Aetna Becomes Obamacare Dropout; Warren Buffet Takes a Big Bite Out of (the) Apple; TJX: Don’t Discount the Discounter

See ya!

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In case it wasn’t entirely clear how some big insurance companies feel about Obamacare, perhaps Aetna might shed some light for you. The healthcare insurer is dropping out of the exchange in 69% of its counties. It’s dropping out of 11 of 15 states after eating $200 million in pre-tax losses during its 2Q. Of the 838,000 Affordable Care Act policies it has, 20% will be adversely affected. Aetna, which is the nation’s third largest insurer, isn’t the first health insurance company to do this. United Healthcare Group already dropped out of Obamacare exchanges and as did Kaiser, with more expected to follow. Whichever side you fall on in terms of the Obamacare debate matters not. It’s arithmetic that’s at play here. Aetna argues that they were losing big money to make the Obamacare policies work. Not enough healthy people were signing up and too many unhealthy people were. The premiums that healthy folks pay were/are intended to offset the large cost of the the unhealthy. Unfortunatey, things didn’t work out that way. The Departement of Health and Human Services was supposed to figure out ways to fix that issue. While its says it did, insurers say it didn’t – or at least, not enough. If you’re really bent on having Aetna insure you and your state’s just been dropped by it, you might want to consider moving to Delaware, Iowa, Nebraska and Virginia. Those states will still be offering policies from Aetna in 2017. Well, at least for now they will be.

Well, if Warren Buffet’s Doing it…

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Berkshire Hathaway’s very own oracle is taking a much bigger chunk out of the not-so-proverbial apple – the one based in Cupertino, that is. Warren Buffet upped his stake in the tech company by a substantial 55%. That’s in direct contrast to his fellow billionaire’s recent actions. George Soros just chucked his Apple stake out the window over concerns in China, or rather concerns about China’s policies regarding the iPhone maker. However, there’s a chance he’ll re-invest down the road. Activist investor billionaire Carl Icahn also ditched his Apple shares back in June. When he did this, shares of Apple had taken a slight dip, at which point Warren Buffet swooped in and increased his stake. Now his total stake of 15. 2 million shares is valued at about $1.7 billion. Shares of Apple, by the way, are up 14% since June. Incidentally, Wal-Mart didn’t fare so well as far as Berkshire Hathaway’s portfolio is concerned. The Oracle of Omaha cut Berkshire Hathaway’s stake in the world’s largest retailer by 27%, keeping it at just over 40.2 million shares. But Warren Buffet has had Wal-Mart in its portfolio a decade now and while his stake might be reduced, it’s probably still not going anywhere. For now. Curious what else Berkshire Hathaway has sitting in its very lucrative portfolio? Coca Cola, American Express, Johnson & Johnson, Kraft Heinz, Wells Fargo…to name but a few.

Who you calling off-price?

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Macy’s and friends might be bemoaning the state of the retail landscape. But they won’t get much sympathy from discount retailers T.J. Maxx. Its parent company TJX Cos came out with its second quarter sales results that had the retailer beating predictions.  But all was not perfect from the company that also owns Marshall’s and HomeGoods. It put out a bit of a bleaker picture for its third quarter that caused shares to fall today, despite its stellar performance.  In all fairness, that depressing and most unimpressive outlook is primarily because TJX Cos is waging war against a strong dollar. Besides, the company is giving out wage increases, so its hard to be mad at a company whose fiscal prowess is taking a hit for a very noble cause. There is even a silver lining – the company is turning out to be a big draw, luring shoppers away from malls with its deeply discounted merchandise on major name brands. Profit for TJX Cos was $562.2 million with 84 cents added to shares, while analysts only predicted 80 cents per share.  A year ago at this time, the company picked up $549.3 million with 80 cents added to shares. The stock is up 17% since January.

 

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In: Charter Spectrum, Out: Time Warner Cable; So Over-time; Has the Fed Finally Made Up its Mind?

Thanks for the memories…

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As the Charter Communications $55.1 billion acquisition of Time Warner Cable comes to a close, we can now bid a final adieu to the latter. And that’s no great loss since Time Warner Cable had the dubious distinction of earning the worst customer service score according to a survey done by the American Customer Satisfaction Index. Yet, strangely enough, TWC still managed to pick up some 32,000 video subscribers and another million high-speed internet users in 2015. In any case, this acquisition joins Charter’s other recent acquisition of Bright House Networks LLC to the tune of $10.4 billion. Charter will scrap the Time Warner Cable name, which nobody is likely to miss, and the newly formed company will be named “Charter” while its products and services will be sold under the name “Spectrum.” Catchy, no?  With that, Charter Spectrum becomes the second largest cable operator in the country, picking up 27.5 million new customers and playing second to Comcast Corp. As for Time Warner Cable’s outgoing CEO, Rob Marcus, he can wipe away his tears with his $92 million severance package, while trying to polish up his LinkedIn profile.

Laboring on…

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The Labor Department’s got some new rules headed your way, but you might not want to try breaking these, particularly if you find yourself working plenty of overtime. Because if you earn less than $47,476 a year, then congrats…sort of. You will now qualify for overtime and a half if you work more than forty hours a week. That’s a far cry from the $23,660 that served as the previous threshold. The reason for nearly doubling that threshold, by the way, is that the Labor Department hadn’t changed the rules since 2004. So I guess it’s kind of making up for lost time.and now has plans to change the numbers up every three years. In any case,  4.2 million workers will be positively affected by these new changes, with a big chunk of that being the millennial demographic. The new rules, however, could have unintended negative consequences. For instance, employers might decide to limit the amount of hours employees can work in order to avoid having to pay them overtime. Employers also might wish to start giving out raises. That might, at first, seem like a very good thing. However, it would be so that they can pay employees more than the $47,476 in order to, once again, avoid paying overtime. But then there are the “highly compensated employees” who may become eligible for overtime as well. By highly compensated, I mean getting paid at least $134, 004. In order for these highly compensated employees to get their overtime paid,  they must pass a “minimal duties test.” Problem is the Labor Department isn’t entirely clear about that part and is leaving it to the discretion of the employers. And before you start slaving away on all those extra hours, know that these rules wont take effect until December 1.

To hike or not to hike…

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It’s official. Or not. The minutes of April’s Fed meeting were released and the would-be experts think there will indeed be a rate hike in June of .25%-.50%. Members of the Fed were pinning their hopes and dreams on finding some hard-core data that the economy is growing. It seems they got it. For one, inflation is headed in the right direction towards that 2% target rate the Fed has its sights on. And unlike George Soros, the Fed is not as freaked out by the prospects of an economic slowdown. Throw in a good labor market, respectable consumer spending and even more respectable manufacturing output numbers and you just might be witness to a June rate hike. News of the likely hike sent the dollar to a seven week high and had markets all over the place. But there is that little issue about April’s disappointing jobs data which came out so inconveniently after the Fed had its meeting. Despite the fact that the labor market is looking fairly decent, those April digits can spook even the most optimistic of economists. So it’s still entirely possible that a rate hike might also get nixed.

George Soros, Golden Boy; Home Run for Home Depot; Pandora’s Streaming Away From Profits

Just because George Soros is doing it…

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George Soros just put a whole lotta money in gold. Lucky for him. However, the non-George Soroses of the world are supposed to take note, because, after all, he is, “The Man Who Broke the Bank of England.” And also because, since his net worth according to Forbes is $25 billion, he knows a things or two. Or a billion. In any case, according to a very recent regulatory filing that folks like him have to file (it’s called a 13F, and you are welcome that I am sparing you the boring details), Mr. Soros has sold off about 37% of his stock holdings. He then whipped out $387 million to buy lots of gold, including picking up a hefty 19 million shares in Barrick Gold, the world’s largest gold producer. It seems Mr. Soros is a more than a bit freaked out by the state of the global economy, and especially the slowdown in China. He feels the fiscal climate is reminiscent to him of 2007 – 2008 period just before the fiscal crash we are all still trying to forget. Not everyone agrees with Soros and his decision for his Soros Fund Management, but hey, he is the one who, back in 1992, bet against the British pound and made $1 billion off that bet – in a single day. I bet he’s real popular there. Anyway, it’s no secret that gold has always been a strong performer on Wall Street, as well as other places, mind you. The precious metal is up 21% for the year. But, just so ya’ know,  Soros still has plenty of other cash in plenty of other places. Like eBay and Apple. And Yahoo. And Gap…well, you see where I’m going with this. In fact, he’s got $80 million invested NOT in gold. In case you’re wondering what stocks he did ditch, some of those include Alibaba Group and Pfizer. Also, TripAdvisor and Expedia are out of his portfolio. Though, he did keep airline United Continental Holdings. Go figure.

Home improvement…

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As the warm weather brutalized plenty of retail outfits lately, (sorry, Macy’s, Nordstrom), Mother Nature knocked it out of the park for Home Depot. In turn, Home Depot warmed our hearts by boosting its sales and profit forecasts after regaling us with the news of its better-than-expected earnings, courtesy of Mother Nature. And as we all know, Wall Street loves nothing better than better-than-expected earnings. Except when investors feel that shares have hit their potential, for the moment anyway, which explains why shares of the home improvement chain were a wee bit down today. But no worries. A good housing market and fabulous weather added some $250 million in sales for Home Depot in the quarter, with February being the sweetest month, fiscally speaking. For the year, Home Depot is up about 20%, posting a profit of $1.8 billion a $1.44 per share. That was a 14% boost over last year, not to mention that it trumped analysts predictions of $1.36 per share. The company also saw $22.76 billion in sales, again stomping on predictions of $22.39 billion. The earnings also showed that consumers are actually spending their hard-earned cash, as opposed to hoarding it under mattresses (okay, banks too), unlike what was previously thought because of the generally poor performance in the retail sector. Spending money is good for the economy and now economists aren’t so worried anymore because they realize where all that hard-earned cash went. For the full year the retailer thinks it’ll pull down $6.27 per share for the year. And Spring has hardly sprung!

Closing the box…

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Pandora Media has had better years. Even better decades. Founded in 2000, the company had its IPO in 2011 and has about 80 million active users. While it was amongst the first crop of music streamers, the company’s stock is now down about 40% for the last twelve months, having never caught the same momentum as some of its competitors, including Apple and Spotify. Enter activist investor/Carl Icahn protégé Keith Meister, who feels that the time has come for Pandora to put itself on the market. Keith Meister’s Corvex Management has some very strong feelings about how much better – and profitable – Pandora can be and seeing as how he’s got 22.7 million shares, giving him an almost 10% stake in the company, he’s entitled to more than just his opinion on the matter. As the largest shareholder in the company, Meister wrote in a recent letter how he has “become increasingly concerned that the company may be pursuing a costly and uncertain business plan, without a thorough evaluation of all shareholder value-maximizing alternatives.” Basically, he’s wondering if the folks in charge, namely CEO and co-founder Tim Westergren, knows what they’re doing. Wall Street certainly seemed to be agreeing with Meister, as it sent the stock up today as much as 7% at one point.