The Federal Reserve, as expected, declined to raise interest rates, although Chair Janet Yellen noted that wages are picking up and further acceleration in wages is possible. I think it’s likely the Fed will raise rates in December, a move which shouldn’t surprise investors. Most stock markets around the world rallied on the Fed’s non-action.
The stock market rally in the U.S. could be short-lived however. Investors are relieved that the Fed didn’t raise interest rates, but now investors’ attention will refocus on their expectation that third-quarter sales and earnings results could be disappointing because of the slower than expected growth in the U.S. economy. Stocks could remain volatile until mid-October before moving ahead during the remainder of 2016.
Six Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news. Prices appearing after each stock symbol are the closing prices on Thursday, September 22, 2016. Reports are for the quarter ended August 31, 2016 unless otherwise stated. Sales and earnings increases and decreases are based on year ago comparisons.
My next Weekly Update will be sent to you on Friday, September 30, 2016. My schedule for the next five weeks will be:
• Friday, September 30, Weekly Update
• Thursday, October 6, Cabot Value Model issue 267V
• Friday, October 7, Weekly Update
• Thursday, October 13, Cabot Enterprising Model issue 267E
• Friday, October 14, Weekly Update
• Friday, October 21, Weekly Update
• Thursday, October 27, Cabot Wealth Advisory
• Friday, October 28, Weekly Update
Company Reports
Allergan PLC (AGN 243.43) will acquire Tobira Therapeutics, a biopharmaceutical company that develops therapies for liver diseases, in a deal worth as much as $1.7 billion. Tobira’s products focus on a common liver disease, known as NASH, which is associated with obesity and type-2 diabetes. NASH can lead to liver cancer or liver failure and affects 5% of the U.S. population.
Allergan also purchased Akarna Therapeutics for $50 million. Akarna is also developing treatments for NASH. In addition, Allergan agreed to acquire biotechnology company Vitae Pharmaceuticals for $639 million in a move aimed at strengthening the drugmaker’s skin-care product line. Allergan has increased its spending power through the recent sale of its generics business to Teva Pharmaceutical for $40.5 billion. Hold.
AT&T (T 41.11) is testing a new technology called AirGig, designed to deliver low-cost high-speed internet service over electrical power lines. This technology will be easier to deploy than fiber, can run over license-free spectrum, and can deliver ultra-fast wireless connectivity to any home or handheld wireless device. AirGig is still in its testing phase, so no scheduled launch dates have been forecast. Buy at 41.77 or below.
FedEx (FDX 176.66)
topped sales and earnings estimates. Sales jumped 19% and EPS climbed 20%, after increasing 7% and 24% in the prior quarter. Results were bolstered by the May 2016 purchase of TNT Express. Management raised its earnings forecast for the company’s fiscal year ending May 31, 2017. FedEx will increase shipping rates by 3.9% to 4.9% beginning January 2, 2017. FDX shares jumped 7% after results were released. Buy at 166.92 or below.
Gilead Sciences (GILD 81.52) announced its intention to sell $10 billion of bonds. The proceeds will likely be used to acquire a company with the potential for strong sales growth. Gilead has a strong balance sheet with low debt and abundant cash. An acquisition is needed to help diversify the company’s portfolio of drug offerings and to counteract lower sales from its hepatitis C drugs. Hold.
Nike (NKE 55.41) will begin selling its “Back to the Future” self-lacing shoes on November 28. Nike will sell the HyperAdapt 1.0 sneakers in select Nike stores in the U.S. at prices yet to be determined. Hold.
Penske Automotive (PAG 49.03) stock price has strengthened lately, partly in reaction to Roger Penske’s purchase of one million shares. The CEO now owns 40% of PAG shares. Hold.