Goldman Sachs charged by SEC with misreporting and drives down financials

The U.S. SEC (Securities and Exchange Commission) has charged Goldman Sachs & Co (GS) and one of its vice presidents with misstating and omitting key facts about a financial product related to subprime mortgages. Goldman shares are currently 20 dollars to $164, and the statement has had a significant impact on the overall market with the DOW industrials currently down 60 at 11,090 and FTSE 100 down 56 at 5,767.


Shorts on the FTSE and DOW placed this morning were closed with this fall.

UK government moves into profit on RBS stake

Royal Bank of Scotland Group PLC (RBS) is up 8% today to 50p as Bank of America Merrill Lynch said the 84%-government owned bank could turn to a profit this year as bad-debt charges and costs fall and margins increase. It thinks RBS shares could double in value over two years on an improved earnings outlook and raising its target price from 45p to 65p. Morgan Stanley also increased its target price on the bank to 50 pence from 40 pence on lower impairments, good asset quality and capital position.

The U.K. government's spent £45.2 billion rescuing RBS in 2009 at an average price of 49.9p.

General Electric beats 1st quarter estimates

General Electric Co. (GE) has just announced that its first-quarter earnings fell 32% to $1.87 billion, or 17 cents a share, and revenue fell 5% to $36.61 billion. From continuing operations it earned 21 cents a share, compared to estimates of earnings of 17 cents a share on revenue of $37.3 billion. Its financial arm, GE Capital, saw its profit drop 41% to $607 million as revenue fell 10%.

The company said it may evaluate additional restructuring that will improve earnings power going forward.

Google earnings rise 35% year on year in first quarter

After the close last night, internet search company Google (GOOG ) said first-quarter revenue was $5.06 billion and net income rose to $1.96 billion, or $6.06 a share, from $1.42 billion or $4.49 a share in the same period in 2009. Excluding special items, earnings for the 1st quarter were $6.76 a share against analyst expectations of $6.60. Google's rate of paid clicks, or the number of times users clicked on its advertisements and generated revenue, rose 15% from the same quarter last year. It had posted 13% growth in paid clicks in the prior fourth-quarter report. Analysts had been looking for first-quarter paid click growth in the range of 12% to 14%.

Some analysts were concerned that it had begun to hire aggressively again in the first quarter, meaning that its total costs and expenses rose to $4.3 billion from $3.6 billion in the same period last year. This drove the share price down 26 dollars to $569, a drop of over 4%, after hours. When out of 27 analysts, 25 have it as buy or overweight this shows the weight of expectation on Google's shares. Although the company beat estimates, the earnings outlook for the rest of the year has moved the share price down. It must be a legitimate concern, whether GOOG can continue driving earnings growth at the same rate if costs rise, its "bread and butter" search engine ads slows down, its exit from China curtails future growth and its acquisitions such as YouTube continue to disappoint in terms of monetization.

It seems the hypothesis that ad spending was going to increase substantially in 2010 is playing out. Companies such as ITV in the UK are already seeing the benefits of this rebound in their share prices with it touching 69p today, 20p higher than the point in March when Sky offloaded its stake. Frustrating to have sold out at 60p!

Mobius's Top Ten investment tips

I liked this story from Times Money Central June 2009 which lists Templeton Emerging Markets' Guru, Dr. Mark Mobius top ten investment tips:

1. Keep an eye on value
Is a share selling for below its book value? What is the relationship between the earnings and the price?

2. Don’t follow the herd
Many of the most successful investors are contrarian investors. Buy when others are selling and sell when others are buying.

3. Be patient
Rome was not built in a day and companies take time to grow to their full potential.

4. Dripfeed your money into the market
No one knows exactly where markets are going so dripfeed your money into the market by making regular investments. That way you will average out the ups and downs of the market.

5. Examine your own situation and your appetite for risk
You should not go into equities if you are the type of person who is nervous every time you read a stock market report.

6. Diversify your portfolio
You must never put all your eggs in one basket unless you have a lot of time to watch that basket - and most of us don’t.

7. Don’t listen to your friends or neighbours when it comes to making investment decisions
Your own situation is different from everyone else’s so you should be making the decisions.

8. Don’t believe everything you read in newspapers, because things tend to be exaggeratedDon’t be swayed by headlines and look at what is going on behind the scenes.

9. Go into emerging markets because that is where the growth is
Emerging markets have consistently grown much faster than the developed countries in virtually every year since 1988.

10. Look at countries where populations are relatively youngCountries with young populations are going to be the most productive in future years.

Ithaca Energy tucked away into SIPP for medium term

Yesterday's news on the early appraisal of the North Sea Stella field indicating that its reserves are much higher than anticipated was good news for Ithaca Energy (IAE). Last week it announced its first profit of $7.9 million on revenues of $111 million, after a loss of $30.4 million (£19.7 million) in 2009. The results were driven by a 50% share of 7,083 barrels of oil per day production from the Beatrice and Jacky fields in the North Sea. Earnings estimates for 2010 are $0.36 per share and $58.7 million. At the current share price of £1.62 ($2.44) this puts Ithaca on a forward p/e of 6.8.

The company has no debt and $30 million of cash. It plans to develop its Athena field and acquire other North Sea assets in what it considers to be a buyer’s market for undeveloped discoveries. The Stella field will come on stream in 2012 with reserves up to 20 million barrels and it is possible that further upgrades of the field's reservoir will be forthcoming.

Although I do not anticipate too much further share price appreciation in the short term after the 10% rise yesterday, I have bought Ithaca in my SIPP (Self Invested personal pension) since the next couple of years should see earnings move up sharply. Though Ithaca can be volatile as it is traded on both the Toronto Stock Exchange and AIM in the U.K. from a fundamentals and momentum point of view this company ticks the boxes.