Posted on 03/15/2013 5:04:36 AM PDT by dennisw
Daily finance & investment thread (3-15-13 edition)
Trying to focus on the markets for today and each day and the economic news
A number of people have talked about such a thread. Lets see how it goes. This is where you can impart some investment wisdom to your fellow freepers. You can vent about the big one that got away. You can chime in how Obama is out to wreck American capitalism.
If you see another FR economic thread you like and want to link to it here, please do
Post your favorite economic site links. Your favorite precious metals blogs and sites
Apmex.com is a solid place with good reputation to buy precious metals Kitco is a good site for charts and other precious metals information
Ping list -- on or off let me know here or via freep-mail. If I missed you then Freep-mail me
I might ping you to other interesting economic threads a few times a week. One per day maybe
ping
Add HarveyOrgan.Blogspot.Com to keep up with what is happening in EU PIIGS and now Japan. Gives you info that caveats what is happening with the Fed induce Wall Street rise which can collapse rapidly by EU and Japan whose crisis has no abated contrary to MSM reporting. One can ride the markets with cheap Fed money, but a collapse can come without warning. Not playing the market, into 90 percent cash and 10 percent prec metals.
Well Fargo CEO: Why Americans Are Saving So Much
http://management.fortune.cnn.com/2012/11/26/wells-fargo-stumpf/
“We’re starting a fourth year of the recovery, but it’s a very cautious recovery. People and businesses are spending money on things they need, but they’re not investing for the future in many cases. They’re putting off decisions. In fact — this is a surprise to most people — in half the mortgages that will be made this year, people will either bring money to the closing — a cash-in refi — or use the reduced rate to shorten the term and keep the payment the same. They’re paying off debt. They’re deleveraging — there’s too much uncertainty right now.”
“We typically run our company with about $1 of loans for every $1 of deposits. Today we’re in the 80% range — we’re about $200 billion short of loans. We are hungry for loans, but there’s a cautiousness because people are unsure about tax policy, about what’s going on with the fiscal cliff, regulation, and a bunch of other things. It creates this sense of uncertainty, which is a really important ingredient.”
IOW - Having a Marxist in Chief is a HUGE factor to America’s economic health!!
Did you catch that? TWO HUNDRED BILLION SHORT ON LOANS! And that’s just Wells Fargo! No business in their right mind is expanding or doing anything. If we’re lucky, and 0bamacare doesn’t sink us immediately, those of us businesses that WANT to survive ARE going to sit on our hands and keep our cards close to the vest!
I’m a local employer. I added only three ‘new’ jobs this season at $8.25/hr. whereas I’d usually hire a dozen or more new people.
I told my loyal core staff, ‘Until the economy turns around EVERYTHING is EVERYONE’S job around here. You WILL be asked to clean toilets, do carry outs, sweep the floors, make coffee, stock shelves AND give Customer Service like your JOB depends upon it. Because. It. Does.’
Keeping Your Job Is The New Raise. It is what it is for the time being. :)
(I sound like a real beotch to work for, don’t I? Well, too bad. People are lined up around the BLOCK for YOUR crummy job. Get on the stick! My staff loves me. They KNOW I’m doing everything within my power to survive this; even the few Libs that work for me!)
Wells Fargo is coming up with new ways to make money off their customers. We had to close our Wells Fargo account yesterday. They wanted to start charging twenty dollars a month if we didn’t keep a large balance in the account. They even charged ten dollars to close the account.
If you are doing a daily ping you can add me to the list. Thanks.
Not sure who coined the phrase ‘don’t fight the Fed’ (I think it was investor Marty Zwieg), but boy have I paid a price for doing it!
Yes, I knew 85 billions were rolling off the digital printing presses every month; I know interest rates are incredibly-and unsustainably-low; the dollar index has rebounded smartly (for how long?); earnings and guidance still positive on balance, but...no meaningful correction as of yet.
As they say - the market can stay irrational a lot longer than you can stay solvent. Yes it can.
Good effort, Diana. You sound like a manager who will make
it through this policy imposed crisis. Your employees are
smart to recognize the fact that you’re doing everything in their best interest.
“Saving your job is the new raise” ....I like it!
When market is having a correction and is trading for low prices, it is very easy to find good value plays. On the other hand, when market is at (for Dow Jones Index) or near (for S&P 500 Index) all-time high, It becomes much more difficult to find good value plays, because a lot of stocks become either overpriced or at least fairly priced at that point. Smith & Wesson (SWHC) provides one of those great opportunities to get a growth stock for a really cheap price when the market is nearly peaking.
Putting all politics aside, the company’s products see very strong demand, and the strong demand will not be going away anytime soon. We are looking at a company that grew its revenues by 39% in the last quarter, raised its guidance for another year of double-digit revenue growth, and this company still trades for a single digit P/E ratio. Apart from Apple (AAPL), Smith & Wesson is truly one of the cheapest companies out there.
According to Smith & Wesson’s latest guidance, the company is expected to grow its revenues by another 40% and it is expected to earn $1.18 per share. Given the current share price of $9.20, we are looking at a pretty cheap stock. Typically, companies that can grow its revenues and earnings by 30-40% year on year will be assigned a P/E ratio of 20 or more. As a general rule, a P/E ratio of 10 implies that a company’s revenues and earnings will be flat for the next few years. A P/E ratio below 10 implies that a company will see revenue and earnings drop and a P/E ratio above 10 implies that investors believe that the company will see revenue and earnings growth. This company already beat the latest estimates and gave guidance that suggest a lot of growth, yet investors price the company as if it will see no growth, or even as if it will see some earnings decline. Given Smith & Wesson’s huge backlog that will take years to clear, I don’t see the company seeing an earnings decline anytime soon unless its production sees some major disruption due to a natural disaster or something.
According to the earnings call that was held recently, the company is working on increasing its production rate in order to address the backlog, even though the specifics of the increased production capacity were not mentioned. It was said that one of the production plants has been working on full capacity for the last 4 quarters straight. It looks like the demand increases at a much faster rate than the company is able to increase its production. On a positive side, the company’s profit margin was up from 30% to 37% in the last quarter as a result of conservative growth of its production capacity. If the company ramped up production too fast, its margin growth might not have been that great. Also, keep in mind that Smith & Wesson’s margin growth came despite the company spent significantly more money on research, development and marketing in the last quarter compared to the quarter before.
Currently, Smith & Wesson doesn’t have dividends, but the company is actively buying back shares, which makes each share more valuable as years go by. The company already spent $20 million on share repurchases and plans to spend another $15 before the fiscal year ends. The number compares nicely with the current market cap of Smith & Wesson, which is around $585 million. At the current rate of generating cash flow, the company will be able to pay off all its existing debt in a matter of few years. Currently, Smith & Wesson has $58 million in cash and $44 million in debt and the company is able to generate free cash flow of $20 million per quarter. Once the company pays off its debt, not only it will be able to afford a higher P/E ratio, but it will also be able to afford more share repurchases and even start paying dividends.
Since announcing great results and increasing its guidance, the share price for Smith &Wesson declined by 13%. This was mostly due to fears of a possible ban on assault weapons. On Thursday, The Senate Judiciary Committee agreed to ban assault weapons, which added up to the plunge of the stock. First, I don’t think this will pass in the Senate, second, even if it passes the Senate, this will not hurt the company’s sales that badly. After all, Smith & Wesson sells a variety of products, including but not limited to assault weapons. If assault weapons are banned, the gun buyers will not simply stop buying guns, they will just switch to different kinds of guns.
This is a solid company with solid growth and strong demand. While Dow Jones nears 14,500 and S&P 500 nears 1600, it is incredibly difficult to find cheap stocks but Smith & Wesson provides another opportunity for value investors.
That was a Seeking Alpha article and the author was Jacob Steinberg. I meant to include that in the first posting. I hope I’m not breaking any copyright laws, if I am please inform the mod to delete the text.
I, personally, wouldn’t do business with them, either. Just interesting how much money is waiting it out.
Thanks. Saving MY job is a priority as well, LOL!
R-i-i-i-i-ght ... you got it, Robbie.
Oops! Mis-posted.
Wells Fargo is the best run bank in the country. By eliminating small accounts they are reducing costs and strengthening their business. They know very well there are small local banks willing to service the small accounts for free.
Those customers will not be without bankers services.
The need to cede this business to other, smaller, and perhaps hungrier banks allows them to shed evermore increasing overhead. People are the overhead and there is a need to shed people.
I've heard that eventually the big banks is all that we'll have to do business with. The small local banks are going away.
It wasn’t our main account just an avenue we used to shop on the internet.
I LOVE my Credit Union. I will fight to the DEATH for them. They saved my farm when the ex decided to run off with of all our retirement money (and the town skank, of course...)
*Rolleyes* Good Riddance!
BUT - they gave me a 3.9% fixed 30 year mortgage so I could keep my farm. (I’ll have it paid off in half that time - I’ve got no time to waste, LOL!) They were the only ones that would work with me, and everything went smoothly. They called me to re-fi when the rates dropped, but I just asked what it would cost me for that and I now throw the extra I’d pay to THEM onto the mortgage principle each month.
I am on a MISSION! :)
I just popped out of Ultra Petroleum Corp.(UPL) from $18 to $21.50 today for 2000 shares and the day before turned 600 in another account when it reached $20.80. This stock, is one of those YO-YOs that tend to bounce around a lot between $17-$22 during any recent period of 3-weeks, sometimes higher or lower ranges. Right now I will waith for it drop back into the $18 range and short it for a couple bucks a share over $20 again. I also traded SandRidge Energy (SD) a lot over the course of 2011-2012 and it is SUNK under $6. Me thinks it is time to buy a couple thousand shares of this one and see where it goes - the lawsuits against management were settled this past week and it was contended that stocks value was actually somewhere between $11-22 a share and an average of $17; time will tell.
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