Q1 Earnings Growth Results with 20% Reported

Hickey and Walters (Bespoke) submit:

Twenty percent of S&P 500 companies have now reported first quarter earnings results. Year over year earnings growth currently stands at a combined -37% for these companies. Financials are the main culprit for this large decline, but the bottom line number will most likely get better since more Financial stocks have reported results than any other sector at the moment.

As shown below, growth expectations for the first quarter stood at -9.9% for the S&P 500 on March 28th. Consumer Discretionary EPS growth currently stands at -23% versus estimates of -13.3% on 3/28. Other sectors with growth currently below estimates are Energy, Financials, Health Care and Industrials. Technology has been the big winner this quarter so far. EPS growth currently stands at 28.8% for the 21.1% of Tech companies that have reported (compared to estimates of 7.9%). Consumer Staples and Materials are the two other sectors with EPS growth that is currently better than expected.

Leucadia Buys Stake in Jeffries as Banks Turn to Private Equity

Eddy Elfenbein submits:

I noticed that Leucadia (LUK) just bought a 14% stake in Jeffries (JEF). I think we're going to see more of this in the near future. Jeffries is not in good shape and they need the cash. For our purposes, I think we can consider Leucadia to be a private equity firm.

Of course, there's the question of why so many banks and brokerages are turning to private equity and SWFs instead of the public market. The easy answer is that they've been completely shut out of the public markets. The other sources are to borrow from Willie Sutton, where the money is.

ETG: An Attractive Tax-Advantaged Fund

Eaton Vance is a leader in the tax-efficiency movement and has launched a number of funds designed specifically to reduce tax exposure, including Eaton Vance Tax-Advantaged Global Dividend (NYSE: ETG).

ETG is a broadly focused fund with a heavy weighting in foreign markets. The primary goal is simple: distribute a high level of dividend income that qualifies for the reduced tax rate. The managers focus on companies that are likely to raise dividends and have substantial capital appreciation potential.

At the moment, the portfolio includes roughly 130 stocks, and the high-yielding utility, energy and financial sectors represent more than half of the fund's assets. From a geographic standpoint, the portfolio is split almost equally between North America and Europe.

Following a sharp increase last April, shareholders can currently expect monthly distributions of $0.1438 per share. That works out to an annual payment of about $1.73 per year, for a yield of 6.9%. And if the past is any indication, then the lion's share of those payouts will be taxed at the favorable 15% rate.

For the fiscal year ending October 31, 2007, the fund reported net investment income (after paying dividends on preferred shares issued for leverage) of $124.5 million, or $1.63 per share -- and 100% of its ordinary income qualified for the reduced rate.

Meanwhile, shareholders were treated to total returns (dividends plus appreciation) of +27.2% for the year, versus just +10.8% for the benchmark Russell 1000 Value Index. And over the past 3 calendar years, ETG has returned an average of +15.4%.

In recent months, ETG's managers have countered the threat of rising inflation by shifting into hard assets -- a move that has already paid off. And looking ahead, the fund has just secured the financing to redeem all of its $750 million in preferred shares and will begin using lower-cost debt to fund its leverage -- which should leave more cash left over for dividends, helping to make it a good fit for anyone looking to maximize their after-tax global income.

Disclosure: No position

RBS Rights Issue Leads European Financials, General Indices Lower

John J. Phillips IV submits:

Taking a look at the equity-related news from overnight, in sector rotation overnight Merrill Lynch raised its ratings for both the European basic resources and European insurance sectors to overweight, cut its ratings on the European media and European technology sectors to neutral, and cut its rating for the European retail sector to underweight. The Royal Bank of Scotland (RBS) officially announced overnight its £12B rights issues. RBS increased its targeted capital ratios to 7.5%-8.5% for Tier 1 capital and in excess of 6% for core Tier 1 capital. RBS noted that the overall underlying performance of the group has remained satisfactory with the exception of a slowdown in capital markets activity in global banking & markets. RBS also noted that the 2007 dividend payout ratio of around 45% remains sustainable over the medium-term Melrose [MRO.UK] agreed overnight to acquire UK-based manufacturing group FKI [FKI.UK] in a cash and stock deal valued at around £478M.

In the newspapers overnight, according to the Wall Street Journal Tribune [TRB] is closing in on an agreement to sell Newsday to News Corp (NWS) for about $580M. Citing sources familiar with the matter the article said that both parties have informally agreed on price, structure and governance. In an interview with The Independent Teun Draaisma, Morgan Stanley's chief European strategist, predicted the end of the FTSE’s rally. Draaisma said that the recent rally will be short-lived, noting that his “all-important market timing indicators have given the warning that the rally is over". Furthermore the group is forecasting a 16% decline in European earnings in 2008.

Wipro Lives to Fight Another Day

Excerpts from Gilford Securities analyst Ashish R. Thadhani's recent update to clients on Wipro Ltd. (NYSE: WIT):

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Finger Pointing at UBS

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