Thursday, 27 January 2011

Some Thoughts on the Fed From Fellow Traders

Fed, Bernanke, Obama, Geither are the worst scum bags alive, and will go down in US history 50 yrs from now when we'r 3rd world

No..They are crooks. Look at 06-07 when gas, housing everything was inflation. Rinse and repeat.

Wednesday, 26 January 2011

Recovery ? The Jobless Recovery

Yahoo -  Chief executive Carol Bartz last night said the company would let a further 1% of its 14,000 staff go, just weeks after announcing 4% of cuts.

Chief Executive Officer Ursula Burns is also reducing costs, including 5000 job cuts announced last year to save the company about $140 million.

Disney has announced more job cuts as they make their strategic move away from developing console games.

With some top state leaders warning that Texas’ dire fiscal situation will lead to the loss of several thousand state jobs, House budget writers will release their first draft budget today — and big job cuts may be just the beginning. Lt. Gov. David Dewhurst went a step further last week and put a number to the cuts, announcing that 8,000 state jobs could be eliminated.

American Express fell 2.5 percent after announcing job cuts.

Tuesday, 25 January 2011

Buy the Dip ?

Very true with the current money printing machine going into overdrive.

Printing Money May Help America

The quantitative easing (printing money) has effectively been used to devalue the dollar, not quite sure if has achieved it yet, but it will given the amount of debt that the US is sitting on.  This could potentially back fire on Bernanke.

Im not entirely sure what the net value of food or fuel imports is into the US.  But although US goods will be cheaper to the rest of the world, the cost of importing food items and fuel into the States could rise significantly.

The impact of this could be a reduction in fat people across America, which will certainly help the health care costs.

The other impact could be the reduction in America's disposable household income.  This could have significant issues for the American economy in the medium term.   

Update on Foot Locker

I posted some analysis on Foot Locker earlier.  Granted my timing was out a little.  However the share price is now $18.04.  My shorts started around $18.34 with full position at $19.00.  I'm still in a small loss on this trade and will now exit as it has come down from the highs at $19.77.   

Hopefully my timing on Columbia sports where here will do better as I think this is at its top of its range. 

Columbia Sportswear Company (COLM)

Results are out 28th January 2010 - after markets close.

PE Ratio is around 28.  This is high compared to say Nike which has a PE ratio of 19.  Market capitalisation stands at around $2bn

Last quarter COLM fell significantly after results.   Estimates are around $436m for the current quarter with earnings of 0.64c.  This would bring the current year earnings to around 2.14 or a PE of 28 based on current share price.  Next years earnings are expected to grow to 2.64 !.   Thats a 23% growth in earnings (50c).  Revenues are expected to grow from $1.49bn to $1.59bn around $100m.  Such a small increase in revenues is hardly representative of the PE attached to this company.

These numbers dont really add up as gross profit margins are around 42%.  So adding $100m to revenue would result in $42m in gross income.   It would require $17m profit to the bottom line after tax in order to get the 50c increase in the EPS.    This would imply no SG&A increases in the next year. Highly unlikely.

Given margin pressure, the cost of transport, raw materials, it is unlikely that the margins will stay the same next year.  Also the increasing move towards the Internet and vast reduction of independent sportswear retailers will add margin pressure.   Dealing with larger companies always means margin pressure.

The austerity measures in Europe have hardly started to kick in which will also impact gross margins for Columbia and its independent retailers.  Particularly with the recent sales tax increases which will make goods seem even more expensive.

Given the last earnings release Columbia has outperformed the market and peers.
Even if the results are good the upside is limited as this company is hardly a $LULU.

Im shorting into earnings at around $61.

Cramer 23-December 2010 "Cramer said Columbia is still an exciting story, but after the stock's recent run up, and the disappointing earnings from Nike, he'd only be a buyer of Columbia on a pullback."

About Me

I try and work a broadly market neutral strategy and based purely on fundamentals and my gut feel.