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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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

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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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

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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Gem – Truly Outrageous Auction Price; Macy’s Needs a Miracle on 34th Street and on Wall Street; Rolls Royce Profits Sputter

Just brilliant…

Image courtesy of Sicha Pongjivanich/FreeDigitalPhotos.net

Image courtesy of Sicha Pongjivanich/FreeDigitalPhotos.net

One Hong Kong billionaire went shopping recently and dropped $77 million…on just two items…for his seven year old daughter. Is your head still attached? Just checking. Joseph Lau, scooped up two large stones at a Geneva auction which was probably way more fun than sitting in a Macau prison where the billionaire is appealing a conviction for corruption and money-laundering. One of the gems Lau bought for $48.5 million is a 12.03 carat “Blue Moon” – as in once in a Blue Moon does a gem like this come around – which set a record for the amount of money paid per carat in a gem. If you do the math, that comes out to approximately $4 million per one brilliant carat. But Lau can afford it since his net worth is estimated to be about $10 billion. Besides, he coincidentally set a second record  – in less than 24 hours – when his company sold a Hong Kong office tower for $1.6 billion. It set a record because it was double the amount of the previous record commercial real estate sale. Some guys – and seven year old girls – have all the luck I tell you.

Let it snow, now!

Image courtesy of Vichaya Kiatying-Angsulee/FreeDigitalPhotos.net

Image courtesy of Vichaya Kiatying-Angsulee/FreeDigitalPhotos.net

Macy’s could use a miracle right about now. Except this time on Wall Street where shares of the company took a 14% hit as it experienced its biggest one day fall in seven years. The company announced that it would be cutting its annual profit forecast as sales and traffic have been anything but miraculous, with quarterly sales that took a 5.2% hit. Revenue dropped to $5.87 billion when analysts thought Macy’s would pull in $6.15 billion. Macy’s profit dropped 45%, falling to $118 million, coming in at 56 cents per share. Analysts thought that would be just 54 cents per share.  First, Macy’s brass blamed the weather. Only this time it was blamed for being too hot instead of too cold explaining why shoppers haven’t been rushing into stores to buy warm-weather apparel. Then Macy’s blamed tourists for not spending enough money in its stores. Macy’s is also pointing the finger at off-price, aka discount, stores like Marshall’s and Nordstrom Rack. Those types of retailers have seen a 44% increase between 2009 and 2014 and have been taking away a big chunk of sales from Macy’s. Together with slow growth and weaker demand for some of Macy’s biggest brands and you get…a big hot fiscal mess. That’s on top of the fact that Macy’s already announced it would be closing 35 – 40 underperforming stores back in September. Too bad the numbers make it seem like all the stores are under-performing. Then investors were bummed that Macy’s nixed the idea of making a Real Estate Investment Trust (REIT) out of its properties. Investors like REIT’s for their liquidity, special tax incentives and the big dividends they yield. Macy’s has got about $21 billion worth of property that could have the potential to trade at a much better value. Instead the retailer will start offering some major discount action in an attempt to get shoppers into its stores just in time for the holiday season.

Not revved up…

Image courtesy of Sharron Goodyear/FreeDigitalPhotos.net

Image courtesy of Sharron Goodyear/FreeDigitalPhotos.net

While visions of Rolls Royce might have you thinking about royalty and James Bond, the heart of its business is in its engines, especially those used for aircraft, ships and industrial use. Unfortunately, the heart of the business is currently undergoing some fiscal coronary issues as new-ish CEO Warren East issued yet another profit warning for Rolls Royce today. Then things got ugly. Shares of Rolls Royce took a 20% beating after Mr. East said that  profits will be 30% lower than what even the analysts were predicting for the famous engine company. To add insult to injury, shares of Rolls Royce suffered their biggest single day drop in fifteen years. The 131 year old, British-based company also reported weak demand for spare parts and services for its existing engines. Now, its executive board is considering scrapping the company’s dividend. Stay tuned…

Target-ing Pay;

You raise me up…

Image courtesy of nongpimmy/FreeDigitalPhotos.net

Image courtesy of nongpimmy/FreeDigitalPhotos.net

Target’s being a follower and that means only good things for some 350,000 of its employees. The retailer is raising its minimum wage from $8.83 to a whopping $9.00 an hour. Don’t laugh. The federal minimum wage is still only $7.25. Walmart already made that move several weeks back and TJX, which owns TJ Maxx, Marshall’s and Home Goods, is also set to follow suit. So what exactly is the downside of raising the minimum wage and why doesn’t everybody just do it already? Critics of raising the minimum wage feel that sometimes doing so might deter employers from hiring more people if they feel they have to shell out more money to do so. So yeah, it’s great if employers are paying more, just as long as you are able to get a job with them, to begin with.  Speaking of not having jobs, this minimum wage announcement comes on the heels of Target’s earlier announcement that it’s cutting about 3,000 jobs. Target’s going to need a few bucks to pay off that $10 million settlement over its 2013 security breach where 40 million cards were compromised and the personal financial information of well over a 110 million people was accessed. Victims could get up to $10,000 in damages but Target doesn’t plan on making it easy for them to collect. Alleged victims will have to bear the burden of proof and submit adequate documentation on losses they incurred.

Monopolize!

Image courtesy of James Barker/FreeDigitalPhotos.net

Image courtesy of James Barker/FreeDigitalPhotos.net

A big happy birthday shout out goes to Monopoly, the iconic board game who turns 80 today.  The game, owned by Hasbro, comes in 47 languages and is available in 114 countries. You could pick up the game for a whole $2, back in 1935, when Parker Brothers originally bought it up from Charles Darrow. But its roots go even deeper, back to 1903, when a woman named Elizabeth Magie came up with the original incarnation of the game, which was meant to highlight the unfairness of property ownership. Ironically, Monopoly has become the world’s best-selling board game. 275 million copies of the game have sold, with more than $30 billion worth of Monopoly money printed each year, and each game coming with $20,580. Rumor has it that Mr. Monopoly, himself, a.k.a Rich Uncle Pennybags is based on none other than J.P. Morgan.  To mark the momentous occasion, Monopoly has come out with its latest version dubbed “Here and Now.” Cities all over the world voted for their picks to make it onto newest board. In case you were wondering, Illinois Avenue, B&O Railroad and the “GO” space are the three most frequently “landed-on” spaces.  Now if only Atlantic City, whose street names can be found on Monopoly board games, can channel some of Monopoly’s success for itself, it might be able to pull itself up from all its recent economic struggles.

GDY mate…

Image courtesy of cooldesign/FreeDigitalPhotos.net

Image courtesy of cooldesign/FreeDigitalPhotos.net

Chances are, if you have a domain name, you went through GoDaddy.com to buy it. The company, which also does web-hosting, wants to make its Wall Street IPO and is looking to raise $418 million with a valuation around $2.87 billion. Just three years ago GoDaddy.com was picked up by KKR and Silver Lake Management and now, here they are looking to offer up 22 million shares for about $17 – $19 a pop.  The company, which currently handles about 20% of the world’s domain names, has approximately 12.7 million customers and took in $1.39 billion for 2014. That was a hefty a 23% increase over 2013. Look for its ticker symbol one day: “GDY.” Catchy, huh?