Source FactSet Nov 22, 2013
Over the past week, the DJIA closed at a record high value (16009.99), and the final DJIA component (Home Depot) reported earnings for the third quarter. During the third quarter earnings season, some companies in the DJIA specifically commented on the difficult conditions they faced in Europe during the quarter. Other companies, however, stated that conditions had improved in Europe relative to recent quarters. In terms of revenue growth from Europe, what did companies in the DJIA report for numbers for the third quarter? Overall, eleven of the 30 companies in the DJIA provided revenue growth numbers for Europe for the third quarter. Of these eleven companies, eight reported a year-over-year increase in revenues. This marked a significant improvement relative to the previous quarter (3). In fact, this was the highest number of DJIA companies to report sales growth in Europe since Q4 2011 (9).
Of the 486 companies in the S&P 500 that have reported earnings to date for the quarter, 73% have reported earnings above estimates. This percentage is equal to the average of 73% recorded over the past four years. In terms of revenue, 52% of companies have reported sales above estimates. This percentage is below the average of 59% recorded over the past four years. In aggregate, companies are reporting earnings that are 1.7% above the mean EPS estimate. This percentage is also well below the average of +6.5% over the past four years. If this is the final surprise percentage for the quarter, it will mark the lowest surprise percentage since Q4 2008.
The blended earnings growth rate for the S&P 500 overall for Q3 2013 is 3.4% this week, unchanged from last week’s growth rate of 3.4%. Upside earnings surprises reported by Deere & Company and Home Depot were offset by downside earnings surprises reported by Campbell Soup, Target, And J. C. Penney during the week. On September 30, the Q3 earnings growth rate for the index was 2.8%. Eight sectors have seen an increase in earnings growth since the end of the quarter, led by the Information Technology and Materials sectors. Only two sectors have witnessed a decline in earnings growth rates since that date: Financials and Energy.
The blended earnings growth rate for the quarter is 3.4%. Eight of the ten sectors are reporting an earnings increase for the quarter, led by the Consumer Discretionary (9.8%), Materials (9.0%), and Information Technology (8.5%) sectors. On the other hand, the Energy (-8.2%) and Financials (-0.2%) sectors have the lowest earnings growth rates for the quarter. The blended revenue growth rate for the index for Q3 is 2.9%, up from an estimate of 2.7% at the end of the third quarter.
The “peak” weeks of the third quarter earnings season are now finished. During the upcoming week, five S&P 500 companies are scheduled to report earnings for the third quarter.
Read more about the earnings trends of the S&P 500 in this week’s edition of FactSet Earnings Insight. Visitwww.factset.com/earningsinsight to launch the latest report.
Posted in Interesting Facts
Tagged blended earnings growth rate, blended revenue growth rate, Campbell soup, Consumer Discretionary, DJIA, earnings, factset, HomeDepot HD, INDEX, jc penny, JCP, Q3 2013, Q3 2014, ron reuven, S&P, target
A tale of two Europes: The UK economy surges ahead while the rest of Europe falls behind
By Sara Potter, VP, Markets Analysis - Nov 20, 2013 - FACTSET
Many global market players were caught off guard earlier this month when the European Central Bank (ECB) cut its main policy interest rate to 0.25% from 0.50%. The move came on the heels of the release of the region’s lowest monthly inflation figures since 2009; in October, prices rose by just 0.7%, well below the ECBs target inflation rate of 2.0% and raising the specter of deflation.
The rate cut had been anticipated by many observers; however, it was the swiftness of the action that caught so many off guard. The quick move appeared to be justified a few days later when the Eurozone third quarter GDP numbers were released: Eurozone GDP grew by just 0.1% from the prior quarter, a significant slowdown from the 0.3% growth seen in the second quarter. Within the disappointing overall number were weak performances by the Eurozone’s two largest economies: German growth dipped from 0.7% to 0.3%, while France’s economy contracted by 0.1% in the third quarter.
The weakness in the French economy is particularly concerning for the region. Earlier this month, the ratings agency, Standard & Poor’s (S&P), downgraded France from AA+ to AA; this downgrade comes less than two years after France lost its coveted AAA rating in January 2012. S&P cited the fact that persistent high unemployment is eroding support for the fiscal and structural policy reforms the economy desperately needs in order to stimulate growth.
In contrast to the persistent economic weakness on the European continent, recent signs of economic strength in the UK have raised speculation that the Bank of England (BOE) will have to raise interest rates sooner than expected. For some time, the BOE has had its hands tied by persistent high inflation accompanied by sluggish economic growth and high unemployment. Last August, the BOE announced that monetary policy would be influenced by the level of unemployment as well as the rate of inflation. In recent months, both indicators have been falling faster than anticipated: the unemployment rate has now fallen to 7.6%, its lowest level in four and a half years, while year-over-year price inflation came in at 2.2% in October, just slightly above the BOE’s target rate of 2.0%.
This has brought the Misery Index, the sum of the inflation rate and unemployment rate, down sharply from where it peaked two years ago. The index still remains high compared to the decade from 1997 to 2007 when most of the developed world was enjoying record low inflation accompanied by low unemployment rates; however, the current index level is well below its 40-year average. This is a positive for UK consumers, whose increased spending has been a bright spot for the economy over the last several quarters.
As a result, UK GDP growth has been solid this year. The economy showed quarter-over-quarter growth of 0.8% in the third quarter, following 0.7% growth in the previous quarter. In fact, the OECD announced this week that based on that quarterly growth rate, the UK is the fastest growing country in the developed world. With the Eurozone’s second and third largest economies, France and Italy, both contracting in the third quarter, the paths of the two Europes continue to diverge.
By Sara Potter, VP, Markets Analysis - Nov 20, 2013 – FACTSET
To view article click here: http://www.factset.com/insight/2013/11/econ-insight-europe?referrer=E-mail&email=Ron@Reuvencapital.Com&domain=economics#.Uo46ErQo74g
Posted in In My Opinion...
Tagged bank of england, central bank, ecb, europe, european central bank, eurozone, french economy, GDP, germany, global market, misery index, policy rates, s&p downgraded france, target inflation rates, uk, uk consumers
For any new or veteran investor in the market, this is a great read introduction to behavioral finance. At bubbly times like today, where it’s widely accepted for companies to trade at 10, 20 and even 75 times projected revenues, investors should be reminded of the principals we were supposed to learn some 10 years ago.
Here are a few excerpts from this very interesting 13 pg white paper on investing behavior basic theories – behavioral finance. The paper was written by Jay R. Ritter – Cordell Professor of Finance – University of Florida and published by Pacific-Basin Finance Journal Vol. 11, No. 4, (September 2003) pp. 429-437
People are overconfident about their abilities. Entrepreneurs are especially likely to be overconfident. Overconfidence manifests itself in a number of ways. One example is too little diversification, because of a tendency to invest too much in what one is familiar with. Thus, people invest in local companies, even though this is bad from a diversification viewpoint because their real estate (the house they own) is tied to the company’s fortunes. Think of auto industry employees in Detroit, construction industry employees in Hong Kong or Tokyo, or computer hardware engineers in Silicon Valley. People invest way too much in the stock of the company that they work for.
People sometimes separate decisions that should, in principle, be combined. For example, many people have a household budget for food, and a household budget for entertaining. At home, where the food budget is present, they will not eat lobster or shrimp because they are much more expensive than a fish casserole. But in a restaurant, they will order lobster and shrimp even though the cost is much higher than a simple fish dinner. If they instead ate lobster and shrimp at home, and the simple fish in a restaurant, they could save money. But because they are thinking separately about restaurant meals and food at home, they choose to limit their food at home.
To view the full white paper click here: http://bear.warrington.ufl.edu/RITTER/publ_papers/Behavioral%20Finance.pdf
Posted in In My Opinion..., Interesting Facts
Tagged behavioral finance, cordell university, diversification, emotional investing, entrepreneurs, human emotions and investing errors, Jay R. Ritter - Cordell Professor of Finance, pacific-basin finance journal, university of florida, value investing, yaron reuven
For those who jumped on the bandwagon of tablets replacing, or better yet ending the age of Personal Computers, here’s some interesting insight from industry insiders who disagree. I love my iPad as much as the next person, but to say it will because the workstation for the corporate is not possible under the current circumstances. Aside from tablets not being powerful enough to really take on the workload, the most practical reason why they don’t work for a full time replacement is that they’re just too small. I believe that ultimately the PC (notebook and desktop) will inevitably adapt by adopting the unique features of the tablets such as app based software, a real touchscreen, and mobility. The latter being executed by connecting a tablet to some type of exclusive peer to peer network between the two devices that would replicate the PC.
Tablets unable to replace notebooks, says Quanta chairman
Aaron Lee, Taipei; Joseph Tsai, DIGITIMES [Monday 18 November 2013]
While global notebook sales in 2013 are expected to significantly decrease on year mainly due to fast growing demand for tablets, it is impossible for tablets to replace notebooks because notebooks are a tool used for work, Quanta Computer chairman Barry Lam said at a November 14 investors conference, adding that 2014 global notebook shipments will drop slightly on year.
Commenting on rumors that Samsung and Apple are considering large-size tablets, and Quanta would be the ODM for Apple’s large-size tablet, Quanta vice chairman CC Leung refused to talk about the company’s clients and only pointed out that if tablet display sizes become too large, prices will be similar to those of notebooks, reducing their appeal to consumers.
Leung also noted that Quanta’s notebook orders are mostly for 14- and 15-inch models, showing that consumers still prefer larger displays for work and browsing. However, the larger the display, the higher costs are, and touchscreen notebooks are also having similar issues because touch panels greatly increased costs, pushing consumers away.
As for wearable devices, Leung pointed out that many brand vendors are eager to try the new industry, but so far there is no killer application and most available products on the market are still expensive. Unless prices can drop to a more friendly level, they are unlikely to attract consumers.
TomTom, which is aggressively trying to enter the wearable device market is a client of Quanta, some market watchers pointed out.
To view full article click here: http://www.digitimes.com/news/a20131115PD207.html?mod=2
Posted in In My Opinion...
Tagged apple, barry lam, cc leung, digitimes, global notebook sales, hedge fund, odm, quanta, Reuven Capital investments, ron reuven, samsung, table vs notebook, tablet replacing notebook, tablets, tomtom, wearable device