matisse capital management

Analysis Brief: McCormick & Company

McCormick's (MKC) recently anounced its second quarter results and net income was up 32% over the second quarter 2007, at a time when many companies are seeing their incomes decline.  Since the beginning of the year, the stock is up 2.8%, while the Dow is down about 13%. McCormick & Company (MKC) is the global leader in the production and distribution of spices, seasonings and flavors for the food industry.  It has the number one market share in the US, UK, Canada, France and China.  Here are some of its brands, other than the spices sold under its own name: Schwartz Herbs (UK), Ducros (Europe), Zatarain’s, Club House (Canada), and soon, Lawry’s, when its acquisition from Unilever is complete. 

Around the World - Economic News You Need to Know

Belgium's InBev to acquire Budweiser?  Rumors of $46 billion takeover push shares up 7%: Telegraph

Soros: Credit crisis is the worst since Great Depression.  UK and US are headed for recession.  Telegraph

Moody's mistakenly gives Aaa ratings due to computer error; some products should have been rated up to four levels lower: Financial Times

Poland to sell 740 state-owned companies.  Warsaw Stock Exchange, utilities, Lot Air among businesses to be sold. Financial Times

Japan's top banks have written off $10 billion in subprime to date. So far bank losses have been absorbed by profits. Guardian

Sue OPEC over high oil prices?  House approves bill allowing Justice Dept. to do just that.  Globe and Mail

Fed auctions another $75 billion to banks.  Total auctioned since December to ease credit crunch = $510 billion . Globe and Mail

Tough times for retailers.  Home Depot Q1 net down 66%; Target Q1 down 7.5%; Saks misses estimates: International Herald Tribune

Architects Billing Index (ABI) at its lowest point in 12-year history.  Usually one year ahead of construction; will commercial real estate suffer next? Newsweek

Oil hits another all-time high: $130 a barrel.  An excellent Financial Times article analyzes the geopolitical and geological constraints that are the cause. "Eighty-five million barrels of oil a day is all the world can produce, and the demand is 87m.  It’s just that simple,” according to T. Boone Pickens.  Per chief energy economist at Deutsche Bank, Adam Sieminski, “The price is going to go up until governments that subsidize oil consumption in Asia and the Middle East can no longer afford it.”

More fallout from the weak US dollar : The diamond trade is considering switching from the US dollar to a more stable currency, according to the world's second largest diamond miner.  Dollar volatility has been hard on the industry, which is considering the Swiss franc: Telegraph

Artists Outperforming the Dow

Over the last week or so, Christie's and Sotheby's both held auctions and judging by some of the prices paid, you wouldn't know there was a recession.  Several records were set.  An Edvard Munch painting from 1902, entitled "Girls on Bridge," pictured left, sold for $30.8 million.  It had previously sold for $7.7 million in 1996.  This equals a compound annual rate of appreciation of 13.1 percent.  During the same time period, the Dow grew at an average rate of 8.2 percent. 

Buffett's First Quarter Buys and Sells

According to Bloomberg (see full article here), Berkshire Hathaway Inc. has changed its position in several companies over the last quarter.   These changes are as follows:

Added More Shares of:  KFT, WFC, UNH, WLP, IR

Sold Shares of: AMP, IRM

Money Quotes of The Week - May 14

"At this year’s meeting of the Mortgage Bankers Association in Boston last week, attendance was down by half and speakers delivered presentations with titles such as 'How to stay off the implode-o-meter.'"

      -Financial Times Article, "Value to Unlock," 5/11

"If the United States were any other country, these would surely be days of panic and austerity in Washington."

       -New York Times, "The Dollar: Shrinkable but (So Far) Unsinkable," 5/11

“These central banks know that holding these low-yielding Treasury bills is just an aid program to the United States, and they want to get out of that business...”

       -Kenneth S. Rogoff, a former chief economist at International Monetary Fund

"The nice decade is behind us..."

       -Mervyn King, Governor of the Bank of England, on inflation report, 5/14

Around the World - News You Need to Know

The dollar is slipping as a reserve currency.  From 2001-2007, its share of the world’s foreign exchange reserves declined from 73% to 64%. New York Times

More inflation problems in China as CPI hits 8.5%.  Food prices are up 22%: Telegraph

HSBC takes $3.2 billion charge on US subprime.  Bank says 5% of mortgage customers are 2 mos, or more, past due. Guardian

Since 2006, 257 US lending companies have "imploded;" check out the list at the web site Implode-O-Meter

Are banks finally finding buyers for mortgage securities?  Blackrock to buy a slice of subprime debt from UBS at $0.75 on the dollar. Financial Times

Where's the bottom in housing?  According to an excellent article in the Financial Times, "The market has an 11-month backlog of unsold homes to clear, the largest inventory since 1981, and the number of foreclosed properties continues to grow." Also in this story are the following home price statistics: "The index of single-family house prices in 10 cities was down 13.6 per cent year-on-year, the steepest fall since records began in 1987. The broader 20-city index fell 12.7 per cent, the biggest drop since the index was launched in 2001. Worst affected were Las Vegas and Miami, where home values have respectively fallen 22.8 per cent and 21.7 per cent in the past year."  Case-Shiller indices to the left, click to enlarge. 

Canada's Dividend Aristocrats: The Dividend Growers

Standard & Poor’s now compiles a list of Canadian Dividend Aristocrats.  These are companies listed on the Toronto Stock Exchange that have a record of consistently increasing their dividend for each of the last seven years.  According to S&P: “Since 1956, dividends have notably contributed 30% of the total equity return of the S&P/TSX Composite index, while capital gains accounted for the remaining 70%.”  While S&P’s criterion is seven years, most of these companies have increased their payout for over 10 years.  With this in mind, what are the top dividend growers on S&P’s Canadian Aristocrats list over the last decade?

Around the World - News You Need to Know

"Worst three months of the company's 89 year history."  AIG loses $7.8 billion; will sell new stock: New York Times 

ECB holds main rate at 4%.  Trichet: fighting inflation is the first mandate: New York Times

Bank of England holds rate at 5%.  Governor Mervyn King vows to fight inflation:  Telegraph UK

South Korea's central bank leaves rate at 4.5%.  Inflation is stable: International Herald Tribune

London home prices start downward slide.  Demand for office space also down.  Telegraph UK

Strong yen, weak US economy sink Toyota sales.  Company expects 27% drop in net income for 2008: Sydney Morning Herald

The Fed maps US home price changes for 2006-7.  Only tracks Fannie Mae and Freddie Mac loans; is the worst data left out?  Map below, story at: Economist

 

Analysis Brief: Companhia de Bebidas Das Americas (ABV)

Are the shares worth the price? No doubt you recognize many of the beer brands pictured to the left:  Bohemia, Labatt’s, Brahma, Stella Artois.  They are all products of AmBev (ABV), the world’s fifth largest brewer and the leader in Latin America.  In 2004, AmBev joined forces with Interbrew of Belgium, creating InBev, the world’s largest brewer, or brewing "cooperative."  I have considered buying ABV shares for some time and decided to do some research.