Thursday, March 11th, 2010

Daily Download: Stock Investing News & Analysis for 2-4-10

February 4th, 2010 at 7:24 am by CB | No Comments

Good morning, investors and traders! You are reading the Daily Download (”Daily DL”), which includes summaries and links to the day’s selected economic and stock investing news. The Daily DL is maintained by Chain Bridge Investing (“CB”), which is a financial blog at www.chainbridgeinvesting.com. Chain Bridge Investing is constantly improving and adding new financial and investing content to the website. Please let us know if you have any suggestions at the following email address: .

General News & Headlines Summary

CB: Remember that below the summaries are a list of interesting links. For the time being, the additional headlines section has been removed as CB contemplates ways to maintain the quality of future Daily DLs, while making its production more efficient.

Briefly, a bit of interesting news occurred today when Bill Ackman, the founder of Perishing Square Capital, stated his belief that the shares of Borders Group represented a more attractive risk/reward ratio than Barnes & Noble. Ackman believes that the bankruptcy potential of Borders Group is low. Consequently, the shares of Borders Group, which Pershing Square Capital holds a position of 17% ownership and has loaned the company $42.5 million, increased 38.3% for the day. That’s a very profitable way of talking your book and an advantage most investors do not have. This incident also points out the degree of trust people are willing to put in one investor’s words without doing any additional due diligence.

Upcoming Economic Data for the Day (all times EST)

6:00 AM Monster Employment Index

8:30 AM Jobless Claims

8:30 AM Productivity and Costs

10:00 AM Factory Orders

10:30 AM EIA Natural Gas Report

4:30 PM Fed Balance Sheet

4:30 PM Money Supply

Initial Public Offerings (”IPOs”) for the Week of February 1- 5, 2010

2/2/10 Film Department Hldgs LLC (“TFDI”) – Motion picture finishing and production company.

2/2/10 FriendFinder Networks (“FFN”) – Internet based social networking company.

2/2/10 Patriot Risk Management (“PMG”) – Insurance management company.

2/2/10 Imperial Capital Group (“ICG”) – Independent, full-service investment bank.

2/2/10 Ironwood BioPharm (“IRWD”) – Pharmaceutical company.

Data from the WSJ Market Data Group

For Daily Market Performance Data, Please Visit the Daily Market Sheet

News

Tech Spending Bounces Back as Profits Rise – The Wall Street Journal

Summary: According to the Commerce Department, business spending on equipment and software increased at a 13.3% annual rate in the fourth quarter, the largest increase since 2006. Yet, this spending remains18.5% below the 2007 levels. Corporate profits may continue to fuel capital expenditure expansion. With 255 S&P 500 companies having reported earnings for the fourth quarter of 2009, corporate profits have increased 47% from a year ago, excluding financial service companies. Meanwhile, sales growth was 3.8%, excluding financial-services. Cisco’s John Chambers, the chief executive, announced that the economy has entered a new “phase of recovery.” He believes his company’s improved operating results is a result of experienced increased growth across Cisco’s various product lines. Cisco’s improved results follow the improved results of other tech companies such as Sybase and Intel. Nevertheless, beyond the tech sector, capital spending remains depressed with declining orders.

CB: It’s always fun the attention John Chambers gets when he signals his economic stance to the markets. He does have a good track record, but again his insights are limited to the technology sector. Technology spending may be the only capital spending being pushed at this time.

Investment Dollars Flow to Green Energy Start-Ups – The Wall Street Journal

Summary: During the third quarter of 2009, 19% of venture capital investment was directed into clean energy, which was second to biotechnology. This clean energy investing is driven by: (1) a desire to reduce and control greenhouse gas emissions, (2) renovate an old power systems; and (3) continue to find and expand domestic sources of energy. The following are some clean energy sectors and their public companies:

(1) Energy Efficiency. This sector attempts to utilize technology to minimize energy consumption. Investors and venture capitalists tend to prefer these companies due to their perceived shorter path to profitability. Two companies mentioned that are publicly traded were Cree, a LED manufacturer, and EnerNOC, an energy management firm.

(2) Solar. Some believe that solar is ready to rapidly expand, but it faces two large headwinds: (a) oversupply of panels, which is forcing prices down and hurting profitability, and (b) a reduction in government cutbacks.

(3) Smart Grid. Focused on the improvement of electricity-delivery and management systems.

(4) Wind. Wind energy is the most mature of the renewable energy sources.

(5) Transport. Electric cars and electric batteries.

(6) Biofuels. Focused on turning plants and waste into liquid fuel, with the drops in the price of oil can gas, demand for this sector has declined recently.

U.S. Builders Set for Consolidation – The Financial Times

Summary: Since the housing crisis began, homebuilders have reduced the land they hold on their balance sheets. For instance, the average number of years of land supply that the nation’s 12 largest builders hold has dropped from eight years in 2008 to five years currently. Homebuilders will require additional land in order to create future growth. Yet, in the near term builders may need to acquire land that can be quickly converted into ready to sell homes to prepare for an unexpected surge in consumer demand. As a result, there may be consolidation in the homebuilding industry in 2010 in order to prepare for a possible surge of consumer demand. Some believe that when demand returns to the market, the rebuilding pressure will be greater than in other economies even with continued downward pressure on home prices.

Service Sectors are Growing as Job Losses Slow – The New York Times

Summary: According to the Institute for Supply Management (“ISM”), the service sector index increased, while failing to meet expectations, to 50.5 in January from 49.8 in December. The service sector is having troubles growing due to continued low activity levels in construction and retail. This slow growth is also demonstrated by the fact that only four of the 18 service sectors grew. Yet, new orders activity increased in January. Separately, ADP reported that 22,000 private nonfarm jobs were eliminated last month.

CB: Perhaps the large disconnect between the service sector index and the manufacturing index, which was reported on Monday, is due to the large inventory restocking that accounted for a majority portion of the GDP growth number released last Friday. The decrease may also be related to increase dependence on outsourcing.

The following are some thoughts respondents wrote in their replies to the ISM survey:

“Business is better, but not robust.” (Agriculture, Forestry, Fishing & Hunting)

“Some client capital spend plans have been delayed until 2nd or 3rd quarter.” (Professional, Scientific & Technical Services)

“Outstanding production month, highest since March 2009, but still lower than December 2008.” (Wholesale Trade)

“Commodity prices are starting to rise. We will be trying to mitigate inflationary price trends through longer contracts and value engineering.” (Accommodation & Food Services)

“Improving outlook.” (Educational Services)

“The recent unexpected rise in fuel prices, with no apparent justification, is cause for concern.” (Public Administration)

More Links of Note

Revenue Beat Rate This Earnings Season – Bespoke

Baltic Dry Index Continues to Drop – Bespoke

Mutual Fund Flows Support a Bullish Thesis – PragCap

Previewing the Jobs Report – PragCap

Stocks Plunge Risk at Highest Since April 1984, Survey Finds – Bloomberg

Jim Chanos Still Bearish on China, Talks Malinvestment – CreditWritedowns

Hedge Fund Panel: Case for Global Equities – MarketFolly

Outside the Box with John Mauldin

Poof: Another 800,000 Jobs Disappear – CNNMoney

Bull Market Can’t Last if You Mind the Gap – Bloomberg