1. National Australia Bank (NABZY) (owed): Yesterday, I mentioned buying 50 shares of NABZY at 19.51. I neglected to mention the last earnings report, which is summarized in this pdf release from the bank. For the first half of its 2010 year, NAB reported cash earnings of 2.2 billion AUD, a 20.9% increase compared to the six month period ending in September 2009. The capital ratios of National Australia Bank and its principal subsidiaries appear to be good to me and can be found at page 6 of this report: pdf. This earnings report is discussed in the following publications: NZ Herald BusinessWeek News.com.au More information about this bank can be found at the Reuters.com site. The market cap is close to 50 billion.
2. Vodafone (VOD): Cramer attempted to make a case for an investment in Vodafone (VOD). CNBC He recommends starting a position when VOD's yield rises to 7%. While he doesn't mind exposure to the British Pound, I am not so comfortable with pound exposure. This is a link to the GBP/USD Currency Conversion Chart. I do not find much much comfort looking at a five year chart: GBP/USD Currency Conversion Some might argue that the current exchange rate has returned to the five year low from March 2009, where the pound found some support.
The ADR for Vodafone closed yesterday at $19.2. VOD was recently at $23.69 on 4/15/2010, and has declined 18.95% since that time to yesterday's closing price. The shares traded in London fell about 15% during the same period: VODAFONE GRP Share Price Chart | VOD.L The difference is due to the fall of the British Pound against the U.S. Dollar. On 4/15/2010, a British pound would buy $1.547 U.S. and $1.44 U.S. yesterday: GBP/USD Currency Conversion Chart
In a post from Tuesday, I referenced some commentary from an analyst from Davenport who had downgraded Verizon (VZ) to neutral. Item # 3 VZ T A reason for the downgrade was that Verizon Wireless would have to start paying out cash flow to Vodafone within two years. VOD owns 45% of Verizon Wireless, and the cash flow was around 14.77 billion in 2009. Cramer mentioned this point in his analysis. In my earlier post on this subject, I thought that this potential future development was "more supportive" of a purchase of VOD shares than a sell of VZ.
3. FT Story On China Reviewing its European Holdings: The market swoon yesterday was caused by a report in the Financial Times, repeated in this article from Reuters, that China was reviewing its Euro holdings. I would assume that China reviews its holdings all of the time. When the knuckleheads hear a story like that, the first reaction is to sell without thinking. I wonder why anyone allows knuckleheads to manage their money when they are sufficiently incompetent that a conservator needs to be appointed to manage their own assets.
The gist of the report was that representatives of China's State Administration of Foreign Exchange met with some bankers who liked to talk to reporters and expressed concern about China's holdings of PIIGS debt. Wasn't there stories about China being concerned about holding so much of U.S. debt, not so long ago (NYT) ? This state agency in China holds an estimated 630 billion of Eurozone bonds.
China said this FT report was groundless today: Bloomberg.com
I have read reports that the CDS market is pricing a Greek government default at 75% within five years. WSJ I would hope that any significant holder of that debt would be reviewing their options.
4. FIRST QUATER GDP: The Gross Domestic Product number for the first quarter was revised down to an annualized 3% rate, down from the Commerce Department's earlier estimate of 3.2%. This number represents the annualized increase over the 4th quarter of 2009, when the GDP rose 5.6%. Consumers increased their spending by 3.5% in the 1st quarter, up from 1.6% in the 4th quarter of 2009.
5. More Facts Dribbling Out About BP's Gross Negligence: A WSJ today summarizes some key decisions made by BP, apparently to save money, that made the Deepwater Horizon well more vulnerable to a blowout. There is more than enough evidence for prosecutors to open a criminal investigation. More information is provided in an article in today's about the latest NYT .
6. Spain's Parliament Approves Modest Austerity Measure by One Vote: The austerity package was just 18 billion and a temporary one, lasting through 2011. MarketWatch To me, this just shows the difficulty that politicians around the world have in reducing spending by even very modest amounts. The Spanish unions have called for a general strike to protest.
In some ways, another Great Depression would have some long term beneficial results. While many people would not learn anything from it, still expecting the government to take care of them even it has no money, most people coming of age during the depression would learn to because more self-reliant and less dependent on others. The Great Depression generation for the most part learned to be frugal, to take on only the debt that could clearly be serviced by them, and to live well within their means. The same can not be said for subsequent generations.
7. Added 40 shares to MDT at $38.99 Using Remaining Cash Flow (See Disclaimer): Apparently the knuckleheads were disappointed when MDT management noted that it was more comfortable with the bottom part of its 3.45 to 3.55 guidance for fiscal 2011. Some naysayers are concerned about the lack of growth in the U.S market for defibrillators during the recession. I would suspect that the slowdown is related to two events connected to the economic downturn: the growing number of uninsured and the expiration of Cobra period for those individuals who were laid-off. laid-off workers - USATODAY.com Management wants to see better results in its spine business before having more comfort with the upper end of its estimated E.P.S. range.
The last quarterly report had an E.P.S. number of 89 cents which beat expectations by 1 cent. A summary of this report can be found at MarketWatch I would just point out the obvious. At a $39 price, MDT is selling for just a 11.14 forward P/E using the midpoint of that estimated range. Excluding the impact of share dilution for acquisitions and an extra week in fiscal 2010, the earnings growth number for fiscal 2011 is estimated to be in the 10 to 13 percent range. The P.E.G. for this quality blue chip company is therefore around 1. A good report to review about this earnings report is the one from Barclays Capital that some brokerage firms, such as Fidelity, make available to their retail customers A negative and myopic view is summarized in this Forbes article summarizing the opinions of a Bernstein analyst, Derrick Sung.
I purchased some MDT shares in early March 2009 at less than $26 per share. I am staying with my target of $50 per share discussed in Item #6 of this post from September 2009. My last add, discussed in that linked post, was at $37.58, so I have been averaging up some since the purchase in March 2009.
The stock did recently fall below its 200 day moving average: Medtronic Inc. Common Stock Share Price Chart | MDT The current price is close to around where MDT was trading in 1999. Given MDT's history of raising its dividend, this purchase would qualify for the dividend growth strategy except that the starting point for the dividend yield is too low to qualify. The current yield is around 2.1% at the $39 price. My dividend growth strategy requires a starting yield of 3% along with several other conditions: See Item # 6 Common Stock Dividend Growth vs. Long Term Investment Grade Bonds
Looking at the dividend data available at VL, I see dividend increases every year since 1994 which is as far back as the current VL report shows. The dividend doubled between 1994 to 1996 (annual 5 to 10 cents-VL uses rounded numbers), and doubled again by 2001 when the annual rate was at $.2225.
The double in the rate occurred again by 2007 when the rate hit .485. I am going to call that a double in six to seven years. A history of MDT's dividends and splits can be found at Medtronic Inc. - Dividends & Splits. If the current rate doubles to around $1.64 in 2017, that would give me a 4.2% yield at a total cost of $39.
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