Selling A Bank Today
“If you want to invest in something with minimum risk
and a guarantee of a big return, Invest in yourself”
― Unknown
The Portfolio
Our blog portfolio continues to perform well and volatility remains low. Year-To-Date the portfolio is up +17.8%. Our benchmark, the S&P 500 is up a stunning +19.89% YTD.
I'm still looking for good buys, unfortunately what I'm finding is a pattern I would prefer not to find. High quality companies and companies that pay a solid dividend (bond proxy's) are expensive. We've seen this before in 2016 and Q4 2018. Money rotated out of growth and riskier names and into high quality bond proxy's. The resulting rotation back to growth can be very painful for investors who have gone overweight in quality and bond proxy's. In general I think a little diversification in growth, safety, quality and dividend payers is a better mix for the long term investor.
Selling First Community Corp (FCCO)
Today I'm selling all 50 shares of First Community Corp (FCCO) ahead of what I expect will be an interest rate cut by the Fed. We got a 6.69% gain on the stock YTD, not much but not a losss.
I waited until after the earnings call to dig through the financials and I have to say, I lack enthusiasm for this name going forward. While FCCO grew revenue, First Community didn't even keep pace with its industry, a black eye I don't forgive in banking.
Revenues only increased 8.3% since last year and none of it made it to the company's bottom line as evidenced by a decline in earnings per share. Gross profit margins are exceptional, coming in over 89%. While that's a profit margin enviable at any bank, it's a decrease year-over-year. A bank can have lower gross profit margins but to remain in this portfolio I expect net profit margins to exceed the industry average; FCCO let us down with a net profit margin of 20.88%. FCCO's return on equity is below that of both the industry average and the S&P 500. Earnings per share were down over 5% compared to the same quarter a year ago. Two over riding issues made the decision to sell easy, 1) FCCO increased their dividend, 2) Customers are paying off their loans at a faster pace than anticipated by management. Increasing the dividend is a way to keep shareholders happy. If you like dividends for income that's fine, but this is a growth fund, I would prefer to see FCCO invest that cash into their own business. The fundamental business of a bank is to make loans, maintain a portfolio of loans over long periods of time and collect interest from those loans. First Community has a problem, customers are paying off their loans faster than they are writing new loans and that makes me worry about future earnings.
All things considered First Community is in a challenging industry and is struggling to outperform its competition. With earnings declining and a host of other stressed metrics, I expect FCCO to deliver sub-par earnings for the remainder of the year. For this reason we are selling the entire position today at $19.62 per share.
Earnings Season
GS 7-16-2019
Goldman Sachs Group is expected* to report earnings on 07/16/2019 before market open. The report will be for the fiscal Quarter ending Jun 2019.
The consensus EPS forecast for the quarter is $5.00. Earnings range is range is $4.38 to $5.52.
The consensus revenue forecast for the quarter is $8.91B, Revenue range is $8.62B to $9.36B.
REPORTED: The Goldman Sachs Group, Inc. (NYSE: GS) today reported net revenues of $9.46 billion and net earnings of $2.42 billion for the second quarter ended June 30, 2019. Net revenues were $18.27 billion and net earnings were $4.67 billion for the first half of 2019. Diluted earnings per common share (EPS) was $5.81 for the second quarter of 2019 compared with $5.98 for the second quarter of 2018 and $5.71 for the first quarter of 2019, and was $11.52 for the first half of 2019 compared with $12.93 for the first half of 2018. Annualized return on average common shareholders’ equity (ROE)1 was 11.1% for both the second quarter of 2019 and the first half of 2019. Annualized return on average tangible common shareholders’ equity (ROTE)1 was 11.7% for both the second quarter of 2019 and the first half of 2019.
FCCO 7-17-2019
First Community Corporation is estimated to report earnings on 07/17/2019. T
The consensus EPS forecast for the quarter is $0.35. Earnings range is range is $0.35 to $0.36.
The consensus revenue forecast for the quarter is $12M, Revenue range is $11.98M - $12.03M.
REPPORTED: Today, First Community Corporation (FCCO), the holding company for First Community Bank, reported net income for the second quarter of 2019 of $2.881 million as compared to $3.001 million in the second quarter of 2018. Diluted earnings per common share were $0.37 for the second quarter of 2019 as compared to $0.39 for the second quarter of 2018. On a linked quarter basis, net income increased 15.2% from $2.500 million in the first quarter of 2019 and diluted earnings per common share increased 15.6% from $0.32. Year-to-date 2019 net income was $5.376 million compared to $5.710 million during the first six months of 2018. Diluted earnings per share for the first half of 2019 were $0.70, compared to $0.74 during the same time period in 2018. Mike Crapps, First Community President and CEO, commented, "We are pleased with growth in pure deposits during quarter while loan growth continues to be impacted by high loan payoffs and paydowns. We continue to benefit from excellent credit quality."
PGR 7-17-2019
Progressive Corporation (The) is expected* to report earnings on 07/17/2019 before market open. The report will be for the fiscal Quarter ending Jun 2019.
The consensus EPS forecast for the quarter is $1.43. Earnings range is range is $1.30 to $1.49.
The consensus revenue forecast for the quarter is $9.14B, Revenue range is $9.06B - $9.29B.
REPORTED: Progressive Insurance reported earnings per share of $1.66 for the second quarter of the year. This is up 39% from the company’s earnings per share of $1.19 from the same time last year. It also has the company beating out Wall Street’s earnings per share estimate of $1.43 for the quarter, but that couldn’t keep PGR stock from falling today.The Progressive earnings report for the second quarter of 2019 also includes net income of $979.40 million. That’s 39% better than the company’s net income of $702.40 million reported in the same period of the year prior.
Progressive earnings for the second quarter of the year also have net premiums written increasing by 13% to $9.13 billion. The company’s net premiums written for the second quarter of 2018 was $8.10 billion. When it comes to net premiums earned for the most recent Progressive earnings report, the numbers come in at $8.83 billion. This is a 16% increase over the company’s net premiums earned of $7.63 billion from the second quarter of the previous year.
Regardless of putting out a great quarter PGR stock was sold by investors, more specifically traders. The stock closed at $80.20 after earnings and has since rebounded to $80.55 today.
ASML 7-17-2019
ASML Holding is expected* to report earnings on 07/17/2019 before market open.
The consensus EPS forecast for the quarter is $1.75. Earnings range is range is $1.75 to $1.75.
The consensus revenue forecast for the quarter is $2.76B, Revenue range is $2.59B - $2.93B.
REPORTED: ASML earned the equivalent of $1.27 a share on sales of $2.89 billion in the June quarter. ASML reports financial results in euros. Analysts expected ASML earnings of $1.06 a share on sales of $2.88 billion. On a year-over-year basis in euros, ASML earnings fell 18% while sales eased 6%. Stronger sales of equipment for logic chip manufacturing helped offset weakness in the memory chip market in the second quarter, ASML said. For the September quarter, ASML guided to earnings of $1.62 a share on sales of $3.37 billion. Wall Street was modeling ASML earnings of $2.02 a share on sales of $3.66 billion.
Despite what appeared to be a weak earnings call, shares of ASML remained flat on the day of earnings and then surged from $217.67 to $226.65 the next day. Shares closed today at $230.21. My $258 price target is looking very achievable.
SAP 7-18-2019
SAP SE is expected* to report earnings on 07/18/2019 before market open. The report will be for the fiscal Quarter ending Jun 2019.
The consensus EPS forecast for the quarter is $1.25. Earnings range is range is $1.19 to $1.38.
The consensus revenue forecast for the quarter is $7.61B, Revenue range is $7.48B - $7.82B.
REPORTED: SAP reported second-quarter 2019 earnings of approximately $1.22 per share, up 11.2% from the year-ago. Total revenues, came in at around $7.479 billion, up 11% year over year . New cloud bookings advanced 17%. Shares of SAP were down approximately 6% in the pre-market, which was blamed on a decline in software license revenues on account of the trade-war.
While the stock has had a notable pull-back since the earnings call, I'm still bullish on the business as a whole, especially post trade-wars. I'm maintaining my position and $144 price target.
AMTD 7-22-2019
TD Ameritrade is expected* to report earnings on 07/22/2019 after market close. The report will be for the fiscal Quarter ending Jun 2019.
The consensus EPS forecast for the quarter is $0.96. Earnings range is range is $0.93 to $0.99.
The consensus revenue forecast for the quarter is $1.46B, Revenue range is $1.44B - $1.49B.
REPORTED: AMTD delivered an excellent but not completely unexpected earnings surprise of 7.2% in third-quarter. Adjusted earnings of $1.04 per share surpassed analysts estimate of $0.97. net income for the quarter came in at $555 million or $1.00 per share compared with $451 million or 79 cents reported in the prior-year quarter. Net revenues for the reported quarter came in at $1.49 billion, up 8% year over year and surpassing most wall street estimates.
Any gains from that earnings call have been erased on the news today (7-23-19) that Chief Executive Officer Tim Hockey will be leaving the company. He said he will be leaving the online brokerage no later than the end of February 2020. While there is a great deal of speculation over his reasons, Mr. Hockey made it clear that it wasn't due to M&A, or to spend more time with family, or to take another job, or due to a conflict with company policy (i.e: sex scandal). Just one hour ago TD Ameritrade announced a new service that allows voice-activated, in car trading; let the controversy begin.
V 7-23-2019
Visa Inc. is expected* to report earnings on 07/23/2019 after market close. The report will be for the fiscal Quarter ending Jun 2019.
The consensus EPS forecast for the quarter is $1.32. Earnings range is range is $1.28 to $1.36.
The consensus revenue forecast for the quarter is $5.7B, Revenue range is $5.64B - $5.78B.
REPORTED: Visa earned $1.37 per share, while analysts expected a profit of $1.32 per share. Net revenue rose 11.5% to $5.84 billion, while analysts had expected $5.70 billion. Total payments volume rose 8.7% to $2.23 trillion, on a constant dollar basis, with the United States - its largest market - accounting for about 8.8% of the total. Visa's numbers show a strong U.S. consumer that is spending and managing debt well and a strong international consumer.
MPWR 7-24-2019
Monolithic Power Systems is estimated to report earnings on 07/24/2019.
The consensus EPS forecast for the quarter is $0.92. Earnings range is range is $0.91 to $0.93.
The consensus revenue forecast for the quarter is $150.52M, Revenue range is $150.16M - $150.7.
NOC 7-24-2019
Northrop Grumman Corporation is expected* to report earnings on 07/24/2019 before market open. The report will be for the fiscal Quarter ending Jun 2019.
The consensus EPS forecast for the quarter is $4.69. Earnings range is range is $4.42 to $4.89.
The consensus revenue forecast for the quarter is $8.43B, Revenue range is $8.28B - $8.52B.
AMZN 7-25-2018
Amazon.com, Inc. is estimated to report earnings on 07/25/2019.
The consensus EPS forecast for the quarter is $5.52. Earnings range is range is $4.34 to $6.77.
The consensus revenue forecast for the quarter is $62.46B, Revenue range is $60.97B - $63.76B.
MA 7-30-2019
Mastercard Incorporated is expected* to report earnings on 07/30/2019 before market open. The report will be for the fiscal Quarter ending Jun 2019.
The consensus EPS forecast for the quarter is $1.83. Earnings range is range is $1.73 to $1.91.
The consensus revenue forecast for the quarter is $4.09B, Revenue range is $4.01B - $4.18B.
SNE 7-30-2019
Sony Corp Ord is expected* to report earnings on 07/30/2019 before market open. The report will be for the fiscal Quarter ending Jun 2019.
The consensus EPS forecast for the quarter is $0.78. Earnings range is range is $0.78 to $0.78.
The consensus revenue forecast for the quarter is $18.79B, Revenue range is $18.79B - $18.79B.
RCL 8-1-2019
Royal Caribbean Cruises Ltd. is estimated to report earnings on 08/01/2019.
The consensus EPS forecast for the quarter is $2.47. Earnings range is range is $2.34 to $2.53.
The consensus revenue forecast for the quarter is $2.8B, Revenue range is $2.76B - $2.84B.
XYL 8-1-2019
Xylem Inc. is expected* to report earnings on 08/01/2019 before market open. The report will be for the fiscal Quarter ending Jun 2019.
The consensus EPS forecast for the quarter is $0.79. Earnings range is range is $0.76 to $0.80.
The consensus revenue forecast for the quarter is $1.35B, Revenue range is $1.32B - $1.40B.
MIXT 8-1-2019
MiX Telematics Limited is estimated to report earnings on 08/01/2019.
The consensus EPS forecast for the quarter is $0.18. Earnings range is range is $0.18 to $0.18.
The consensus revenue forecast for the quarter is $35.46M, Revenue range is $34.36M - $36.25M.
AWR 8-5-2019
American States Water Company is estimated to report earnings on 08/05/2019.
The consensus EPS forecast for the quarter is $0.51. Earnings range is range is $0.50 to $0.53.
The consensus revenue forecast for the quarter is $115.2M, Revenue range is $110.5M - $122.31M.
FOXF 8-7-2019
Fox Factory is estimated to report earnings on 08/07/2019.
The consensus EPS forecast for the quarter is $0.66. Earnings range is range is $0.65 to $0.67.
The consensus revenue forecast for the quarter is $187.94M, Revenue range is $185.12M - $190.3M.
CCMP 8-7-2019
Cabot Microelectronics is expected* to report earnings on 08/07/2019 after market close. The report will be for the fiscal Quarter ending Jun 2019.
The consensus EPS forecast for the quarter is $1.57. Earnings range is range is $1.50 to $1.65.
The consensus revenue forecast for the quarter is $267.13M, Revenue range is $263M - $270M.
NSP 8-7-2019
Insperity, Inc. is estimated to report earnings on 08/07/2019.
The consensus EPS forecast for the quarter is $0.83. Earnings range is range is $0.83 to $0.84.
The consensus revenue forecast for the quarter is $1.04B, Revenue range is $1.02B - $1.05B.
CVS 8-7-2019
CVS Health Corporation is expected* to report earnings on 08/07/2019 before market open. The report will be for the fiscal Quarter ending Jun 2019.
The consensus EPS forecast for the quarter is $1.69. Earnings range is range is $1.65 to $1.72.
The consensus revenue forecast for the quarter is $62.71B, Revenue range is $61.66B - $63.28B.
BDSI 8-8-2019
BioDelivery Sciences is estimated to report earnings on 08/08/2019.
The consensus EPS forecast for the quarter is $-0.06. Earnings range is range is $-0.25 to $-0.01.
The consensus revenue forecast for the quarter is $24.59M, Revenue range is $23.07M - $27.3M.
NBRV 8-8-2019
Nabriva Therapeutics is estimated to report earnings on 08/08/2019.
The consensus EPS forecast for the quarter is $-0.33. Earnings range is range is $-0.34 to $-0.33.
The consensus revenue forecast for the quarter is $790K, Revenue range is $500K - $1.25M.
BSTC 8-8-2019
BioSpecifics Technologies Corp is estimated to report earnings on 08/08/2019.
The consensus EPS forecast for the quarter is $0.72. Earnings range is range is $0.72 to $0.72.
The consensus revenue forecast for the quarter is $8.98M, Revenue range is $8.98M - $8.98M.
NVDA 8-15-2019
NVIDIA Corporation is estimated to report earnings on 08/15/2019.
The consensus EPS forecast for the quarter is $1.14. Earnings range is range is $1.07 to $1.24.
The consensus revenue forecast for the quarter is $2.54B, Revenue range is $2.41B - $2.57B.
VEEV 8-22-2019
Veeva Systems Inc. is estimated to report earnings on 08/22/2019.
The consensus EPS forecast for the quarter is $0.49. Earnings range is range is $0.48 to $0.51.
The consensus revenue forecast for the quarter is $259.37M, Revenue range is $254.17M - $262.6M.
HEI 8-26-2019
Heico Corporation is estimated to report earnings on 08/26/2019.
The consensus EPS forecast for the quarter is $0.54. Earnings range is range is $0.50 to $0.56.
The consensus revenue forecast for the quarter is $510.16M, Revenue range is $503.4M - $521.53M.
"Markets don't go to zero, Portfolio's do.
Buy quality, be patient...and look twice for motorcyclists"
- Clay Baker
Stay Invested,
Clay
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Keep Me Honest
S&P 500 declines to 2,350 or more (1-3-2019)
Healthcare and Biotech sectors outperform (1-3-2019)
S&P reaches 3,000 by year end (1-11-2019)
CSCO reaches $60/share (1-18-2019)
VEEV reaches $145/share (2-14-2019) (achieved $145.23 on 5-10-2019)
CVS reaches $91.50 (2-27-2019)
Bull market takes another leg up (4-7-2019)
The Fed will lower rates 1-2 times (5-13-2019)
Clay's Rules
Rule #1: Don't lose money
Rule #3: Portfolios go to zero, markets don't, Stay Invested
Rule #4: When a good stock you own drops 10% below your cost basis, add shares
Rule #5: Bull markets aren't sustained without the Transports
Rule #6: When Forward P/E is lower than TTM P/E, expect earnings to increase
Disclosure: I am personally invested long in some or all of these stocks or funds that appear in the Stay Invested portfolio and may purchase or sell shares within the next 72 hours. I am also invested in other stocks and funds that do not appear in the Stay Invested portfolio but may be mentioned or related to this article. It is not my intention to advise or encourage the purchase or sale of any security. I am invested long in these securities mentioned in this post:
CVS, CSCO, VEEV, STZ, AMZN, NVDA, BCRX, GS, BDSI, VEEV, VTI, GLD, HD, AWR, XLNX, MRVL
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article is not intended to offer investing advice, guarantee 100% accurate predictions, or to be interpreted as providing a personal recommendation.
