Is ADSK Setting Up For An Earnings Pop?

Autodesk (ADSK) has its earnings call next week.

Recently Caterpillar (CAT), John Deere (DE), and The Home Depot (HD) all nicely surprised to the upside.  Could these proxies bode well for ADSK, too?

While the market was down today, ADSK was actually up most of the session and only dipped as the Nasdaq took a dive toward the close.  I think this show of strength is a positive sign as well.

I get that ADSK is expensive, in transition, etc., etc. But I used to compete against AutoCAD. They own the market.  Actually, they own a few markets, including general CAD and Hollywood animation stuff.  Both construction and Hollywood are on fuego, yet more positive indicators.

I also get that ADSK stumbled after their last earnings call.  From an all-time high, the stock tumbled some 20%.

As best as I could determine, though, it was a series of items blown out of proportion that stung them.

For example:

* They announced a layoff, which always sounds bad.

But when you listened to the conference call (and subsequent CEO interview), the layoff wasn’t a, “we’re doing badly” kinda layoff, rather, it was a, “we’re changing our business model from product to subscription so that’s going to streamline our infrastructure” thing.  In other words, it sounds like good, proactive management.

* ADSK had a few less subscribers than expected, and they lowered the top end of their subscriber projections from 675K to 650K, which also sounds bad.

But people didn’t want to hear the reason why: Because they’re finding that each subscription is worth more than they thought.

I thought the CEO was very open and positive about this… he said subscriptions is a relatively new thing for ADSK so they’re still learning how to project appropriately… and he immediately followed that up with something to the effect that while they guessed subs a bit too high (in actuality off by less than 3%), they guessed a bit too low on the value of each subscription (sub revs were up over 105.6%), which the CEO (and I!) thought was a perfectly fine trade-off.

Note they kept the low end of the range (625K) intact, which I think is also a good sign (i.e., nothing is “crumbling”).

* The headlines were wrong! Investors.com said, “… delivered disappointing fiscal third-quarter results and guidance”… yet, they beat on both the top and bottom lines and revised guidance upwards. I firmly believe that — in the rush to get out news — if the starting headlines are wrong, unfortunately everyone follows suit… in these days of instant news, there simply isn’t time to properly analyze.

Of course I’m trying to read tea leaves here… but I think ADSK could see an earnings pop… maybe amplified by what I believe was an overdone (erroneous?) pounding after last earnings release.  We’ll see next week!

 

3/7/18 UPDATE:  ADSK REPORTED EARNINGS YESTERDAY AND TODAY WAS UP ALMOST 15%.  :)

 

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Could Be True Poetic Justice For Klay Thompson!

In June of 2016 I had the sad responsibility of taking Warrior Klay Thompson to task for wearing a f***ing Dodger hat to a Giants game.  (Here.)

Klay was there supporting his brother Trayce, who was playing for the f***ing Dodgers.  I love brotherly support, but he could have supported his brother without disrespecting 3/4’s of his fan base.  Case in point:  Steve Kerr, a big f***ing Dodger fan, was also at the game, but Steve was professional and respectful enough — i.e., wasn’t a clueless moron — not to wear f***ing Dodger blue at AT&T Park.

Over the few years, my resentment hasn’t diminished.  While I root for the Warriors, I don’t actually root for Klay any more… which makes me a bit sad since he has always seemed like a nice guy and great role model.  Unfortunately, it’s a “… other than that, Mrs. Lincoln, how did you enjoy the play” thing for me.

I heard something last night, though, that made me LAUGH OUT LOUD.  Apparently the Dodgers may release Trayce Thompson… and guess who might pick him up?  THE GIANTS!  HA HA HA, TRAYCE IN A GIANTS’ COLORS… TAKE THAT THOMPSON TWINS!

If and when Klay wears a Giants cap to a Giants game… then I will accept his apology.

That will be perfect.

Military Spending Is Killing Us

I’ve often said that running a company with too little money is easier than running it with too much money.

I know that may sound counter-intuitive.  But not having money sharply clarifies what is important and forces you to focus on just the critical priorities.

In contrast, when you have too much money, the world is your oyster (so to speak)… so everything is possible… so most of the time you end up trying to do everything… regardless of how important — or unimportant — it is to the mission.

I believe that’s the problem with our military spending.  We have too much money.  We already can bury every other country in the world with thousands of nukes… yet we feel like we need to spend more… because… we can…

… because all we have to do is just rack up some more deficit spending.

What does this mean in terms of dollars and cents?  Way over half of our government’s discretionary spending goes to the military!

If that number was way smaller, I guarantee you that we’d get a lot more done simply by being forced to focus on our top priorities.

Whether you like him or hate him, Senator Rand Paul (KY) recently wrote an interesting piece that touches on this, entitled, “Is Our Military Budget Too Small, Or Is Our Mission Too Large?“  It’s short and well worth the read (underlining is my emphasis):

     Is our military budget too small, or is our mission too large?  Since 2001, the U.S. military budget has more than doubled in nominal terms and grown over 37% accounting for inflation. The U.S. spends more than the next eight countries combined.

It’s really hard to argue that our military is underfunded, so perhaps our mission has grown too large. That mission includes being currently involved in combat operations in Iraq, Syria, Afghanistan, Somalia, Niger, Libya, and Yemen. We have troops in over 50 of 54 African countries. The wars in Iraq and Afghanistan have cost over a trillion dollars and lasted for over 15 years.

Unfortunately, none of these wars have been authorized by Congress, and Afghanistan and Iraq have gone far beyond their original authorizations. And when all combined, these wars are draining our treasury. A country can only remain strong as long as it remains solvent.

In Afghanistan, we spend about $50 billion each year. Where does the money go? For troops and weapons, of course, but billions have also been spent on roads, bridges, and schools for Afghanistan. Seems a shame that bridges, roads, and schools crumble here while we persist in nation-building abroad. Maybe it’s time to do some nation-building at home.

Don’t get me wrong. I supported going after the jihadists who attacked us on 9/11. But that mission is long past over. We killed the plotters and their supporters. The question we need to ask is, “When will the Afghanis be able to defend themselves?”

Most conservatives believe welfare should be temporary, and that ultimately the able-bodied must stand on their own. Foreign assistance is no different. If the U.S. coddles and comforts and does all the fighting, the Afghanis will never become self-sufficient. People argue that the Taliban will take over Afghanistan. Not if the Afghanis stand and fight. We’ve given them 15 years of training and billions of dollars of the most sophisticated weapons known to man. Surely, the time for them to step up and fight is now.

Is it worth one more American life to try to build a nation for people unwilling to fight for their own country?

The recent 21% increase in the military budget will buy a lot of weapons, but it won’t win the war in Afghanistan. President Obama already tried that. Obama increased our troops to around 100,000, and, sure enough, the Taliban ran and bided their time for the inevitable troop withdrawals.

The Taliban now controls a sizeable area of Afghanistan. I just can’t, in good conscience, ask our soldiers to go back to Afghanistan to take back the same villages they’ve taken twice, first in 2002 and then again in 2010.

Candidate Trump wisely ran on a platform that the Iraq War was a mistake. But President Trump is surrounded by Generals who’ve never seen a war that they believe cannot be won. And so the wars continue.

My hope is that President Trump will remember Candidate Trump and tell the Generals who surround him: “Enough is enough. I’m bringing the boys home.”

 

And, I would add, “… so we can stop spending so much money on non-prioritized military stuff… so we have a hope of balancing our OUT-OF-CONTROL deficits!”

 

How To Slow Down High School Gun Violence Before It Starts

I know what you are going to think, “just take all guns away and that will stop high school gun violence.”

That’s not what I’m going to say.

Information is the key.

Certainly the community can chime in more… maybe someone heard something or saw something on social media?  I’ve always said “people on the front lines” (whether employees or students) know the most about what’s really going on.

But how do parents fit into this?  In fact, how does a parent with a troubled child know when to ask for help… or even when to turn their child into the authorities?

Most likely a parent in this situation already has their hands full just dealing with a difficult child… imagine how gut-wrenching it would be to make the leap from acknowledging your child is not only difficult but potentially a killer!

Stigma aside, I’m not sure how many parents would be so quick to make that leap… especially in this day & age where violent video games are not just standard fare but celebrated. In other words, what really is normal these days?

What I think we may need — what I think the entire country may need — is some kind of standardized “Child Assessment Test”…

… i.e., some kind of simple, multiple choice test that a parent can honestly fill out and in return get an honest, professional, and *anonymous* psychological appraisal of a child’s mental health as it relates to the potential for mass violence and such.

Having such an assessment might give a parent confidence that they are not acting alone, which would be a tremendous burden lifted.

A website could be setup with a conversational FAQ that could help answer frequently asked questions about the surveys, designed to further advise a parent whether they should seek more immediate guidance to prevent a dangerous situation to others or even the child themself.

Maybe there’s already such a thing?  If not, I think we may be reaching the point where it’s needed.

P.S.  Taking guns away from crazy people — whether student or adult — is a good thing to do, too!

Uh Oh, Has Shale Peaked? You Heard It Hear Second.

For some reason, I thought shale was invincible… that is, a technology-enabled, found source of additional oil for many decades into the future.

But I just read a ZeroHedge piece — The Shale ‘Miracle’ & The Reality-Optional World Of Bizarro Finance — and apparently shale isn’t going to be the grand savior after all.

The two original big shale plays, the Bakken in North Dakota and the Eagle Ford in south Texas, have now apparently peaked and the baton has passed to the Permian Basin in west Texas. If the first two bonanzas were characteristic of shale, we can look forward not very far into the future when the Permian also craps out. There are only so many “sweet spots” in these plays.

The unfortunate part of the story is that the shale oil miracle only made this country more delusional at a moment in history when we really can’t afford to believe in fairy tales.

Let’s not give up on renewables quite yet!

 

All That Wall Street Panic Because A Number Was Misinterpreted?

Last week was quite a ride on Wall Street.  Unbelievably, the Dow traveled 22,253 points in one week — approaching 1x its own index value — I’d say that’s the definition of a wild ride!

Everyone is speculating about the trigger.

Other than the obvious reason — which is healthy markets aren’t supposed to go up 100% of the time like we have — two factors seem to have kicked things off.

One had to do with a short squeeze on an ETN (Exchange Traded Note) that tracks the inverse of volatility.  The issue itself was rather harmless in that it did not directly affect underlying securities like some ETFs (Exchange Traded Fund) can.  What wasn’t harmless, though, was it is a leveraged asset… which meant when the pendulum swung, it caused a pretty big short squeeze… which meant that people probably had to sell other assets — like stocks — to cover.  So, ultimately, it’s plausible that these did have some affect in the market last week… selling pressure is, after all, selling pressure.

The other — which people consider the bigger culprit — was a reported surge in hourly earnings reported in last Friday’s (2/2/18) jobs report.  While that signals a healthy economy, which of course is good for the stock market, it also signaled that interest rates might start rising… which, ironically enough, is actually historically good for the stock market, too, at least during the initial rising phase.

But, in last week’s case, people got flat out freaked out.  Hence, the wild ride.

But, it appears that no one asked why hourly earnings surged.  From ZeroHedge:

Well, not so fast, because as a closer look at the data reveals, the only reason why average hourly earnings rose, is because the total weekly hours worked posted a relatively steep decline, dropping from 34.5 in December to 34.3 in January, a 2.9% drop from the 34.4 last January.

What economists (and Wall Street analysts!) should care about is actual earnings power… and average weekly earnings actually declined from December to January.

Seems like no one wanted to let facts get in the way of a good panic.

 

P.S.  Investor sentiment is always the biggest wild card in the deck.  But, weekends are good circuit breakers in that regard.  More and more folks are coming to the conclusion that a lot of what is underpinning the market is still intact.  Readers of my blog know I track the price of oil… and oil has not only been behaving, but has been declining… which I believe bodes well for spending… which bodes well for corporate profits… which bodes well for the market.

Awesome News About Jimmy G.! But There’s A Little Voice…

I’m a big Jimmy G. fan… as is everyone in the Bay Area.

However, I can remember being a big Colin Kaepernick fan as well… as it seemed everyone was in the Bay Area, too.

And why not?  Kaep ran wild against the mighty Packers in a playoff game.  He — single-handedly — was reinventing the quarterback position.  He brought us to Conference Championships and even the first Super Bowl in many years… came within a whisper of winning it, too.

I even remember a friend posing the ultimate question:  “Would you rather have an aging Aaron Rodgers leading your team into the future… or a fresh disruptor like Kaep?”  I remember at the time it feeling very much like a toss up.  Rodgers already had one MVP under his belt, but it is impossibly to deny that we were all still punch-drunk with Kaep’s u-n-l-i-m-i-t-e-d  p-o-t-e-n-t-i-a-l.

So, when everyone asks, “what could possibly go wrong with making Jimmy G. the highest-paid football player in the league after only starting seven games?!” it’s hard not to think we were all feeling just as giddy about Kaep at one point…

… a feeling that seemed to go away as fast as it came.

P.S.  With that said, I want to say for the record that I was one of the fans at this year’s incredible Niners-Titans game screaming, “Let Jimmy kick!  Let Jimmy play D!  Let Jimmy coach!”  Certainly seems like he can do anything he puts his mind to on a football field.  :)

“Flight To Quality” Is What They Call AAPL Action These Last Few Days

I remember the first Gulf War back in 1991.  The entire world was freaked out, including — especially — the financial markets.

Yet, the day we attacked, the Dow had one of its best days ever.

I remember hearing the phrase, “flight to quality.”  That is, when the going gets scary, the smart move to safe and trustworthy investments.

On that January 18th day back in 1991, it was IBM that people flocked to… IBM being, back then, the most important tech company on the planet.

Over the last few days, it’s been AAPL.

I think this puts a lot of the nitpicking criticisms of AAPL in appropriate perspective:  When the going is tough, the tough don’t hesitate to flock to Apple.