Lemley Yarling Management Co
309 W Johnson Street
Madison, WI 53703
Bud: 312-925-5248 Kathy: 630-323-8422
Comments on activity in client accounts
27 November 2015
Too much holiday Turkey and a short day Friday caused us to post this week's message a day late.
Our stocks meandered during the week and the constant talking head chatter about how any folks were shopping added spark to our retailers. During the week we added to The Gap; repurchased a small amount of Joy Manufacturing and U.S. Steel in larger accounts; sold Affimed for a plus scratch and bought an equal number of Sprint shares with the proceeds. We also added Twitter and sold Deere when it popped $5.
We are now just adjusting around the edges and are content with our exposure.
News this week:
Activist investor Elliott Management Corp. has taken a 6.4% stake in aluminum producer Alcoa Inc., saying it believes shares of the company are "dramatically undervalued."
Shares of Alcoa, which have declined more than 40% so far this year, rose 5% to $9.12 in early trading on Monday.
Elliott also threw its weight behind Alcoa's planned spinoff transaction announced at the end of September, saying it will create value substantially above the current share price. But Elliott said it wants to talk with the Alcoa board and management regarding the split and other available opportunities.
Alcoa representatives didn't immediately respond to a request for comment.
20 November 2015
During the week we sold AT&T for a plus scratch to replace cash we spent. We also took a small loss on Newmont for the same reason. We doubled our position in Urban when it dropped on earnings news that we considered positive but the Street viewed negatively. We also added to QUALCOMM and bought CAT and Deere in a few large accounts.
We currently own: Whole Foods and Sprouts; Deutsch Bank; Abercrombie and Urban Outfitters; Alcoa and Hecla; QUALCOMM, VMware, 3D and Symantec; Affimed; Oil ETF (XOP) and Marathon; and GM common and B warrants.
We expect a rally to renew into year end. Happy thanksgiving
News and Stuff:
Abercrombie & Fitch shares are flying 16.52% to $22.17 in pre-market trading on Friday after the apparel retailer earlier this morning delivered better-than-expected third quarter 2015 financial data.
For the latest quarter ended October 31, the company earned 48 cents a share on $878.6 million in revenue.
Wall Street had forecast the company to deliver 22 cents a share on revenue of $863 million.
In the same period the year prior, the company earned 42 cents a share on $911.5 million in revenue.
The Street's Jim Cramer, Portfolio Manager of the Action Alerts PLUS Charitable Trust Portfolio commented on Abercrombie & Fitch's earnings saying: "This Company's been ramping ever since they fired Mike Jefferies--good trajectory even without a CEO."
Along with the earnings release, Executive Chairman Arthur Martinez stated, "Our third quarter results exceeded our expectations coming into the quarter and provide the strongest validation yet that our initiatives are working."
While currency fluctuations had a negative impact on financial figures, overall, the company's results were helped by initiatives to have fewer discounted items on sale, the Wall Street Journal reports.
Comparable store sales were also better than estimates in the U.S. and internationally, declining 3% year-over-year and rising 1%, respectively. Analysts had thought comp sales would fall 4% in the U.S. and drop 10% abroad.
For the first time since January 2012, sales at Hollister were up 3% year-over-year.
QUALCOMM, Inc. plummeted more than 9.4 percent on Wednesday following news of a new Korean antitrust probe of the company. The decline leaves shares down 33.9 percent in 2015, but Bank of America analyst Tal Liana sees plenty of value to the stock at current levels.
According to Liana, Qualcomm investors have nothing to fear from the Korean probe. He points out that, regardless of the outcome of the probe, the Korean market accounts for only about 0.6 percent of the company's global unit market. More importantly, the US is not currently pursuing any antitrust actions against Qualcomm. Qualcomm has long been rumored to potentially split its Qualcomm Technology Licensing (QTL) business from its Qualcomm CDMA Technologies (QCT) business. Liana feels that breaking down the valuations of both segments reveals just how much value is currently stored in Qualcomm's stock. Bank of America's valuation model, which includes an assumption that royalty rates over the next decade will decline from 3.1 percent to 2.2 percent, values QTL at $35-39 per share. Using Intel Corporation PE of 12x and Bank of America's $1.50 per share annual earnings estimate for QCT, the firm derived a sum-of-the-parts valuation for Qualcomm of $65.
"We believe fair value is even higher and maintain our $75 PO," Liana added. In addition to an attractive valuation, Bank of America sees the potential for new deals in China, continued cost-cutting and strong traction for the company's SD820 chip as potential positive catalysts ahead for Qualcomm. The firm maintains its Buy rating and believes investors should be loading up after the 2015 dips.
Read more: http://www.benzinga.com/analyst-ratings/analyst-color/15/11/5991964/does-qualcomms-break-up-value-hint-at-massive-upside#ixzz3ry2vOKsN
Company Earnings Comment:
Urban Outfitters, Inc. a leading lifestyle specialty retail company operating under the Anthropologie, Bhldn, Free People, Terrain and Urban Outfitters brands, today announced net income of $52 million and $152 million for the three and nine months ended October 31, 2015, respectively. Earnings per diluted share were $0.42 and $1.18 for the three and nine months ended October 31, 2015, respectively.
Total Company net sales for the third quarter of fiscal 2016 increased 1% over the same quarter last year to a record $825 million. Comparable Retail segment net sales, which include our comparable direct-to-consumer channel, increased 1%. Comparable Retail segment net sales increased 3% at Free People and 1% at Urban Outfitters, while the Anthropologie Group was flat. Wholesale segment net sales declined 5% due to shipment delays at our new distribution facility in Gap, Pennsylvania.
"I am pleased we delivered sales, margin and profit growth in the third quarter despite weaker customer traffic," said Richard A. Hayne, Chief Executive Officer. "I believe the strong customer response to expanded category offerings at each brand bodes well for our future growth," finished Mr. Hayne.
Urban Outfitters Inc. stock is getting sliced Tuesday.
The eclectic retailer's stock is down 13%, on track to close at a six-year low, after at least two dozen analysts downgraded their view on the company's shares following Urban Outfitters' third-quarter sales miss and report of "weaker customer traffic."
Downbeat results from Urban Outfitters come after some mall-based retailers, including Macy's Inc. and Nordstrom have recently reported soft third-quarter results in recent days and warned of weakness during the important holiday season.
Dana Telsey, chief executive of Telsey Advisory Group, is one analyst who cut her view on shares of Urban Outfitters after its report. She lowered her rating to "market perform" from "outperform" and reduced her price target to $23 from $40. Still, the new target is 17% above where shares recently traded at $19.66.
"Several unanticipated factors further cloud earnings visibility in our view causing us to reduce our rating," wrote Ms. Telsey.
She noted that fourth-quarter comparables for the retailer are tough, with same-store sales up 6% in the year-ago period. And she said that Urban Outfitters' "aggressive" move into the food industry further shifts management away from its core competency of retail and fashion while "potentially introducing incremental volatility and execution risk."
That's a reference to a deal Urban Outfitters announced Monday morning, when it said it had purchased Philadelphia's Vetri Family group of restaurants, including the popular Pizzeria Vetri. As MoneyBeat pointed out shortly after the news was announced, Urban Outfitters' push into food services is a more radical step than the efforts taken by other retailers to improve results.
After Urban Outfitters' third-quarter results, Brian Tunick, an analyst at RBC Capital Markets, said he too is staying on the sidelines on shares until he sees "signs of top line stabilization." Mr. Tunick also downgraded shares to "sector perform" from "outperform" and cut his price target to $23 from $32.
What Analysts Have to Say About Urban Outfitters After Earnings
By Chris Lange November 17, 2015 10:20 am EST
Urban Outfitters Inc. (NASDAQ: URBN) reported its fiscal third quarter financial results Monday after the markets closed. However, with the harsh environment for most retail stocks, everyone is looking at revenue growth and comparable sales. Unfortunately it does not appear that Urban Outfitters delivered on these. As a result, analysts poured into the stock, updating their ratings and price targets following this miss.
The company posted $0.42 in earnings per share (EPS) on $825.26 million in revenue, which compares to consensus estimates from Thomson Reuters of $0.42 in EPS on $872.00 million in revenue. The same period from the previous year had EPS of $0.35 and revenue of $814.47 million.
Total net sales for the third quarter increased 1% over the same quarter last year, and comparable retail segment net sales, which includes the comparable direct-to-consumer channel, increased 1%.
Credit Suisse adjusted its estimates and lowered its target price to $29 from $38. The firm said:
We are adjusting our fiscal 2016 retail segment comp, revenue and EPS estimates to 1.9%, $3,454 million and $1.72 from 4.2%, $3,545 million and $1.87. Our fiscal 2017 estimates for comp, revenue and EPS go to 3%, $3,669 million and $1.82 from 5.6%, $3,852 million and $2.13. We maintain our Neutral rating, but lower our target price to $29 from $38, reflecting a weighted average of: 1) peer group multiple ($27); 2) a discounted cash flow analysis ($32); and 3) a long-term growth model ($29). Our fiscal 2018 estimates reduce to $2.03 from $2.40.
Wells Fargo has a Market Perform rating for the company and gave its valuation range as $22 to $24, down from the previous $27 to $29. The firm noted that the Urban Outfitters brand has displayed signs of a turnaround, Anthro growth has materially decelerated and it believes that this is too little visibility into top-line trends right now to get constructive on these shares. Despite another positive year at Anthropologie and a solid U.O. business, Wells Fargo remains concerned given upcoming tougher compares, recent product misses at Anthro and low margin visibility.
Merrill Lynch maintained Buy rating but cut its price objective to $36 from $45. In its report, Merrill Lynch said:
Urban Outfitters reported third quarter EPS of $0.42, 2c above our estimate, with sales weakness offset by SG&A. Total company comps rose 1%, versus our +3%. Urban Outfitters acquired Vetri Family Restaurant group in an effort to innovate and drive traffic. We are lowering our fiscal 2016 EPS estimate by 13c to $1.72 to reflect the disappointing start to the fourth quarter, and cutting our Price Objective to $36. The stock is trading at 11.5x our calendar 2016 EPS estimate. We think Urban Outfitters' small store base, high ecommerce penetration and unique retail presentation will make it a secular winner in a difficult environment and we retain our Buy rating.
A few other analysts weighed in on Urban Outfitters after it reported earnings:
Cantor Fitzgerald downgraded the stock to Hold from Buy with a $22 price target.
Stifel has a Buy rating but lowered its price target to $30 from $40.
FBR has a Market Perform rating and lowered its price target to $29 from $32.
RBC Capital downgraded it to Sector Perform from Outperform and lowered its target to $23 from $32.
Wunderlich has a Hold rating but lowered its price target to $22 from $30.
Telsey Advisory Group downgraded it to Market Perform from Outperform and lowered the target to $23 from $40.
Morgan Stanley has an Equal Weight rating and lowered its price target to $31 from $38.
Shares of Urban Outfitters were trading down over 13% to $19.63 Tuesday morning, with a consensus analyst price target of $37.32 and a 52-week trading range of $22.04 to $47.25.
Read more: Analysts Lower Price Targets on Urban Outfitters (NASDAQ: URBN) - 24/7 Wall St. http://247wallst.com/retail/2015/11/17/what-analysts-have-to-say-about-urban-outfitters-after-earnings/#ixzz3rlWpLrr5
Why Urban Outfitters Bought a Pizza Chain
Urban Outfitters Inc. is getting into the pizza business.
The eclectic retailer on Monday morning announced an agreement to acquire Philadelphia's Vetri Family group of restaurants, including the popular Pizzeria Vetri, for an undisclosed price. It's a substantial pivot for the chain, which is among the companies suffering from the slowdown in shopper traffic that has cast a dark cloud over the retail industry.
As Ahead of the Tape's Steven Russolillo noted just before the deal was announced, Urban Outfitters has suffered from many of the same disappointing themes that recently hurt rivals including Macy's Inc. and Nordstrom Inc.JWN -0.37%: Consumers just aren't going to stores and spending as much as they used to. Nordstrom last week specifically cited weak store traffic for its poor results, a trend that Urban Outfitters knows all too well.
While other retail chains are talking about refreshing their brands or ramping up their online efforts to counter the slowdown, Urban Outfitters has a more radical idea in mind. It's going into a business where the economics are actually improving.
(The acquisition comes after Urban Outfitters had already run an experiment where it added restaurants to some stores.)
Urban Outfitters Chief Development Officer Dave Ziel told Philly.com that shoppers are increasingly spending their disposable income on food instead of retail.
"Until they invent actual replicators like on Star Trek, e-commerce is not a threat to the restaurant business," he told the website.
The move comes as Urban Outfitters has seen its stock price lose roughly half its value since March. But investors apparently aren't ready to embrace the new plan—at least not yet. Shares of the company are down 5.3% in mid-morning trading to $23.20.
It's not yet clear if new locations of the pizza chain will have its own storefronts, or be located inside existing Urban Outfitters—or both. Expect Urban Outfitters executives to offer more details on their plans when they host a conference call Monday after the company reports earnings when markets close. But for now, it seems safe to say that Urban Outfitters is keen to continue growing the small chain. In the press release announcing the deal, Urban Outfitters Chief Executive Richard Hayne said there was "tremendous opportunity to expand the Pizzeria Vetri concept."
UPDATE: Analyst Richard Jaffe of Stifel wrote in a note to clients that he believed the the Urban Outfitters experiment to add restaurants to its existing stores had likely been successful in "driving traffic and increasing the amount of time consumers stay in the stores."
"While the potential overlap of the customer base is obvious (URBN shoppers surely like gourmet pizza!), the challenge of operating a new business and successfully integrating it with URBN is not insignificant," Mr. Jaffe wrote,
There's no beating around the bush: 3D printing companies have had a dismal year. However, looking into 2016, investors with a high tolerance for risk looking for a longer-term growth story might be wise to dig into 3D Systems (NYSE:DDD).
With its shares down around 90% from their peak, 3D Systems looks like a mess. Fresh off yet another quarterly EPS and revenue shortfall in the third quarter, 3D Systems put the blame on weakened capital investments and reduced demand across the globe. It's also dealt with supply-chain issues related to the introduction of new products during the last couple of years.
However, there are reasons to believe that 3D Systems could have a much brighter year in 2016. To begin with, the company is seeing growth in its healthcare segment, and it ended the latest quarter with $157.5 million in cash on hand. At the moment, this cash comprises around 15% of the company's valuation, and is acting as extra cushion for the company while it attempts to navigate choppy global demand in non-healthcare industries.
3D Systems also has an exceptionally high level of short interest: 33.8 million shares compared to a float of 106.3 million shares. With the company now trading below book value and well capitalized, it wouldn't take much good news -- say a revenue beat in 2016, or an earnings-accretive acquisition -- to create a possible short squeeze.
Finally, we're talking about a long-term growth story that, at least on paper, seems to make a lot of sense. 3D printing has the ability to lower long-term business expenses across a variety of industries. If 3D Systems can simply demonstrate sales stabilization in 2016, it's possible the stock could see the $20 level once again.
13 November 2015
During the week we repurchased Symantec lower, Cisco slightly lower and also added to Deutsch Bank, Alcoa, Hecla, the SPDR oil, AT&T and Sprint. The markets are again in a funk. The economy is fine; worrying about interest rates is ridiculous, and the holiday season is usually a positive in normal markets. We view the market action of the last few months as normal last quarter activity and thus remain positive in our outlook. We don't like lower portfolio values but sometimes they go with the territory.
We repurchased a few shares of GM and GM warrants this week when Barron's ran an upbeat story on the company for the first time in recent memory. http://finance.yahoo.com/news/general-motors-stock-40-percent-011639380.html
Short sellers are back with a vengeance in retail as the theme for this week was killing the retailers. Macy's disappointed and that began the carnage and our retail stocks were not spared. The article below is typical of the current guru wisdom on why not to own retail. In the article the writer concedes that earnings will be higher as will sales for the quarter and the year but —unfortunately- not high enough and heaven forbid- Urban is conducting sales to eliminate inventory. The folks who run Urban — the Haynes — have been doing it for years and have a large ownership stake. We remain confident in their ability. The potential gain in Abercrombie and Urban make the risk and temper paper losses bearable.
Avoid Urban Outfitters Ahead of Third-Quarter Earnings (L not our thought)
Owing to tepid retail sales and slumping profit margins, shares of specialty retailer Urban Outfitters (URBN - Get Report) have been struggling, down some 17% in just the past three months. At around $27 per share, URBN stock, which Thursday made a new 52-week low of $26.20, has lost some 23% of its value in 2015, including a 33% decline since April. If you've followed my advice and avoided URBN stock in August, you've saved about 15%. Comparatively, URBN stock does seem attractive today, especially at a P/E of 16, which is five points below the S&P 500 (SPX). But the business improvements needed to turn me bullish on this stock have yet to occur.
Headquartered in Philadelphia, Urban Outfitters reports third-quarter 2015 results after the closing bell Monday. Based on declining consensus earnings per share estimates, it would seem analysts lack confidence about the company's direction. And falling estimates are a bad sign for a stock that's already trading near its 52-week low.
For the quarter that ended in October, the analysts' average estimate calls for earnings of 43 cents a share on revenue of $872.8 million, compared to the year-ago quarter, when the company earned 35 cents a share on revenue of $814 million. At the start of the quarter, the forecast EPS number was at 45 cents. Now, the currently forecast 23% increase in earnings might still seem impressive. But the metrics to deliver those earnings are on the decline.
In the second quarter, for instance, despite a 7% increase in revenue (which missed Wall Street's estimates), Urban Outfitters' gross profit rate declined 70 basis points to 36.7%. This led to a 60 basis point decline in net income, reaching 7.7%. Combine these metrics with a 30 basis point increase in expenses; the picture they paint is of a company still suffering from inefficiencies in its operation.
And here's the thing: In the second quarter, revenue for its wholesale segment surged 21%. This increase, which grew three percentage points faster than in the first quarter, suggests Urban Outfitters resorted to aggressive discounting to move merchandise. But even then, total inventory still grew by over 7%, implying that those discounting strategies -- combined with higher marketing expenses -- didn't yield the results the company had hoped for, given that second-quarter revenue still missed analysts' projections.
I expect more of the same for the third quarter. Urban Outfitters, which competes with the likes of Forever 21 and H&M -- two chains that have quickly grown in popularity among millennials -- wants to grow market share. To do so, it has had to sacrifice profit margins, which has led to its stock being punished. Until profit margins and revenue begin trending in the right direction, the stock -- despite its consensus hold rating -- should be avoided. http://www.thestreet.com/story/13363269/1/avoid-urban-outfitters-ahead-of-third-quarter-earnings.html?puc=yahoo&cm_ven=YAHOO
This company posted very solid third-quarter numbers, and many on Wall Street think the fourth quarter will be good as well. AT&T Inc. (NYSE: T) is clearly one of the most ignored dividend plays on Wall Street. In fact, AT&T continues to be one of the most under-owned securities by active fund managers. Trading at a very cheap 12.07 times estimated 2016 earnings, AT&T continues to expand its user base, and strong product introductions from smartphone vendors have not only driven traffic, but increased device financing plans, an area that many on Wall Street believe could lead to some earnings weakness.
AT&T posted outstanding third-quarter results last week and reiterated 2015 guidance for double-digit revenue growth and continued consolidated margin expansion. Management expects capital spending to increase sequentially and estimates that free cash flow could be better than $4.5 billion. Third-quarter wireless subscriber additions came in higher than many Wall Street estimates, and DirecTV saw positive video additions where many expected losses.
AT&T investors receive an outstanding 5.57% dividend. The Jefferies price target for the stock is $40, and the Thomson/First Call consensus estimate is $36.96. Shares closed Monday at $32.84.
Read more: VMware Removed From Jefferies Franchise Picks List (NYSE: VMW) - 24/7 Wall St. http://247wallst.com/investing/2015/11/10/top-technology-stock-removed-from-jefferies-franchise-picks-list/#ixzz3r6dT4cof
The Daily Fantasy Nightmare Is Here Because the NFL Made It So
6 November 2015
The economy added 272,000 jobs and the jobless rate is 5%. Average hourly earning's gained 0.2%. August and September job gains were also revised upward. The U6 jobless rate (http://www.macrotrends.net/1377/u6-unemployment-rate ) is under 10% after being almost 20% in the depths of the crisis. Bad news- yes- because the Fed will probably raise interest rates from 0% to 0.25%. Woe is us--Obama surely is to blame :).
We did more portfolios adjusting this week selling a few stocks ahead of earnings.
We sold Marathon for a gain the day before earnings and bought back two days later $1, 40 per share lower. We knew earnings would be bad and hoped to get lucky- which we did.
We thought of selling 3D before earning's because we guessed the report would be bad- and it was. But we didn't sell but when the share price popped up 12% after the disappointing earnings we said thank you and took a much smaller loss. We may revisit DDD before year end at a lower price.
This news report Wednesday when shares were up:
Shares of 3D Systems traded significantly higher after it reported its third-quarter earnings Wednesday morning. During Wednesday's trading session, 3D Systems' stock traded in a wide range, but it finished the day about 10% higher.
Or this news Thursday when shares were down what they were up the day before:
3D Systems Corp. -9.49% shares slumped on Thursday after the 3D printer company reported disappointing quarterly results. 3D Systems late Wednesday posted third-quarter adjusted earnings of a penny a share, below the 8 cents a share forecast by analysts in a FactSet survey. Revenue also fell short of expectations at $151.6 million versus a consensus estimate of $181 million. The company blamed "challenging market conditions" for its poor financial performance. Shares of 3D Systems were down 8.2% to $10.55.
We also sold Symantec ahead of and will wait for it to retreat to a lower level after in line earnings.
We added Sprint at $4.50 when it dropped on a terrible report. We have been in and out of these shares for the past few years for mostly a wash. Softbank, which owns 82%, has been steadily purchasing more shares in the open market when they drop adding 170 million to ownership in the last six months. We are taking our cue from them.
We eliminated the balance of our biotech stocks except AFMD and realized a scratch profit on the exercise.
We sold Old Second again for a 12% profit and added Newmont Mining twice. It is selling below book and on its 10 year low.
Newmont Mining Corp (NYSE:NEM) continues to deal with low commodity prices. However, the third quarter proved it's handling the gold price trough in stride. In fact, it's even looking to expand its operations.
Read More at
Whole Foods dropped then moved back to even on Thursday and Sprouts jumped 15% the same day when both reported earnings. We believe in both and added to the WFM on the pullback. The analysts who loved Whole Foods at $60 and Sprouts at $35 don't want to own them at $30 and $20 respectively. Go figure. (more below)
PHOENIX (AP) _ Sprouts Farmers Market Inc. (SFM) on Thursday reported third-quarter earnings of $32 million.
On a per-share basis, the Phoenix-based company said it had profit of 21 cents.
The results beat Wall Street expectations. The average estimate of 12 analysts surveyed by Zacks Investment Research was for earnings of 19 cents per share.
The natural and organic food retailer posted revenue of $903.1 million in the period, also beating Street forecasts. Five analysts surveyed by Zacks expected $901.6 million.
Sprouts Farmers expects full-year earnings in the range of 83 cents to 84 cents per share.
One not so good:
Sale at Whole Foods—Oops!!
Disappointment 2015 continued for natural foods grocer Whole Foods Market as it reported higher fiscal-fourth-quarter revenue but lower profit after the markets closed on Wednesday. The company's top line grew 5.6% to $3.4 billion. Yet net income declined versus the prior year by 56% to $58 million. Earnings per share decreased by roughly the same percentage to $0.16 per diluted share, in comparison to the $0.35 earned in Q4 2014.
Read More at: The Motley Fool.
QUALCOMM dropped $10 on revenue news (see below) and we purchased a small amount in a few accounts.
From WSJ via Yahoo:
Nearly every wireless phone sold in the world generates revenue for Qualcomm. At least, that's how it's supposed to work.
As the key inventor of the technology that connects most of today's wireless handsets to mobile networks, Qualcomm draws a royalty on nearly every sale of those devices—even those that don't employ the company's chipsets. And that royalty is key to Qualcomm's business model, accounting for more than two-thirds of adjusted earnings before taxes over the past five years.
So it is especially painful when that model comes under strain. Late Wednesday, Qualcomm reported licensing revenue for the fiscal fourth quarter ended Sept. 27 was down 1% versus a year earlier. Analysts were expecting a 10% gain.
That disappointment offset a positive surprise in the company's chipset business, and sparked a new selloff in Qualcomm's stock. It is now down 30% for the year.
The problems for Qualcomm's licensing business first appeared last year. Chinese handset makers—emboldened by their government's probe into the company's royalty rates—have been either underreporting sales of devices or withholding royalty payments, or some combination of both.
Qualcomm officially settled the matter with the Chinese government back in February, but negotiating new deals with handset makers in the country has proven slower than expected. That has clouded the licensing business.
For fiscal 2015, the gap between global sales of royalty-bearing devices and sales of devices Qualcomm is actually collecting royalties on widened to 10%. That compared with 4% last year.
While royalties from licensing make up less than one-third of Qualcomm's total revenue, they have an outsized bottom-line impact. And the pain doesn't look like it is ending anytime soon. The midpoint of the company's guidance range for licensing revenue in fiscal 2016 implies a 4% year-over-year decline.
That would be the first full-year drop in this segment since fiscal 2009, when Nokia suspended royalty payments to Qualcomm over a patent dispute. That was eventually settled.
That last point offers some encouragement that the company's latest pain may also be temporary. In fact, Qualcomm signed a new license with major Chinese handset maker ZTE earlier this week. And the stock has never been cheaper: Its multiple of forward earnings is at a 43% discount to the Nasdaq Composite.
But a cheap valuation and chunky dividend yield only goes so far. Qualcomm will need to show further progress with other Chinese handset makers and some proof royalty rates there won't be seriously eroded.
Any clarity there should get the stock out of the doghouse.
It's takeover time now that stocks are selling at all time highs and interest in bitcoin has resurfaced. Maybe the takeovers should use bitcoins for the transaction. Since bitcoin moves 25% in value some days, Bitcoin would add another volatile variable to the for the computer jocks and jockesses who trade takeover stocks. Greater Fools and all that. more on bitcoins: http://www.nytimes.com/2015/11/05/business/dealbook/value-of-bitcoin-surges-emerging-from-a-lull-in-interest.html?hpw&rref=technology&action=click&pgtype=Homepage&module=well-region®ion=bottom-well&WT.nav=bottom-well
Heads they win tails you lose:
What would you say is a fair amount to pay a savvy, sophisticated hedge fund manager for taking a pile of your money and making it smaller?
Most hedge fund managers are paid both a percentage of the profits they make from investing your money, and a percentage of the total assets that they manage each year. If you are able to quickly grasp the fact that this arrangement enables hedge fund managers to get paid a lot of money each year just for having a lot of money to invest even if they lose money for their investors, then you may "have what it takes" to be a hedge fund manager, or small-time con man, depending upon the circumstances of your birth.
According to a new story in Chief Investment Officer magazine, the hedge fund industry as a whole lost about 1.6% in the year ending in September. What, do you think, would be a "fair" average compensation for these money management wizards? I would suggest that given the exorbitant amounts that hedge fund managers can make in good years, in years that hedge funds lose their investors' money, a fair payment for them would be $0. (Even if this were the case I assure you we would still have thousands and thousands of people desperate to be hedge fund managers!)
In fact, though, CIO reports that "Annual compensation for managers of mid-sized portfolios—including base salary and estimated year-end bonuses—was projected to average $950,000, a decline of 8% to 11%." To be clear, these are not the big hedge fund managers, who make much more; these are just the goons managing a few billion, essentially the struggling middle class of hedge fund workers.
A million bucks a year to lose money. From Wall Street to Main Street, everyone is struggling these days.
In the same vein as above the house always wins. Goldman and the other major investment banks encourage CEOs to borrow money against their shareholding so they don't have to sell and pay taxes to obtain money to spend on their lavish lifestyles. It all works until it doesn't. The story of the Valeant CEO below was repeated many times in the 2009 Crash.
Valeant Pharmaceuticals International, Inc. (NYSE: VRX) (TSX: VRX) stated today that 1,297,399 shares pledged to Goldman Sachs to secure loans made to chairman and chief executive officer J. Michael Pearson were sold by Goldman Sachs on November 5, 2015. Goldman Sachs held the shares as collateral for loans extended to Pearson.
As disclosed in the company's proxy statement filed on April 22, 2014, the company's board permitted Pearson to pledge approximately two million shares. As of the company's most recent proxy statement, filed April 9, 2015, those shares represent approximately 20.19% of his shares beneficially owned. Pearson pledged those shares to Goldman Sachs as collateral for loans of approximately $100 million that he used for, among other things, financing charitable contributions, including to Duke University, and helping to fund a community swimming pool, purchasing Valeant shares, and meeting certain tax obligations related to the vesting and payment of Valeant compensatory equity awards. Goldman Sachs required repayment of the loans, and has informed the company that it sold the shares it held as collateral in satisfaction of the loans. After repayment of the loans with the proceeds from the sale by Goldman Sachs, the loan agreements will terminate and there will be no amounts outstanding under those agreements.
"Since joining Valeant, I have not sold any shares provided to me as compensation, and it was not my desire that shares be sold now," Pearson said. "I have complete confidence in Valeant's ability to move forward and continue meeting our commitments to patients, doctors, and shareholders."
No tag day is needed for Pearson- he owns another 8 million shares.
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For those clients of LY& Co and other
interested persons the Quarterly Report on the routing of customer orders under
All SEC Rule11Ac1-6 Quarterly reports up to March 2, 2012 may be found by visiting
the diclosures at LY& Co Clearing Broker Mesirow Financial
From March 2, 2012 forward all
SEC Rule11Ac1-6 Quarterly reports may be found by visiting the website
Annual offer to present clients of Lemley Yarling Management Co. Under Rule 204-3 of the SEC Advisors Act, we are pleased to offer to send to you
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A list of all recommendations made by Lemley Yarling Management Co. for the preceding one-year period is available upon request.
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