Huge Uptick in First Time Gun Buyers May Help Upcoming Earnings

* Sturm Ruger, Smith & Wesson to report quarterly results

* Gun sales strong as buyers rush to beat gun-control proposals

* Some investors cool after Newtown shootings

By Arpita Mukherjee and Siddharth Cavale

“Feb 25 (Reuters) – U.S. gun makers are aiming for record quarterly sales as first-time buyers, including a growing number of women and pensioners, rush to buy weapons before anticipated gun-control laws come into force.

President Barack Obama’s proposals to curb gun violence in the United States, including enhanced background checks and a ban on military-style assault weapons, have increased political and investor scrutiny on gun companies accustomed to growth.

But Smith & Wesson Corp and Sturm Ruger Inc , which will report quarterly results within the next two weeks, brushed off negative sentiment after the Newtown, Connecticut school shootings on Dec. 14. Shares recovered and sales never stopped.

“The firearms industry is certainly seeing explosive sales growth in the last several months,” Wedbush Securities analyst Rommel Dionisio told Reuters.

Background checks for firearm sales, mandatory for all purchases made at U.S. gun stores, rose nearly 50 percent year-on-year in December, data from the FBI’s National Instant Criminal Background Check System showed.

This was the highest monthly percentage rise ever reported for a measurement commonly used to gauge the firearm industry’s performance. It eclipsed the 30.8 percent rise of November 2012….”

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“Cars sales should surge again in February, as the annual rate reaches closer to the record levels of 2005 and 2006. Nothing — not even higher gas prices — can block the relentless demand for new cars. That is, of course, if the economy cooperates, which it may not.

According to research firm Edmunds, car sales this month should be so good that they can be used to estimate total 2013 U.S. sales at 15.5 million. The technical name for the calculation is the Seasonally Adjusted Annual Rate (SAAR).

The firm released this comment when it announced its forecast:

“Car sales are persevering despite economic factors on people’s minds like rising gas prices and the implementation of the payroll tax,” says Edmunds.com Senior Analyst Jessica Caldwell. “Pent-up demand and widespread access to credit are keeping up car sales momentum.” …”

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“Another big implosion is taking place in the world of biotech and biohealth. Affymax Inc. (NASDAQ: AFFY) and Takeda Pharmaceutical announced over the weekend that they are going to voluntarily recall all lots of the Omontys injection to the user level as a result of new postmarketing reports regarding serious hypersensitivity reactions.

The reaction cited was anaphylaxis, which can be life-threatening or fatal. The companies have worked actively with the U.S. Food and Drug Administration (FDA), which has indicated its agreement with this decision. The companies also have issued a letter to health care professionals indicating that no new or existing patients should receive Omontys.

Affymax said that fatal reactions have been reported in approximately 0.02% of patients following the first dose of intravenous administration. These serious hypersensitivity reactions occurred within 30 minutes after such administration of Omontys. The companies said that there have been no reports of such reactions following subsequent dosing, or in patients who have completed their dialysis session….”
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“BEIJING KFC launched a campaign Monday to rebuild its battered brand in China, promising tighter quality control after a scandal over misuse of drugs by its poultry suppliers.

The company, a unit of Yum Brands Inc. (YUM), promised to test meat for banned drugs, strengthen oversight of farmers and encourage them to improve their technology. It said more than 1,000 small producers used by its 25 poultry suppliers have been eliminated from its network.

KFC, which is China’s biggest fast-food chain with more than 4,000 outlets, was hit hard when state television reported in December that some suppliers violated rules on the use of drugs to fatten chickens. The company estimates January sales plunged 37 percent.

“Starting now, we will stress strict management and the principle of zero tolerance in food safety,” Sam Sun, the chairman of Yum Restaurants China, said at a news conference. “We will immediately drop any supplier that lacks the determination or the ability to manage breeding well.”

The complaint against KFC was less serious than other product scandals in China over the past decade in which infants, hospital patients and others have been killed by phony or adulterated milk powder, drugs and other goods. But KFC’s high profile attracted attention, and its status as a foreign company with less political influence meant Chinese media could publicize its troubles more freely.

Yum, based in Louisville, Kentucky, said it expects sales in China to tumble by up to 25 percent in the current quarter. The company also owns Pizza Hut and Taco Bell.

Chen Hao, a stock market analyst who was having lunch at an outlet of the Japanese chain Yoshinoya in Shanghai, said Monday the KFC scandal soured him on the whole fast food industry….”

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“Chances are slim that Congress will avert the automatic spending cuts before they take effect on Friday. It’s more likely lawmakers will reach a deal to replace the cuts after they begin.

Funding for numerous federal agencies and programs will be slashed, half from defense and half from nondefense spending.

Generally speaking, both parties say they don’t want the cuts to kick in as planned.

Just how the cuts would be replaced — if they are — remains unclear, however.

Scenario 1 – Shutdown threat pushes Congress to act: The current measure funding the government expires on March 27. Known as a continuing resolution, that law is separate from the one that mandates the automatic cuts. It sets spending levels and authorizes the government to continue operating.

If lawmakers don’t agree to new funding levels soon, the government will shut down on March 28 and remain closed until Congress reaches a deal.

A shutdown wouldn’t bode well for either party. Most government offices and services would be shuttered. The only exception: services deemed “essential” — those related to the safety of human life and protection of property. Taxpayer money would be wasted in the process because it costs money to close the government and to ramp it back up when Congress reaches a deal.

The urgency to avert a shutdown might spur lawmakers to agree on a replacement of the automatic spending cuts as part of a final deal…”

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Something you would expect to hear from Celente, Faber, or Rubini….but not from El-Erian.

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“The average price for regular gasoline at U.S. pumps rose 20.32 cents a gallon in the past two weeks to $3.795 a gallon, according to Lundberg Survey Inc.

The survey covers the period ended Friday and is based on information obtained at about 2,500 stations by the Camarillo, California-based company. The average has jumped 53.71 cents this year and is 10.33 cents above a year earlier.

“Although this is a steep rise, it’s not as steep as the price rise during the prior two weeks,” Trilby Lundberg, president of Lundberg Survey, said in a telephone interview. “There’s reason to expect the price rise will not continue at this pace and may even end soon because crude oil prices are down and refiners are starting to cut wholesale prices to their marketing and retail customers.” …”

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“Small cap stocks have been on a tear lately, rising to record highs as they outperform their larger brethren. But many experts say small caps have reached overvalued levels.

The Russell 2000 Index of small stocks reached an all-time peak Tuesday. Since Dec. 1, it has gained 11.5 percent, outdoing the Standard & Poor’s 500 Index, which has climbed 7 percent during the same period.

The difference is even more startling for the long-term. Since January 2000, the Russell 2000 has ascended 85 percent, compared with just 7 percent for the S&P 500, The Wall Street Journal reports.

Small caps have outperformed large caps for almost 14 years, the longest streak ever, according to Ned Davis Research. If history is any guide, there will be a reversal, the firm says.

Others agree. Small caps are “overvalued on most measures relative to large caps” and thus likely to suffer more in a market decline, Stacy Francis, a New York-based financial adviser, tells The Journal.

Comparing stock prices with per-share earnings and growth rates, William Callahan, a financial adviser in Omaha, Neb., estimates that small caps now trade at an 11 percent premium to large caps.

“You’re taking on more risk only to pay a higher price for every dollar of expected profit today,” he tells The Journal….”

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Something to remember if this company reaches a point o IPO. Cool tech for sure.

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“New York Mayor Michael Bloomberg and a handful of Silicon Valley’s top technology investors are planning a nation-wide social media campaign to pressure congress to pass immigration reform. The so-called “virtual march” will attempt to galvanize thousands of netizens to email, tweet, and facebook their leaders to come up with a solution that solves the industry’s looming skills shortage.

“Usually in Washington when you try to push an issue, people knock on senators and congressmens doors, they hire paid lobbyists,” says Jonathan Feinblatt, policy advisor to Bloomberg, “but what we’re doing is actually using the tools of the technology trade–email, and facebook, and social networking–too actually raise the voice of the innovators in this country.”

To be sure, both Republicans and Democrats are bound together in a rare bi-partisan lovefest over the need for more high-skilled immigrants. They differ in how low-skilled and undocumented workers should be let into the country, and have been unable to separate low-skilled and high-skilled reform into different bills.

There’s no guarantee that congress will find a compromise…..”

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“Rumors of the spendthrift American consumer may be slightly exaggerated. Bankrate’s 2013 February Financial Security Index found that a majority of consumers — by a narrow margin — say they have more savings than credit card debt.

For more than half the country, 55 percent, an emergency fund outweighs credit card debt. Nearly a quarter, 24 percent, admit to having more debt on plastic than money in the bank, while 16 percent say they have neither credit card debt nor savings. That puts 40 percent of the population close to the edge of ruin while everyone else seems to be sitting pretty.

If most people have more savings than credit card debt, “Why are so many people broke?” asks Howard Dvorkin, CPA and founder of ConsolidatedCredit.org….”

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“Goldman Sachs’ Hedge Fund Trend Monitor report takes a close look at what the world’s biggest hedge funds are trading.

The report includes the Very Important Short Positions (VISP) — stocks in which have the most short interest outstanding.

It’s interesting to note that while the largest company by market value (Apple) is high on the list of stocks loved by hedge funds, the second largest company (ExxonMobil) ranks #2 on the list of stocks being shorted.

We pulled the 50 stocks on Goldman’s VISP list and ranked them by the total dollar value of short interest — the extent to which investors have been betting against the stock. Also included are the short interest expressed as a percentage of float cap, the YTD return, and the stock’s ticker and sector.

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“Morgan Stanley bills this weekend’s Italian elections as a “crucial risk event.”

The euro crisis front has been relatively quiet since ECB President Mario Draghi gave his famous “whatever it takes to save the euro” speech in July, and many analysts have been waiting for this weekend for months.

Mario Monti, an unelected technocrat, has been relatively successful in pushing through economic reforms since assuming office in late 2011, but those reforms have driven the country deeper into recession, and record high unemployment shows how Italians are suffering.

As a result, former comedian Beppe Grillo and his newly-formed political party, the anti-establishment Five Star Movement, have seen a surge in interest.

As the elections draw nearer, the position of establishment political parties heading into the polls appears to be weakening.

The fear is that reforms could be hampered, causing Italian bond yields to rise again, causing the European chaos to reignite. Furthermore, the election shows what happens when the goals of the elites goes up against the economic situation of the voters.

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“The week ahead is going to have many key earnings reports. Retail is heavily represented, while technology and banking giants are non-existent. Some of these are stocks which can move big on earnings just alone and others are expected to be sector-influencing stocks that can bleed over into peers. As a reminder, the coming week marks the end of February and brings the start of March.

We have not given detail on every single one but we have given a breakdown or input on those where we have some color to add. The earnings estimates are from Thomson Reuters. We would note that some earnings dates (and the estimates) may change or may have already changed.

As a reminder, retail stocks are complaining about the end of payroll tax holidays on Joe Public and they are also commenting about tax refunds hurting their sales. So far the thought is that this will last one quarter but the verdict is still out on that.

Monday, Feb. 25…”

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“HONG KONG—New York-based Pfizer Inc., PFE -0.11% the world’s largest drug company, plans to forge more alliances in China as pharmaceutical companies combat shrinking margins in one of the world’s fastest-growing health-care markets.

“We’re open for collaboration,” said Wu Xiaobing, Pfizer’s country manager for China, noting that he is looking for partnerships in the research, manufacturing and marketing of drugs. “If we were alone, it would take such a long time to make our drugs accessible to patients.”

Foreign drug makers are increasingly turning to local partners to expand their access in China, among Asia’s most promising pharmaceutical markets. They are also facing a big wave of patent expirations globally.

Pfizer already has a joint venture in the world’s second-largest economy with Zhejiang Hisun Pharmaceuticals to develop generic drugs, which dominate China’s pharmaceutical sales. Pfizer also has a minority investment in Shanghai Pharmaceuticals Holding Co., 601607.SH -1.03% one of China’s largest drug distributors, and its animal health division has a JV with China’s Jilin Guoyuan Animal Health Co. for animal vaccines.

Meanwhile, Merck & Co MRK +1.09% ., the world’s second-largest drug company, recently formed a joint venture with China’s Simcere Pharmaceutical GroupSCR +0.63% to develop and sell drugs.

“You can expect to see more momentum going forward,” said Jin Wang, a Shanghai-based partner at McKinsey & Co. “Both multinationals and locals are excited by the growth potential in this market, and they are all facing limitations in terms of their portfolio and capabilities, so they’re teaming up.”

As local companies become fiercer competitors, joining with them is also appealing because of their in-depth knowledge of the China market, according to Mr. Wu….”

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“Barnes & Noble Inc.’s BKS +2.37% chairman and biggest shareholder, Leonard Riggio, has expressed interest in buying out the retailer’s consumer-bookstore chain, raising the prospect that the company could be split in two.

Mr. Riggio, 71 years old, built Barnes & Noble into a retail powerhouse in the 1980s and ’90s, and he still controls about 30% of the company’s common stock.

In an regulatory filing Monday, Mr. Riggio said he plans to propose to purchase the company’s stores and website, but not Nook Media LLC—the company’s college-store chain and its Nook e-reader and tablet business. Mr. Riggio plans to negotiate a price with Barnes & Noble’s board and pay for the deal with cash and debt.

Early last year, Barnes & Noble disclosed it was exploring dividing the Nook business from the rest of the company, although it hasn’t elaborated on the effort since. But a special committee of the board, advised by Evercore Partners, EVR +2.84% has been working on the separation idea….”

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