Friday, November 30, 2007
Friday's 52 Week Lows
WAG Walgreen Co. 36.87
UXG US Gold Corporation 3.50
NVGN Novogen Limited 6.10
NOBL Noble Intl Ltd 16.10
NOA North Amern Energy Pa ... 12.55
SOLD Housevalues Inc 3.42
SMTK Simtek Corp 2.05
IIG Imergent Inc 12.79
IHC Independence Holding ... 13.90
BMJ Birks & Mayors Inc 6.15
BIG Big Lots Inc 19.00
ANEU American Cmnty Newspa ... 4.00
ACME Acme Communication Inc 3.05
Sears Holdings Eddie Lampert's Letter To Employees
Sears Holdings (SHLD) Chairman Eddie Lampert issued the following letter to employees yesterday.
To our Associates:
Yesterday, Sears Holdings announced our results for the third quarter of 2007. While we were not pleased with these results, much of the commentary in the media and on Wall Street following the results ignores the strength of our company and the progress that we have made. In fact, over the past several years, we are one of the few retail companies that have actually reduced our overall debt levels, while at the same time investing over $1 billion on capital expenditures, making investments in inventory for our customers, contributing significantly to our pension plans for our past and future retirees and repurchasing over $3 billion of our shares.
As Aylwin said yesterday, we cannot blame our results entirely on the retail and macro-economic environments, and we need to continue our quest to improve. At the same time, it is also the case that many retailers, including Home Depot (HD), Lowe’s (LOW), Macy’s (M), Kohl’s (KSS) and JC Penney (JCP), have suffered from the economic environment of the past year and have had disappointing sales and earnings results. Much of the commentary following their results focused on the difficulties in the housing markets, the overall macro environment, and the highly promotional nature of the retail environment that has existed recently. An analyst for Fitch, the credit rating agency, reacting to JC Penney’s new store openings was cited as praising JC Penney for keeping expenses under control. When other companies manage expenses carefully, it is often characterized as a sign of good management and prudence. In the case of Sears Holdings, meanwhile, expense controls are often cited as a root cause of poor performance.
Sears Holdings sells a large variety of merchandise. Many of our merchandise categories, including home appliances, tools, and lawn and garden equipment are directly related to home improvement, home maintenance and home turnover related activities. As Mike Ullman, CEO of JC Penney, was quoted recently as saying, “It’s hard to sell window coverings to homes that aren’t being built.” JC Penney reported lower income in its most recent quarter compared to last year. Kohl’s Corp. reported that its income for the past quarter was lower as well. The same goes for Home Depot and Lowe’s. All of these companies have spent enormous amounts to open new stores and to remodel existing stores and still ended up with lower earnings. Spending lots of money doesn’t always lead to the results people expect.
In fact, Sears Holdings has made significant investments and taken measured risks, including the increase in our inventory position over the past couple of years. Not all of these risks pan out and, in the case of our inventory investment, the additional inventory has not resulted in improved sales and profitability. Had the economic environment been different, certain actions may have led to different results. We are taking actions to adjust our inventory position so that, by the end of our fiscal year, we expect our inventory levels will be below the levels of the prior year.
Retail is a fickle business. Nevertheless, like any other business, by focusing on the long term, making decisions based on facts and logic, and appreciating that all decisions are based on many possible future scenarios, companies can navigate the ups and downs of the economy and the stock market to create long term value for their shareholders. That is our focus, and our goal, at Sears Holdings. We will take the actions we believe are necessary to drive value over the long term and manage the business closely and opportunistically in the short term.
We thank you for your hard work and are committed to working to deliver better results in the future. Remember, not everybody likes rooting for the underdog. It is up to us to earn their respect by our performance on the retail playing field.
Respectfully,
Edward S. Lampert
Chairman
Sears Holdings
To our Associates:
Yesterday, Sears Holdings announced our results for the third quarter of 2007. While we were not pleased with these results, much of the commentary in the media and on Wall Street following the results ignores the strength of our company and the progress that we have made. In fact, over the past several years, we are one of the few retail companies that have actually reduced our overall debt levels, while at the same time investing over $1 billion on capital expenditures, making investments in inventory for our customers, contributing significantly to our pension plans for our past and future retirees and repurchasing over $3 billion of our shares.
As Aylwin said yesterday, we cannot blame our results entirely on the retail and macro-economic environments, and we need to continue our quest to improve. At the same time, it is also the case that many retailers, including Home Depot (HD), Lowe’s (LOW), Macy’s (M), Kohl’s (KSS) and JC Penney (JCP), have suffered from the economic environment of the past year and have had disappointing sales and earnings results. Much of the commentary following their results focused on the difficulties in the housing markets, the overall macro environment, and the highly promotional nature of the retail environment that has existed recently. An analyst for Fitch, the credit rating agency, reacting to JC Penney’s new store openings was cited as praising JC Penney for keeping expenses under control. When other companies manage expenses carefully, it is often characterized as a sign of good management and prudence. In the case of Sears Holdings, meanwhile, expense controls are often cited as a root cause of poor performance.
Sears Holdings sells a large variety of merchandise. Many of our merchandise categories, including home appliances, tools, and lawn and garden equipment are directly related to home improvement, home maintenance and home turnover related activities. As Mike Ullman, CEO of JC Penney, was quoted recently as saying, “It’s hard to sell window coverings to homes that aren’t being built.” JC Penney reported lower income in its most recent quarter compared to last year. Kohl’s Corp. reported that its income for the past quarter was lower as well. The same goes for Home Depot and Lowe’s. All of these companies have spent enormous amounts to open new stores and to remodel existing stores and still ended up with lower earnings. Spending lots of money doesn’t always lead to the results people expect.
In fact, Sears Holdings has made significant investments and taken measured risks, including the increase in our inventory position over the past couple of years. Not all of these risks pan out and, in the case of our inventory investment, the additional inventory has not resulted in improved sales and profitability. Had the economic environment been different, certain actions may have led to different results. We are taking actions to adjust our inventory position so that, by the end of our fiscal year, we expect our inventory levels will be below the levels of the prior year.
Retail is a fickle business. Nevertheless, like any other business, by focusing on the long term, making decisions based on facts and logic, and appreciating that all decisions are based on many possible future scenarios, companies can navigate the ups and downs of the economy and the stock market to create long term value for their shareholders. That is our focus, and our goal, at Sears Holdings. We will take the actions we believe are necessary to drive value over the long term and manage the business closely and opportunistically in the short term.
We thank you for your hard work and are committed to working to deliver better results in the future. Remember, not everybody likes rooting for the underdog. It is up to us to earn their respect by our performance on the retail playing field.
Respectfully,
Edward S. Lampert
Chairman
Sears Holdings
Friday's Links
Buffett's success, Blogsport, Rove, Censorship
- Here is one of the best articles to date about what makes Warren so good at what he does.
- Great name Adam.
- If you can't get 'em legally, just cheat.
- Starbucks apparently has some thin skin
- Here is one of the best articles to date about what makes Warren so good at what he does.
- Great name Adam.
- If you can't get 'em legally, just cheat.
- Starbucks apparently has some thin skin
EPA Ethanol Mandate: A Joke
Why "mandate" refiners use less ethanol they are already using? Shouldn't a "mandate" require they use more than they already are? Isn't that the point?
Regulators on Tuesday set the new renewable fuels standard of nearly 4.7% for next year to meet a federal mandate that at least 5.4 billion gallons of ethanol be blended into transportation gasoline in 2008.
The standard for 2007 was slightly more than 4 percent, which amounted to roughly 4.7 billion gallons, according to the Environmental Protection Agency. The volume target increases every year until reaching 7.5 billion gallons in 2012. Why is this a joke? The U.S. currently has 134 operating ethanol plants with a total capacity of 7.2 billion gallons. That means the "mandate" could have been raised another 20% to 30% and current capacity could have easily handled it.
With producers like ADM (ADM) currently undergoing capacity upgrades that will have it producing 1.6 billion gallons itself annually, if congress and the EPA are indeed serious about making a dent in our oil consumption and the strangle hold it has on us, more aggressive target are required. Verasun (VSE) has put expansion on hold chiefly due to uncertainty over Congressional legislation.
The industry is currently subdued after it meteoric rise in early 2006. Unless congress want the inevitable consolidation that will occur, concentrating production in only a few companies, action is required. We are at a crossroads. We have the production available but unless we force refiners like Exxon (XOM), BP (BP) and Chevron (CVX) to use it, they will not as it ultimately threatens them.
Ethanol currently sells for $1.96 a gallon and every car in the US can run on a 10% blend. Currently several states have not yet enacted the 10% blend level and this EPA "mandate" only assures that will not happen anytime soon.
Almost 8 million of autos and trucks can run on the E85 blend. My Suburban can, but I cannot buy the fuel here. Supply it and you can bet I will. I would gladly support an Iowa farmer over a Saudi Shiek and smile while doing it.
Down the road, Konrad Imielinski reports:
"The U.S. House of Representatives could vote on a wide-ranging energy bill next week that would triple the use of ethanol. There is speculation that legislation will require 20.5 billion gallons of ethanol by 2015, with 5.5 billion gallons of that coming from cellulosic ethanol. The bill is also speculated to set short-term targets of 9.5 billion gallons by 2008 and 11.6 billion gallons by 2009. Back in June, the Senate passed a proposal to require 36 billion gallons of ethanol use by 2022. Democrats will also attempt to hit the oil industry with $15 billion in taxes and require utilities to get 15 percent of their electricity from wind, solar and other renewable sources."
Congress needs to act and the party that takes the lead may just get credit years from now for saving us from oil. Isn't that enough motivation?
Regulators on Tuesday set the new renewable fuels standard of nearly 4.7% for next year to meet a federal mandate that at least 5.4 billion gallons of ethanol be blended into transportation gasoline in 2008.
The standard for 2007 was slightly more than 4 percent, which amounted to roughly 4.7 billion gallons, according to the Environmental Protection Agency. The volume target increases every year until reaching 7.5 billion gallons in 2012. Why is this a joke? The U.S. currently has 134 operating ethanol plants with a total capacity of 7.2 billion gallons. That means the "mandate" could have been raised another 20% to 30% and current capacity could have easily handled it.
With producers like ADM (ADM) currently undergoing capacity upgrades that will have it producing 1.6 billion gallons itself annually, if congress and the EPA are indeed serious about making a dent in our oil consumption and the strangle hold it has on us, more aggressive target are required. Verasun (VSE) has put expansion on hold chiefly due to uncertainty over Congressional legislation.
The industry is currently subdued after it meteoric rise in early 2006. Unless congress want the inevitable consolidation that will occur, concentrating production in only a few companies, action is required. We are at a crossroads. We have the production available but unless we force refiners like Exxon (XOM), BP (BP) and Chevron (CVX) to use it, they will not as it ultimately threatens them.
Ethanol currently sells for $1.96 a gallon and every car in the US can run on a 10% blend. Currently several states have not yet enacted the 10% blend level and this EPA "mandate" only assures that will not happen anytime soon.
Almost 8 million of autos and trucks can run on the E85 blend. My Suburban can, but I cannot buy the fuel here. Supply it and you can bet I will. I would gladly support an Iowa farmer over a Saudi Shiek and smile while doing it.
Down the road, Konrad Imielinski reports:
"The U.S. House of Representatives could vote on a wide-ranging energy bill next week that would triple the use of ethanol. There is speculation that legislation will require 20.5 billion gallons of ethanol by 2015, with 5.5 billion gallons of that coming from cellulosic ethanol. The bill is also speculated to set short-term targets of 9.5 billion gallons by 2008 and 11.6 billion gallons by 2009. Back in June, the Senate passed a proposal to require 36 billion gallons of ethanol use by 2022. Democrats will also attempt to hit the oil industry with $15 billion in taxes and require utilities to get 15 percent of their electricity from wind, solar and other renewable sources."
Congress needs to act and the party that takes the lead may just get credit years from now for saving us from oil. Isn't that enough motivation?
Ethanol Consolidation Begins
It was just matter of time.
Verasun (VSE) and US Bioenergy (USBE), both trading around 52 week lows, have agreed to merge.
Under the agreement, 0.81 share of VeraSun common stock will be issued for each outstanding share of US BioEnergy common stock, representing a premium of approximately 11% based on 11/23, closing prices. Existing VeraSun shares will remain outstanding and will represent approximately 60% of the shares outstanding after the merger.
VeraSun Chairman, CEO and President Donald L. Endres will remain CEO of the combined company, and US BioEnergy President and CEO Gordon Ommen will serve as chairman following the closing of the merger. VeraSun Senior Vice President and Chief Financial Officer Danny C. Herron will become president of the combined company. The combined entity will retain the VeraSun name and trade under VeraSun’s existing ticker symbol, VSE.
Upon completion, the new company will have nine ethanol production facilities in operation and seven additional facilities under construction. By the end of 2008, the company is expected to have a total production capacity of more than 1.6 billion gallons per year (BGY) and 16 facilities constructed by Fagen, Inc. and utilizing ICM process technology. Through the merger, the employees of both companies will be integrated into a combined work force.
VeraSun will then be the or equal to ADM (ADM) as the largest public ethanol producer in the US. With valuation of producers at record lows, do not expect this to be the last merger or buyout you read about in the coming months. Prime targets are Pacific Ethanol (PEIX) for its west coast monopoly and The Andersons (ANDE) because it is still profitable and has a fertilizer segment that is doing very well.
Verasun (VSE) and US Bioenergy (USBE), both trading around 52 week lows, have agreed to merge.
Under the agreement, 0.81 share of VeraSun common stock will be issued for each outstanding share of US BioEnergy common stock, representing a premium of approximately 11% based on 11/23, closing prices. Existing VeraSun shares will remain outstanding and will represent approximately 60% of the shares outstanding after the merger.
VeraSun Chairman, CEO and President Donald L. Endres will remain CEO of the combined company, and US BioEnergy President and CEO Gordon Ommen will serve as chairman following the closing of the merger. VeraSun Senior Vice President and Chief Financial Officer Danny C. Herron will become president of the combined company. The combined entity will retain the VeraSun name and trade under VeraSun’s existing ticker symbol, VSE.
Upon completion, the new company will have nine ethanol production facilities in operation and seven additional facilities under construction. By the end of 2008, the company is expected to have a total production capacity of more than 1.6 billion gallons per year (BGY) and 16 facilities constructed by Fagen, Inc. and utilizing ICM process technology. Through the merger, the employees of both companies will be integrated into a combined work force.
VeraSun will then be the or equal to ADM (ADM) as the largest public ethanol producer in the US. With valuation of producers at record lows, do not expect this to be the last merger or buyout you read about in the coming months. Prime targets are Pacific Ethanol (PEIX) for its west coast monopoly and The Andersons (ANDE) because it is still profitable and has a fertilizer segment that is doing very well.
Friday's Upgrades and Downgrades
UPGRADES
MGP Ingredients MGPI Northland Securities Under Perform » Market Perform
InterActive IACI Piper Jaffray Neutral » Buy
General Maritime GMR Citigroup Sell » Hold
Sigma Designs SIGM RBC Capital Mkts Sector Perform » Outperform
Natl Oilwell Varco NOV Citigroup Hold » Buy
Patterson Companies PDCO Lehman Brothers Equal-weight » Overweight
Nalco NLC Jefferies & Co Hold » Buy
Red Robin Gourmet RRGB CIBC Wrld Mkts Sector Perform » Sector Outperform
Dollar Tree DLTR Friedman Billings Mkt Perform » Outperform
Range Resources RRC Friedman Billings Mkt Perform » Outperform
General Motors GM Bear Stearns Underperform » Peer Perform
TiVo TIVO JP Morgan Underweight » Overweight
Double Hull Tankers DHT UBS Neutral » Buy
Nuvelo NUVO UBS Neutral » Buy
DOWNGRADES
Rogers Comms RCI BMO Capital Markets Outperform » Market Perform
Men's Wearhouse MW Caris & Company Above Average » Average
Transocean RIG Sterne Agee Buy » Hold
Rogers Comms RCI Bear Stearns Outperform » Peer Perform
Sierra Pacific SRP Credit Suisse Outperform » Neutral
State Auto Fin STFC Piper Jaffray Neutral » Sell
Donegal Group DGICA Piper Jaffray Neutral » Sell
Piper Jaffray PJC Wachovia Outperform » Mkt Perform
Tyler Tech TYL Banc of America Sec Buy » Neutral
Rogers Comms RCI CIBC Wrld Mkts Sector Outperform » Sector Perform
Aeropostale ARO Sun Trust Rbsn Humphrey Buy » Neutral
Thursday, November 29, 2007
"Fast Money" for Friday
Friday's Picks
Tim Seymour recommended Sears Holdings (SHLD). Open $104.09
Guy Adami would buy E*TRADE (ETFC). Open $4.82
Karen Finerman went with Domtar (UFS). Open $7.23
Pete Najarian agreed with Guy: Buy E*TRADE (ETFC). Open $4.82
Thursday's Results
Tim Seymour recommended Stillwater Mining (SWC). Open $9.81 Close $9.76 LOSS
Guy Adami likes US Steel (X). Open $96.16 Close $97.67 GAIN
Karen Finerman prefers Pzena (PZN) as a value play. Open $12.00 Close $11.85 LOSS
Pete Najarian says Isis (ISIS) is a buy. Open $17.48 Close $17.53 GAIN
Guy Adami= 47-41 = 53%
John Najarian= 13-4 = 76%
Jeff Macke= 54-35 = 60%
Pete Najarian= 37-36 = 51%
Tim Seymore= 5-6 = 45%
Karen Finerman= 29-23 = 55%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Thursday's 52 Week Low's
TSH Teche Holding Company 37.90
TSC Stephan Company , The 3.25
SOLD Housevalues Inc 3.50
SMTK Simtek Corp 2.10
SMSI Smith Micro Software Inc 7.72
SMRT Stein Mart Inc 5.41
SHLD Sears Hldgs Corp 102.13
PBY The Pep Boys-Manny, M ... 10.86
PAL North Amern Palladium Ltd 5.40
PAGI Pemco Aviation Inc 3.01
NYT New York Times Company 16.73
NVGN Novogen Limited 6.36
NUTR Nutraceutical Intl Corp 11.34
MW Mens Wearhouse Inc 34.81
MTLK Metalink Ltd 4.90
CTR Cato Corp New 14.63
CRED Credo Petroleum Corpo ... 8.45
Did Lampert Dump Burnett?
Jesus, what did Sears Holdings (SHLD) Eddie Lampert do to CNBC's Erin Burnett? Did they date when she worked at Goldman Sachs (GS) or did he rebuff her advances? Perhaps she is miffed that she did not get an interview she wanted?
She has been joyously drubbing this quarters performance all day today on CNBC. She does is with this sick little smile on her face too. Odd...
Now, I am not saying this was a good quarter, it sucked. But, Burnett has taking it a bit farther. She spent this morning comparing his Citigroup (C) purchases to that of Saudi Prince Alwaleed's. Now, it is one thing to compare two investors purchase price but is it really legitimate or the slightest bit honest to compare purchases of a company made 17 years apart? Am I the only one who finds that embarrassingly transparent?
Then she jumps into the "how much time does Lampert have left" doomsday scenario. Okay,,,,,, let's just forget the 20 year and 28% annual return Lampert has produced for investors. That track record alone places him in a handful of investors. I mean, I am sure anyone who has made a fortune with Lampert is jumping ship now because of a bad year. Let's also forget the 5 year lockup people give him when they fork over their $10 million minimum to invest with him. Let's also ignore the fact that folks who have $10 million to give someone for 5 years to invest, did not get that type of money by pissing their pants at every bump in the road.
Sears. Burnett clearly has no grasp of the situation. It is a retail turnaround story. Those take years. Sears is not losing money and still is producing billions for Lampert to repurchase shares. Has Burnett seen the stock price and performance of other comparable retailers like JC Penny (JCP) down 48% from its high and Macy's (M) down 30% from its high? Apparently not. Check out the one year chart of all three here. Look similar?
What Burnett casually glosses over is that when Lampert took control of both Sears and Kmart, they were careening toward extinction (Kmart actually was bankrupt). Now they produce about $1 billion in cash and every quarter that goes buy, Lampert increases our ownership percentage.
Awful job Eddie.... (please detect the sarcasm)
Erin, get over it "he just not that into you"
She has been joyously drubbing this quarters performance all day today on CNBC. She does is with this sick little smile on her face too. Odd...
Now, I am not saying this was a good quarter, it sucked. But, Burnett has taking it a bit farther. She spent this morning comparing his Citigroup (C) purchases to that of Saudi Prince Alwaleed's. Now, it is one thing to compare two investors purchase price but is it really legitimate or the slightest bit honest to compare purchases of a company made 17 years apart? Am I the only one who finds that embarrassingly transparent?
Then she jumps into the "how much time does Lampert have left" doomsday scenario. Okay,,,,,, let's just forget the 20 year and 28% annual return Lampert has produced for investors. That track record alone places him in a handful of investors. I mean, I am sure anyone who has made a fortune with Lampert is jumping ship now because of a bad year. Let's also forget the 5 year lockup people give him when they fork over their $10 million minimum to invest with him. Let's also ignore the fact that folks who have $10 million to give someone for 5 years to invest, did not get that type of money by pissing their pants at every bump in the road.
Sears. Burnett clearly has no grasp of the situation. It is a retail turnaround story. Those take years. Sears is not losing money and still is producing billions for Lampert to repurchase shares. Has Burnett seen the stock price and performance of other comparable retailers like JC Penny (JCP) down 48% from its high and Macy's (M) down 30% from its high? Apparently not. Check out the one year chart of all three here. Look similar?
What Burnett casually glosses over is that when Lampert took control of both Sears and Kmart, they were careening toward extinction (Kmart actually was bankrupt). Now they produce about $1 billion in cash and every quarter that goes buy, Lampert increases our ownership percentage.
Awful job Eddie.... (please detect the sarcasm)
Erin, get over it "he just not that into you"
Thursday's Links
Thank-You, Shopping, Mutual funds, 1,000%
- Here is a great read from Minyanville about children and the Holidays
- Even better than that, how to make Christmas shopping an educational experience.
- If you invest in mutual funds, here is how to do it.
- Not a bad year?!?
- Here is a great read from Minyanville about children and the Holidays
- Even better than that, how to make Christmas shopping an educational experience.
- If you invest in mutual funds, here is how to do it.
- Not a bad year?!?
Sears Holdings Results
Going to be an ugly day for Lampert and compnay.
Sears (SHLD) today reported net income of $2 million, or $0.01 per diluted share, for
the Q3 ended November 3, 2007, compared with net income of $196 million, or $1.27 per diluted share, for the Q3 ended October 28, 2006. The Q3 2006 results included $101 million in pre-tax gains ($64 million after tax or $0.42 per diluted share) on total return swap investments outstanding during that period.
Excluding these gains, earnings per diluted share were $0.85 for the Q3 of fiscal 2006. The year-over-year decline in income is primarily the result of a $223
million decline in gross margin, reflecting both sales declines, as well as an overall decline in our gross margin rate for the quarter due to discounting.
Operating income for the quarter decreased $230 million to $46 million in 2007, as compared to $276 million in the third quarter of 2006, mainly due to lower gross margin generated at both Kmart and Sears. For the quarter, Sears Holdings generated $3.2 billion in total gross margin as compared to $3.4 billion in the third quarter last year.
Lampert had cash and cash equivalents of $1.5 billion at 11/3 (of which $0.8 billion was domestic and $0.7 billion was at Sears Canada) as compared to $2.1 billion at October 28, 2006. The $1.1 billion net decline in cash for the quarter primarily reflects $0.9 billion used for share repurchases and $0.9 billion used to build inventories for the holiday selling season, partially offset by $0.6 billion of cash generated through short-term borrowings that have been repaid as of 11/27.
Lampert repurchased 6.7 million common shares at a total cost of $0.9 billion (or $131.72 per share) under our share repurchase program during Q3. As of November 27, he had remaining authorization to repurchase $736 million of common shares under the program.
The bright spot was November month-to-date period (Sunday, November 4, 2007
through Tuesday, November 27, 2007) domestic comparable store sales
at Sears increasing 1.9%.
Good? Hell no. Sucks actually. But, did you really expect any better? Sears is going to get hit hard today and that is fine as I will be a buyer when shares drop below $110. Retails stories are long term ones ans Lampert is only in act two. Act one was getting both companies off the bankruptcy express, act two is determining the format which appears to be a brand central one. Act three will be the roll out of this (this will happen over the next year) and then we wait.
The good news is share count is decreasing rapidly, now down to about 137 million so the turnaround earnings will be excellerated for those holding shares.
View release here:
Sears (SHLD) today reported net income of $2 million, or $0.01 per diluted share, for
the Q3 ended November 3, 2007, compared with net income of $196 million, or $1.27 per diluted share, for the Q3 ended October 28, 2006. The Q3 2006 results included $101 million in pre-tax gains ($64 million after tax or $0.42 per diluted share) on total return swap investments outstanding during that period.
Excluding these gains, earnings per diluted share were $0.85 for the Q3 of fiscal 2006. The year-over-year decline in income is primarily the result of a $223
million decline in gross margin, reflecting both sales declines, as well as an overall decline in our gross margin rate for the quarter due to discounting.
Operating income for the quarter decreased $230 million to $46 million in 2007, as compared to $276 million in the third quarter of 2006, mainly due to lower gross margin generated at both Kmart and Sears. For the quarter, Sears Holdings generated $3.2 billion in total gross margin as compared to $3.4 billion in the third quarter last year.
Lampert had cash and cash equivalents of $1.5 billion at 11/3 (of which $0.8 billion was domestic and $0.7 billion was at Sears Canada) as compared to $2.1 billion at October 28, 2006. The $1.1 billion net decline in cash for the quarter primarily reflects $0.9 billion used for share repurchases and $0.9 billion used to build inventories for the holiday selling season, partially offset by $0.6 billion of cash generated through short-term borrowings that have been repaid as of 11/27.
Lampert repurchased 6.7 million common shares at a total cost of $0.9 billion (or $131.72 per share) under our share repurchase program during Q3. As of November 27, he had remaining authorization to repurchase $736 million of common shares under the program.
The bright spot was November month-to-date period (Sunday, November 4, 2007
through Tuesday, November 27, 2007) domestic comparable store sales
at Sears increasing 1.9%.
Good? Hell no. Sucks actually. But, did you really expect any better? Sears is going to get hit hard today and that is fine as I will be a buyer when shares drop below $110. Retails stories are long term ones ans Lampert is only in act two. Act one was getting both companies off the bankruptcy express, act two is determining the format which appears to be a brand central one. Act three will be the roll out of this (this will happen over the next year) and then we wait.
The good news is share count is decreasing rapidly, now down to about 137 million so the turnaround earnings will be excellerated for those holding shares.
View release here:
Ackman Increases Stake in Borders: Why?
I am trying to understand what Bill Ackman sees in Borders (BGP)
According to a filing with the SEC, Bill Ackman's Pershing Square Capital Management disclosed an increased 17.1% stake in bookseller Borders Group, up from 12%. Last week management said Q4 earnings, excluding restructuring charges, will exceed last year's earnings from continuing operations of around $1.48 per share. Now that improvement is only about $1 million dollars, it is not like they knocked it out of the park here. They attributed the difference to both the fear of lead in toys and a strong best-seller lineup.
I noted this "no toy" trend last week in a "Black Friday" post that I observed very few toys being taken to the register at several locations.
Now, in an Oct. 9 SEC filing, Ackman's Pershing Square said it did not believe its
"activities would effect a change of control" at the book seller. Simply put, Ackman is playing this as a ValuePlay story, not as an activist investor pushing for change at the top.
What to see in Borders? Shares trade at 1/2 their 52 week high and sit at $12 a each and CEO George Jones has ponied up $1.2 million for 100,000 shares in the past two months. After that? I just cannot find much. They sold off their UK operations, big box discounters like Wal-Mart (WMT) and Target (TGT) are crushing margins and online retailers like Amazon (AMZN) and Ebay (EBAY) are taking traffic the thought of a meaningful online business away from them. The only reason I can find to buy shares is in the hope they merge with Barnes and Nobel (BKS) who is actually making money. But, why would BKS want it? Borders does have almost no debt and about $1.10 a share in cash. Taking it over would not hinder the balance sheet at Barnes and Nobel.
It would enable them to sell off duplicate locations and effectively eliminate foot traffic competition. The FTC might have something to say about it but they so far have been unable to stop anyone who wants to merge so it is doubtful they would be able to actually do anything even if they did object.
Now, there must be something else there or Ackman knows something we don't. The merger of the two have been rumored for about a year now and with both CEO's buying shares in the company, that assures it is far off. The SEC would be all over both companies were a merger announced anytime soon after insiders were seen buying large amounts of shares on the open market.
Borders is a non-factor in the online game so that cannot be it. FY 2008 ending in Jan. will mark the second consecutive year the retailer has lost money and FY 2009 does not look all that much brighter. Sales for the past three years have been essentially stagnant. Personally, I love to read but book are the last thing I want to go to the store for. My first stop is online and borders.com does not even come to mind. This simply means that the economics of the company do not have a huge impetus to change anytime soon.
The environment they operate in is getting tougher, not easier and that does not bode well for a "turnaround" story. More digging is in order to find out what Ackman is thinking.
According to a filing with the SEC, Bill Ackman's Pershing Square Capital Management disclosed an increased 17.1% stake in bookseller Borders Group, up from 12%. Last week management said Q4 earnings, excluding restructuring charges, will exceed last year's earnings from continuing operations of around $1.48 per share. Now that improvement is only about $1 million dollars, it is not like they knocked it out of the park here. They attributed the difference to both the fear of lead in toys and a strong best-seller lineup.
I noted this "no toy" trend last week in a "Black Friday" post that I observed very few toys being taken to the register at several locations.
Now, in an Oct. 9 SEC filing, Ackman's Pershing Square said it did not believe its
"activities would effect a change of control" at the book seller. Simply put, Ackman is playing this as a ValuePlay story, not as an activist investor pushing for change at the top.
What to see in Borders? Shares trade at 1/2 their 52 week high and sit at $12 a each and CEO George Jones has ponied up $1.2 million for 100,000 shares in the past two months. After that? I just cannot find much. They sold off their UK operations, big box discounters like Wal-Mart (WMT) and Target (TGT) are crushing margins and online retailers like Amazon (AMZN) and Ebay (EBAY) are taking traffic the thought of a meaningful online business away from them. The only reason I can find to buy shares is in the hope they merge with Barnes and Nobel (BKS) who is actually making money. But, why would BKS want it? Borders does have almost no debt and about $1.10 a share in cash. Taking it over would not hinder the balance sheet at Barnes and Nobel.
It would enable them to sell off duplicate locations and effectively eliminate foot traffic competition. The FTC might have something to say about it but they so far have been unable to stop anyone who wants to merge so it is doubtful they would be able to actually do anything even if they did object.
Now, there must be something else there or Ackman knows something we don't. The merger of the two have been rumored for about a year now and with both CEO's buying shares in the company, that assures it is far off. The SEC would be all over both companies were a merger announced anytime soon after insiders were seen buying large amounts of shares on the open market.
Borders is a non-factor in the online game so that cannot be it. FY 2008 ending in Jan. will mark the second consecutive year the retailer has lost money and FY 2009 does not look all that much brighter. Sales for the past three years have been essentially stagnant. Personally, I love to read but book are the last thing I want to go to the store for. My first stop is online and borders.com does not even come to mind. This simply means that the economics of the company do not have a huge impetus to change anytime soon.
The environment they operate in is getting tougher, not easier and that does not bode well for a "turnaround" story. More digging is in order to find out what Ackman is thinking.
Gazprom and Dow Chemical: Wow
The potential here is just stunning for Dow (DOW).
Russian natural gas monopoly OAO Gazprom and Dow signed a memorandum of understanding that outlines potential cooperation on projects in Russia and Germany. Gazprom said the companies will consider creating a joint venture based on Dow's new petrochemical facilities in Germany and cooperating in refining gas from Russia's Yamalo-Nemets autonomous district, and study other possibilities.
CEO Andrew Liveris has long lamented high natural gas prices and the US policy (or lack thereof) has lead to the expedited JV strategy at Dow over the past two years.
Some backround here is now necessary. In late October Gazprom announced an agreement with Statoilhydro.
From the Release:
"The Shtokman gas and condensate field is located in the central part of the Russian sector of the Barents Sea offshore.
Approved by the RF Nature Ministry’s State Commission for Mineral Resources in January 2006, Shtokman’s C1+C2 reserves make up 3.7 tcm of gas and over 31 mln t of gas condensate.
In October 2006, the Gazprom Management Committee decided that pipeline gas deliveries from the Shtokman field to the European market would take priority over LNG shipments. Shtokman was identified as the resource base for Russian gas export to Europe via the Nord Stream Gas pipeline.
Phase 1 stipulates production of 23.7 bcm of natural gas per annum, gas and LNG supplies via the gas pipeline will start in 2013 and 2014, respectively."
A massive deal, but what to so with it all.
Fast forward To Dow and Gazprom:
The potential JV would give Gazprom access to new petrochemical facilities set up by Dow in Germany. In return Dow would refine gas at Gazprom's fields in the Yamalo-Nemets region in the north of Russia. Essentially Dow would have the inside track in building the Russian petrochemical industry. This follows similar deals for Dow in both Saudi Arabia and China.
See where this is going?
Russian natural gas monopoly OAO Gazprom and Dow signed a memorandum of understanding that outlines potential cooperation on projects in Russia and Germany. Gazprom said the companies will consider creating a joint venture based on Dow's new petrochemical facilities in Germany and cooperating in refining gas from Russia's Yamalo-Nemets autonomous district, and study other possibilities.
CEO Andrew Liveris has long lamented high natural gas prices and the US policy (or lack thereof) has lead to the expedited JV strategy at Dow over the past two years.
Some backround here is now necessary. In late October Gazprom announced an agreement with Statoilhydro.
From the Release:
"The Shtokman gas and condensate field is located in the central part of the Russian sector of the Barents Sea offshore.
Approved by the RF Nature Ministry’s State Commission for Mineral Resources in January 2006, Shtokman’s C1+C2 reserves make up 3.7 tcm of gas and over 31 mln t of gas condensate.
In October 2006, the Gazprom Management Committee decided that pipeline gas deliveries from the Shtokman field to the European market would take priority over LNG shipments. Shtokman was identified as the resource base for Russian gas export to Europe via the Nord Stream Gas pipeline.
Phase 1 stipulates production of 23.7 bcm of natural gas per annum, gas and LNG supplies via the gas pipeline will start in 2013 and 2014, respectively."
A massive deal, but what to so with it all.
Fast forward To Dow and Gazprom:
The potential JV would give Gazprom access to new petrochemical facilities set up by Dow in Germany. In return Dow would refine gas at Gazprom's fields in the Yamalo-Nemets region in the north of Russia. Essentially Dow would have the inside track in building the Russian petrochemical industry. This follows similar deals for Dow in both Saudi Arabia and China.
See where this is going?
Thursday's Upgrades and Downgrades
UPGRADES
Prospect Energy PSEC Ferris Baker Watts Sell » Neutral
Verigy VRGY Stifel Nicolaus Hold » Buy
Overstock.com OSTK Stifel Nicolaus Sell » Hold
Novellus NVLS Stifel Nicolaus Sell » Hold
DuPont DD Soleil Hold » Buy
Cepheid CPHD Piper Jaffray Neutral » Buy
Anheuser-Busch BUD UBS Neutral » Buy
Ceradyne CRDN Morgan Joseph Hold » Buy
Blue Coat BCSI Roth Capital Hold » Buy
Holly HOC Friedman Billings Mkt Perform » Outperform
ICT Group ICTG Friedman Billings Underperform » Mkt Perform
UBS AG UBS Credit Suisse Neutral » Outperform
AptarGroup ATR Lehman Brothers Underweight » Equal-weight
AGL Resources ATG UBS Neutral » Buy
Molson Coors Brewing TAP UBS Neutral » Buy
Alpha Natural Resources ANR UBS Neutral » Buy
Potash POT JP Morgan Neutral » Overweight
Banco Santander SAN Deutsche Securities Hold » Buy
DOWNGRADES
Finlay Enterprises FNLY B. Riley & Co Neutral » Sell
SourceForge LNUX Dougherty & Company Buy » Neutral
Sonic Solutions SNIC Kaufman Bros Buy » Hold
Casual Male CMRG Stifel Nicolaus Buy » Hold
Ariad Pharm ARIA JP Morgan Overweight » Neutral
Astronics Corporation ATRO Boenning & Scattergood Market Outperform » Market Perform
New York Times NYT Banc of America Sec Neutral » Sell
Advanta Corp ADVNB Friedman Billings Mkt Perform » Underperform
Ryanair Hldgs RYAAY Deutsche Securities Buy » Hold
Air France KLM AKH Deutsche Securities Buy » Hold
Genlyte GLYT Banc of America Sec Buy » Neutral
Wednesday, November 28, 2007
"Fast Money" for Thursday
Thursday's Picks
Tim Seymour recommended Stillwater Mining (SWC). Open $9.81
Guy Adami likes US Steel (X). Open $96.16
Karen Finerman prefers Pzena (PZN) as a value play. Open $12.00
Pete Najarian says Isis (ISIS) is a buy. Open $17.48
Wednesday's Results
No "First Trade" Picks
Records: Since 6/21/2007
Guy Adami= 46-41 = 52%
John Najarian= 13-4 = 76%
Jeff Macke= 54-35 = 60%
Pete Najarian= 36-36 = 50%
Tim Seymore= 5-5 = 50%
Karen Finerman= 29-22 = 57%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Wednesday's 52 Week Low's
SRG Seanergy Maritime Corp 9.41
SMTK Simtek Corp 2.25
SMSI Smith Micro Software Inc 7.57
SMMF Summit Financial Grou ... 16.40
PBY The Pep Boys-Manny, M ... 13.05
PAL North Amern Palladium Ltd 5.60
NYT New York Times Company 16.27
NVGN Novogen Limited 6.43
MTLK Metalink Ltd 4.98
MRVL Marvell Technology Gr ... 14.98
KUB Kubota Corporation 34.78
KTV Corts Tr First Un Ins ... 25.53
KDE 4 Kids Entertainment Inc 12.20
Ackman Raises Target Stake
Bill Ackman was just on CNBC and announced he has raised his stake in retailer Target (TGT). He did not specify how much. He was not asked about Sears Holdings (SHLD)
Wednesday's Links
Mobile Web, Buybacks or Dividends, Iran, UK iPhone issues
- AT&T "Edge" network is disappointing iPhone users
- Interesting post about buybacks and dividends
- It must be weird being the party in which good news is bad for you.
- For $600, you'd expect to not see these issues.
- AT&T "Edge" network is disappointing iPhone users
- Interesting post about buybacks and dividends
- It must be weird being the party in which good news is bad for you.
- For $600, you'd expect to not see these issues.
Markets Misinterpreting Kohn's Remarks
People are seizing on Fed Vice Chairman Donald L. Kohn's speech today as evidence a rate cut is a sure thing on 12/11. Not so fast.
Here is the sentence people are focused on:
"...such a repricing in the form of wider spreads and tighter credit standards at banks and other lenders would make some types of credit more expensive and discourage some spending, developments that would require offsetting policy actions, other things being equal."
The key words? "other things being equal"
Simply put, if inflation were to jump, a cut is off the table. Should credit and financial institutions conditions improve (Citigroup's (C) have), a rate cut is dead. Think about it. Kohn referred to "recent weeks" in the statement several times. So, essentially if things turn around or stabilize in the next couple weeks until the next meeting, Kohn's entire speech is rendered moot.
The Dow and S&P were both up about 1% early today and I fear it is a matter of people hearing what they want to hear rather than listening to what Kohn said.
A careful read of Kohn's speech really does not shine a new light on anything. His statements are discussion are really nothing that have not already been discussed and when you condition a statement on "things being equal" you are essentially saying "if we had to act today". Since they do not, everything he said prior to that is rendered meaningless as tomorrow is not today and next month is definitely not today.
What to think? The last rate cut by the Fed was a close call. Bernanke has said repeatedly that inflation is his main concern. That is what we need to watch first. Growth second. If inflation remains stable or falls then he will act to cut rates should conditions warrant it. If it jumps, Bernanke will be more than happy to let the economy slow even more to stop it. Think Paul Volcker.
Be very careful investing based on Fed statements because once the day they are issued has passed, their relevance pases also.
Here is the sentence people are focused on:
"...such a repricing in the form of wider spreads and tighter credit standards at banks and other lenders would make some types of credit more expensive and discourage some spending, developments that would require offsetting policy actions, other things being equal."
The key words? "other things being equal"
Simply put, if inflation were to jump, a cut is off the table. Should credit and financial institutions conditions improve (Citigroup's (C) have), a rate cut is dead. Think about it. Kohn referred to "recent weeks" in the statement several times. So, essentially if things turn around or stabilize in the next couple weeks until the next meeting, Kohn's entire speech is rendered moot.
The Dow and S&P were both up about 1% early today and I fear it is a matter of people hearing what they want to hear rather than listening to what Kohn said.
A careful read of Kohn's speech really does not shine a new light on anything. His statements are discussion are really nothing that have not already been discussed and when you condition a statement on "things being equal" you are essentially saying "if we had to act today". Since they do not, everything he said prior to that is rendered meaningless as tomorrow is not today and next month is definitely not today.
What to think? The last rate cut by the Fed was a close call. Bernanke has said repeatedly that inflation is his main concern. That is what we need to watch first. Growth second. If inflation remains stable or falls then he will act to cut rates should conditions warrant it. If it jumps, Bernanke will be more than happy to let the economy slow even more to stop it. Think Paul Volcker.
Be very careful investing based on Fed statements because once the day they are issued has passed, their relevance pases also.
Walmart.com Blows Away Competition
Walmart.com (WMT) has almost double the online share of it nearest competitor in the brick and mortar retail space.
Through the week ending 11/17 (% equals share):
1. www.walmart.com (WMT) =7.2%
2. www.target.com (TGT) =4.86%
3. www.bestbuy.com (BBY) =2.91%
4. www.jcpenney.com (JCP) =2.48%
5. www.circuitcity.com (CC) =2.34%
6. www.toysrus.com (private) =2.32%
7. www.sears.com (SHLD)= 2.16%
8. www.kohls.com (KSS) =1.39%
9. www.lowes.com (LOW) =1.29%
10. www.homedepot.com (HD)= 1.29%
I have chronicled Wal-Mart's online success before and these results only add to the proof. Wal-Mart is clearly the leader here and their "site to store" program has been a huge hit. I have used it myself and it is very easy to use and when you consider the shipping charges you save, it really adds up very quickly.
More bad news for Home Depot and Lowes as they tied for last on the list. To make matters worse, Sears is well ahead of them and with more visits to Sears.com, you can bet additional tool and appliance sales are going there rather than to either HD or Lowes.
Through the week ending 11/17 (% equals share):
1. www.walmart.com (WMT) =7.2%
2. www.target.com (TGT) =4.86%
3. www.bestbuy.com (BBY) =2.91%
4. www.jcpenney.com (JCP) =2.48%
5. www.circuitcity.com (CC) =2.34%
6. www.toysrus.com (private) =2.32%
7. www.sears.com (SHLD)= 2.16%
8. www.kohls.com (KSS) =1.39%
9. www.lowes.com (LOW) =1.29%
10. www.homedepot.com (HD)= 1.29%
I have chronicled Wal-Mart's online success before and these results only add to the proof. Wal-Mart is clearly the leader here and their "site to store" program has been a huge hit. I have used it myself and it is very easy to use and when you consider the shipping charges you save, it really adds up very quickly.
More bad news for Home Depot and Lowes as they tied for last on the list. To make matters worse, Sears is well ahead of them and with more visits to Sears.com, you can bet additional tool and appliance sales are going there rather than to either HD or Lowes.
Lead Paint Defendants Attack RI Abatement Plan
Filed from Jane Genova. Through their attorneys, the three defendants in the Rhode Island Lead Paint Trial II - Sherwin-Williams (SHW), Millennium Holdings and NL Industries (NL) - filed a motion today in RI Superior Court.
The motion seeks to strike the plaintiff's proposed lead-abatement plan [that is, the state Attorney General's plan] in its entirety. Alternatively, defendants move the court to strike each part of the Attorney General's plan that
*Constitutes improper equitable relief
*Exceeds the court's jurisdiction and authority
*Affects the rights of persons not a party to this proceeding
*Is constitutionally improper
*And, is unsupported by the prior record in this proceedings.
This particular motion is separate from the defendants' response to that abatement plan which is due December 15, 2007.
Specifically, here are more details on the defendants' claim that the abatement plan is on its face defective for five basic reasons:
It seeks money damages that cannot be awarded in equity. The court is constitutionally precluded from awarding money damages, a form of relief exclusively reserved for the jury. Moreover, the plan confirms that an adequate remedy at law exists for the Attorney General through RI's ability to bring future claims for money damages and because the relief sought is or was compensable in charges. As a matter of law, no remedy can now include the payment of money or the creation of a fund.
It is premised on abatement of individual properties. No remedy can include the inspection or abatement of individual properties because those properties were not part of the trial and verdict, and property owners were neither given notice nor permitted to participate in the proceedings. Ordering abatement of individual properties would exceed the court's jurisdiction and authority, would be improper in a parens patriae action, and would violate property owners' constitutional rights.
It includes a request for prospective injunctive relief to prevent future harm, but the RI AG filed to prove his right to such equitable relief. The jury never decided, as it was constitutionally required to do, the predicate facts for mandatory injunctive relief by clear and convincing evidence. Not did the RI AG prove under the proper standard of proof that any harm from properly maintained lead paint is practically certain to occur in the future. Therefore, there is no basis on which the court can enter a mandatory injunction.
It improperly seeks relief for properties and environmental conditions that were never part of the trial or verdict, ranging from playgrounds to public buildings. Similarly, no relief can include the abatement of intact, well-maintained lead paint because the AG conceded (and the legislature declared) that such paint does not present an immediate hazard.
It purports to supplant existing statutory and regulatory requirements for addressing lead-based paint hazards. This court cannot properly enter an order that conflicts with or is inconsistent with the General Assembly's enactments. Any permissible remedy may only fill a gap in those requirements beyond that which can be achieved through compliance with, and enforcement of, existing laws and regulations.
You can receive a complimentary copy of this 38-page motion by contacting Mgenova981@aol.com.
More commentary an be found here.
The long and short of it is Lynch can file his motions that make a nice neat little press release and play well in the local papers while the defendants will eventually win with a little called the law.
The motion seeks to strike the plaintiff's proposed lead-abatement plan [that is, the state Attorney General's plan] in its entirety. Alternatively, defendants move the court to strike each part of the Attorney General's plan that
*Constitutes improper equitable relief
*Exceeds the court's jurisdiction and authority
*Affects the rights of persons not a party to this proceeding
*Is constitutionally improper
*And, is unsupported by the prior record in this proceedings.
This particular motion is separate from the defendants' response to that abatement plan which is due December 15, 2007.
Specifically, here are more details on the defendants' claim that the abatement plan is on its face defective for five basic reasons:
It seeks money damages that cannot be awarded in equity. The court is constitutionally precluded from awarding money damages, a form of relief exclusively reserved for the jury. Moreover, the plan confirms that an adequate remedy at law exists for the Attorney General through RI's ability to bring future claims for money damages and because the relief sought is or was compensable in charges. As a matter of law, no remedy can now include the payment of money or the creation of a fund.
It is premised on abatement of individual properties. No remedy can include the inspection or abatement of individual properties because those properties were not part of the trial and verdict, and property owners were neither given notice nor permitted to participate in the proceedings. Ordering abatement of individual properties would exceed the court's jurisdiction and authority, would be improper in a parens patriae action, and would violate property owners' constitutional rights.
It includes a request for prospective injunctive relief to prevent future harm, but the RI AG filed to prove his right to such equitable relief. The jury never decided, as it was constitutionally required to do, the predicate facts for mandatory injunctive relief by clear and convincing evidence. Not did the RI AG prove under the proper standard of proof that any harm from properly maintained lead paint is practically certain to occur in the future. Therefore, there is no basis on which the court can enter a mandatory injunction.
It improperly seeks relief for properties and environmental conditions that were never part of the trial or verdict, ranging from playgrounds to public buildings. Similarly, no relief can include the abatement of intact, well-maintained lead paint because the AG conceded (and the legislature declared) that such paint does not present an immediate hazard.
It purports to supplant existing statutory and regulatory requirements for addressing lead-based paint hazards. This court cannot properly enter an order that conflicts with or is inconsistent with the General Assembly's enactments. Any permissible remedy may only fill a gap in those requirements beyond that which can be achieved through compliance with, and enforcement of, existing laws and regulations.
You can receive a complimentary copy of this 38-page motion by contacting Mgenova981@aol.com.
More commentary an be found here.
The long and short of it is Lynch can file his motions that make a nice neat little press release and play well in the local papers while the defendants will eventually win with a little called the law.
Wednesday's Upgrades and Downgrades
UPGRADES
Citigroup C Punk, Ziegel & Co Mkt Perform » Buy
Semtech SMTC Caris & Company Below Average » Average
Affiliated Computer ACS Stifel Nicolaus Hold » Buy
American Science & Engineering ASEI Jefferies & Co Hold » Buy
Techtarget TTGT Oppenheimer Neutral » Buy
Cavium Networks CAVM Lehman Brothers Equal-weight » Overweight
BP BP Bear Stearns Peer Perform » Outperform
BB&T Corp BBT Punk, Ziegel & Co Mkt Perform » Buy
PNC Bank PNC Punk, Ziegel & Co Mkt Perform » Buy
Regions Fincl RF Punk, Ziegel & Co Mkt Perform » Buy
Washington Mutual WM Punk, Ziegel & Co Sell » Mkt Perform
KeyCorp KEY Punk, Ziegel & Co Sell » Mkt Perform
Marathon Oil MRO Bear Stearns Underperform » Peer Perform
Chevron CVX Bear Stearns Peer Perform » Outperform
AXA AXA Credit Suisse Neutral » Outperform
Emageon EMAG Friedman Billings Mkt Perform » Outperform
DOWNGRADES
Genlyte GLYT BB&T Capital Mkts Buy » Hold
Axcan Pharma AXCA BMO Capital Markets Market Perform » Underperform
Advanced Micro AMD AmTech Research Buy » Neutral
First American FAF Keefe Bruyette Outperform » Mkt Perform
Arbitron ARB Bear Stearns Outperform » Peer Perform
Equity Res EQR UBS Neutral » Sell
BRE Properties BRE UBS Neutral » Sell
AvalonBay AVB UBS Buy » Neutral
NovaGold Resources NG Bear Stearns Outperform » Peer Perform
Tuesday, November 27, 2007
"Fast Money" for Wednesday
Wednesday's Picks
No "First Trade" Picks
Tuesday's Results
Jeff Macke is buying S&P 500 Index “Spiders” (SPY) with a tight stop. If the S&P drops 1% to 1395 -- sell. Open $140.95 Close $142.57 GAIN
Guy Adami preferred JetBlue (JBLU). Open $6.78 Close $6.77 LOSS
Karen Finerman recommended shorting Big Lots (BIG).Open $20.32 Close $19.82 LOSS
Pete Najarian said Arch Coal (ACI) is a buy. Open $36.18 Close $36.86 GAIN
Records: Since 6/21/2007
Guy Adami= 46-41 = 52%
John Najarian= 13-4 = 76%
Jeff Macke= 54-35 = 60%
Pete Najarian= 36-36 = 50%
Tim Seymore= 5-5 = 50%
Karen Finerman= 29-22 = 57%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Tuesday's 52 Week Low's
ZLC Zale Corporation 18.47
WOLF Great Wolf Resorts Inc 10.49
TWC Time Warner Cable Inc 23.74
TWB Tween Brands Inc 24.61
TSH Teche Holding Company 38.20
TSC Stephan Company , The 3.25
TRY Triarc Companies, Inc ... 8.09
S Sprint Nextel Corporation 14.40
NBR Nabors Industries Ltd 26.32
NBBC Newbridge Bancorp 10.20
MXWL Maxwell Technologies Inc 8.10
LZB La-Z-Boy Incorporated 6.02
LYV Live Nation Inc 13.14
HD Home Depot, Inc 26.97
COO The Cooper Companies, Inc 41.39
COBR Cobra Electronics Cor ... 5.15
COA Coachmen Industries, Inc 5.32
ADY American Dairy Inc 14.97
ACC American Campus Cmnty ... 24.06
ACAT Arctic Cat Inc 11.17
Restoration Answers Sears Holdings
Restoration Hardware (RSTO) answered Sears Holdings (SHLD) today only a day after Sears reminded it who was "it largest shareholder".
The release below:
PRNewswire-FirstCall/ -- "In response to media and other inquiries concerning the Schedule 13D amendment filed by Sears Holdings Corporation on Monday, November 26, 2007, the Independent Committee of Restoration Hardware's Board of Directors stated if Sears will agree to execute the customary confidentiality and standstill agreement on substantially the same terms that other parties have signed, it would be pleased to provide Sears with the confidential information it requested.
"While Sears has announced its willingness to sign a confidentiality agreement, there is no agreement on terms and, to date, instead of agreeing to the standstill agreement to which other interested parties have agreed, Sears has proposed to reserve the right to launch a tender offer outside the process," the Independent Committee said in a statement today.
The Committee stated that it is encouraged by Sears' current proposal at $6.75 per share based upon publicly available information, which is a vast improvement over its prior proposal at $4.00 per share. At the same time, the Committee stated that it believes that stockholder value will be maximized if Sears participates inside the process with other interested parties.
"Sears is an American icon," said Ray Hemmig, Chairman of the Independent Committee. "We are flattered that it is interested in learning more about our company. We welcome its participation in the process along with the other interested parties. However, the Committee is firmly committed to a fair process that will yield the best results for all stockholders and believes that process is best served through all parties agreeing to the proposed standstill terms without preferential treatment of one party over another."
On November 8, 2007, Restoration Hardware announced a merger agreement with Catterton Partners. In that announcement, the Company said that under the terms of the agreement, the Independent Committee of the Company's Board of Directors, consistent with its fiduciary duties, would be soliciting competing proposals from third parties during a 35 day period ending December 13, 2007. On November 19, 2007, Sears filed a Schedule 13D with the SEC indicating that it had accumulated shares equaling just under a 14% ownership position in the Company."
The whole release is a bit self-serving at best. Why? The other "bidders" in this situation is management itself! What unfair advantage could Sears possibly get over the people currently running the company? Answer? None. Restoration is trying to save face.
Restoration got bitch slapped by Lampert & Co. the other day when they reminded them that as the "largest shareholder" they actually owned more of the company than the current bidders and the Board or Directors themselves and that as such, deserved consideration in the process in getting the information they wanted. It is no coincidence that this information was forthcoming immediately.
There is nothing to stop Lampert from acquiring more shares on the open market during this process, he just cannot launch an official tender offer for shares. Semantics.
Where do we go from here? Lampert gets what he wants (information) and either two things happen. He ends up buying the company OR management raises it offer above that of what Sears would be willing to pay and Lampert cashes out at a profit. Either way Sears shareholders win.
The release below:
PRNewswire-FirstCall/ -- "In response to media and other inquiries concerning the Schedule 13D amendment filed by Sears Holdings Corporation on Monday, November 26, 2007, the Independent Committee of Restoration Hardware's Board of Directors stated if Sears will agree to execute the customary confidentiality and standstill agreement on substantially the same terms that other parties have signed, it would be pleased to provide Sears with the confidential information it requested.
"While Sears has announced its willingness to sign a confidentiality agreement, there is no agreement on terms and, to date, instead of agreeing to the standstill agreement to which other interested parties have agreed, Sears has proposed to reserve the right to launch a tender offer outside the process," the Independent Committee said in a statement today.
The Committee stated that it is encouraged by Sears' current proposal at $6.75 per share based upon publicly available information, which is a vast improvement over its prior proposal at $4.00 per share. At the same time, the Committee stated that it believes that stockholder value will be maximized if Sears participates inside the process with other interested parties.
"Sears is an American icon," said Ray Hemmig, Chairman of the Independent Committee. "We are flattered that it is interested in learning more about our company. We welcome its participation in the process along with the other interested parties. However, the Committee is firmly committed to a fair process that will yield the best results for all stockholders and believes that process is best served through all parties agreeing to the proposed standstill terms without preferential treatment of one party over another."
On November 8, 2007, Restoration Hardware announced a merger agreement with Catterton Partners. In that announcement, the Company said that under the terms of the agreement, the Independent Committee of the Company's Board of Directors, consistent with its fiduciary duties, would be soliciting competing proposals from third parties during a 35 day period ending December 13, 2007. On November 19, 2007, Sears filed a Schedule 13D with the SEC indicating that it had accumulated shares equaling just under a 14% ownership position in the Company."
The whole release is a bit self-serving at best. Why? The other "bidders" in this situation is management itself! What unfair advantage could Sears possibly get over the people currently running the company? Answer? None. Restoration is trying to save face.
Restoration got bitch slapped by Lampert & Co. the other day when they reminded them that as the "largest shareholder" they actually owned more of the company than the current bidders and the Board or Directors themselves and that as such, deserved consideration in the process in getting the information they wanted. It is no coincidence that this information was forthcoming immediately.
There is nothing to stop Lampert from acquiring more shares on the open market during this process, he just cannot launch an official tender offer for shares. Semantics.
Where do we go from here? Lampert gets what he wants (information) and either two things happen. He ends up buying the company OR management raises it offer above that of what Sears would be willing to pay and Lampert cashes out at a profit. Either way Sears shareholders win.
Tuesday's Links
Sears, CDO's, USG, Capitalism
- Like I was saying, this is true.
- They are all over the news. Now you can find out what they are.
- If you want to play a housing rebound, forget the homebuilders, go with this company.
- Here is a great piece on Capitalism
- Like I was saying, this is true.
- They are all over the news. Now you can find out what they are.
- If you want to play a housing rebound, forget the homebuilders, go with this company.
- Here is a great piece on Capitalism
Sears Holdings Ups Ante for Restoration
The key paragraph here in the letter filed today from Sears Holdings (SHLD) is the last one where it calls out management and the board of Restoration (RSTO) and states that "as your largest stockholder, we are concerned by certain aspects of the management and director-led buyout."
Dear Mr. Hemmig:
We are disappointed that our numerous requests to receive confidential information have not yet been granted by the Special Committee of the Board of Directors (the “Special Committee”) of Restoration Hardware, Inc. (the “Company”). As you know, we have sought such information to enable us to determine whether to submit a binding proposal to acquire the Company on terms superior to the insider buyout contemplated by the Agreement and Plan of Merger (the “Current Merger Agreement”), dated as of November 8, 2007, among the Company, Home Holdings, LLC, and Home Merger Sub, Inc.
As you know we have been discussing the terms of a confidentiality agreement with you and your advisors and in this regard you have asked us to provide you with a proposal to acquire the Company. While we do not understand your requirement that we submit such a proposal prior to providing us with due diligence information during the “go shop” period, we are prepared to inform you that, based on the public information currently available to us, we would be prepared to enter into an agreement to offer your stockholders $6.75 per share in cash via tender offer. We would contemplate entering into a merger agreement on terms substantially similar to the Current Merger Agreement, modified as necessary to accommodate the tender offer structure and with a lower, more reasonable break-up fee than contained in the Current Merger Agreement.
We believe that this proposal, if agreed, would provide a compelling opportunity for your stockholders to realize significant value for their shares in an all cash transaction. The structure of our proposal would enable all of your stockholders to realize value for their shares sooner with less execution and other risk than the transaction contemplated by the Current Merger Agreement. Accordingly, we believe that the Special Committee should as soon as practicable designate Sears Holdings Corporation and its subsidiaries as “Excluded Parties,” as defined in the Current Merger Agreement and should exempt the transactions contemplated by our proposal, including the tender offer, from Section 203 of the Delaware General Corporation Law.
As noted above, our proposal is based solely on publicly available information (including the projections contained in your August 30 press release but not including the results of your most recent quarter, which we expect to be announced shortly), and would require access to the due diligence information we have been seeking. To that end, we again request that you allow us to enter into a confidentiality agreement with the Company on terms permissible under the Current Merger Agreement. Moreover, as you have requested we would be willing to agree to a customary “standstill” provision in such confidentiality agreement, subject to the exception we have discussed with you and your advisors which would enable us to commence a tender offer for all of the shares of the Company only at a price greater than that offered pursuant to the Current Merger Agreement.
We believe that providing us with information and the opportunity to offer all stockholders more consideration than they would receive pursuant to the Current Merger Agreement would be in their best interest. As your largest stockholder, we would similarly encourage you to provide this “superior tender offer” exception to other persons, if any, who might also be interested in receiving confidential information in order to submit a superior proposal, whether as part of a “process” or otherwise.
Additionally, as your largest stockholder, we are concerned by certain aspects of the management and director-led buyout. We note in this regard that you entered into a confidentiality agreement with the private equity leader of the insider group on July 20, 2007 and apparently have been focused exclusively on the insider deal since that time rather than exploring our known interest (first expressed to you in June of this year and repeatedly reiterated). Notwithstanding our known interest, you did not provide us with either guidance or information which could potentially have enabled us to submit a superior proposal to the insider deal in advance of its execution. Our concerns have been increased by the delays we’ve encountered during the “go shop” period which have served to further exacerbate the procedural, contractual advantages (including break-up fees, match rights, and new change of control benefits) and informational superiority which the insider group enjoys.
We hope that you will recognize the benefits of a transaction along the lines that we have proposed and quickly grant us access to the information we have requested as we believe that this would be in the best interests of the Company, its stockholders, customers and employees. We stand ready and willing to complete this transaction quickly, and look forward to doing so.
Sincerely,
/s/ William C. Crowley
Now, it should also be noted that Sears upped its offer from $4 an share to $6.75 a share. Sears, being the largest shareholder (double that of the next largest shareholder) here does have management in a precarious situation. I would bet Lampert has been buying more shares recently (or soon will be) and will up his ownership percentage. At that point, what management wants to do could become essentially irrelevant
One has to think management is stonewalling Sears in order to keep their jobs since they are the one trying to buy the company currently. If Lampert gets control of more shares, it will become a moot point. Currently share trade about 25 cents over Lampert's offer price indicating folks feel Lampert will eventually pay more. That being said, Lampert could double his ownership to 27.4% for about $1.5 million more than he would pay if the offer price was accepted. It would be a rather cheap premium to pay to all but assure a deal.
Also, the letter twice refers to Sears as "your largest stockholder". It is a veiled way of saying "hey, we own more of this sucker than you do, want to get ugly?
Go ahead."
Now, Restoration management has done the right thing in waiting this out until now to get a higher price. However, there now comes a point where they will be viewed as obstructing the process rather than getting the best deal. This is especially apparent since the are the other bidder for the company and their offer is now inferior to the one Sears has made. Sears, being the "largest stockholder" does have the the upper hand should things get contentious.
Dear Mr. Hemmig:
We are disappointed that our numerous requests to receive confidential information have not yet been granted by the Special Committee of the Board of Directors (the “Special Committee”) of Restoration Hardware, Inc. (the “Company”). As you know, we have sought such information to enable us to determine whether to submit a binding proposal to acquire the Company on terms superior to the insider buyout contemplated by the Agreement and Plan of Merger (the “Current Merger Agreement”), dated as of November 8, 2007, among the Company, Home Holdings, LLC, and Home Merger Sub, Inc.
As you know we have been discussing the terms of a confidentiality agreement with you and your advisors and in this regard you have asked us to provide you with a proposal to acquire the Company. While we do not understand your requirement that we submit such a proposal prior to providing us with due diligence information during the “go shop” period, we are prepared to inform you that, based on the public information currently available to us, we would be prepared to enter into an agreement to offer your stockholders $6.75 per share in cash via tender offer. We would contemplate entering into a merger agreement on terms substantially similar to the Current Merger Agreement, modified as necessary to accommodate the tender offer structure and with a lower, more reasonable break-up fee than contained in the Current Merger Agreement.
We believe that this proposal, if agreed, would provide a compelling opportunity for your stockholders to realize significant value for their shares in an all cash transaction. The structure of our proposal would enable all of your stockholders to realize value for their shares sooner with less execution and other risk than the transaction contemplated by the Current Merger Agreement. Accordingly, we believe that the Special Committee should as soon as practicable designate Sears Holdings Corporation and its subsidiaries as “Excluded Parties,” as defined in the Current Merger Agreement and should exempt the transactions contemplated by our proposal, including the tender offer, from Section 203 of the Delaware General Corporation Law.
As noted above, our proposal is based solely on publicly available information (including the projections contained in your August 30 press release but not including the results of your most recent quarter, which we expect to be announced shortly), and would require access to the due diligence information we have been seeking. To that end, we again request that you allow us to enter into a confidentiality agreement with the Company on terms permissible under the Current Merger Agreement. Moreover, as you have requested we would be willing to agree to a customary “standstill” provision in such confidentiality agreement, subject to the exception we have discussed with you and your advisors which would enable us to commence a tender offer for all of the shares of the Company only at a price greater than that offered pursuant to the Current Merger Agreement.
We believe that providing us with information and the opportunity to offer all stockholders more consideration than they would receive pursuant to the Current Merger Agreement would be in their best interest. As your largest stockholder, we would similarly encourage you to provide this “superior tender offer” exception to other persons, if any, who might also be interested in receiving confidential information in order to submit a superior proposal, whether as part of a “process” or otherwise.
Additionally, as your largest stockholder, we are concerned by certain aspects of the management and director-led buyout. We note in this regard that you entered into a confidentiality agreement with the private equity leader of the insider group on July 20, 2007 and apparently have been focused exclusively on the insider deal since that time rather than exploring our known interest (first expressed to you in June of this year and repeatedly reiterated). Notwithstanding our known interest, you did not provide us with either guidance or information which could potentially have enabled us to submit a superior proposal to the insider deal in advance of its execution. Our concerns have been increased by the delays we’ve encountered during the “go shop” period which have served to further exacerbate the procedural, contractual advantages (including break-up fees, match rights, and new change of control benefits) and informational superiority which the insider group enjoys.
We hope that you will recognize the benefits of a transaction along the lines that we have proposed and quickly grant us access to the information we have requested as we believe that this would be in the best interests of the Company, its stockholders, customers and employees. We stand ready and willing to complete this transaction quickly, and look forward to doing so.
Sincerely,
/s/ William C. Crowley
Now, it should also be noted that Sears upped its offer from $4 an share to $6.75 a share. Sears, being the largest shareholder (double that of the next largest shareholder) here does have management in a precarious situation. I would bet Lampert has been buying more shares recently (or soon will be) and will up his ownership percentage. At that point, what management wants to do could become essentially irrelevant
One has to think management is stonewalling Sears in order to keep their jobs since they are the one trying to buy the company currently. If Lampert gets control of more shares, it will become a moot point. Currently share trade about 25 cents over Lampert's offer price indicating folks feel Lampert will eventually pay more. That being said, Lampert could double his ownership to 27.4% for about $1.5 million more than he would pay if the offer price was accepted. It would be a rather cheap premium to pay to all but assure a deal.
Also, the letter twice refers to Sears as "your largest stockholder". It is a veiled way of saying "hey, we own more of this sucker than you do, want to get ugly?
Go ahead."
Now, Restoration management has done the right thing in waiting this out until now to get a higher price. However, there now comes a point where they will be viewed as obstructing the process rather than getting the best deal. This is especially apparent since the are the other bidder for the company and their offer is now inferior to the one Sears has made. Sears, being the "largest stockholder" does have the the upper hand should things get contentious.
Circuit City: Please Come Back!!
Circuit City (CC) has now regressed into the guy in high school that dumps his girlfriend only to beg her to come back after he realizes what a huge mistake he made.
Circuit City Spokesman Bill Cimino said last week that Circuit City invited former U.S. workers to apply for jobs, a practice he said was not uncommon in retail, given the typically high turnover. It should be noted here that many of these folks are that same ones that in March, Circuit City let go. More than 3,000 workers were fired and replaced them with lower-paid staff. Cimino added that Circuit City would likely invite more ex-staffers to return next year.
"In a lot of cases, we've completely changed how our stores operate; the roles of our associates within the stores," Cimino told Reuters. "We've got a better career path now for associates." By career path do you mean you will not fired them unexpectedly?
Now, what does Circuit City really hope to accomplish? The good one they let go because the were "too expensive" will already have jobs and those who are still unemployed 6 months after they were let go, do they really want them back? The timing of this is terrible too. They now have themselves competing with the holiday hiring spree that happens every years in retailing.
This is just another in a long line of management failures that has shares snuggled comfortably at 4 year lows. There has been a lot of talk in the blogsphere about shares being a bargain and by most mathematical metrics, they are. Big problem though. In order for those metrics to translate into a retail turnaround and thus have shareholders reap the benefits of that value, management needs to do its job.
Circuit City could carve itself out a niche among the monsters out there like Best Buy (BBY) and Wal-Mart (WMT) much like Julian Day at RadioShack (RSH) has done. It would need to be done on service and a more professional shopping experience. Getting rid of the best folks you have to do that based on their pay scale was just inexplicably short-sighted.
If current management has shown anything, they are just not up to the job and until new management is there, Circuit City will continue to be a value-trap for investors that if it is not bought out soon (next 8 months), will most likely be driven into bankruptcy a sentiment I first expressed in June.
On a side note, why haven't any of these electronics retailers with "help desks" inside like City's "Firedog" or Best Buy's "Geek Squad" jumped at the chance to associate somehow with the hit show "Chuck"? It is a natural association.
Circuit City Spokesman Bill Cimino said last week that Circuit City invited former U.S. workers to apply for jobs, a practice he said was not uncommon in retail, given the typically high turnover. It should be noted here that many of these folks are that same ones that in March, Circuit City let go. More than 3,000 workers were fired and replaced them with lower-paid staff. Cimino added that Circuit City would likely invite more ex-staffers to return next year.
"In a lot of cases, we've completely changed how our stores operate; the roles of our associates within the stores," Cimino told Reuters. "We've got a better career path now for associates." By career path do you mean you will not fired them unexpectedly?
Now, what does Circuit City really hope to accomplish? The good one they let go because the were "too expensive" will already have jobs and those who are still unemployed 6 months after they were let go, do they really want them back? The timing of this is terrible too. They now have themselves competing with the holiday hiring spree that happens every years in retailing.
This is just another in a long line of management failures that has shares snuggled comfortably at 4 year lows. There has been a lot of talk in the blogsphere about shares being a bargain and by most mathematical metrics, they are. Big problem though. In order for those metrics to translate into a retail turnaround and thus have shareholders reap the benefits of that value, management needs to do its job.
Circuit City could carve itself out a niche among the monsters out there like Best Buy (BBY) and Wal-Mart (WMT) much like Julian Day at RadioShack (RSH) has done. It would need to be done on service and a more professional shopping experience. Getting rid of the best folks you have to do that based on their pay scale was just inexplicably short-sighted.
If current management has shown anything, they are just not up to the job and until new management is there, Circuit City will continue to be a value-trap for investors that if it is not bought out soon (next 8 months), will most likely be driven into bankruptcy a sentiment I first expressed in June.
On a side note, why haven't any of these electronics retailers with "help desks" inside like City's "Firedog" or Best Buy's "Geek Squad" jumped at the chance to associate somehow with the hit show "Chuck"? It is a natural association.
Tuesday's Upgrades and Downgrades
UPGRADES
Five Star Quality Care FVE Davenport Neutral » Buy
SI International SINT BB&T Capital Mkts Hold » Buy
Forest Labs FRX AmTech Research Neutral » Buy
Vaxgen VXGN Punk, Ziegel & Co Mkt Perform » Accumulate
ITT Industries ITT Credit Suisse Neutral » Outperform
Teradyne TER HSBC Securities Neutral » Overweight
Boeing BA Wachovia Mkt Perform » Outperform
Laboratory Corp LH Wachovia Mkt Perform » Outperform
Virgin Mobile USA VM Soleil Sell » Hold
Bankrate RATE Bear Stearns Peer Perform » Outperform
Celgene CELG Banc of America Sec Neutral » Buy
FEMSA FMX JP Morgan Neutral » Overweight
National Grid NGG Lehman Brothers Equal-weight » Overweight
Kimberly-Clark KMB Lehman Brothers Underweight » Equal-weight
Deere DE Banc of America Sec Neutral » Buy
Aetna AET JP Morgan Neutral » Overweight
DIRECTV DTV Bernstein Underperform » Mkt Perform
Grant Prideco GRP UBS Neutral » Buy
Air France KLM AKH Citigroup Hold » Buy
Royal Philips Electronics PHG Deutsche Securities Hold » Buy
Tidewater TDW Jefferies & Co Hold » Buy
OmniVision OVTI Robert W. Baird Underperform » Neutral
DOWNGRADES
Buckeye Partners BPL SMH Capital Buy » Sell
Sasol SSL Bear Stearns Outperform » Peer Perform
Public Storage PSA Wachovia Outperform » Mkt Perform
Amer. 1st Tax Exempt Inv. ATAXZ RBC Capital Mkts Outperform » Sector Perform
Intersil ISIL Jefferies & Co Buy » Hold
Casey's General CASY Friedman Billings Outperform » Mkt Perform
Freddie Mac FRE UBS Buy » Neutral
Fannie Mae FNM UBS Buy » Neutral
Sierra Pacific SRP Deutsche Securities Buy » Hold
First Marblehead FMD Friedman Billings Mkt Perform » Underperform
Monday, November 26, 2007
"Fast Money" for Tuesday
Tuesday's Picks
Jeff Macke is buying S&P 500 Index “Spiders” (SPY) with a tight stop. If the S&P drops 1% to 1395 -- sell. Open $140.95
Guy Adami preferred JetBlue (JBLU). Open $6.78
Karen Finerman recommended shorting Big Lots (BIG).Open $20.32
Pete Najarian said Arch Coal (ACI) is a buy. Open $36.18
Records: Since 6/21/2007
Guy Adami= 46-40 = 60%
John Najarian= 13-4 = 76%
Jeff Macke= 53-35 = 62%
Pete Najarian= 35-36 = 48%
Tim Seymore= 5-5 = 50%
Karen Finerman= 29-21 = 59%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Wachovia Insiders Can't Stop Buying
Wachovia (WB) insiders are buying shares in their bank by the truck load.
After chronicling the latest purchases on November 20th, Wachovia director John Baker decided to part with $558,000 of his own cash to buy more shares.
This latest activity brings the total purchases from insiders since the "banking crisis" began to near $7 million. It also happens to be the most shares bought by insiders at a financial institution during that time frame.
Good news? Sure. Does it mean the stock is destined to turn around and begin an ascent tomorrow? No. It does mean that those folks with intimate knowledge of the firm operations are in a hurry to get shares faster than their employee stock plans will provide them. That is very good.
If you are a long term holder getting in bed with insiders buying shares is rarely a bad idea, especially when the buying is this heavy.
After chronicling the latest purchases on November 20th, Wachovia director John Baker decided to part with $558,000 of his own cash to buy more shares.
This latest activity brings the total purchases from insiders since the "banking crisis" began to near $7 million. It also happens to be the most shares bought by insiders at a financial institution during that time frame.
Good news? Sure. Does it mean the stock is destined to turn around and begin an ascent tomorrow? No. It does mean that those folks with intimate knowledge of the firm operations are in a hurry to get shares faster than their employee stock plans will provide them. That is very good.
If you are a long term holder getting in bed with insiders buying shares is rarely a bad idea, especially when the buying is this heavy.
Monday's 52 Week Low's
LZB La-Z-Boy Incorporated 6.28
LSTR Landstar System Inc 37.41
LRY Liberty Property Trust 30.64
LPX Louisiana Pac Corp 14.01
LOW Lowe's Companies, Inc 22.05
TRY Triarc Companies, Inc ... 8.60
TPGI Thomas Pptys Group Inc 10.29
TOH Hicks Acquisition Co ... 8.96
MNRO Monro Muffler Brake Inc 20.29
CAR Avis Budget Group 14.21
CAC Camden Natl Corp 30.90
BXXX Brooke Corp 7.65
BBIB Blockbuster Inc 3.22
BBBY Bed Bath & Beyond Inc 29.65
Monday's Links
Texting, Old Barrista?, Sue RI, Bill Miller
- You can now legally "text" in sick?
- Go away lady, just because you did not get the job, it does not mean you are discriminated against.
- Yes, Yes, Yes!!!!!!!!!
- How can you not listen to this guy?
- You can now legally "text" in sick?
- Go away lady, just because you did not get the job, it does not mean you are discriminated against.
- Yes, Yes, Yes!!!!!!!!!
- How can you not listen to this guy?
Another Bad Analyst Call: Starbucks
Odlum Brown analyst Felix Narhi had an interesting call on Starbucks (SBUX)last week.
Recently Starbucks' projected earnings per share growth of 17% to 21%, while previous guidance was 20% to 22% for FY 2008. Narhi said of this "While this performance and outlook would have been stellar for most companies, apparently some Starbucks investors were expecting even more, nevertheless, this reduction in earnings guidance is hardly a disaster, in our view."
"Starbucks shares are cheap", said Mr. Narhi, and they are trading at their lowest level since going pubic in 1992 (26.6 times trailing 12 months as of Friday). He rates Starbucks a “buy” with a $35 price target, down $1 from his previous forecast and he recommends aggressive buying in the low $20-range.
Here is the problem and it is a question of looking at price and implying value from it.
EPS Growth for Starbucks.
2004- 41%
2005- 29%
2006- 20%
2007- 19%
2008- 17%-21% (company provided)
So, we have 4 consecutive years of EPS decline. The last time that happened? Uh, never?!? Investors think there may be a fifth and that is a VERY good chance. That is the reason they are fleeing the stock. It is not due to a "temporary" disruption.
In those previous years Starbucks faced competition on a national scale from, um, nobody. Now they have the juggernaut that is McDonald's (MCD) gunning from them and regional goliath Dunkin' Donuts taking direct aim at Starbucks' business. When one look at the results from those operations, the only deduction that can be made is that it is working. As McDonalds introduces espresso drink nationwide in 2008, that competition will only get more intense, putting more pressure on Starbucks earnings growth.
Mr. Narhi mentions the stock being at its lowest levels since 1992, well in 1992 the company was growing EPS at over 50% a year and there was almost 100 million LESS shares outstanding. Comparing the pure dollar value of a stock is just meaningless unless other factors are also considered.
I have said it here countless times and it has yet not to be true. As earnings growth slows, the premium investors will pay for a stock also decreases. That is simply what is happening with Starbucks. At 26 times trailing EPS, shares are by no means a bargain or an "aggressive buy". A low share price does not automatically equate to value. Investors are not sure where the bottom is because they cannot get a handle on how much slower things will get. This is in part because of the fierce competition that the company has now it did not have even two years ago AND the lack of honesty or disclosure from management. Donald and Schultz seem to be in denial about their business and with the rest of us seeing it, we doubt everything coming out of Seattle HQ.
The fact they did not address milk costs until almost 2 months after I did ought to make current or potential investors very nervous. It is like they are closing their eyes hoping it will just go away and be ok.
In August management addressed the store traffic issue and said "we expect it to be short term issue". Now we find out it will take until halfway through 2008 at best to get that straightened out. A "short term" year?
Back in May I said "With all the uncertainty surrounding the company at this point, I could not even begin to consider shares at any price other than the lowest end of the range, $22 or another 21% lower than current prices as I expect EPS growth to slow more."
That price point now looks too optimistic, high teens are the range now. Those who blindly follow Mr. Narhi's advice will be disappointed to say the least.
Think it is just Mr. Narhi? Check out the other analyst calls that would have had you throwing you money away in 2007 alone.
20-Nov-07 Friedman Billings Upgraded Mkt Perform to Outperform
16-Nov-07 McAdams,Wright,Ragen Reiterated Buy
16-Nov-07 UBS Reiterated Buy
16-Nov-07 RBC Capital Mkts Reiterated Outperform
16-Nov-07 Friedman Billings Reiterated Mkt Perform
16-Nov-07 CIBC Wrld Mkts Reiterated Sector Outperform
16-Nov-07 Robert W. Baird Downgraded Outperform to Neutral
12-Nov-07 UBS Reiterated Buy
08-Oct-07 Lehman Brothers Reiterated Overweight
27-Sep-07 Banc of America Sec Downgraded Neutral to Sell
02-Aug-07 JMP Securities Reiterated Mkt Outperform
02-Aug-07 McAdams,Wright,Ragen Reiterated Buy
02-Aug-07 RBC Capital Mkts Reiterated Outperform
02-Aug-07 CIBC Wrld Mkts Reiterated Sector Outperform
19-Jul-07 CIBC Wrld Mkts Reiterated Sector Outperform
18-Jul-07 Lehman Brothers Reiterated Overweight
02-Jul-07 Bear Stearns Reiterated Outperform
22-Jun-07 Friedman Billings Downgraded Outperform to Mkt Perform
15-Jun-07 Lehman Brothers Reiterated Overweight
08-Jun-07 Deutsche Securities Reiterated Hold
21-May-07 CIBC Wrld Mkts Reiterated Sector Outperform
02-May-07 CIBC Wrld Mkts Reiterated Sector Outperform
18-Apr-07 Lehman Brothers Reiterated Overweight
01-Mar-07 Prudential Reiterated Neutral
30-Jan-07 JP Morgan Upgraded Neutral to Overweight
Only 1 sell in the whole bunch..... sad
Recently Starbucks' projected earnings per share growth of 17% to 21%, while previous guidance was 20% to 22% for FY 2008. Narhi said of this "While this performance and outlook would have been stellar for most companies, apparently some Starbucks investors were expecting even more, nevertheless, this reduction in earnings guidance is hardly a disaster, in our view."
"Starbucks shares are cheap", said Mr. Narhi, and they are trading at their lowest level since going pubic in 1992 (26.6 times trailing 12 months as of Friday). He rates Starbucks a “buy” with a $35 price target, down $1 from his previous forecast and he recommends aggressive buying in the low $20-range.
Here is the problem and it is a question of looking at price and implying value from it.
EPS Growth for Starbucks.
2004- 41%
2005- 29%
2006- 20%
2007- 19%
2008- 17%-21% (company provided)
So, we have 4 consecutive years of EPS decline. The last time that happened? Uh, never?!? Investors think there may be a fifth and that is a VERY good chance. That is the reason they are fleeing the stock. It is not due to a "temporary" disruption.
In those previous years Starbucks faced competition on a national scale from, um, nobody. Now they have the juggernaut that is McDonald's (MCD) gunning from them and regional goliath Dunkin' Donuts taking direct aim at Starbucks' business. When one look at the results from those operations, the only deduction that can be made is that it is working. As McDonalds introduces espresso drink nationwide in 2008, that competition will only get more intense, putting more pressure on Starbucks earnings growth.
Mr. Narhi mentions the stock being at its lowest levels since 1992, well in 1992 the company was growing EPS at over 50% a year and there was almost 100 million LESS shares outstanding. Comparing the pure dollar value of a stock is just meaningless unless other factors are also considered.
I have said it here countless times and it has yet not to be true. As earnings growth slows, the premium investors will pay for a stock also decreases. That is simply what is happening with Starbucks. At 26 times trailing EPS, shares are by no means a bargain or an "aggressive buy". A low share price does not automatically equate to value. Investors are not sure where the bottom is because they cannot get a handle on how much slower things will get. This is in part because of the fierce competition that the company has now it did not have even two years ago AND the lack of honesty or disclosure from management. Donald and Schultz seem to be in denial about their business and with the rest of us seeing it, we doubt everything coming out of Seattle HQ.
The fact they did not address milk costs until almost 2 months after I did ought to make current or potential investors very nervous. It is like they are closing their eyes hoping it will just go away and be ok.
In August management addressed the store traffic issue and said "we expect it to be short term issue". Now we find out it will take until halfway through 2008 at best to get that straightened out. A "short term" year?
Back in May I said "With all the uncertainty surrounding the company at this point, I could not even begin to consider shares at any price other than the lowest end of the range, $22 or another 21% lower than current prices as I expect EPS growth to slow more."
That price point now looks too optimistic, high teens are the range now. Those who blindly follow Mr. Narhi's advice will be disappointed to say the least.
Think it is just Mr. Narhi? Check out the other analyst calls that would have had you throwing you money away in 2007 alone.
20-Nov-07 Friedman Billings Upgraded Mkt Perform to Outperform
16-Nov-07 McAdams,Wright,Ragen Reiterated Buy
16-Nov-07 UBS Reiterated Buy
16-Nov-07 RBC Capital Mkts Reiterated Outperform
16-Nov-07 Friedman Billings Reiterated Mkt Perform
16-Nov-07 CIBC Wrld Mkts Reiterated Sector Outperform
16-Nov-07 Robert W. Baird Downgraded Outperform to Neutral
12-Nov-07 UBS Reiterated Buy
08-Oct-07 Lehman Brothers Reiterated Overweight
27-Sep-07 Banc of America Sec Downgraded Neutral to Sell
02-Aug-07 JMP Securities Reiterated Mkt Outperform
02-Aug-07 McAdams,Wright,Ragen Reiterated Buy
02-Aug-07 RBC Capital Mkts Reiterated Outperform
02-Aug-07 CIBC Wrld Mkts Reiterated Sector Outperform
19-Jul-07 CIBC Wrld Mkts Reiterated Sector Outperform
18-Jul-07 Lehman Brothers Reiterated Overweight
02-Jul-07 Bear Stearns Reiterated Outperform
22-Jun-07 Friedman Billings Downgraded Outperform to Mkt Perform
15-Jun-07 Lehman Brothers Reiterated Overweight
08-Jun-07 Deutsche Securities Reiterated Hold
21-May-07 CIBC Wrld Mkts Reiterated Sector Outperform
02-May-07 CIBC Wrld Mkts Reiterated Sector Outperform
18-Apr-07 Lehman Brothers Reiterated Overweight
01-Mar-07 Prudential Reiterated Neutral
30-Jan-07 JP Morgan Upgraded Neutral to Overweight
Only 1 sell in the whole bunch..... sad
RIMM's iBerry?
I was thinking about getting a new blackberry from Research in Motion (RIMM) for my birthday next year and just in time, a neat little device is being planned.
From Unstrung:
The 9000-series is described by Carmi Levy, an analyst at AR Communications Inc. , as "the future of the BlackBerry franchise," a complete breakaway from the device's business roots. Instead, the new series targets the consumer space served by the Pearl and Curve models.
"The 9000 is supposed to be a touch-screen device, very similar in form factor to the iPhone," Levy says. "Which means that it is not an enterprise-friendly device."
The 9000 series will break from the traditional half-screen, half-keyboard look of the BlackBerry. The handsets will also incorporate an upgraded multimedia system, along with the standard push email capabilities. Better MP3 and video capabilities are crucial if RIM is to take on Apple, Google, and others.
Levy speculates that RIM will introduce the 9000-series in the first quarter of next year. "They were originally shooting for the second half of 2007," he notes.
The touch-screen devices, however, won't mean the end of the line for the 8000 series, because businesses will still need devices with proper QWERTY keyboards. "There will be incremental updates. They won't disappear," Levy says.
Among the updates will be "a Curve with WiFi," according to Levy. These devices may have other updates like GPS location tracking and higher resolution onboard cameras as well
I have toyed with folk's iPhone from Apple (APPL) but just disdain At&T (T) slightly more than my carrier Sprint(S) so that rules out Mr. Jobs' (had he not tried to screw every penny out of the device he would have sold millions more of them). Since I am pretty sure the price of my leaving them would be a child, I am going to stay with Sprint for now. That and their network is leap and bounds better than the "T's" is.
I am very intrigued by this phone and cannot wait to see and try it. A new phone is in the cards for the bday and this just might fit the bill.
From Unstrung:
The 9000-series is described by Carmi Levy, an analyst at AR Communications Inc. , as "the future of the BlackBerry franchise," a complete breakaway from the device's business roots. Instead, the new series targets the consumer space served by the Pearl and Curve models.
"The 9000 is supposed to be a touch-screen device, very similar in form factor to the iPhone," Levy says. "Which means that it is not an enterprise-friendly device."
The 9000 series will break from the traditional half-screen, half-keyboard look of the BlackBerry. The handsets will also incorporate an upgraded multimedia system, along with the standard push email capabilities. Better MP3 and video capabilities are crucial if RIM is to take on Apple, Google, and others.
Levy speculates that RIM will introduce the 9000-series in the first quarter of next year. "They were originally shooting for the second half of 2007," he notes.
The touch-screen devices, however, won't mean the end of the line for the 8000 series, because businesses will still need devices with proper QWERTY keyboards. "There will be incremental updates. They won't disappear," Levy says.
Among the updates will be "a Curve with WiFi," according to Levy. These devices may have other updates like GPS location tracking and higher resolution onboard cameras as well
I have toyed with folk's iPhone from Apple (APPL) but just disdain At&T (T) slightly more than my carrier Sprint(S) so that rules out Mr. Jobs' (had he not tried to screw every penny out of the device he would have sold millions more of them). Since I am pretty sure the price of my leaving them would be a child, I am going to stay with Sprint for now. That and their network is leap and bounds better than the "T's" is.
I am very intrigued by this phone and cannot wait to see and try it. A new phone is in the cards for the bday and this just might fit the bill.
Citigroup Gets $7.5 Billion Investment
I have been saying for weeks now that big banks like Citigroup (C), Bank of America (BAC) and Wachovia (WB) were screaming buys at these levels. Insiders are buying like crazy at Wachovia and now Abu Dhabi has invested $7.5 billion in Citi.
"This investment, from one of the world's leading and most sophisticated equity investors, provides further capital to allow Citi to pursue attractive opportunities to grow its business," said Win Bischoff, Citi's Acting Chief Executive Officer. "It builds on a series of actions we have taken over the past several months to strengthen our capital base, which have included sales of certain non-strategic assets, the issuance of trust preferred securities, and the previously announced plan to use common stock to purchase 32% of Nikko Cordial in Japan. In addition, ADIA is a significant participant in alternative investments and emerging markets financial services, two areas in which we have major positions and have been expanding."
For its investment, Abu Dhabi will receive convertible stock in Citigroup yielding 11% annually. The shares are required to be converted into common stock at a conversion price of between $31.83 and $37.24 a share over a period of time between March 2010 and September 2011. The investment, which took about a week to put together, is expected to close within days. The payment rate reflects market terms based on the conversion premium as well as Citi's current dividend yield.
American's current pessimism about banks is not shared by the outside world. Why? They recognize large international banking operations will not be toppled by the US housing market. Will they be hurt? Sure. Will they recover yes. Those who have the guts to buy in when most are fleeing and ride out the storm will be handsomely rewarded just like every other financial "crisis" from the dawn of man.
If you only listen to one piece of advice during your investment career, make it Berkshire Hathaway's (BRK.A) Warren Buffett's, "buy fear and sell greed".
"This investment, from one of the world's leading and most sophisticated equity investors, provides further capital to allow Citi to pursue attractive opportunities to grow its business," said Win Bischoff, Citi's Acting Chief Executive Officer. "It builds on a series of actions we have taken over the past several months to strengthen our capital base, which have included sales of certain non-strategic assets, the issuance of trust preferred securities, and the previously announced plan to use common stock to purchase 32% of Nikko Cordial in Japan. In addition, ADIA is a significant participant in alternative investments and emerging markets financial services, two areas in which we have major positions and have been expanding."
For its investment, Abu Dhabi will receive convertible stock in Citigroup yielding 11% annually. The shares are required to be converted into common stock at a conversion price of between $31.83 and $37.24 a share over a period of time between March 2010 and September 2011. The investment, which took about a week to put together, is expected to close within days. The payment rate reflects market terms based on the conversion premium as well as Citi's current dividend yield.
American's current pessimism about banks is not shared by the outside world. Why? They recognize large international banking operations will not be toppled by the US housing market. Will they be hurt? Sure. Will they recover yes. Those who have the guts to buy in when most are fleeing and ride out the storm will be handsomely rewarded just like every other financial "crisis" from the dawn of man.
If you only listen to one piece of advice during your investment career, make it Berkshire Hathaway's (BRK.A) Warren Buffett's, "buy fear and sell greed".
Sunday, November 25, 2007
Monday's Upgrades and Downgrades
UPGRADES
US BioEnergy USBE Soleil Sell » Hold
TIBCO Software TIBX Bear Stearns Underperform » Peer Perform
PetroChina PTR Bear Stearns Underperform » Peer Perform
Omega Health OHI UBS Sell » Neutral
Anglo American AAUK HSBC Securities Neutral » Overweight
CNOOC Ltd CEO Citigroup Hold » Buy
DOWNGRADES
Hecla Mining HL CIBC Wrld Mkts Sector Perform » Sector Underperform
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