains strong," said Francisco D'Souza, Chief Executive Officer. "We continue to see positive returns from our extensive strategic investment in disruptive technologies, new digital business models and best-in-class delivery capabilities. We believe our strong fundamentals have positioned us well to be the transformation partner of choice for our clients."

"As anticipated, during the first quarter we saw softness in our healthcare segment due to M&A activity, as well as softness in our banking segment due to financial market volatility," said Gordon Coburn, President. "As we move into the second quarter, we are quite pleased with our momentum with new and existing clients, which we expect to drive sequential revenue growth in the second quarter of $140 to $200 million. To support this expected growth, we significantly accelerated hiring during the first quarter and increased our global headcount by 11,300 employees."

Thursday, May 5, 2016

Church & Dwight Earnings

Today Church & Dwight(CHD) reported Q1 EPS of $0.86/share on revenues of $849 million. The company re-affirmed it's 7-9% adjusted EPS growth. Shares are trading up over 1.5% today. Here is what CEO Matthew Farrell had to say.

“2016 is off to a strong start with solid first quarter results. We believe that we are positioned to continue to deliver strong sales and earnings growth with our balanced portfolio of value and premium products, the launch of innovative new products, aggressive productivity programs and tight management of overhead costs. Although the 2016 business environment will be extremely challenging with continued competitive pressure, we are confident in achieving our 2016 business targets.”

Wednesday, May 4, 2016

BUD & HAIN Earnings

This morning AB InBev and Hain Celestial reported earnings. Judging by the reaction in each healthy is winning over unhealthy(but more fun).

AB InBev(BUD) reported Q1 EPS of $0.51/share on revenues down 10.1% to $9.4 billion. That's a tough decline in revenues to take, but I think the company will work to fix this once the SABMiller transaction closes. That should allow it to focus more. The company did not make any changes to guidance. The shares are down over 2%. Here is what management had to say.

"The first quarter of 2016 saw a strong volume performance in Mexico, as well as improving volume trends in the US and Europe. However, our business in Brazil experienced one of its most challenging quarters in many years, as anticipated.

We expect the macroeconomic environment to remain challenging in a number of our markets. However, we have solid plans in place to address these challenges, and remain cautiously optimistic for the rest of the year. Consequently, we have not made any changes to our previous FY16 guidance. 
"

Hain Celestial(HAIN) reported Q3 EPS of $0.47/share on revenues up 13% to $750 million. The company updated FY'16 guidance to $2.00-$2.04 per share(Non-GAAP). The shares are up 8% this morning. Considering how beaten down the shares were it's kind of expected. Since the February lows the shares are up 30%. Here is what CEO Irwin Simon had to say. 

"Our net sales reflect the strong performance across our businesses led by Hain Celestial United States, Hain Pure Protein, Hain Celestial United Kingdom and Hain Celestial Europe as well as Hain Celestial Canada," said Irwin D. Simon, Founder, President and Chief Executive Officer of Hain Celestial. "The diversification of our product portfolio with leading organic, natural and better-for-you brands around the world, combined with our team's solid execution of our operational initiatives fueled our financial performance. We are extremely pleased with our US results where we returned to growth in the third quarter and expect these trends to continue."

Tuesday, May 3, 2016

CMI & EMR Earnings

Today we received earnings from two of our industrial picks - Cummins and Emerson Electric.

Cummins(CMI) reported Q1 EPS of $1.87 per share on revenues of $4.3 billion down 9% from last year. The company re-affirmed its EBIT guidance of 11.6%-12.2% of sales and sales down 5-9% from last year. The shares hit a high of $120 today. Here is what COO Rich Freeland had to say.

“Our results for the first quarter reflect solid execution of our cost reduction plans in the face of very challenging market conditions,” said Rich Freeland Chief Operating Officer. “Benefits from restructuring actions, material cost reduction projects and lower warranty costs all helped to mitigate the impact of lower sales.”

Emerson Electric(EMR) reported Q2 EPS of $0.57 per share on revenues of $4.9 billion down 9% from last year. The company re-affirmed it's guidance of $3.05-$3.25 per share. The shares have traded down slightly most the day. Here is what CEO David Farr had to say. 



"While pressure from global economic conditions continued, our second quarter results reflected varying levels of incremental improvement in our businesses," said Chairman and Chief Executive Officer David N. Farr. "The restructuring efforts we initiated last February are generating the margin improvement we expected, while at the same time trailing three-month underlying order rates improved sequentially throughout the quarter. Conditions in our oil and gas and industrial served markets will remain challenging, but order trends in our other markets are expected to strengthen in the second half of the fiscal year. As a result, the Company continues to expect better second half performance in terms of both profitability and underlying sales as our restructuring actions take hold."

"In April, we took another important step in our strategic portfolio repositioning plan by filing the Vertiv Form 10 for the Network Power spinoff," Farr continued. "While working diligently on the spin process, we continue to discuss the potential sale of the Network Power business with interested parties. In addition, the sale process for the motors and drives and power generation businesses is well underway. There is still much work to be done to complete our repositioning strategy, but we remain committed to substantially completing these actions by the end of the fiscal year in order to position both Emerson and Vertiv for growth and to drive shareholder value."

Monday, May 2, 2016

FinTech

There is a lot of talk today about "FinTech", or basically "Financial Technology".  A lot of it can be contributed to this video from CBS 60 Minutes which recently highlighted a company called Stripe. You can watch the video here


I don't think most people don't realize how far off the financial industry(banks) is from historical highs.  We can see from the XLF ETF that financials are still well below their 2008 high near $32. That actually seems like a warning signal to me considering the S&P has already surpassed its historical highs.




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The portfolio is in a way heavy on "FinTech". PayPal comes to mind here. I'd consider Visa, MasterCard and Global Payments as more traditional financial technology.  This is a big industry overall with plenty of players FYI. Also not all "FinTech" is created equal.  There are a variety of sub sectors within this industry.  Kind of like the PC industry where you have multiple companies comprising many different niches.