"Fast Money" For Wednesday

Here are the picks for tomorrow.

Jeff Macke recommended selling Wendy’s (WEN) on the Peltz takeover news. Open $35.03

Pete Najarian preferred Alvarion (ALVR) Open $10.26

Guy Adami liked EMC Corp. (EMC) Open $18.51


There were no picks for Tuesday so here are the records.

Records:

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week)

Adami= 9-8 Gain $26.18
Bolling= 8-8 Loss $4
John Najarian= 13-3 Gain $15.54
Macke= 16-9 Gain $5.76
Pete Najarian=4-5 Gain $17.18
Seymore= 1-1 Gain $.01
Finerman= 1-2 Gain $.68
Gilbert= 1-0 Gain $.29

Today's 52 Week Lows

Here is the list, same disclaimer: if you own homebuilders, financials or REIT's consider them at or near the low.

VOXX Audiovox Corporation
TR Tootsie Roll Inds Inc
THC Tenet Healthcare Corp
SHRP Sharper Image Corporation
POP Pope & Talbot, Inc
ODP Office Depot, Inc
NI Nisource Inc
MWRK Mothers Work Inc
MKC Mccormick & Co Inc
LXK Lexmark International
JNY Jones Apparel Group, Inc
HRL Hormel Foods Corporation
COA Coachmen Industries, Inc
CC Circuit City Stores,
BSX Boston Scientific Corp.
ATAR Atari Inc (they still exist?)
ALQ Alabama Power Co
ALL The Allstate Corporation

Citigroup Radioshack Downgrade: Are You Kidding?

Here is another one that just has me shaking my head. Citigroup analyst Bill Sims downgraded Radioshack (RSH) to "Sell" from "Hold" and said RadioShack's wireless business remains pressured and is not likely to rebound soon because of declining market share and other factors. He said RadioShack is losing market share to direct channel retailers such as Sprint Nextel (N), Verizon (VZE), and Cingular (T).

"With the direct channel finding it more profitable to sell phones through their own stores than through RadioShack, they are increasingly opening stores next to Radio Shack with better merchandising, contracts, etc. and winning share as a result," Sims wrote in a client note.

OK, all that is logical stuff and you can agree with it or not but the logic is there. Here were the head shaking comes in:

Sims cut his price target for the company from $32 to $20. How? How can you make am almost 40% reduction in your target price based on one earnings call that had, by the way the company swing from a 2 cent loss a year ago to a 34 cent gain and nothing announced that was not already really known? What is different about Radioshack today from yesterday or the day before? Nothing

This stuff mystifies me and is the reason these folks should be ignored when they talk stock prices.

New Goldman Sachs Debt Fund A Good Sign

In what may be a sign of a bottom, the Wall St. Journal reported Friday that Goldman Sachs (GS) is launching a $20 billion fund to invest in corporate debt, taking advantage of a turmoil in credit markets.

The fund was expected to be $12 billion but has been increased, the paper said, citing the typical unnamed sources. It has good company as a slew of hedge funds have been jumping on debt the past week as the "credit" crunch has lead to spectacular deals to be had. It is ironic as the talking heads on TV are pondering the effects of "tightening credit" on business when, at the same time, groups intimately familiar with the action are buying that very debt as fast as they can get their hands on it.

Sounds like the TV folks may be behind the curve here and the "issue" has already come and gone?

In another note, can anyone, anyone at all out there attempt to explain to me how a company like Goldman can trade for LESS than 9 times current earnings and LESS than 9 times next years? How? Can anyone please give me a reasonable explanation?

Goldman is by far the cream of the crop of the the investment bankers / brokers, almost no deal gets done out there that they do not have their hands in somehow. What is the logic to the current valuation? The current mortgage situation? Please, that barely qualifies as a blip on the screen for a company like Goldman. It isn't like they are Citigroup (C) that has had operational issues and it is not clear if they have totally solved them or a Bank of America (BAC) that is really tied to the US consumer. Goldman is firing on all cylinders and in all reality is not even totally tied to the US market as over 50% of its profits come from overseas operations and the last I checked, foreign economies were simply on fire.

I think financials, and Goldman in particular may end up being the ValuePlays of the year when all is said and done 12 months from now. Goldman is a screaming buy at these levels..

US Lead Paint Litigation Update

File this under "everything you wanted to know about lead paint litigation is the US but where afraid top ask". It updates litigation against Sherwin Williams (SHW), NL Industries (NL) and now RC2 Corp. (RCRC), the makers of the Thomas The Tank Engine children's toys that were recently recalled to to lead pain. Again, thank to Jane Genova.

Full text here

"Fast Money" For Tuesday

Here are Tuesday's picks:

No specific "fast money" picks for today.



Monday's Results

Stacey Briere Gilbert recommended buying Intel (INTC) Open $23.54 Close $23.85 Gain $.29

Guy Adami liked NVIDIA (NVDA)Open $44.25 Close $45.49 Gain $1.19

Pete Najarian preferred shares of NASDAQ Stock Market (NDAQ) Open $31.18 Close $30.90 Loss $.28

Jeff Macke told investors to get long Disney (DIS) Open $33.74 close $34.01 Gain $.27

Records:

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week)

Adami= 9-8 Gain $26.18
Bolling= 8-8 Loss $4
John Najarian= 13-3 Gain $15.54
Macke= 16-9 Gain $5.76
Pete Najarian=4-5 Gain $17.18
Seymore= 1-1 Gain $.01
Finerman= 1-2 Gain $.68
Gilbert= 1-0 Gain $.29

Upgrades / Downgrades

Here are the late Monday and early Tuesday's analyst calls

UPGRADES


CH Energy CHG Soleil Sell » Hold
FirstEnergy FE Jefferies & Co Hold » Buy
Mortons Restaurant Group MRT RBC Capital Mkts Sector Perform » Outperform
ABM Industries ABM Lehman Brothers Equal-weight » Overweight
Varian Semi VSEA Credit Suisse Underperform » Neutral
Cameco CCJ CIBC Wrld Mkts Sector Perform » Sector Outperform
Darling International Inc DAR Avondale Partners Mkt Perform » Mkt Outperform
Ballard Power BLDP Ardour Capital Reduce » Hold
ValueClick VCLK Credit Suisse Neutral » Outperform
MTS Systems MTSC Ferris Baker Watts Neutral » Buy
Gorman-Rupp Company GRC Boenning & Scattergood Market Perform » Market Outperform
Weyerhaeuser WY DA Davidson Neutral » Buy
Smurfit-Stone SSCC DA Davidson Underperform » Neutral
MicroStrategy MSTR First Analysis Sec Equal-Weight » Overweight
Goodrich GR Credit Suisse Neutral » Outperfor



DOWNGRADES

American Reprographics ARP Sun Trust Rbsn Humphrey Buy » Neutral
Energy Transfer ETP UBS Neutral » Reduce
Unilever PLC UL Credit Suisse Neutral » Underperform
Double Hull Tankers DHT JP Morgan Overweight » Neutral
Intevac IVAC Piper Jaffray Outperform » Market Perform
RadioShack RSH Citigroup Hold » Sell
Cobra Electronics COBR Northland Securities Outperform » Market Perform
Foot Locker FL Susquehanna Financial Positive » Neutral
MC Shipping MCX Cantor Fitzgerald Buy » Hold
ValueClick VCLK JMP Securities Strong Buy » Mkt Perform
Symbion SMBI RBC Capital Mkts Outperform » Sector Perform
QLogic QLGC Needham & Co Buy » Hold
Chartered Semi CHRT JP Morgan Neutral » Underweight
Children's Place PLCE Susquehanna Financial Positive » Neutral

Today's 52 Week Lows

Here is today's list. REIT's are now joining homebuilders and financials as daily participants.


TUES Tuesday Morning Corp
TRMP Trump Entmt Resorts Inc
POP Pope & Talbot, Inc
PNY Piedmont Natural Gas
THC Tenet Healthcare Corp
STMP Stamps Com Inc
ODP Office Depot, Inc
NI Nisource Inc
MOT Motorola, Inc
HDL Handleman Company
GMCR Green Mountain Coffee Inc
FL Foot Locker Inc
DF Dean Foods Co New

ADM Earnings: Investments Pay Off

Archer Daniels Midland (ADM) released results today and reported earnings of $954.8 million, or $1.47 a share, up from net income of $410.3 million, or 62 cents a share in 2006. Results included gains on asset sales of $616 million in oilseeds processing and agricultural services.

Net sales rose 28% to $12.21 billion, topping analysts' prediction of $10.13 billion. Corn processing operating profit fell 16% to $241.3 million and the company cited lower ethanol sales volume and higher net corn costs as the culprits.

Oilseeds processing operating profit more than tripled to $587.2 million, boosted by a gain on the exchange of the company's interests in several Chinese JV's for shares in Wilmar International, the largest ag processing business in Asia. Agricultural services operating profit nearly tripled to $240.8 million due to a gain on the sale of the company's Agricore United investment.

ADM repurchased $533 million worth of shares during the year.

So, what to think? About what I expected in corn processing and oil seed processing and good news on the asset sales. ADM clearly want to expand into Brazil to produce ethanol. They are doing everything except issuing a press release stating as such. The assets sales are giving ADM the funds they need to make that investment without a significant jump in debt, always a good thing. Now that these gains are booked and in the bank, I would look for action in Brazil soon.

Another positive sign is the 28% jump in sales. A real good sign. Corn prices are what they are as these prices are contracted and locked in before the crops go in the ground. ADM will see the benefit of this year's record crop in the fall and winter contracts they sign for next year. This will significantly lower input costs and boost profits going forward.

Additional capacity begins to come on line this fall which will add to profits also. The ND biodiesel plant just came on line and the Rhondopolis, Brazil biodiesel plant will commence operations in August. The fall of 2008 will bring additional ethanol capacity in Iowa and Nebraska that will expand current capacity by 50%.

All in all an unspectacular quarter but one that has the company perfectly situated to execute it plans for the future, that is a very good thing.

A Buffett Primer

The business editor of US News & World Report, James Pethokoukis sent me and email over the weekend alerting me to a special they put out on Berkshire Hathaway's (BRK.A) Warren Buffett. It is entitled "Making Money The Buffett Way".


Here are the table on contents:

1) The Ultimate Guide to Investing like Warren Buffett

2) Six Keys to Investing Like Buffett

3) From Nothing to $52 Billion: A Buffett Timeline

4) Berkshire After Buffett -- Buy, Sell, Hold

5) Buffettesque Fund Managers

6) The Anti-Buffett

You can read all the pieces here.

It is a great introduction to Buffett and the time line piece is really neat. However, hard core Buffett devotees will not find anything new in the pieces but despite that, I think it is an excellent accumulation of Buffett information and well worth the read.

Today's Upgrades and Downgrades

Here are this mornings analyst calls

UPGRADES

MicroStrategy MSTR First Analysis Sec Equal-Weight » Overweight
Goodrich GR Credit Suisse Neutral » Outperform
Ashworth ASHW B. Riley & Co Neutral » Buy
Kinder Morgan Prtnrs KMP AG Edwards Hold » Buy
Leapfrog LF Wedbush Morgan Sell » Hold
Atheros Communications ATHR AG Edwards Hold » Buy
Turkcell TKC Bear Stearns Peer Perform » Outperform
Transalta TAC RBC Capital Mkts Underperform » Sector Perform
Exxon Mobil XOM AG Edwards Hold » Buy
McAfee MFE WR Hambrecht Hold » Buy
American Axle AXL Soleil Sell » Hold
Fortune Brands FO Barrington Research Mkt Perform » Outperform
XM Satellite XMSR Janco Partners Mkt Perform » Buy
FNB CORPORATION (VA) FNBP Janney Mntgmy Scott Sell » Neutral
Granite Constr GVA Davenport Neutral » Buy



DOWNGRADES

Symbion SMBI RBC Capital Mkts Outperform » Sector Perform
QLogic QLGC Needham & Co Buy » Hold
Chartered Semi CHRT JP Morgan Neutral » Underweight
Children's Place PLCE Susquehanna Financial Positive » Neutral
American Home Mortgage AHM JMP Securities Mkt Perform » Mkt Underperform $8
American Home Mortgage AHM RBC Capital Mkts Outperform » Sector Perform

US Market Cheapest vs Earnings Since 1991: A Lot Of Irony Here

Here is one for those of you who like irony. The S&P 500 currently trades for 15.4 times future earnings according to a Bloomberg report. That means that on a earnings basis (and isn't that what really counts?), the US market has not been this cheap in 16 years!!

I guess that explains why Berkshire Hathaway's (BRK.A) Warren Buffett has been initiating and adding to positions left and right recently. Now, about the irony part?

1991- We had a Bush family member in the White House
1991- We had a housing "bust"
1991- We were in a war in Iraq
1991- In April 1991, the Dow Jones Industrials crossed 3,000 for the first time ever. In 2007, the Dow crossed 14,000 for the first time ever.
1991- A Clinton announces their intention to run for the White House.
1991- Dick Cheney served the President (Secretary of Defense)
1991- The S&P crossed 400 for the first time ever. The S&P hit a record 1555 in July of 2007
1991- Court bars Jack Kevorkian from assisting in suicides. 2007, Kevorkian released from prison
1991 -Exxon (XOM) agrees to pay $1 billion to clean up after Exxon Valdez spill. In May, 2007, Exxon said it will appeal to Supreme Court a $2.5 billion punitive damage award from the spill.
1991- Pete Metzelaars is in a Super Bowl as tight end for Buffalo Bills. In 2007. Metzelaar is a coach for the Indianapolis colts


The good news? The bargain prices investors paid in 1991 lead to barrels of profits over the next decade and stocks embarked on a historic steady climb. What is interesting is that even though stocks in 1991 were at "all time record highs" and there was a war going on, because they were cheap relative to their earnings, they proved to have plenty of room to run to the upside and they did just that.

I have said it here before many times, ign ore the "noise" out there and just focus on earnings, buy cheap stocks, and hold on to them. It is a winners game.

Starbucks at $22? Maybe lower....

I got a great question to my recent Starbucks (SBUX) post last week.

Here is the question: Matthew asked, "Earlier you wrote that SBUX is a matter of price for you, and you mentioned the $22 level as the highest you'd pay. Does this news make your price go lower? Or were you already discounting the fact that having screwed up already, they're likely to screw up some more?"

This got me to thinking, is my $22 target actually too high? To date, none of the moves Starbucks had made since the beginning of the year have worked and I strongly feel the recent price increase will backfire on them in a major way. The bottom line for them is store traffic and that is falling fast. I cannot think of a retail situation in the past in which raising prices increased foot traffic to a location.

$22 may end up being just a way point downward from here. I know Starbucks fans out there are coughing up their latte's but they did the same thing early this year when the stock was trading north of $35 and I said it was just way overpriced. If anything, things have only deteriorated for the company since then and I cannot see any light at the end of the tunnel right now. Costs are rising and look to stay there, the competition is getting more fierce, people are becoming very price conscious and the lack of convenience Starbucks offers is becoming a larger issue now that the competition offers a quality substitute with the convenience. All these add up to more headwinds to earnings going forward.

What should Starbucks do? Much like many people feel Citigroup (C) shares would jump if CEO Chuck Prince was let go, I would expect the same from Starbucks shares should CEO Jim Donald be ask to seek "other opportunities". Founder Howard Schultz's support of the CEO is noble but it is a bit like standing next to the captain of the Titanic and telling him "things will be ok".

They are not and do not look to get better any time soon.

Supporters will point to the recent announcement with Hershey (HSY) as proof the company is moving in the right direction. But, my opinion is that this is just another move further in the wrong direction. They only industry that is seeing prices skyrocket and industry fundamentals deteriorating faster is the chocolate business. They have gotten so bad that makers have petitioned the FDA to let them call a substantially cheaper substance called "mocklet" chocolate. Does this means we will be buying a "double mocklet latte"?

They will then point to the "overseas" expansion but to date is has been a bit of a mess. Plans into India were shelved this week and their entry into China's "Forbidden City" was a unmitigated disaster and a huge PR flop for the company. We need to scale back our expectations here. Just because they are huge in the US does not mean a billion tea drinking Chinese will run to them. Just ask WalMart (WMT) about expansion in other countries, it is not alway just a matter of "if you build it, they will come".

Now, stop frothing and relax, Starbucks is not going under nor will it become irrelevant, nor am I saying "it sucks". I actually think it is a great company but even great companies go astray and make moves (or have CEO's) that hurt performance. That being said, earnings growth is going to slow dramatically and paying 35 times that slowing growth, well, will be a losing game.

Starbucks reports earnings Wednesday, August 1st. Want a prediction? They will miss, or, if they hit, it will be due to some creative number crunching (nothing illegal, or another huge unsustainable share repurchase like in Q1)If they meet expectations and that is a major "if" I would expect them to guide earnings lower or at the very bottom of estimates for the rest of the year. Now for those of us who do not own shares, a miss and a decimation of shares into the high teens might just be the catalyst to get changes made that turn this thing around.

The earnings call will be infinitely more important than the numbers they release in telling us plans or at least the though process they have. A word of caution, Starbucks has not been very forthcoming or honest with shareholders up to this point so to expect much may leave you disappointed. Stay tuned..

Interview With The Legal Blog "Law and More"

I recently did an interview with Jane Genova for here blog "Law and More" . As far as I am concerned Jane's blog is at the forefront of anything lead paint. Interested parties could easily spend an entire day there educating themselves on the lead paint and public nuisance areas of law. Our interview focused on the investing aspects of the litigation on companies like Sherwin Williams (SHW), DuPont (DD) and NL Industries (NL). The full text is below and can be read on her blog here. The interview was also referenced by Walter Olson at the Manhattan Institutes's blog "Point of Law".

It's the stock price, stupid - along with hits to brandname, the distraction from operations, and the actual legal expenses of being ensnared in a lawsuit. These are the reasons business in the U.S. and increasingly now in Europe factor in liability risk into everything from their accounting to where they will locate a new facility [think Nissan and Toyota's eventual decision to build plants in a tort-reformed Mississippi].

Because of the importance of this matter, I am providing readers with an exclusive interview with financial-markets expert Todd Sullivan. In addition to being a frequent commentator on this blog, Sullivan contributes his financial assessments to, among others, THE WALL STREET JOURNAL and FORBES. He publishes VALUE PLAYS, which is morphing into the go-to site for investors and the investment community.

JG: In myriad ways, the threat of litigation itself costs public companies. Do you know how some of these costs can be reduced? Does settling rather than going to court tend to put a lid on those costs?

TS: When the federal government is involved, it seems that settling may be the only option if for no other reason than the limitless pockets and the ability to pursue the litigation from all angles until it is exhausted. When we drop to the state government and individual plaintiffs, the only recourse is to fight.

Had the lead paint litigation happened prior to the asbestos cases, we may have avoided bankruptcies at USG, Owens Corning, WR Grace and dozens of others due to that litigation. The resources of state government and private plaintiffs can be exhausted or future litigation can be discouraged by the ferocity of the fight by defendants. This is what we are seeing currently with lead paint. After the Rhode Island victory it would seem that the plaintiffs had a false sense of future victories and that the defendants stiffened their resolve, as well as learned from their defeat and honed their strategies. As I assess the lead paint public nuisance litigation situation, I see that the tide has turned.

JG: As a value investor, are you attracted to or turned off by public companies which have a record for settling?

TS: Had the lead paint defendants even broached the word "settlement," an avalanche of suits would have followed that would have bankrupted them. I have no doubt about that. The ferocity of their fight has essentially discouraged additional suits being filed and has lead to several localities dropping suits.

Jane, settling local or private litigation is an admission of guilt in the eyes of the public. The only time settling is acceptable is to stop federal charges as there is really no limit to how far the government can push a case. In this instance, settling is not seen as an admission of guilt but as "a cost of doing business" because, as a group, the government seems to be trusted less than business.

Many people have had dealings with federal, state or local government over myriad issues and settling usually seems to be the best resource for most individuals. For business it is no different. There is a sense of being powerlessness against the government when it decides you are guilty. So, businesses are usually not penalized in public perception for acting in a way that depicts these feelings and putting the issue to bed, so to speak.

JG: In your opinion, how was Sherwin-Williams able to protect its share price during the prolonged lead paint public nuisance litigation?

TS: Sherwin-Williams separated its situation from the tobacco and asbestos mass tort cases. Comparisons were drawn immediately by the investment community and Sherwin-Williams was careful to distance itself from that litigation. It did so by educating the public about the differences in the kinds of litigation. Moreover, it explained in detail and kept reinforcing the local government's roles in the "nuisance." In addition, it downplayed the potential significance of the litigation.

Sherwin-Williams was careful in its earnings calls to ever so briefly summarize the litigation and then continue on to its results and plans for the future which included expansion and growth. There was no talk of "setting aside reserves" for the litigation of anything that would have lead people to believe they anticipated either ultimately losing or settling. At no time did Sherwin-Williams act as a company which even believed for a minute it may ultimately be liable.

JG: What advice would you give public companies about preventing being sued or what to do when sued?

TS: Fight, fight, fight. The tide is slowly turning against mass tort litigation and the longer and harder the fight, the odds are greater that other potential litigates will stay away.

Read more about Jane Genova here

"Fast Money" Picks For Monday

Here are tomorrow picks and Friday's results

Stacey Briere Gilbert recommended buying Intel (INTC) Open $23.54

Guy Adami liked NVIDIA (NVDA)Open $44.25

Pete Najarian preferred shares of NASDAQ Stock Market (NDAQ) Open $31.18

Jeff Macke told investors to get long Disney (DIS) Open $33.74



FRIDAY'S RESULTS

Jeff Macke recommended buying Costco (COST),Open $59.09 Close $58.57 Loss $.52

Pete Najarian likes Myriad Genetics (MYGN). Open $39.43 Close $38.46 Loss $.97

Guy Adami preferred Dell (DELL) because their PC shipments are up 12% year over year.Open $28.49 Close $27.81 Loss $.68

Eric Bolling said Goldman Sachs (GS) is a buy, Open $194.77 Close $192.65 Loss $2.12

Records:

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week)

Adami= 8-8 Gain $24.99
Bolling= 8-8 Loss $4
John Najarian= 13-3 Gain $15.54
Macke= 15-9 Gain $5.49
Pete Najarian=4-4 Gain $17.38
Seymore= 1-1 Gain $.01
Finerman= 1-2 Gain $.68

Top Stories This Week AT Value Investing News

Here they are. please visit the site at www.valueinvestingnews.com


1- Today's Biggest Market Losers

2- Should You Follow Marty Whitman Into Handelman?

3- Mohnish Pabrai- Additional Answers


4- Expedia Tender Offer

5- Getting Ready To Strangle Apple

The Lunacy of Regulators

At the end of last year Owens corning (OC) and St. Gobain announced a joint venture for the production of composite materials. It was going to be 60 /40 owned by OC and either company had the option to buy out the other's interest in 4 years and OC indicated that they would most likely eventually exercise that option.

The plan ran into hurdles with EU regulators and both companies withdrew their application earlier this year. The objections of the regulators was never really made clear.

So, in order to satisfy them, OC is selling it's siding business to St. Gobain for $371 million and then turning around and buying St. Gobain's composite business for $640 million. Can anyone tell me what has been accomplished? How is this any different than before and why are regulators now satisfied?

It seems that EU regulators just needed something to do so they thought they would make the two companies alter an agreement to do the same thing another way. At the end of the day OC got rid of a siding business they have been trying to sell for almost a year now and with those funds they were able to finance the purchase of a composite business they had every intention of buying anyway. The regulators must have wanted to accomplish something, I just for the life of me cannot figure out what. It need to be point out that neither business was a world leader in either siding or composite so it did not have a monopoly issues attached top it.

Maybe just a slow Monday at the EU regulators office?

Who knows, but the deal is good for OC. composite sales are exploding around the globe and this deal ads 40% to OC composite sales that are growing organically at double digit rates. "This is a transformational acquisition for Owens Corning," said Dave Brown, Owens Corning president and chief executive officer. "This acquisition expands Owens Corning's footprint around the world and strengthens our position in key markets such as Russia, China, India, Mexico and Brazil. It also brings talented people and proven technology to Owens Corning, and it balances our exposure to the cyclical downturns associated with the residential construction market in North America. Composite Solutions is a core business at Owens Corning and we are committed to its continued growth."

"Glass fiber markets are global, diverse and growing at two-times global GDP," said Mike Thaman, Owens Corning chairman and chief financial officer. He continued, "This strategic acquisition extends our global reach to commercial and industrial markets of interest and expands our global presence in a capital- efficient way that adds near- and long-term value to shareholders."

Chuck Dana, the president of Owens Corning Composite Solutions business, said, "This acquisition will accelerate the ability of Owens Corning to grow with our customers in both developed and high-growth emerging markets.

It is a great deal for OC, just a mystifying regulator intervention.

Interesting ADM Purchase

Much has been said about what might be the next move for Archer Daniel's Midland's (ADM) US operations. We got a very interesting answer Friday.

There has been speculation that ADM maybe after another ethanol producer like Verasun (VSE) or Aventine (AVR) or even a jump to the west coast and a partnership with Bill Gates and Pacific Ethanol (PEIX). On Friday ADM may have given us a glimsp at their direction. Rather than adding more production (ADM already produces more than twice it's closest competitor), ADM entered into an agreement to acquire the Fasco Mills Company in Illinois.

Fasco Mills is a family-owned grain and feed company operating one of the largest networks of grain elevators and rail shipping terminals in Illinois. Their thirteen grain elevators will dramatically increase ADM's footprint tributary to the prime farm production areas of northern Illinois. The grain from these elevators will flow into ADM's domestic and global processing and marketing network.

Matthew Jansen, president of ADM's Grain Group, said "these elevators allow ADM to offer increased marketing alternatives to farmers in northern Illinois while securing the commodity flow for ADM's biofuel, food and feed needs."

Richard Zimmerman, chairman of Fasco Mills, said "our management team at Fasco has built significant value into these operations, and we feel that ADM's diverse resources will further enhance their value to the farmer." The parties expect the transaction to close on September 1, 2007.

To be honest I am a bit miffed at myself for not looking in this area sooner. Rather than go after another producer, what is ADM doing? Securing the corn! The recent high prices must have convinced ADM that the single most important move for them now is expansion to cheaper production areas abroad and securing feedstock at home. ADM is moving into Brazil very soon and this move, to be honest is brilliant. With the other, less diversified producers struggling now to cope with temporary high corn and low ethanol prices, only ADM is in a position to do deals like this.

What they have effectively done is secure lower cost inputs for their ethanol than their rivals and other grain products from the upper Midwest. This move basically corners the region for ADM. This is like Exxon (XOM) making a huge oil find in the US.

ADM is moving to control it's corn cost for decades to come and at the same time, act a a toll bridge for the corn coming out of that area to other companies.

Nice. In the end what will be the most important, producing the most ethanol or controlling the corn that makes it? If you control the corn, you dictate ethanol profits, at least for the other companies. It at least guarantees you significantly remain the low cost producer of the stuff.

Notable Dividend Hikes

Here are this weeks dividend increases

Noble Corp (NE) = 100%

Republic Services (RSG) = 59%

Greenhill & Co. (GHL) = 52%

National Instruments (NATI) = 42%

Gannett & Co. (GCI) = 29%

Bank Of America (BAC) = 14%

Time Warner (TWX) = 13%

Reynolds American (RAI) = 13%

Anheuser - Busch (BUD) = 12%

Wells Fargo (WFC) = 10%

This Weeks Notable Insider Buys

Again as Peter Lynch famously said "the are many reasons insiders sell shares but only one reason they buy, they feel the price is going up".

Company and amount of insider purchases:

Jeffries Group (JEF) = $9,821,000
Gatehouse Media (GHS) = $6,605,000
Thornburg Mortgage (TMA) = $5,997,000
Allied Nevada Gold (ANV) = $5,614,000
Western Alliance Bancorporation (WAL) = $3,433,000

52 Week Low Club

Here are todays cellar dwellers. Homebuilders actually escaped the list today

WMG Warner Music Group Corp
WCC Wesco Intl Inc
SIX Six Flags Inc
SHRP Sharper Image Corporation
RNWK RealNetworks Inc
ODP Office Depot, Inc
OB Onebeacon Insurance
LNY Landry's Seafood Rest
FORR Forrester Research, Inc
FBN Furniture Brands

KKR Will Pull IPO Plans

After watch shares in fellow PE guys that went public plummet, KKR has wisely pulled plans to list it's shares. Both Blackstone (BX) and Fortress (FIG) are now trading almost 30% below their IPO prices. Why?

Democrats. Democrats are looking to take power in 2008 and are already sharpening their tax pencils with cigarettes, your dividends, your capital gains, oil companies and now private equity in the cross-hairs. Currently PE can classify earnings in a way that provides them with a 15% tax rate. Democrats want to change the rule and make it 35%. Why would anyone want to buy shares in a company whose tax liability may jump 125% in a year?

They wouldn't, and aren't.

Blockbuster Loses More Money

So, it would finally appear that the "lower prices" plan at Blockbuster (BBI) is only "lowering profits"?

This one is really bad. Despite a GAIN of $77 million on the sales of Gamestation Stores, the company still managed to lose $35 million. Lest one think this is "not that bad", last year at the same time they had a $68 million profit. Blockbuster currently has a "get more subscribers that Netflix (NFLX)" at all cost mentality and it is coming at, unfortunately, too great a cost. Far too great...

I am just waiting for the next earnings call when they announce that "in an effort to gain more subscribers, we will now pay them $2.99 per rental. If we have to pay every person in America to rent from us in order to be the number one video rental chain we will do it."

At least they will have more subscribers than Netflix.... fools..

GAP's Choice: Looks Good

Let's just ignore that GAP (GPS) said when the board committee first launched its search it said that it intended to find an apparel merchant with "deep" experience in retail and merchandising.

GAPS new CEO comes from Canada, where much of his two decades of business experience is in grocery stores and book retailing. Glenn Murphy, 45 was unanimously chosen after a "rigorous process," according to Gap's recent statement. Murphy's last job was a six-year stint as chairman and chief executive of Shoppers Drug Mart, Canada's largest drugstore chain were he credited with leading the company through an unprecedented period of growth and shareholder returns. Before that, he spent time selling groceries and books. When he joined Shoppers Drug Mart, it was a mature retailer that was generating lots of cash from 800 stores. When he left, there were more than 1,000 stores and sales and productivity were dramatically improved as they turned in 22 straight quarters of increasing revenues and per-share profits. So, we know the guy can get results. But, can a grocery store guy sell clothes?

In a word, yes.

The problem with GAP as I have claimed several times before is not it's merchandise but it's operations. Too many stores with the same merchandise competing against each other (GAP and Old Navy) for dollars and not enough investment in the brand that has the most value and growth in it, Bannana Republic.

GAP does not need someone who can come up with the latest style to lead them what they need is someone who can allocate capital smartly to get the most out of what GAP already has. In my first GAP post in March I detailed how minor changes could produce good return for shareholders almost immediately. I also like that he is going to pony up $2.5 million of his own cash to buy shares this week.

Murphy has a track record of succeeding in this area. "Murphy implemented several innovative changes including altering interior layouts, converting the in-store cosmetics area to a destination, and elevating product mix to include luxury labels," Citigroup (C) said on Murphy's performance at his previous role in upgrading the retailer to a "buy"

What to do? Based on his past record a gambler should buy shares. Those will a little less risk tolerance may want to wait and here what he has to say on the subject..

All in all, I think this will end up being a good move for GAP.

Sherwin Williams Chart Analysis

I do not pretend to nor do I want to know how people come up with this stuff but it is interesting reading for you chart folks out there



Here it is

Interesting Post On Management Attitude

Here is a really interesting post on Sherwin Williams (SHW) and the power of a business's attitude. I think not enough thought is given to the culture managers create and how the business either benefits or suffers due to that culture and the manager own attitude. It is a great read because it is transferable to any business and really does make you think about the subject.

Another nice job by Jane Genova (it that becoming redundant?)...

Please read it here

Dow Chemical Earnings Call Highlights

Here are the notable from the earnings call on Wednesday regarding the Dow 's (DOW) future, the joint Venture Strategy (Asset Light)

Joint Ventures

-Equity earnings (JV's) for the quarter were up 11% from a year ago to $258 million; -Year-to-date they climbed more than 30% to $532 million.
-Cash contributions from joint ventures were also up significantly in the second quarter compared with a year ago.
-Cash contributions to these joint ventures so far this year have been minimal, as their activities are in fact largely self-funded.
-Given the importance of joint ventures to future strategy, Dow will be providing more detailed information on how they are performing
-Before the end of the third quarter they will issue a white paper offering greater clarity around Dow's joint venture strategy and more insight to the dynamics that shape equity earnings.
-Dow currently participates in more than 75 joint ventures
-A relatively small proportion of them have significant impact on financial results. -Principal joint ventures include
about a dozen companies and collectively accounted for more than 90% of equity earnings last year
-These joint ventures will be the focus of the upcoming white paper, which they plan to update annually.
-Joint ventures added significantly to the bottom line in Performance Chemicals

Responding to the question, "Andrew, are you pushing the ball forward on doing a MEGlobal type deal in your U.S. basics? Liveris replied, "I remain committed to making it a transformational year in the company. I also remain committed to do the very best for our shareholders so that we don't just do any deal. And we have been working very hard and doing deals that we fit. MEGlobal is a classic example of a deal that fits. Similarly, some of these projects we have announced I think fit that criteria. And we have a very powerful basics franchise that we're not just going to monetize with short-term endeavors. We're going to marry and joint venture because it makes strategic sense and improves the returns and cash flows to our shareholders. As you can see in the transparency that Bob Koort referred to in our JVs, these are tremendously strong cash flow, high-return enterprises we're setting up, and you ain't seen nothing yet. And the answer to your question is yes, we are working diligently on the right deal for the right reasons."

I love it.. "you aint't seen nothing yet"...


Full transcript may be found at seekingalpha.com

Today's Upgrades / Downgrades

Here are today's early calls


UPGRADES

Building Materials BLG DA Davidson Neutral » Buy
Natl Instruments NATI Sanders Morris Harris Neutral » Buy
Precision Drilling PDS BMO Capital Markets Underperform » Market Perform
Universal Truckload Services UACL Morgan Keegan Mkt Perform » Outperform
Rackable Systems RACK Caris & Company Below Average » Average
AU Optronics AUO HSBC Securities Neutral » Overweight
FMC Corp FMC Longbow Neutral » Buy
Foundry Ntwks FDRY CE Unterberg Towbin Market Perform » Buy
Dime Community DCOM FTN Midwest Sell » Neutral
AutoZone AZO Kevin Dann Sell » Hold
Foundry Ntwks FDRY Sanders Morris Harris Hold » Buy
Columbia Sportswear COLM Caris & Company Below Average » Average
Oplink Comms OPLK Needham & Co Hold » Buy
Cymer CYMI Needham & Co Hold » Buy
Flow FLOW McAdams,Wright,Ragen Hold » Buy
Aeropostale ARO Citigroup Sell » Hold
McAfee MFE WR Hambrecht Hold » Buy
Grant Prideco GRP Calyon Securities Neutral » Buy
Universal Truckload Services UACL Stifel Nicolaus Hold » Buy
National City NCC Stifel Nicolaus Sell » Hold
Bankunited Fin BKUNA Stifel Nicolaus Hold » Buy
Embarq EQ RBC Capital Mkts Sector Perform » Outperform
Snap-On SNA Matrix Research Hold » Buy
Convergys CVG BMO Capital Markets Underperform » Market Perform
Genesis Microchip GNSS Roth Capital Sell » Hold
Cash America CSH Roth Capital Hold » Buy
Microtune TUNE Roth Capital
Nordstrom JWN Citigroup Hold » Buy
SPX Corp SPW Citigroup Hold » Buy
Gap Inc GPS Citigroup Hold » Buy
Brunswick BC Rochdale Securities Sell » Hold
Old Dominion ODFL Credit Suisse Neutral » Outperform $34
Alaska Air ALK JP Morgan Neutral » Overweight
Penn Natl Gaming PENN Jefferies & Co Hold » Buy
Rightnow Tech RNOW Jefferies & Co Hold » Buy


DOWNGRADES

RadiSys RSYS Merriman Curhan Ford Buy » Neutral
3M MMM Hilliard Lyons Buy » Long-term Buy
QLogic QLGC Caris & Company Above Average » Average
Sierra Wireless SWIR Piper Jaffray Outperform » Market Perform
CTC Media CTCM UBS Neutral » Reduce
Volcom VLCM Piper Jaffray Outperform » Market Perform
Taiwan Semi TSM HSBC Securities Overweight » Neutral
Isilon Systems ISLN AG Edwards Buy » Hold
Cutera CUTR Lazard Capital Buy » Hold
Riverbed Technology RVBD Janco Partners Buy » Mkt Perform
Diomed DIO Roth Capital Buy » Hold
Marvell MRVL Matrix Research Hold » Strong Sell
Darden Restaurants DRI Matrix Research Buy » Hold
AutoNation AN Bear Stearns Outperform » Peer Perform

"Fast Money" Picks for Friday

Here are today's picks.

Jeff Macke recommended buying Costco (COST),Open $59.09

Pete Najarian likes Myriad Genetics (MYGN). Open $39.43

Guy Adami preferred Dell (DELL) because their PC shipments are up 12% year over year.Open $28.49

Eric Bolling said Goldman Sachs (GS) is a buy, Open $194.77


THURDAY'S RESULTS

Eric Bolling recommended owning MEMC Electronic Materials (WFR) Open $57.76 Close $61.06 Gain $2.30

Guy Adami liked Harley-Davidson (HOG). Open $58.66 Close $57.30 Loss $1.33

Pete Najarian preferred Bristol Myers (BMY) Open $31.59 Close $29.85 Loss $1.74

No stock pick from Jeff Macke.

Records:

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week))

Adami= 8-7 Gain $25.67
Bolling= 8-7 Loss $1.88
John Najarian= 13-3 Gain $15.54
Macke= 15-8 Gain $6.01
Pete Najarian=4-3 Gain $18.41
Seymore= 1-1 Gain $.01
Finerman= 1-2 Gain $.68

Today's 52 Week Lows

Same drill, homebuilders, financials and mortgage companies get whacked. Even though it is not on the list, assume yours may be near it.

WWE World Wrestling Entmt Inc
WMG Warner Music Group Corp
WLK Westlake Chem Corp
WFMI Whole Foods Market Inc
UTSI Utstarcom Inc
USG USG Corporation
SPF Standard Pacific Corp
SPC Spectrum Brands Inc
PNY Piedmont Natural Gas
PNRA Panera Bread Co
PEET Peets Coffee & Tea Inc
PAG Penske Automotive Grp Inc
ODP Office Depot, Inc
MYL Mylan Laboratories Inc
MOT Motorola, Inc
LZB La-Z-Boy Incorporated
KKD Krispy Kreme Doughnut
JNY Jones Apparel Group, Inc
HSY Hershey Foods Corporation
DTG Dollar Thrifty Automotive
C Citigroup, Inc
BX Blackstone Group L P
BSX Boston Scientific Cor
BSR Bear Stearns Cos Inc

A Nice Read On Walmart and Apparel

Here is a great post that talks about WalMart's (WMT) clothing issues. You can read it here

"Fast Money" Picks for Thursday

Here are today's picks

TODAY'S PICKS

Eric Bolling recommended owning MEMC Electronic Materials (WFR) Open $57.76

Guy Adami liked Harley-Davidson (HOG). Open $58.66

Pete Najarian preferred Bristol Myers (BMY) Open $31.59

No stock pick from Jeff Macke.



WEDNESDAY'S RESULTS



Vodafone (VOD) down over 3% today represented a buying opportunity, Guy Adami says. Open $32.09 Close $32.32 Gain $.13

Pete Najarian liked Teva Pharmaceuticals (TEVA) Open $43.44 Close $43.29 Loss $.15

Jeff Macke reiterated that Costco (COST)is a buy. Open $60.15 Close $60.30 Gain $.15


Records:

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week))

Adami= 8-6 Gain $27
Bolling= 7-7 Loss $4.18
John Najarian= 13-3 Gain $15.54
Macke= 15-8 Gain $6.01
Pete Najarian=4-2 Gain $20.29
Seymore= 1-1 Gain $.01
Finerman= 1-2 Gain $.68

Today's Upgrades / Downgrades

Here are todays calls.

UPGRADES

AtheroGenics AGIX Needham & Co Underperform » Hold
VASCO Data Security VDSI Lazard Capital Sell » Hold
Human Genome HGSI Lazard Capital Sell » Hold
PC-TEL PCTI B. Riley & Co Neutral » Buy
CyberSource CYBS Wedbush Morgan Hold » Buy
Convergys CVG Wedbush Morgan Sell » Hold
Vignette VIGN Roth Capital Hold » Buy
LHC Group LHCG Stifel Nicolaus Hold » Buy
Amerigroup AGP Stifel Nicolaus Hold » Buy
Aaron Rents RNT Merriman Curhan Ford Neutral » Buy
Baidu.com BIDU Citigroup Hold » Buy




DOWNGRADES

Exelixis EXEL Stanford Research Buy » Hold
Business Objects BOBJ Wedbush Morgan Strong Buy » Buy
Mattson MTSN Am Tech/JSA Research Buy » Sell
F5 Networks FFIV Janco Partners Buy » Accumulate
Southwest Air LUV Matrix Research Strong Buy » Buy
Actuant ATU Matrix Research Strong Buy » Buy
Advantest ATE Matrix Research Hold » Strong Sell
Lincare LNCR Stifel Nicolaus Buy » Hold
Newport NEWP Needham & Co Buy » Hold
Covenant Transport CVTI Wachovia Outperform » Mkt Perform
Akamai Tech AKAM Jefferies & Co Buy » Hold
Akamai Tech AKAM Credit Suisse Outperform » Neutral
Akamai Tech AKAM Merriman Curhan Ford Buy » Neutral

Dow's Quarterly Results: A Brilliant Management Job

It what perhaps could be the toughest operating environment in over a decade for Dow Chemical (DOW), management did a brilliant job with company and the results were earnings growth in what was expected to be a flat or declining quarter (especially after DuPont's (DD) recent earnings release).

Highlights

-- Sales for the quarter set a new Company record, rising 6 percent from
the same period last year to exceed $13 billion for the first time in
Dow's history.
-- Earnings were $1.07 per share, up from $1.05 per share last year.
-- Equity earnings for the quarter increased to $258 million, up 11
percent from 2006.
-- Solid cash flow in the quarter supported investment in organic growth
and acquisitions, as well as $400 million in share repurchases.
-- Purchased feedstock and energy costs surged by almost $700 million
compared with the first three months of the year - the highest ever
sequential increase. Year over year, costs increased by more than $550
million.
-- Strong volume increases in Asia Pacific, Latin America and most
operating segments in Europe offset continued weakness in the North
American housing and automotive sectors.


How many businesses could experience a record increase in input costs of almost a billion dollars and still produce a year over year increase in earnings? A key factor was the Joint Venture strategy Dow has embarked on that to date in 2007 has produced 11% year over year earning growth. As new ventures are announced monthly, shareholders have to be excited about their potential.

Said CEO Andrew Liveris, "We have a very clear strategy, with well-defined priorities, which we are executing with discipline to deliver strong financial results for the Company."

"During the quarter, our global strength, diverse business portfolio, focus on price/volume management and commitment to joint ventures combined to overcome an unprecedented rise in feedstock and energy costs.

"In addition, we continued to invest in exciting new joint ventures, such as the recently announced Dow Crystalsev project in Brazil, in our Performance businesses with acquisitions like Wolff Walsrode, and in strong organic growth programs - implementing a strategy that can deliver a consistent earnings growth profile through the years ahead."

I had been expecting earning a small decline in earnings and Dow being able to pull of an increase is just fantastic new. Here is some math. Currently 50% of Dow input cost are the raw material costs that are skyrocketing. Many of the recently announced venture will be in areas that will enable Dow to obtain feedstock at less than a third of their current costs. If we translate that to their current structure, that means Dow will recognize those costs going from 50% to around 20% for most of it's major product lines. These are cost savings that will drop directly to the bottom line as Dow sells in global markets so their end selling price will not be affected. Theoretically, this means Dow could be looking at 30% eps growth just from cost savings alone. The fact that eps from the current ventures grew 11% while non-JV earnings grew 1.5% in the recent quarter only serve to back up this assertion.

Dow transition to a JV models will have a compounding effect as high cost revenues are replaced with dramatically lower ones, compounding their eps effect.

Commenting on the Company's outlook, Liveris said, "We expect global GDP to remain healthy, as the U.S. economy stabilizes and growth around the world continues to be strong.

"We anticipate solid demand through the third quarter, although Agricultural Sciences is likely to see a typical seasonal decline. Feedstock and energy costs are expected to remain relatively high and volatile through this quarter. Our performance through the first half of the year reinforces our view that our strategy is working and that we will continue to deliver strong results for the Company and for its shareholders."

So far so good...

Starbucks Still Doesn't Get It

You own a business that is suffering declining store traffic for consecutive quarters. Your business is being challenged by competitors that offer a quality product at a fraction of the price you charge for yours. What do you do? If you are Starbucks (SBUX) you raise prices and make the affordability gap between you and your competitors even greater? Please tell me how this make sense.

Starbucks recently announced that meeting estimates for the upcoming quarter "would be a challenge" due to higher milk and coffee prices. Now, if they were serving more people each day, this decrease in margins would be offset by the additional transactions. What this warning tells me is they are still facing stagnant or declining store traffic in addition to decreasing margins. Can anyone explain how making your product less affordable will solve this store traffic issue?

I mean, Mcdonalds (MCD) and Dunkin Donuts both serve milk and coffee so we must assume they are facing the same cost pressures, right. It would be foolish to assume only Starbucks is facing these issues. Today McDonald released results and revenue came in 12% higher at more than $6 billion, while sales at restaurants open for more than a year were up 7.4%. They also met expectations of 71 cents a share profit from operations, 26% higher than last year and Starbucks admits they are struggling . How did McDonald's do it? They sell a quality product at affordable prices, novel. Said CEO Jim Skinner "In the U.S., we are aggressively going after the $60 billion beverage industry with the focus on coffee. We added credibility in this arena now with lots of premium coffee last March. Today, premium coffee sales are up 20%. This credibility gave us brand elasticity to expand further into specialty beverages. Currently, we are testing a wider range of offerings including hot and cold drip coffee beverages an espresso-based coffee and ice beverages. We are encouraged by the preliminary results. Including these specialty offerings, total coffee sales are up more than 30%."

I have been pounding this point since January, Starbucks is at the peak of what they can charge for a cup of coffee. Increasing those prices will lead to further decreases in store traffic and with Starbucks now relying on more ancillary sales to customers for revenues and profits, decreased visits now have a compounding negative effect on the bottom line.

I also fully understand the hard core Starbucks "aficionados" will continue to visit Starbucks no matter what type of home equity loan becomes required to purchase a latte, it is the casual customer who is walking away in hoards and the numbers continue to back up this assertion. Goldman Sachs (GS) analyst Steven Kron said today that higher prices could reduce store traffic given the state of the consumer, media coverage and increasing competition in the coffee space. Not could Steve, will.

The only way for Starbucks to reverse this decline is to get more people into their stores. Once there they will buy more muffins, sandwiches, CD, toaster ovens, and SUV's or whatever else they sell there now. Raising prices will not accomplish this. If the consumer is becoming more cost conscious and recent retail sales report would support this than one must assume discretionary items like a cup of coffee will be one of the first items they will pinch pennies on.

I also recognize that it is only 9 cents on some drinks (ones in cups?), but we live in a appearance is reality world out there and the last thing people want to hear nowadays are the words "price increase". It is a turn off and the extra revenue they may get per cup is more than offset by the negative sentiment they are creating.

I have asked this question repeatedly and have yet received a decent answer. Why should I pay $5 for a cup of coffee when I can get the same thing for $2 other places and not have the DMV like "wait in line" experience?

Answer? I shouldn't and apparently increasingly other folks are not either.

Dow Falls 226: Predictably, Hysterical Headlines Follow

About 4:15 yesterday my blackberry started buzzing as the end of the day emails came pouring in. They contained the words "tumbles", "plummets", "free fall" and other dramatic phrases. My initial reaction in seeing them was to think the market collapsed and there was blood running in the street. After reading the details of a 226 point drop in the Dow Jones Average, my reaction was "are you kidding me?".

Gang, 200 points stopped being a big deal a real long time ago and a whole lot of perspective is needed here. Look at it this way, if you owned a $140 stock and it dropped $2.26 today, would you panic? That is exactly what the Dow did. A piddly little $2 drop. Now, you might be slightly annoyed at the $2 drop but if anyone ever asked you how your stock did today would you say it "plummeted" or "collapsed" ? Me either.

We need to stop looking at the number gain and loss for the Dow and start focusing on it's percentage gain or loss. As we climb higher and higher, not only are 200 point swings either up and own more insignificant, but mathematically, they are more likely. Both these scenarios diminish the importance of the event. It also stands to reason that as we climb towards 15,000 and then 20,000 (FYI, 20,000 is only 35% higher than today) not only should we expect more 200 point swings but we should logically expect the occasional 300 point swing to appear.

Again, this is really no big deal. It does makes for a snappy little headline though and those who live off inducing market panic for news purposes will start using colorful adjectives to describe these days. I mean, "Dow Plummets 226 Points" will attract more readers than "Dow Slips 1.6%", right?

Stop looking at the points and start following the percentages, it will save you some unnecessary angst.

"Fast Money" Calls For Wednesday

Here are today's picks and yesterday's results. It seem the gang is getting a little skittish..

Wednesday's Picks

Vodafone (VOD) down over 3% today represents a buying opportunity, Guy Adami says. Open $32.09

Pete Najarian liked Teva Pharmaceuticals (TEVA) Open $43.44

Jeff Macke reiterated that Costco (COST)is a buy. Open $60.15

Tuesday's Results

Jeff Macke liked Microsoft (MSFT).Open $31.19 Close $30.80 Loss $.39

Pete Najarian preferred Sterlite Industries India Limited (SLT). Open $17.97 Close $17.07 Loss $.97

Guy Adami recommended American Express (AXP).Open $64.66 Close $61.17 Loss $3.49

Eric Bolling said keep an eye on Google (GOOG) Open $512.51 Close $514 Gain $1.49 and recommended owning IBM (IBM) Open $116.38 Close $116.17 Loss $.21

Records:

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week))

Adami= 7-6 Gain $26.87
Bolling= 7-7 Loss $4.18
John Najarian= 13-3 Gain $15.54
Macke= 14-8 Gain $5.86
Pete Najarian=4-1 Gain $20.44
Seymore= 1-1 Gain $.01
Finerman= 1-2 Gain $.68

Upgrades / Downgrades

Here is the late Tuesday and early Wednesday action

UPGRADES

Hain Celestial HAIN UBS Neutral » Buy
Payless Shoe PSS KeyBanc Capital Mkts / McDonald Buy » Aggressive Buy
Countrywide CFC Keefe Bruyette Underperform » Mkt Perform
Alaska Comms ALSK Lehman Brothers Underweight » Equal-weight
Amazon.com AMZN Lehman Brothers Underweight » Equal-weight
Amazon.com AMZN Bear Stearns Underperform » Peer Perform
Seabright Insurance Holdings SEAB Friedman Billings Mkt Perform » Outperform
Amazon.com AMZN RBC Capital Mkts Sector Perform » Outperform
Amazon.com AMZN JP Morgan Underweight » Neutral
Total System TSS JMP Securities Mkt Perform » Mkt Outperform
Ultra Clean Holdings UCTT Needham & Co Hold » Buy
Ultra Clean Holdings UCTT Stanford Research Hold » Buy
Telus TU RBC Capital Mkts Sector Perform » Outperform
Amylin Pharms AMLN Stanford Research Hold » Buy
Sonoco Products SON Matrix Research Buy » Strong Buy
Commercial Metals CMC Matrix Research Buy » Strong Buy
Ceragon CRNT Morgan Joseph Hold » Buy
Rightnow Tech RNOW Credit Suisse Neutral » Outperform
Wachovia WB Citigroup Hold » Buy


DOWNGRADES


Radian Group RDN Friedman Billings Outperform » Mkt Perform
MGIC Investment MTG Friedman Billings Outperform » Mkt Perform
PMI Group PMI Friedman Billings Outperform » Mkt Perform
Spectrum Pharma SPPI Friedman Billings Outperform » Mkt Perform
Skechers USA SKX First Albany Buy » Neutral
Inter Parfums IPAR Oppenheimer Buy » Neutral
Overseas Shipholding OSG Banc of America Sec Buy » Neutral
Weight Watchers WTW Lehman Brothers Equal-weight » Underweight
Nutrisystem NTRI Lehman Brothers Overweight » Equal-weight
Countrywide CFC Friedman Billings Mkt Perform » Underperform
Sterling Financial STSA Punk, Ziegel & Co Accumulate » Mkt Perform
Tellabs TLAB Kaufman Bros Buy » Hold
Astec Industries ASTE Janco Partners Accumulate » Mkt Perform
Netflix NFLX Cowen & Co Outperform » Neutral
Neoware Systems NWRE BMO Capital Markets Outperform » Market Perform
Cumulus Media CMLS BMO Capital Markets Outperform » Market Perform
TASER TASR Feltl & Co. Buy » Hold
San Juan Basin Royalty SJT AG Edwards Buy » Hold
DuPont DD BB&T Capital Mkts Buy » Hold
Netflix NFLX Needham & Co Buy » Hold
American Express AXP Friedman Billings Outperform » Mkt Perform
Canadian Natl Rail CNI Stifel Nicolaus Buy » Hold

Today's 52 Week Low Club

Here are today's 52 weeks lows. If you own a regional bank, homebuilder or mortgage company, even though they are not here, assume they also hit a new low. I am sick of putting them here everyday.

USG Corporation
TZOO Travelzoo Inc
TRB Tribune Company
TRMP Trump Entertainment
TBL The Timberland Company
SMRT Stein Mart Inc
PSA Public Storage, Inc
NFLX Netflix, Inc
MSO Martha Stewart Living
LZB La-Z-Boy Incorporated
JRC Journal Register Co
JNY Jones Apparel Group
GCI Gannett Co.
FIG Fortress Investment
FBN Furniture Brands
CFC Countrywide Financial
CC Circuit City Stores
BGP Borders Group, Inc

Upgrades / Downgrades

Here is the late Monday and early Tuesday calls..

UPGRADES

Rightnow Tech RNOW Credit Suisse Neutral » Outperform
Wachovia WB Citigroup Hold » Buy
Lee Enterprises LEE Wachovia Underperform » Mkt Perform
Xcel Energy XEL Lehman Brothers Underweight » Equal-weigh
Expedia EXPE Soleil Sell » Hold
Chemtura CEM KeyBanc Capital Mkts / McDonald Underweight » Hold
Forest Labs FRX Pacific Growth Equities Neutral » Buy
Illumina ILMN Pacific Growth Equities Neutral » Buy
Eagle Rock Energy EROC RBC Capital Mkts Sector Perform » Outperform
Jack In The Box JBX Wedbush Morgan Hold » Buy
TiVo TIVO Kaufman Bros Hold » Buy
Navteq NVT UBS Neutral » Buy
Satyam Computer SAY Stifel Nicolaus Hold » Buy
Progressive PGR Stifel Nicolaus Sell » Hold
Fifth Third FITB Stifel Nicolaus Sell » Hold
Knoll KNL Matrix Research Buy » Strong Buy
Stoneridge SRI KeyBanc Capital Mkts / McDonald Hold » Buy


DOWNGRADES

Parametric PMTC Jefferies & Co Buy » Hold
Turkcell TKC Bear Stearns Outperform » Peer Perform
Netflix NFLX Cantor Fitzgerald Buy » Hold
Lifepoint Hospitals LPNT CIBC Wrld Mkts Sector Outperform » Sector Perform
Chesapeake Energy CHK Fortis Bank Buy » Hold
Astec Industries ASTE BB&T Capital Mkts Buy » Hold
Dexcom DXCM First Albany Buy » Neutral
Canadian Natl Rail CNI Citigroup Buy » Hold
Cumulus Media CMLS Barrington Research Mkt Perform » Underperform
TASER TASR Merriman Curhan Ford Buy » Neutral
Wachovia WB Punk, Ziegel & Co Buy » Mkt Perform
Labor Ready LRW Davenport Buy » Neutral
Nucryst Pharma NCST Sun Trust Rbsn Humphrey Buy » Neutral
Open Text OTEX Canaccord Adams Hold » Sell
Netflix NFLX Cantor Fitzgerald Buy » Hold
Netflix NFLX Jefferies & Co Buy » Hold
Cephalon CEPH Am Tech/JSA Research Buy » Neutral
Transocean RIG Deutsche Securities Buy » Hold

Citigroup Turnaround Progressing

Much like a large ocean liner turns slowly, Citigroup's (C) size determines that a turnaround at the banking giant will not be immediate. But, when you have consecutive quarters of year over year strong earnings growth for the fist time in recent memory, one must be encouraged.

International operations posted a 34% increase in earnings and "alternative investments " (read: hedge fund operations) saw a 77% increase. Citi has made a huge push internationally the past two years and those efforts are now paying off in a major way. In thew recent quarter they closed the acquisition of Egg in the UK (credit card and online banking businesses) and Grupo Cuscatlan (Central American banking). Deals for the Bank of Overseas Chinese and Taiwan, of Bisys and of ATD are all businesses that will expand operations in high growth markets. Also they closed Old Lane early this month and managers Vikram Pandit and John Haven that come with the have a value that cannot be quantified. Most significantly, they now own 60% of Nikko Cordial in Japan in a deal that puts them in the forefront in that region. Roughly 1/3 of the international units growth came from acquisitions meaning that Citi is consistently picking winners.

The big negative and the reason for jittery investors selling shares? Credit costs rose to $934 million in the quarter, including a $259 million rise in credit losses and a $465 million charge to increase loan loss reserves. The $465 million net charge compares to a net reserve release of $210 million in the prior-year period, the company said. Simply put, credit losses are expected to mount.... no kidding. Bank after bank so far has reported the same thing so this should be no surprise. What this news means is that for the first time during his reign, CEO Chuck Prince was able to manage the business to it's best quarter ever during a tough time. Since we are so worried about load losses, let's look closer at the same quarter last year. Last year Citi released $210 million from loss reserves that help earnings and this year added $465 to them. That is a cool $675 million swing to earnings or a additional 12% earnings from operations in 2007 over 2006 when these items are backed out. That is significant because it means that when US credit improves and yes it will, Citi is sitting pretty with it's international operations to really boost earnings.

The consumer unit experienced a 15% earnings decrease and again, this was not totally unexpected. It was pointed out that they are opening up new locations at a "very healthy clip" and this will negatively impact earnings for that segment until those locations are up and running.

Citi is also still cutting costs and said they were "less than halfway" through the $2.3 billion they anticipate saving this year through staff reductions and IT improvements. The reductions to date have finally lead to operations leverage improvements as witness by Q2's revenue increase of 20% vs cost increases of 16%.

Where does all this leave us? Citi finally seems to be being "managed" and is producing results. It will not happen overnight but I do not have a problem getting paid a rock solid 4.2% by them to wait. T think the street is waiting for confirmation of a turnaround and another strong quarter or two should do the trick and get shares that trade at only 12 times earnings running.

"Fast Money" Picks for Tuesday

Here are Tuesday's picks and Monday's results


Jeff Macke likes Microsoft (MSFT).Open $31.19

Pete Najarian prefers Sterlite Industries India Limited (SLT). Open $17.97

Guy Adami recommends American Express (AXP).Open $64.66

Eric Bolling says keep an eye on Google (GOOG) Open $512.51 and recommends owning IBM (IBM) Open $116.38

Monday's Results

Jeff Macke told investors to add to their position in Microsoft (MSFT) Open $31.16 Close $31.19 Gain $.03

Pete Najarian recommended Clorox (CLX) on recent options volume. Open $63.90 Close $64.87 Gain $.97

Jon Najarian liked Zimmer Holdings (ZMH), Open $88.08 Close $89.39 Gain $1.31 as well as Rowan (RDC) Open $44 Close $45.70 Gain $1.70

Tim Seymour preferred buying Stillwater Mining Company (SWC) Open $11.25 Close $10.91 Loss $.34


Records:

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week))

Adami= 7-5 Gain $30.56
Bolling= 6-6 Loss $5.46
John Najarian= 13-3 Gain $15.54
Macke= 14-7 Gain $6.25
Pete Najarian=4-0 Gain $21.17
Seymore= 1-1 Gain $.01
Finerman= 1-2 Gain $.68

Sears: A Look Back At The Merger Announcement

With all the clatter out there about Sears Holdings (SHLD) results and the frustration out there a look back is necessary. I was emailed a copy of the press conference announcing the merger of Kmart and Sears by the blog "Concentrated Value" and it was very revealing given what has transpired since and what may happen down the road.

Lampert on Earnings:
"And given the large ownership that we will have on the Board, we will be able, similar to what Kmart has been able to do for the last couple of years, we will be able to manage the business strategically and for the long-term without having to worry about figuring out how to make monthly same-store sales, hit a specific target, and without giving any type of quarterly earnings guidance and then trying to manage the business to that guidance. We understand the potential for the combination. We're going to manage to the potential, and we're not going to manage to try to generate sort of steady progress. It's going to be probably lumpy progress over time."

Lampert On Real Estate Value
" I don't think any retailer should aspire to have its real estate be worth more than its operating business. There's been a lot of speculation about real estate strategy, real estate value, and I think that there is some truth to the notion that there are certain retailers whose real estate is worth more than its operating business. I think while that may have been true at Kmart at one point in time, we've worked very, very hard to improve the profitability of each of our stores and to make those stores worth a lot more as an operating business than as real estate. The more money the store makes, the more valuable they are as operating businesses, and that's something that I think the combined company can do very, very well.

To the extent that we have stores that can produce the type of profit that we're looking for, we would have to consider other alternatives. I think well-run retailers over time should be able to earn a 10 percent EBITDA to sales ratio. I think when you look at Home Depot, you look at Target, you look at The Gap, they all achieve that metric. And again, that's not something we think that we're going to be able to do anytime soon, but that's something that we're going to work towards. We're going to work towards best-in-class financial metrics and best-in-class customer metrics."

Lewis on Cost Savings
"Savings we expect to be fully realized by the end of the third year. We expect this transaction to be accretive in the first year, excluding some onetime costs"

Lampert responding to the comment: Beyond doubling the synergies here, you are not just doubling the challenges also; taking 2 admittedly weaker retailers and just increasing the challenges that both of them face in one larger perhaps weaker retailer entity?


"You made the sure statement that you're talking about 2 weaker retailers, and I would say that there is probably unanimity of opinion that that's the perception of the 2 companies. My perception of Sears is that in terms of the Sears experience, the Sears service, and certainly the Sears products, they're every bit as good as any of its competition. The problem is they are not where the customers are, and that's the big opportunity. It is not that the retailer per se is weak, but if you have the greatest store and it's not near where the customers are, that's a problem. So I think Sears has a very, very different problem in a sense, or had a different problem than Kmart had. So I think that it's a pretty substantial opportunity to simply bring Sears experience and the Sears product closer where, by the way, Home Depot, Best Buy, Lowe's, Target, Wal-Mart, that is where they are building, that's where they're growing. We're there. We know it because they seem to want to open stores near us, meaning Kmart, because we are perceived as a weak competitor.

In effect, Sears in a Kmart box in that same environment ought to do very, very well. So that's the presumption; we've got to make it happen. So I think that is really the answer to the first question. In terms of cross-merchandising, we're going to try all different types of things, and I think that we have the ability because we have such a large store base to experiment. And we're going to get some things right and we're going to get some things wrong. But we're going to have a flexible culture, and with a flexible culture, we're going to correct our mistakes quickly and move onto something else."

Lampert on Capital Allocation

"I would say that in terms of capital allocation, I mean that is something that I think that this company will do very, very well. It is great to have internal opportunities where you could actually take the free cash flow and invest it in the business. We have a very significant opportunity, whether it is converting the Kmart stores to Sears, whether it is converting the Kmart stores to a better version of a Kmart store. But we are going to have very strict return on capital requirements, and we're going to want to allocate the capital to where the best -- where it is best used. And if the best use is to repurchase shares, we're going to look at that. If it is to build new stores, we're going to look at that.

I think it is important that at least through the transition period, we have a very, very strong balance sheet. And I think that Kmart went through a period where it had a weak balance sheet, and we basically built up sort of undeniable financial strength. I think once Sears sold the credit card business, its balance sheet was very, very significantly strengthened. And I think on a combined basis, you look at the combined cash flow, we feel obviously very comfortable with where we're coming out of the box. But I do think that at different stages of opportunity, you have different capital structures, and it is something that I think we will critically review on an ongoing basis."

So, where are we? Lampert and Lewis are managing the business exactly as they said they would just over two years ago. Lampert anticipated a bumpy earnings ride and it has been, he promised balance sheet improvement as a priority and has accomplished that, they also said they had no set idea as to merchandise and was going to try various ideas and are doing it. Notice no mention of the Land's End expansion currently underway and this illustrates they are flexible and still looking at ways to improve and coming up with new ideas.

All in all, the plan is being executed as initially proposed. It seems the first two years were being spent fixing the financial mess the two separate retailers were in and now we are onto the sales end. That this stage of the plan has coincided with the housing bust and it's corresponding effect on all retailers like Home Depot (HD), Target (TGT), Lowes (LOW) and Macy's (M). It does also mean that other retailers will get cheaper and may mean that Lampert may choose to invest the cash in another retailer rather than build new stores from scratch.


Either way, it will be exciting

Now, the recent stock activity. Take a look at a long term chart of Sears Holdings here. The summers of 2004, 2005 and 2006 all saw large percentage share price declines of 15%, 26% and 15% respectively followed buy large run ups and no, same store sales were not increasing back then either. This current one is a great buying opportunity as shares are off 26% from their all time high, just like 2005. Let's call it the "Annual Sears Summer Stock Sale Event"
s

Today's 52 Week Lows

Here are today's 52 week lows. home builders all hit new lows today, I just am sick of putting them down everyday. If you own them, assume they hit a new low today and will again tomorrow.

TRMP Trump Entertainment Resorts Inc
TRB Tribune Company
WB Wachovia Corp
SHFL Shuffle Master Inc
SEPR Sepracor Inc
PLCE Childrens Place
PKTR Packeteer Inc
PHM Pulte Homes Inc
PFK Prudential Financial Inc
NFLX Netflix, Inc
JOE St. Joe Company
HSY Hershey Foods Corporation
CC Circuit City Stores

Dow Chemical Enters Bio-plastics In Yet Another JV

Just in case anyone thought DOW Chemical CEO Andrew Liveris might rest after the flurry of deals he has announced to date this year, think again. Dow (DOW), the world's largest producer of polyethylene, and Crystalsev, one of Brazil's largest ethanol players announced plans for a world-scale facility to manufacture polyethylene from sugar cane. Polyethylene is the most widely used of all plastics and can be found in all manner of everyday products, from food packaging, milk jugs and plastic containers to pipes and liners.

Under the terms, Dow and Crystalsev will form a joint venture in Brazil to design and build the first integrated facility of its scale in the world. It is expected to start production in 2011 and will have a capacity of 350,000 metric tons. The venture will combine Dow's leading position in polyethylene with Crystalsev's know-how and experience in ethanol to meet the needs of Dow's customers in Brazil and what will likely be international interest. "Meet the needs of Dow's customers in Brazil." This is huge. Rather than producing plastic from petroleum and shipping it to Brazil like it does now, Dow will produce it there for pennies and sell it locally to the same people.

Crystalsev is a 100% Brazilian group that commercializes products made from sugar cane through three areas: providing of services to mills; commercialization of sugar and alcohol; and trading - purchase, resale and management of assets. The Group produces 1.8 million tons of sugar, which corresponds to 8% of all sugar manufactured in Brazil, and employs 30,000 people. Crystalsev operates in several regions in the country through 13 companies that, together, form the second major producer of sugar cane in Brazil.

The new facility will use ethanol derived from sugar cane, an renewable feedstock, to produce ethylene, the raw material required to make polyethylene. Ethylene is traditionally produced using either naphtha or natural gas liquids, both of which are petroleum products. It is estimated that the new process will produce significantly less CO2 compared to the traditional polyethylene manufacturing process.

Now, this brings up a few questions. Since Dow will be using ethanol, will they eventually branch into ethanol production in Brazil? Will they export some of the ethanol when the market dictates to the US duty free? ADM is actively looking for a Brazilian partner for ethanol production, will this joint venture possibly lead to a ADM, Dow venture? The possibilities here are endless.

Let's look at future earnings. The end of this decade should bring in significant, prolonged earnings from the Saudi joint venture, the China project, this Brazilian one and the Lybian venture announced earlier. All these have been announced in just the past 4 months and they will not only bring in additional earnings, they will do so while dramatically decreasing and stabilizing input costs, currently Dow largest wild-card in relation to earnings. In his last letter to shareholders Liveris claimed 2007 would "be a significant year" in the history of Dow.

So far, so good and we are only 1/2 way through.

Sherwin Williams On A Roll

The lead paint discussion now a days does not even merit the attention of CEO Chris Connor as it's brief 3 sentence mention was relegated to the PR dept. Good, too much was made of it anyway from the beginning.

As always, SHW delivered consistent results and based on the stock price action, (up 8%) not too many folks had realized that Sherwin was a global company that did not just sell paint to the US housing market. With housing retailers like home Depot (HD) and Lowes (LOW) suffering, the consensus was that Sherwin would also. Yet another reason to ignore the "consensus".

Highlights:
- Raised expectations for diluted net income per common share for the year to a range of $4.60 to $4.70 per share compared to $4.19 per share last year.
- Paint Stores segment opened 13 new stores, bringing the total new stores for the first half of the year to 30. At this pace, they remain on track to open around 100 net new stores during the year.
- Commitment to control distribution as planned it in the past extends beyond North America.
- Global Group additionally opened nine new stores and branches during the quarter including the 131 MAB stores reopened or acquired, the total of 153 stores during the second quarter and that brings year-to-date total to 180 additional stores
- Cash flow up $46 million to $349 million and bought back 1.3 million shares and has 88 million shares authorized under the current plan
- Declared an 31.5 cent dividend that will increase to 35.25 cents a share next year if the $4.70 guidance is achieved.
- Closed the MA Bruder deal

All in all a great quarter. Can you imagine what they would have done had the US housing market not been in a slump? If you have not been in a Sherwin paint store, they are great and are popping up all over the place. This is a great way to access the DIY crowd and based on results, it is working.

The real story with Sherwin is the overseas operations. With each quarter that passes, the expansion there decreases the impact of the US housing market and turns Sherwin into more of a global player rather that a regional one. Estimates going forward need to take this into account. ValuePlays has been stumping this fact since January and hopefully this quarters results may have convinced more people out there. The key will be the Nitco paints acquisition as, according th CEO Connnor "Nitco Paints is a leading manufacturer and distributor of exterior specialty paints and coatings headquartered in Mumbai, India. Although, a relatively small in total revenues today, Nitco will provide us with the platform in which to grow our presence in the dynamic and growing Indian market."

Sherwin will grow abroad through transaction like Nitco and it will be come the dominant player in that area of the world. There is no reason to stop trusting Connor now..

Altria: Earnings and Some Interesting Comments

Dinny Divetre opened the Altria (MO) earnings call by saying "As mentioned earlier, my remarks today will focus on our quarterly results. I will not be addressing specific actions Altria may take going forward to further enhance shareholder value except to repeat what I said last quarter.

He continued, "We remain as committed as ever to meaningfully enhance long term shareholder value. We continue to carefully and diligently examine the benefits of a spin-off of Philip Morris International and other possible value enhancing options to decide the optimal long-term strategic course to follow. And once a decision has been made, we will promptly communicate it."

Okay, we won't ask. Earning were about as expected, up 5% after charges related to the NC plant closing. Altria purchased another 30% of a Mexican cigarette maker in a deal valued at $1.1 billion, brining it's stake to 80% and adding $.30 a share to earnings once it closes. The rest of the stuff was rather vanilla until the Q&A.

Q: "It will take some time before Marlboro Snus will really have a meaningful impact on your EPS. So, would it be fair to say that over the near term, we may hear from Philip Morris more news in terms of the adjacency strategies that will make a more meaningful impact on the EPS and also would some of these adjacency strategies be suitable to be exported to other markets, let's say Western Europe which demonstrates today many of the same trends as we are seeing in the US market."

A: "Well, we have announced or PM USA rather has announced that it is going to progress with its adjacency strategy and going to go further into the smokeless category. So I think, you can expect further news from Philip Morris USA. As far as the prospects for Snus you're right, this is a new category and that's why we are going to go about it very carefully and cautiously and that's why we are doing this test -- we did the test market with Taboka. We learned a lot. We are using many of those lessons in the introduction of Marlboro Snus. And now we will gradually step this up and you can expect more news from us in the future"

Meaning? I would look towards more acquisitions or large investments in existing makers for Altria. They have a huge cash hoard and a painfully under leveraged balance sheet. There is no tobacco related investment out of their reach.

Q: " Speaking of Snus and smokeless, certainly there is a shift, and depending on what happens with the federal excise tax increase, which certainly will also include other tobacco products. It's going to depend on the gap. It's going to depend on how all the manufacturers handle it. If it occurs, where do you see your portfolio makeup in terms of, as you look out the next 5-10 years and I am thinking specifically PM USA? If you use just the first sort of step into smokeless, would you expand like you said into other tobacco products? Do you feel that will become a larger and larger stake of your overall portfolio into a less (inaudible) top-line."


A: "Philip Morris USA has announced and said many times in the past, they are committed to their adjacency strategy that covers a wide range of non-cigarette products. And if these are successful which we hope they will be, then obviously these products will make up a larger part of the business than they do today. The question remains. Which are going to be successful? Which are not going to be successful? And it's impossible to predict but I would venture to say that, five years from now certainly non-cigarette products will make up a meaningful proportion of the Philip Morris USA product mix."

Commenting on more potential M&A, Devitre said "there are always going to be M&A opportunities out there and there are opportunities out there today, but there are many business development opportunities out there today and we just showed you one with our acquisition of 30% of our Mexican business, so there are many opportunities like that. There are also free standing M&A opportunities.."

Clearly two things are happening. First, Altria some how, some way is going to get into the smokeless tobacco business and second, mergers or acquisitions are in their future. It is clear that the Altria we know to day and the Altria we will be holding shares of years from now will be a dramatically different company.

As for the PMI spin? We will wait patiently for the August 29th board meeting for an announcement or at the very least dividend or buyback news...

Wal-Mart Making More Apparel Moves

Wal-Mart (WMT) said Friday that a high level apparel executive resigned after the transition to more trendy items from low-priced basics failed to do anything for clothing sales. Claire Watts, executive vice president of apparel merchandising, stepped down Thursday to "pursue other interests," said Sarah Clark, a spokeswoman for the world's largest retailer. Yeah, "other interests" like "looking for a new job".

Promoted along with the company's move to relocate clothing operations to NYC was GAP veteran Dottie Mattison, formerly chief merchant for Walmart.com. She will oversee women's apparel, jewelry, shoes and accessories as well as product development. Let's honest, even if she only manages to bring the apparel offering at Wal-Mart to average, it will be a huge plus for earnings. As it stands now other retailers like Target (TGT), Macy's (M), Sears Holdings (SHLD) and JC Pennys (JCP) are miles ahead of Wal-Mart.

Many people, including yours truly feel the changes are due to pressure from Allen Questrom has suggested them since joining the board in early June. Questrom was chairman and chief executive of J.C. Penney Co. from 2000 to December 2004. Now, JC Penny has been a great turnaround story so let's let a guy who was there for the genesis of it make some suggestions, like I said before, can they do any worse?

Today's Early Analyst Calls

Here are today's early analyst calls

UPGRADES

HSBC Holdings HBC Lehman Brothers Equal-weight » Overweight
Navteq NVT UBS Neutral » Buy
Progress Energy PGN Robert W. Baird Neutral » Outperform
Piedmont PNY Robert W. Baird Neutral » Outperform
FPL Group FPL Robert W. Baird Neutral » Outperform
Anheuser-Busch BUD Citigroup Sell » Hold
Amgen AMGN Citigroup Sell » Hold
AFLAC AFL Lehman Brothers Underweight » Overweight

DOWNGRADES

Transalta TAC CIBC Wrld Mkts Sector Outperform » Sector Perform
Great A&P Tea GAP CIBC Wrld Mkts Sector Outperform » Sector Perform
Assoc Banc-Corp ASBC Lehman Brothers Equal-weight » Underweight
Ventana Medical VMSI RBC Capital Mkts Outperform » Sector Perform

"Fast money " Picks for Monday

Here are the picks for Monday.

Jeff Macke tells investors to add to their position in Microsoft (MSFT) Open $31.16

Pete Najarian recommends Clorox (CLX) on recent options volume. open $61.90

Jon Najarian likes Zimmer Holdings (ZMH), Open $88.08 as well as Rowan (RDC) Open $44

Tim Seymour prefers buying Stillwater Mining Company (SWC) Open $11.25


Records:

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week))

Adami= 7-5 Gain $30.56
Bolling= 6-6 Loss $5.46
John Najarian= 11-3 Gain $12.53
Macke= 13-7 Gain $6.22
Pete Najarian=3-0 Gain $20.20
Seymore= 1-0 Gain $.35
Finerman= 1-2 Gain $.68

This Weeks Dividend Increases

Here are the payment increases for the past week


Renaissanse Learning Systems (RLRN)= 40%

Burlington Northern (BNI)= 28%

Fannie Mae (FNM)= 25%

M&T Bank (MTB)= 16.7%

Commonwealth Bankshares (CWBS)= 16.7%

This Weeks Insider buys

Here are the insider purchases for the past week


Opko Health (OPK)= $5,308,000

Equity One(EQY)= $3,109,000

Chelsea Therapeutics (CHTP)= $2,671,000

Environmental Tectronics (ETC)= $2,228,000

Allied Nevada Gold (ANV)= $2,217,000

Notable Dividend Hikes

Here are the notable boosts for the week ending July 15th.

Paychex (PAYX)= 43%

Cummins (CMI)= 39%

Walgreens (WAG)= 23%

Timberland Bancorp (TSBK)= 11%

Bank of NY (BK)= 9%

Recent Insider Buys

Here are the notable insider buys for the week ending July 15th.


Hudson Technologies (HDSN)= $10,186,000

Management Capital Investments (MGT)= $5,000,000

Books A Million (BAMM)= $1,985,000

Amicus Therapeutics (FOLD)= 1,892,000

Liberty Media (LCAPA)= $1,764,000

Sprint Customer Service Still Sucks

So here I am on vacation and I brought my laptop so if the mood hit me I could whip out a post or two. One problem, I cannot access the internet with my PCS card. No problem I think, I will just call Sprint (S) customer service and they will help me out.

DUH!!! This is Sprint we are talking about. For two days now I have either been on eternal hold or told "we cannot take your call at this time" by the computer that answers the phone. I never thought I would be relived to get blown off by a robot, at least it saves my wireless minutes.

These guys just do not get it. "Customer" should not be a four letter word and I am really not the enemy.

Now we are going to have to talk about refunds if they ever take my call.

I think the customers Sprint "fired" last week may just may up being the lucky ones.
Todd Sullivan

Sent from my BlackBerry® wireless device

On vacation

Valueplays is on vacation for the week. Here is wishing a safe week for all.


Todd Sullivan

Sent from my BlackBerry® wireless device

The Fallacy of "Buffett Can't Buy More"

Since my initial post of Berkshires' (BRK.A) WEB and the replies, there has been quite a bit of discussion on the topic out there. I will not specify any bloggers because I have no desire to have a virtual battle with anyone, but, as before, I invite anyone to refute me and I will be happy to post it here. The more diverse discussion the better, right? If any blogger wants to have public discourse about this, I am happy to do so, I just am not the type to blindside someone.

Here are the initial posts, here and here, read them so at least we are on the same page.

Recently the line of thinking out there is that due to Berkshire's size and the various SEC regulations surrounding stock purchases, this prohibits large stakes in public companies at prices Buffett is willing to pay. It says that because Berkshire can only buy up to 1% of a companies daily volume without disclosing it is doing so, it cannot make purchases of a percentage to Berkshire size that it did in the past. Essentially, when you are a $100 million company investing 20% in a single stock is a whole lot easier than investing 20% of the approx. $50 billion Buffett sits on today. This is all very true, but, here is the rub: If we look at a few of the Berkshire purchases the last few years, this reasoning for Berkshire not buying more just does not hold water.

In order to continue we need to some to agreement on a few things:

1- Buffett only buys stocks he considers a value
2- He would not invest expecting only a "small return" on an equity. This is despite his public proclamations, this is called "under promising and over delivering". He has been saying essentially the same things for the past two decades. Not buying it anymore.


WalMart (WMT)

Berkshire first announced a Walmart stake in 6/2005 and added to it in 9/2005 for a total of 34 millions shares at an average price of about $48 a share. The prevailing thinking out there now is that Buffett just could not buy more once the initial stake was announced because copy-cats poured into the stock and pushed the price above a level Buffett would be willing to pay. But WalMart has essentially traded at or below Buffett's purchase prices since he bought shares! He could easily have made WalMart a substantial Berkshire holding. When you consider WalMart trades 13 million shares a day, Buffet could have bought about 760,000 shares a day.

Johnson & Johnson (JNJ)

In the spring and summer of 2006, Buffett bought 26 million shares of JNJ at $59 a share. He sat there for the next year as the stock price fluctuated around the almost $64 a share price he bought another 22 million shares at in the spring of 2007. Berkshire now owns 48 million JNJ shares that represent just under 3% of Berkshire's assets. Could Berkshire have bought much more at prices it clearly was willing to pay in the past year and a half? Yes. JNJ trades almost 9 million shares a day and even with Buffett gobbling up 22 million more shares, the price of JNJ stock fell precipitously during the spring of 2007 from $67 to $60. This means that even with him purchasing just about the maximum number of shares in order to avoid public reporting, his activity did nothing to cause a "jump" in the stock price.


These are just two quick examples. Now there may be many reasons Buffett did not take bigger stakes. Since he has never said, we will never really know. What we do know, is that the common excuse "he just can't do it because of SEC regulations and reporting requirements" just does not wash. Even Munger inexplicably jumped on this bandwagon recently when he claimed as much. Now, for some of the smaller companies Berkshire has taken stakes in this is entirely true but the above reasoning is being used to eliminate any conversation of why Berkshire stopped "swinging for the fences" almost decades ago. If you did deeper into purchases that past three years there are many examples of companies Berkshire took stakes in that the opportunity to take much larger stakes at or below the original purchase price was there (USB, for example), they just chose not to. It had nothing to do with the recently espoused reasons. Let's not forget additionally that Buffett is one of the few folks out there that the SEC actually allows to delay reporting of purchases while he finish building his positions. Even without this grace period and even after his stake has been announced, a larger position in Budweiser (BUD) was available.

Warren "can" build Berkshire portfolio changing positions, he just "chooses" not to. That is ok, but let's just admit that and let go of the excuses.

Top Sories At VIN- July

Here are the top 5 at VIN to date:


1- Value Creation Or Destruction

2- Valuing the Tyco Spinoffs

3- 4kids Entertainment

4- Chipotle Mispricing

5- Fly, Don't Buy Airlines

Please visit this great site Value Investing News

52 Week Lows

S&P hits a record high, regional banks keep setting yearly lows

ILA Aquila Inc
IHR Interstate Hotels
HDL Handleman Company
RSTO Restoration Hardware
REDE Redenvelope Inc
OPOF Old Point Finl Corp
FMAR First Mariner Bancorp
FFSX First Fed Bankshares
FFNM First Fed Northern Michigan
FBNC First Bancorp North Carolina
CCBD Community Central Bank
CBIN Community Bank Shares
CBHI Centennial Bank Holdings
BFBC Benjamin Franklin Bank

Upgrades / Downgrades

Here are the late Thursday and early Friday calls


UPGRADES:


Del Monte DLM Matrix Research Hold » Buy
Fleetwood FLE BB&T Capital Mkts Hold » Buy
Fedrl Rlty Inv Trst FRT Cantor Fitzgerald Hold » Buy
MRV Comms MRVC Roth Capital Hold » Buy
National Instruments NATI Thomas Weisel Market Weight » Overweight
BJ's Wholesale BJ Lehman Brothers Underweight » Equal-weight
AT&T T Davenport Neutral » Buy
Lockheed Martin LMT JP Morgan Underweight » Neutral
Seagate Tech STX Brean Murray Hold » Buy
Hartford Financial HIG AG Edwards Hold » Buy
BMC Software BMC Credit Suisse Underperform » Neutral
Merck MRK AG Edwards Hold » Buy
Robbins & Myers RBN Matrix Research Hold » Buy

DOWNGRADES:


Vimicro VIMC Susquehanna Financial Neutral » Negative
Tenaris TS Credit Suisse Neutral » Underperform $50
Charles River CRL Cowen & Co Outperform » Neutral
Thor Industries THO Matrix Research Strong Buy » Sell
Warner Chilcott PLC WCRX Oppenheimer Buy » Neutral
US Cellular USM Soleil Hold » Sell
Frontline FRO UBS Neutral » Reduce
BCE Inc BCE Davenport Neutral » Reduce/Sell
Big 5 Sports BGFV DA Davidson Buy » Neutral
PFF Bancorp PFB Friedman Billings Outperform » Mkt Perform
Huntsman HUN BB&T Capital Mkts Buy » Hold
China Petroleum (Sinopec) SNP Bear Stearns Peer Perform » Underperform
Gerdau AmeriSteel GNA RBC Capital Mkts Outperform » Sector Perform
XL Capital XL AG Edwards Buy » Hold
Ruby Tuesday RT Sun Trust Rbsn Humphrey Buy » Neutral
Denbury Resources DNR Calyon Securities Add » Neutral
Delek US Holdings DK HSBC Securities Neutral » Underweight
Cubic CUB Friedman Billings Mkt Perform » Underperform
Gerdau AmeriSteel GNA CIBC Wrld Mkts Sector Outperform » Sector Perform

"Fast Money" Picks For Friday

Here are today's picks

Jeff Macke is buying McDonald’s (MCD). Open $51.65

Pete Najarian preferred New York Bancorp (NYB). Open $17.56

Guy Adami recommended EMC Corp. (EMC). Open $19.25

Eric Bolling didn’t have a stock pick.


THURSDAY'S RESULTS:


Guy Adami likes EMC Corp. (EMC). Open $18.92 Close $19.25 Gain $.33

Pete Najarian prefers PDL BioPharma (PDLI)Open $23.48 Close $23.74 Gain $.26

Jeff Macke recommends buying Saks (SKS). Open $20.71 Close $20.44 Loss $.27




Records:

Since my tracking began on 6/21 (1-1 means one up pick and one down pick)

Adami= 7-4 Gain $30.61
Bolling= 6-6 Loss $5.46
John Najarian= 10-3 Gain $12.36
Macke= 12-7 Gain $5.96
Pete Najarian=3-0 Gain $20.20
Seymore= 1-0 Gain $.35
Finerman= 1-2 Gain $.68

WalMart's Recent Moves Beginning To Pay Off

After what seemed to be a never ending series of missteps, WalMart (WMT) would seem to be getting it mojo back. On Wednesday, WalMart.com CEO Raul Vasquez said the company's "Site to Store" program that lets shoppers order online and ship for free to nearby stores was very successful. Yesterdays same store sales results, gave a whole lot of credence to those remarks. Sales of flat panel televisions, MP3 players, video game hardware and accessories, laptops and desktop computers had significant year-over-year gains. Computer sales were fueled by the introduction of select Dell computers now sold at WalMart stores and Sam’s Clubs throughout the United States. Less than a month ago I commented on the significance of the Dell (DELL) move and it seems to be a winner.

For months prior to recent events, investors including yours truly had been screaming for a reduction in new store growth and a meaningful share buyback. At the annual meeting in June executives finally acknowledged they are no longer a growth company and have scaled back those plans and announced a $15 billion share repurchase plan. Yet, the stock had been stagnant as investors waited to see the results of their actions. The answer came today and investor liked those results.

The final piece of the WalMart gripe is clothing. To be frank, virtually every other retailer trounces WalMart here. Whether it be JC Penny (JCP), Target (TGT), Sears (SHLD), or Macy's (M), WalMart offerings are woefully inadequate in comparison. The questions begs to be asked, what would happen to sales if they ever got clothing right? The answer should make investors salivate.

Maybe we have the beginnings of something here now. WalMart has agreed to a 12-year lease for a new 47,000 sq. ft. studio in Manhattan that will replace two nearby studios that combined are only a fraction of the new one. This demonstrates a long-term commitment by WalMart to attract more top talent to pick and design its fashions that had been hampered by the location of WalMart's headquarters in Bentonville. It seems they now recognize Bentonville, while a very nice community is not a particularly big attraction for those in the fashion scene.

This event, while not very widely reported may be the most significant move they have made long term to date. Along with slowing store expansion, many of us begged them to invest in apparel and get it right. This is a first and a huge step. WalMart, who can squeeze a profit out of a penny like no other retailer will not let this sit for 12 years and not produce. They are going to put the money necessary into it to make it work. Locating the facility in NYC will give them access to top and upcoming talent that being in Bentonville just prohibited.

While nothing is certain, WalMart is on a roll recently and the potential for this move to pay off is staggering. If people ever though of WalMart for quality and stylish clothing instead of just cheap, company sales would explode. For proof just look what the Dell move did for their electronics sales almost immediately.

The stock buyback, the slowed expansion plans, the Moneycenter announcement, selling Dell's , the Site -to -Store program all have been great moves and Thursday's results mean that their effects are beginning to show up on the bottom line.

I said before that WalMart was getting real hard not to buy and I did just that only a few days later. Now I am saying that it is real hard not to buy more.

Today's 52 Week Lows

Even in a record up day, there are bottom feeders

SPA Sparton Corporation
RAS Rait Financial Trust
PHA Pulte Homes Inc
PFB PFF Bancorp Inc
HMB Homebanc Corp Ga
HDL Handleman Company
AHM American Home Mtg
SHFL Shuffle Master Inc
RSTO Restoration Hardware
REDE Redenvelope Inc

Mohnish Pabrai Interview

Here is an interview with the man who just paid $650,000 for lunch with Warren Buffett. It was sent to me by the interviewer and can be found at Investorguide.com

July 11, 2007

Interview conducted by Tom Murcko.

It is my privilege to bring you the following interview I recently conducted with value investing superstar Mohnish Pabrai. Mohnish is one of my favorite investors who doesn't have the initials W.B. His investment style is similar to the low risk, high value style followed by Warren Buffett and myself, and has led his portfolios to perform marvelously since the 1990s.

How successful have his techniques been? I'll let the numbers speak for themselves: A $100,000 investment in Pabrai Funds at inception (on July 1, 1999) was worth $722,200 on March 31, 2007. That works out to an annualized return of 29.1%, and is after all fees and expenses. Assets under management are over $500 million, up from $1 million at inception. Although a person probably can't get into the investing hall of fame with eight years of outperformance (even if they crush the indices), Pabrai is already mentioned in most articles about the search for the next Warren Buffett, and justifiably so.

Equally important, he genuinely wants to help others become better investors, and in that spirit has just published his second book, The Dhandho Investor. The book is both illuminating and easy to read, and it deserves to be on every investor's bookshelf next to Benjamin Graham's The Intelligent Investor.

I felt extremely fortunate when he recently agreed to answer some questions about his investment strategy in this exclusive interview, conducted by email. I hope you find it useful, and that it inspires you to pick up a copy of his book if you haven't already.

Happy Investing,
Tom Murcko
CEO, InvestorGuide.com

InvestorGuide: You have compared Pabrai Funds to the original Buffett parternships, and there are obvious similarities: investing only in companies within your circle of competence that have solid management and a competitive moat; knowing the intrinsic value now and having a confident estimate of it over the next few years, and being confident that both of these numbers are at least double the current price; and placing a very small number of very large bets where there is minimal downside risk. Are there any ways in which your approach differs from that of the early Buffett partnerships (or Benjamin Graham's approach), either because you have found ways to improve upon that strategy or because the investing world has changed since then?

Mohnish Pabrai: The similarity between Pabrai Funds and the Buffett Partnerships that I refer to is related to the structure of the partnerships. I copied Mr. Buffett's structure as much as I could since it made so much sense. The fact that it created a very enduring and deep moat wasn't bad either. These structural similarities are the fees (no management fees and 1/4 of the returns over 6% annually with high water marks), the investor base (initially mostly close friends and virtually no institutional participation), minimal discussion of portfolio holdings, annual redemptions and the promotion of looking at long term results etc. Of course, there is similarity in investment style, but as Charlie Munger says, "All intelligent investing is value investing."

My thoughts on this front are covered in more detail in Chapter 14 of The Dhandho Investor.

Regarding the investment style, Mr. Buffett is forced today to mostly be a buy and hold forever investor today due to size and corporate structure. Buying at 50 cents and selling at a dollar is likely to generate better returns than buy and hold forever. I believe both Mr. Munger and he would follow this modus operandi if they were working with a much smaller pool of capital. In his personal portfolio, even today, Mr. Buffett is not a buy and hold forever investor.

In the early days Mr. Buffett (and Benjamin Graham) focused on buying a fair business at a cheap price. Later, with Mr. Munger's influence, he changed to buying good businesses at a fair price. At Pabrai Funds, the ideal scenario is to buy a good business at a cheap price. That's very hard to always do. If we can't find enough of those, we go to buying fair businesses at cheap prices. So it has more similarity to the Buffett of the 1960s than the Buffett of 1990s. BTW, even the present day Buffett buys fair businesses at cheap prices for his personal portfolio.

Value investing is pretty straight-forward - you try to get $1 worth of assets for much less than $1. There is no way to improve on that basic truth. It's timeless.

InvestorGuide: Another possible difference between your style and Buffett's relates to the importance of moats. Your book does emphasize investing in companies that have strategic advantages which will enable them to achieve long-term profitability in the face of competition. But are moats less important if you're only expecting to hold a position for a couple years? Can you see the future clearly enough that you can identify a company whose moat may be under attack in 5 or 10 years, but be confident that that "Mr. Market" will not perceive that threat within the next few years? And how much do moats matter when you're investing in special situations? Would you pass on a special situation if it met all the other criteria on your checklist but didn't have a moat?

Pabrai: Moats are critically important. They are usually critical to the ability to generate future cash flows. Even if one invests with a time horizon of 2-3 years, the moat is quite important. The value of the business after 2-3 years is a function of the future cash it is expected to generate beyond that point. All I'm trying to do is buy a business for 1/2 (or less) than its intrinsic value 2-3 years out. In some cases intrinsic value grows dramatically over time. That's ideal. But even if intrinsic value does not change much over time, if you buy at 50 cents and sell at 90 cents in 2-3 years, the return on invested capital is very acceptable.

If you're buying and holding forever, you need very durable moats (American Express (AXP), Coca Cola (KO), Washington Post etc. (WPO). In that case you must have increasing intrinsic values over time. Regardless of your initial intrinsic value discount, eventually your return will mirror the annualized increase/decrease in intrinsic value.

At Pabrai Funds, I've focused on 50+% discounts to intrinsic value. If I can get this in an American Express type business, that is ideal and amazing. But even if I invest in businesses where the moat is not as durable (Tesoro Petroleum (TSO), Level 3, Universal Stainless (USAP)), the results are very acceptable. The key in these cases is large discounts to intrinsic value and not to think of them as buy and hold forever investments.

InvestorGuide: For that part of our readership which isn't able to invest in Pabrai Funds due to the net worth and minimum investment requirements, to what extent could they utilize your investing strategy themselves? Your approach seems feasible for retail investors, which is why I have been recommending your book to friends, colleagues, and random people I pass on the street. For example, your research primarily relies on freely available information, you aren't meeting with the company's management, and you don't have a team of analysts crunching numbers. To what extent do you think that a person with above-average intelligence who is willing to devote the necessary time would be able to use your approach to outperform the market long-term?

Pabrai: Investing is a peculiar business. The larger one gets, the worse one is likely to do. So this is a field where the individual investor has a huge leg up on the professionals and large investors. So, not only can The Dhandho Investor approach be applied by small investors, they are likely to get much better results from its application than I can get or multi-billion dollar funds can get. Temperament and passion are the key.

InvestorGuide: You founded, ran, and sold a very successful business prior to starting Pabrai Funds. Has that experience contributed to your investment success? Since that company was in the tech sector but you rarely buy tech stocks (apparently due to the rarity of moats in that sector), the benefits you may have derived seemingly aren't related to an expansion of your circle of competence. But has learning what it takes to run one specific business helped you become a better investor in all kinds of businesses, and if so, how? And have you learned anything as an investor that would make you a better CEO if you ever decide to start another company?

Pabrai: Buffett has a quote that goes something like: "Can you really explain to a fish what it's like to walk on land? One day on land is worth a thousand years of talking about it, and one day running a business has exactly the same kind of value." And of course he's said many times that he's a better investor because he's a businessman and he's a better businessman because he is an investor. My experience as an entrepreneur has been very fundamental to being any good at investing.

My dad was a quintessential entrepreneur. Over a 40-year period, he had started, grown, sold and liquidated a number of diverse businesses - everything from making a motion picture, setting up a radio station, manufacturing high end speakers, jewelry manufacturing, interior design, handyman services, real estate brokerage, insurance agency, selling magic kits by mail - the list is endless. The common theme across all his ventures was that they were all started with virtually no capital. Some got up to over 100 employees. His downfall was that he was very aggressive with growth plans and the businesses were severely undercapitalized and over-leveraged.

After my brother and I became teenagers, we served as his de facto board of directors. I remember many a meeting with him where we'd try to figure out how to juggle the very tight cash to keep the business going. And once I was 16, I'd go on sales calls with him or we'd run the business while he was traveling. I feel like I got my Harvard MBA even before I finished high school. I did not realize it then, but the experience of watching these businesses with a front-row seat during my teen years was extremely educational. It gave me the confidence to start my first business. And if I have an ability to get to the essence of a subset of businesses today, it is because of that experience.

TransTech was an IT Services/System Integration business. We provided consulting services, but did not develop any products etc. So it wasn't a tech-heavy business. While having a Computer Engineering degree and experience was useful, it wasn't critical. TransTech taught me a lot about business and that experience is invaluable in running Pabrai Funds. Investing in technology is easy to pass on because it is a Buffett edict not to invest in rapidly changing industries. Change is the enemy of the investor.

Being an investor is vastly easier than being a CEO. I've made the no-brainer decision to take the easy road! I do run a business even today. There are operating business elements of running a fund that resemble running a small business. But if I were to go back to running a business with dozens of employees, I think I'd be better at it than I was before the investing experience. Both investing and running a business are two sides of the same coin. They are joined at the hip and having experience doing both is fundamental to being a good investor. There are many successful investors who have never run a business before. My hat's off to them. - For me, without the business experiences as a teenager and the experience running TransTech, I think I'd have been a below average investor. I don't fully understand how they do it.

InvestorGuide: Is your investment strategy the best one for you, or the best one for many/most/all investors? Who should or shouldn't consider using your approach, and what does that decision depend on (time commitment, natural talent, analytical ability, business savvy, personality, etc)?

Pabrai: As I mentioned earlier, Charlie Munger says all intelligent investing is value investing. The term value investing is redundant. There is just one way to invest - buy assets for less than they are worth and sell them at full price. It is not "my approach." I lifted it from Graham, Munger and Buffett. Beyond that, one should stick to one's circle competence, read a lot and be very patient.

InvestorGuide: Some investment strategies stop working as soon as they become sufficiently popular. Do you think this would happen if everyone who reads The Dhandho Investor starts following your strategy? As I've monitored successful value investors I have noticed the same stocks appearing in their various portfolios surprisingly often. (As just one example, you beat Buffett to the convertible bonds of Level 3 Communications (LVLT)back in 2002, which I don't think was merely a coincidence.) If thousands of people start following your approach (using the same types of screens to identify promising candidates and then using the same types of filters to whittle down the list), might they end up with just slightly different subsets of the same couple dozen stocks? If so, that could quickly drive up the prices of those companies (especially on small caps, which seem to be your sweet spot) and eliminate the opportunities almost as soon as they arise. Looked at another way, your portfolio typically has about ten companies, which presumably you consider the ten best investments; if you weren't able to invest in those companies, are there another 10 (or 20, or 50) that you like almost as much?

Pabrai: As long as humans vacillate between fear and greed, there will be mispriced assets. Some will be priced too low and some will be priced too high. Mr. Buffett has been talking up the virtues of value investing for 50+ years and it has made very few folks adopt that approach. So if the #2 guy on the Forbes 400 has openly shared his secret sauce of how he got there for all these decades and his approach is still the exception in the industry, I don't believe I'll have any effect whatsoever.

Take the example of Petrochina. The stock went up some 8% after Buffett's stake was disclosed. One could have easily bought boat loads of Petrochina stock at that 8% premium to Buffett's last known buys. Well, since then Petrochina is up some eight-fold - excluding some very significant dividends. The entire planet could have done that trade. Yet very very few did. I read a study a few years back where some university professor had documented returns one would have made owning what Buffett did - buying and selling right after his trades were public knowledge. One would have trounced the S&P 500 just doing that. I don't know of any investors who religiously follow that compelling approach.

So, I'm not too concerned about value investing suddenly becoming hard to practice because there is one more book on a subject where scores of excellent books have already been written.

InvestorGuide: You have said that investors in Pabrai Funds shouldn't expect that your future performance will approach your past performance, and that it's more likely that you'll outperform the indices by a much smaller margin. Do you say this out of humility and a desire to underpromise and overdeliver, or is it based on market conditions (e.g. thinking that stocks in general are expensive now or that the market is more efficient now and there are fewer screaming bargains)? To argue the other side, I can think of at least two factors that might give your investors reason for optimism rather than pessimism: first, your growing circle of competence, which presumably is making you a better investor with each passing year; and second, your growing network of CEOs and entrepreneurs who can quickly give you firsthand information about the real state of a specific industry.

Pabrai: Future performance of Pabrai Funds is a function of future investments. I have no idea what these future investment ideas would be and thus one has to be cognizant of this reality. It would be foolhardy to set expectations based on the past. We do need to set some benchmarks and goals to be measured against. If a fund beats the Dow, S&P and Nasdaq by a small percentage over the long-haul they are likely to be in the very top echelons of money managers. So, while they may appear modest relative to the past, they are not easy goals for active managers to achieve.

The goals are independent of market conditions today versus the past. While circle of competence and knowledge does (hopefully) grow over time, it is hard to quantify that benefit in the context of our performance goals.

InvestorGuide: Finally, what advice do you have for anyone just getting started in investing, who dreams of replicating your performance? What should be on their "to do" list?

Pabrai: I started with studying Buffett. Then I added Munger, Templeton, Ruane, Whitman, Cates/Hawkins, Berkowitz etc. Best to study the philosophy of the various master value investors and their various specific investments. Then apply that approach with your own money and investment ideas and go from there.

"Fast Money" for Thursday

Here are today's picks and yesterday's results.

Guy Adami likes EMC Corp. (EMC). Open $18.92

Pete Najarian prefers PDL BioPharma (PDLI)Open $23.48

Jeff Macke recommends buying Saks (SKS). Open $20.71



Wednesday's Results:

Eric Bolling likes streetTRACKS Gold Shares (GLD). Open $65.61 Close $65.44 Loss $.17

Karen Finerman would be a buyer of ConocoPhilips (COP). Open $84.12 Close $85.59 Gain $1.47

Pete Najarian likes Biogen Idec (BIIB) because a new buyback should take it much higher. Open $54.51 Close $54.85 Gain $.34

Jeff Macke recommended Electronic Arts (ERTS) as a trade ahead of its conference(Open $49.44 Close $49.60 Gain $.16) and said to stay long Activision (ATVI). Open $19.17 Close $19.25 Gain $.08

Records:

Since my tracking began on 6/21 (1-1 means one up pick and one down pick)

Adami= 6-4 Gain $30.28
Bolling= 6-6 Loss $5.46
John Najarian= 9-3 Gain $12.10
Macke= 12-6 Gain $6.23
Pete Najarian=3-0 Gain $20.20
Seymore= 1-0 Gain $.35
Finerman= 1-2 Gain $.68

Today's Upgrades / Downgrades

Here are the early analyst calls for today


UPGRADES:

Lockheed Martin LMT JP Morgan Underweight » Neutral

Raytheon RTN JP Morgan Neutral » Overweight

Commscope CTV Morgan Keegan Mkt Perform » Outperform

Kimco Realty KIM Friedman Billings Mkt Perform » Outperform



DOWNGRADES:

Endo Pharm ENDP RBC Capital Mkts Outperform » Sector Perform

Columbus McKinnon CMCO RBC Capital Mkts Top Pick » Outperform

Dendreon DNDN JMP Securities Mkt Perform » Mkt Underperform

Jabil Circuit JBL Banc of America Sec Buy » Neutral

Today's 52 Week Lows

Homebuilders and banks hit the skids again, sounds like a Melloncamp song


NCC National City Corporation
MYL Mylan Laboratories Inc
KBH Kb Home
PHA Pulte Homes Inc
HMB Homebanc Corp Ga
HDL Handleman Company
RSTO Restoration Hardware
RIGL Rigel Pharmaceuticals Inc
REVU Princeton Review Inc
REDE Redenvelope Inc
TRMP Trump Entmt Resorts Inc
IBCP Independent Bank Corp
HTLF Heartland Finl Usa Inc
GFLS Greater Community Bancorp
GCBC Greene County Bancorp Inc
FSNM First State Bancorporation
FMBI First Midwest Bancorp Inc
FFNM First Fed Northn Michigan
FCTR First Charter Corp
FCCO First Cmnty Corp S C
FBTX Franklin Bank Corporation

American Eagle Out...standing

ValuePlays contributor Joe Ponzio takes look into a business that Wall Street rates a “Hold” - American Eagle Outfitters (AEO).

“Shop ae.com for men's and women's clothes, shoes, and more.” That’s what their website says. Sounds like a pretty simple business to me - American Eagle Outfitters (AEO) sells clothes, and for roughly $25 a share, you could be in the clothing business as well.

Wall Street doesn’t want you selling clothes. The consensus on AEO is that you should not buy or sell, rather hold (and probably put the rest of your money into their mutual funds).

The Past Ten Years
Over the past ten years, AEO has grown its shareholder equity from $91 million to $1.4 billion - a median rate of 31.6% when you look at various time frames. In addition, it has grown its free cash flow at a median rate of 35.4%. If you look at it from a personal finances standpoint, that is like you doubling your net worth every 2 1/2 years and increasing your monthly savings by 35.4% a year for ten years.

Hey, you’d be rich too.

Management And Money
The company carries almost no long-term debt which is much better than if it were swimming in debt and being choked by interest payments. In addition, it has generated nearly $0.18 a year for every dollar it has invested in the company. Last I checked, business interest rates were not at 18% so AEO is doing a great job of using its (very little) debt to generate additional cash.

What You Are Buying
If you were to buy AEO today, you’d be buying your fair share of its net worth and the future cash it can generate. If the future is anything like the past, an investment in AEO makes a lot of sense...if it can be done at a “fair” or “bargain” price. Assuming it is business as usual at AEO, it is already trading at a bargain price. If AEO plugged along at the rate it has for the past ten years, then slowed to 5% growth for the next ten years, the company is worth about $149 a share. Even with a 50% Margin of Safety, AEO is anything but a “hold”.

What If It’s Not Business As Usual?
Ahhh, the quandary of analyzing a smaller, rapidly growing business. What if AEO can’t sustain its 35.4% growth in free cash flow? Should you be penalized and lose money if management or the company stumbles a bit? Besides, it is impractical to think that any company can grow its cash generation abilities at 35.4% forever.

Let’s say AEO does slow down a bit. In fact, let’s say the next ten years are only half as good as the past ten years. Let’s also say that years 11-20 slow to 5% again. Now what’s the value of AEO? To earn 15% or more on an average annual basis, today’s value of AEO would be about $52.61 a share. With a 50% Margin of Safety - a smart move when buying a smaller, rapidly growing company - AEO becomes attractive at $26.31 a share.

The Buffett-esque Result?
Simple business. Undervalued by more than 50%, assuming much slower growth. Generates a ton of cash without using a lot of capital to do so? What do you think?

So, Will Buffett Buy It?
That’s a different story. AEO only trades about 1.2 million shares a day. For Buffett to “sneak” in, he’d only be able to buy 1% of that, or roughly 12,000 shares every day. Over the course of sixty trading days - the amount of time he has to sneak into a position before he reports it to the SEC...and the rest of the world - he’d only be able to acquire about 720,000 shares, or $18 million worth. An $18 million investment is barely worth his time, considering the size of Berkshire Hathaway.

So no, I don’t expect to see AEO in Berkshire’s swelling portfolio any time soon.

Joe Ponzio blogs at F Wall Street. He owns a piece of AEO’s business, directly or indirectly.

Wal-Mart's Online Pickup Program A Success

Wal-Mart's (WMT) buy-online-pickup-in-store strategy has reduced customer shipping costs by $5 million while sharply increasing new customer acquisitions and in-store sales the world's largest retailer reported Tuesday.

In announcing that it is extending the program to more than 3,300 stores in the U.S., Wal-Mart released statistics to show the strategy is working.

Wal-Mart's approach is different than the traditional approach at retailers like Target (TGT) and JC Penny (JCP) that use the Web to help move in-store merchandise. Walmart.com promotes "tens of thousands of products" that are not available in stores and ships them free to a local Wal-Mart where customers can pick them up.

Since the launch, about one-third of all Walmart.com sales have been placed through Site-to-Store and "more than half-a-million total units have been shipped through Site-to-Store, saving customers more than $5 million in shipping fees."

Great, but is it growing sales? Wal-Mart said that "more than 50 percent of Site-to-Store orders [came] from new customers who make their first purchase at Walmart.com using the service." The chain also reported a 20 percent increase in the number of Site-to-Store "customers who spend an additional $60 on purchases in the store when picking up their orders." Bingo

Wal-Mart also claimed the $345 billion chain reported a weekly gasoline savings of 1,000 gallons and a monthly box reduction of 20,000 "as a result of transportation and packaging efficiencies."

Increased sales and decreases expenses...very nice indeed..

TODAY'S UPGRADES / DOWNGRADES

Here are this mornings analyst calls

UPGRADES:

Intl Speedway ISCA AG Edwards Sell » Hold
Discover Financial Services DFS Calyon Securities Sell » Neutral
Colonial Properties CLP BMO Capital Markets Underperform » Market Perform
Micron MU WR Hambrecht Hold » Buy
Allscripts MDRX Caris & Company Above Average » Buy
Vulcan Materials VMC Matrix Research Hold » Buy
Rosetta Resources ROSE Matrix Research Buy » Strong Buy
Strayer Education STRA Citigroup Sell » Hold
Equifax EFX JMP Securities Mkt Perform » Mkt Outperform
YUM! Brands YUM UBS Neutral » Buy
Essex Property ESS Lehman Brothers Equal-weight » Overweight
NYSE Euronext NYX Lehman Brothers Equal-weight » Overweight

DOWNGRADES:

Chaparral Steel CHAP\ Ferris Baker Watts Neutral » Sell
Eldorado Gold EGO BMO Capital Markets Outperform » Market Perform
Baldor Electric BEZ AG Edwards Buy » Hold
Atheros Communications ATHR AG Edwards Buy » Hold
Kyphon KYPH Needham & Co Strong Buy » Buy
JA Solar JASO Needham & Co Buy » Hold
Hilton Hotels HLT Stifel Nicolaus Buy » Hold
Taiwan Semi TSM UBS Buy » Neutral
ARM Holdings ARMHY Credit Suisse Outperform » Neutral
Cascade CAE Rodman & Renshaw Mkt Perform » Mkt Underperform
Halliburton HAL RBC Capital Mkts Outperform » Sector Perform
BJ Services BJS RBC Capital Mkts Outperform » Sector Perform
Patterson-UTI PTEN RBC Capital Mkts Outperform » Sector Perform
Nabors Ind NBR RBC Capital Mkts Outperform » Sector Perform
Grey Wolf GW RBC Capital Mkts Outperform » Sector Perform
Key Energy Services KEGS RBC Capital Mkts Outperform » Sector Perform

Sears Holdings: The Hybrid Retailer

So, Sears Holdings (SHLD) reported sub-par expectations on Tuesday and as I read the various reports and "analyst" comments, something jumped off the page. The first analyst compared Sears to retailers like Target (TGT), JC Penny (JCP), Kohls (KSS) and Macy's(M). I read the comments and they all seemed legit. Same store sales are down at Sears in excess of the others. This must be bad. Then I read another report and that analyst commented that Sears was in trouble because it's appliance and "big ticket" items were down like retailers Home Depot (HD) and Lowes (LOW).

All this got me to thinking, what is Sears and how should we set expectations for it? Is it a home improvement retailer like Home Depot, an electronics one like Best Buy (BBY) or a clothing retailer like JC Penny? The answer is neither and all of them.

Sears garners revenue and profits from both the big ticket washers and dryers, lawn and garden equipment, large screen tv's and electronics and children's shoes and family photos. Home Depot gets revenue from the former, Best Buy the middle and JC Penny the latter. None of them do all and because of that, we cannot judge and set our expectations for the retail performance of Sears according to our expectations for them, but look at all of them. We must expect the home appliance and electronics sections of Sears to continue to suffer as long as the sector's major members do. This is not due to a failure of management or "Lampert's store neglect" (today's excuse being thrown around in the media) but simply due to "people not buying these items anywhere".

Clothing. Even thought apparel is turning around at Sears (Land's End will have a record smashing year and womens and children's apparel are doing very well) one must sell a whole lot of clothing to make up for the lost sale of a $2000 washer & dryer or TV set. These are issues that JC Penny and Macy's do not suffer from. It also means that when housing begins it's turn around, that fact that Sears has turned the tide in clothing retailing will lead to spectacular results as folks begin buying those washers, dryers, refrigerators and TV's again (they will).

What does this mean? Sears is not necessarily suffering from "bad management" , but "bad expectations". The people setting the public expectations for Sears are comparing it to other retailers "in total" and not separating out the divisions. Just because Sears is a retailer does not means that because we expect "x" at JC Penny, we should expect the same at Sears. Sears is essentially in a retailing class by itself. It's Kmart divisions competes with Walmart (WMT), it's clothing with JC Penny and other clothing retailers, it's home appliances and lawn equipment with Home Depot and it sells electronics against Best Buy. In order to set our expectations for Sears earnings, we must included expectations for all these areas as they all effect Sears. Currently, way to much comparison is being placed on the clothing retailers and not enough on the home improvement chains.

This is leading to over ambitious expectations for Sears and when they do not deliver, we have events like today. There are pithy headlines about Sears being a "broken retailer" but I have to wonder, did not Target, Home Depot and Best Buy just finish dialing back expectations for the near future? Are they "broken" or is it just a general slowdown for anyone who has significant exposure to those big ticket household items? I think it is the later. Just because Sears is not making excuses, do not be lulled into thinking they are immune from housing.

It is ok though, I will be in the market with Lampert today and we welcome the shares you want to sell.

"Fast Money" Recap For Wednesday

Here are yesterday's results and today's picks

Today's Picks

Eric Bolling likes streetTRACKS Gold Shares (GLD). Open $65.61

Karen Finerman would be a buyer of ConocoPhilips (COP). Open $84.12

Pete Najarian likes Biogen Idec (BIIB) because a new buyback should take it much higher. Open $54.51

Jeff Macke recommended Electronic Arts (ERTS) as a trade ahead of its conference(Open $49.44) and said to stay long Activision (ATVI). Open $19.17




Yesterday's Results

Jeff Macke recommended Hasbro (HAS). Open $36.47 Close $31.63 Loss $.84

Pete Najarian likes EMC Corp. (EMC). Open $18.59 Close $18.72 Gain $.13

Karen Finerman recommended Kraft (KFT). Open $35.01 Close $34.40 Loss $.61

Eric Bolling liked Korea Electric Power (KEP) Open $23.50 Close $23.25 Loss $.25 and Companhia de Bebidas das Americas (ABV). Open $72.92 Close $72.50 Loss $.42




Records:

Since my tracking began on 6/21 (1-1 means one up pick and one down pick)

Adami= 6-4 Gain $30.28
Bolling= 6-5 Loss $5.63
John Najarian= 8-3 Gain $11.74
Macke= 10-6 Gain $5.99
Pete Najarian=3-0 Gain $20.20
Seymore= 1-0 Gain $.35
Finerman= 0-2 Loss $.79

Today's 52 Week Lows

More blood in the streets for homebuilders and regional banks

WBS Webster Financial Corp
WB Wachovia Corp
WAL Western Alliance Bancorp
PHM Pulte Homes Inc
PFS Provident Finl Svcs Inc
LEN Lennar Corporation
KEY KeyCorp (New)
KBH Kb Home
DHI D.R. Horton, Inc
CC Circuit City Stores
BZH Beazer Homes USA, Inc
MTH Meritage Homes Corp
STSA Sterling Financial Corp
SHFL Shuffle Master Inc
CRBC Citizens Banking Corp ...
COBZ Cobiz Financial Inc
CHFC Chemical Financial Co
CEBK Central Bancorp Inc Mass
CCBD Community Central Bank
CBSH Commerce Bancshares Inc

Sears Holdings: If Lampert Is Buying More, Shouldn't We?

So here is the financial nitty gritty. Sears Holdings (SHLD) said this morning it expected quarterly profit of $160 million to $200 million, or $1.06 to $1.32 a share, including special items.

Those special items would be an after-tax gain of about $12 million from bankruptcy-related settlements and total return swap investing activities, Sears expects to earn 98 cents to $1.24 per share. A gain on the total return swaps is good news.Last year in Q2, Sears earned $294 million, or $1.88 a share. Excluding special gains, it earned $272 million, or $1.74 per share.

Sears said it expected to end the second quarter with about $2.8 billion in cash and cash equivalents, excluding Sears Canada, down from $3.1 billion at the end of the first quarter.

In addition, Sears announced a new $1 billion share repurchase authorization in addition to the $121 million worth of shares still available for repurchase under an existing program. Sears said it had bought back about 13.8 million shares for $1.9 billion since the repurchase plan was approved in the third quarter of fiscal 2005. As of July 7, it had about 150.9 million common shares outstanding. On the last 10Q, Sears stated that the had 152,492,175 shares outstanding meaning Lampert has bought 1,592,170 shares since May 25. The new $1 billion program will take 7.1 million shares off the market or 4.7% of shares outstanding. A huge amount? No, but we know, based on past results this plan will be completed and share count reduced.

Should we panic? Sell? Hell no. Why? Sears is tied to the housing market far more than most other clothing retailers. It sells a huge amount of appliances, tools and yard equipment. It is a true mix of a Home Depot (HD) and a Macy's (M) or JC Penny (JCP). That part of Sears is getting hit hard and it is not a management issue as both Home Depot and Lowes (LOW) are suffering the same fate now. Sears did say that women's and children's apparel both showed gains last quarter and the Land's End division is having a record year. Neither of these are signs of a failing retailer. Rather, Sears is a retailer caught in the unavoidable train wreck that is the US housing market. When housing turns around, and yes it will, you will be left with a retailer that has made huge gains fixing it's apparel offerings and now will be drawing more shoppers to those stores who are now spending money on their homes. They will also now have vastly different choices for apparel and based on current trends, will be buying them also.

Just as folks are claiming Home Depot and Lowes are undervalued, so to is Sears and for the same reasons. Today's prices are a sale.



The reported numbers were from results for the nine weeks ended on July 7. The second quarter ends on August 4 and Sears said it did not plan to update its outlook before announcing second-quarter results on or about August 30.

Today's Upgrades / Downgrades

Here are this mornings calls

UPGRADES:

First Solar FSLR Am Tech/JSA Research Sell » Neutral

Greenbrier Comp GBX Morgan Keegan Underperform » Mkt Perform

Delta Petroleum DPTR AG Edwards Hold » Buy

Take-Two TTWO Soleil Hold » Buy

Dawson Geophys. DWSN Matrix Research Hold » Buy

Principal Financial PFG Bernstein Mkt Perform » Outperform

SK Telecom SKM Citigroup Hold » Buy

United Comm Banks UCBI Sun Trust Rbsn Humphrey Neutral » Buy

Micron MU Jefferies & Co Hold » Buy

Scotts Miracle-Gro SMG JP Morgan Neutral » Overweight

PNM Resources PNM Citigroup Sell » Hold

DIRECTV DTV Citigroup Hold » Buy

DOWNGRADES:

Extreme Networks EXTR Lehman Brothers Overweight » Equal-weight

Darling International Inc DAR Avondale Partners Mkt Outperform » Mkt Perform

Altera ALTR AG Edwards Buy » Hold

Unica UNCA Needham & Co Buy » Hold

Spirit Finance SFC Robert W. Baird Outperform » Neutral

SMSC SMSC Matrix Research Buy » Hold

First Solar FSLR Lazard Capital Buy » Hold

American Science & Engineering ASEI Roth Capital Buy » Hold

Natural Resource NRP Friedman Billings Outperform » Mkt Perform

AMEDISYS AMED BB&T Capital Mkts Buy » Hold

Graco GGG CIBC Wrld Mkts Sector Outperform » Sector Perform

Sempra Energy SRE RBC Capital Mkts Top Pick » Outperform

Today's 52 Week Lows

Here are the new cellar dwellers. Regional banks are now getting hit

MYL Mylan Laboratories Inc
LXK Lexmark International

SCMF Southern Community Financial Corp
SBBX Sussex Bancorp

REDE Redenvelope Inc
FFSX First Fed Bankshares
FCCO First Community Corp S C
FBNC First Bancorp North Carolina

BOMK Bank Of Mckenney Va
AWBC Americanwest Bancorp
ABVA Alliance Bankshares Corp

Now Conoco Teaches Home Depot A Lesson

Just in case management at Home Depot (HD) did not learn anything about how to announce a buyback, from Best Buy's (BBY) announced share repurchase, ConocoPhillips (COP) today tried to drive the point home.

ConocoPhillips (COP)approved the repurchase of up to $15 billion of the company's shares through the end of 2008. This amount includes $2 billion remaining under the $4 billion program previously announced on February 9, 2007. Based upon its current commodity price and operational outlook, ConocoPhillips expects third quarter 2007 purchases of $2 billion to $3 billion, and fourth quarter 2007 purchases of a similar range. Now this is a buyback announcement.

With a market cap of $133 billion, Conoco will take 11% of the company off the market by the end of 2008. They will do this by taking 3% to 4.5% this year and the rest in 2008. Unlike Home Depots "we are going to buy back a lot sometime in the future" announcement, this one gives us the details we need to determine if it is a good one or not. Clearly this is. This is the reason shares have jumped almost 4% since the announcement while the Depot's were unmoved.

Today's Upgrades / Downgrades

Here are today's early analyst calls.

UPGRADES:


National Financial Partners NFP Lehman Brothers Underweight » Overweight

Regal-Beloit RBC KeyBanc Capital Mkts / McDonald Buy » Aggressive Buy

Walgreen WAG Matrix Research Buy » Strong Buy

ScanSource SCSC Matrix Research Hold » Buy

Virage Logic VIRL Needham & Co Hold » Buy

ISIS Pharm ISIS Needham & Co Buy » Strong Buy

Terex TEX Robert W. Baird Neutral » Outperform

Astec Industries ASTE Robert W. Baird Neutral » Outperform

Powerwave PWAV Robert W. Baird Neutral » Outperform

Central Garden CENT Sun Trust Rbsn Humphrey Neutral » Buy

Silgan Holdings SLGN Lehman Brothers Equal-weight » Overweight

Quality Systems QSII Jefferies & Co Hold » Buy

Rush Enterprises RUSHA Bear Stearns Peer Perform » Outperform

Cummins CMI Bear Stearns Peer Perform » Outperform

PACCAR PCAR Bear Stearns Peer Perform » Outperform

Xilinx XLNX Robert W. Baird Neutral » Outperform $30 » $37

Expeditors Intl EXPD Robert W. Baird Neutral » Outperform

Harley-Davidson HOG Robert W. Baird Neutral » Outperform

Regal-Beloit RBC Deutsche Securities Hold » Buy

Weatherford WFT JP Morgan Underweight » Neutra

DOWNGRADES:


Komag KOMG Citigroup Buy » Hold

Watsco WSO KeyBanc Capital Mkts / McDonald Aggressive Buy » Buy

IMPAC Mortgage IMH Roth Capital Buy » Hold

Hilton Hotels HLT Matrix Research Buy » Hold

Baidu.com BIDU Citigroup Buy » Hold

McDermott MDR Calyon Securities Buy » Add

Commerce Bancorp CBH Sun Trust Robinson Humphrey Buy » Neutral

Tyco TYC Citigroup Hold » Sell

Ensco ESV Credit Suisse Neutral » Underperform

Eldorado Gold EGO UBS Buy » Neutral

Allied World Assurance AWH Lehman Brothers Overweight » Equal-weight

Ball Corp BLL Banc of America Sec Buy » Neutral

Visicu EICU Jefferies & Co Buy » Hold

Cablevision CVC Deutsche Securities Buy » Hold

Another Dow Joint Venture

I do not have may details yet but Dow Chemical's (DOW) European unit has signed a joint venture agreement with India's Gujarat Alkalies and Chemicals Ltd to manufacture chlorine-based products at the Gujarat's Dahej project site in the western state of Gujarat, The Economic Times reported.

A government source refused to divulge any information on the investment and size of the proposed plant, The Economic Times said.

GACL's managing director Guruprasad Mohapatra announced "Both Dow and GACL have a lot of synergies. We will benefit from Dow's proven technologies and presence in the globe"

The companies are working on the details of the 50-50 joint venture, which is expected to sell products in India and overseas. Dow will provide the technology for the joint venture.

Again, perfectly in keeping with CEO Andrew Liveris's "asset light" strategy. He continues to delivery on his stated goals for shareholders as it seems a new joint venture is being announced at least once a month as he move Dow from it's cyclical commodities business into the specialty chemical area that will giver shareholder steadier returns and diversify earnings.

Retails Sales Preview: Yawn

On Thursday this week retailers are expected to announce June numbers and economists project sales to fall 0.3%, with weaker spending on vehicles, gasoline, building materials and clothing.

In their weekly preview, Brian Bethune and Nigel Gault, U.S. economists for Global Insight wrote, "Consumer spending will conclude the second quarter with a whimper" and Leslie Preston, an economist for CIBC World Markets, said "Consumption is looking anemic"

Macy's (M), J.C. Penney (JCP), Kohl's (KSS) and Saks (SKS) all have forecast a decline in June same-store sales. Sears Holdings (SHLD) does not announce numbers.

The assumption seems to be that consumer spending, which jumped at a 4.2% pace in the first quarter, slowed to about a third of that rate in Q2. Excepting the quarter that followed hurricane's Katrina and Rita, it would be the weakest quarterly spending in more than four years.

The past weeks reports on retail chain store sales were weak and the results showed the slowest growth since the recession ended in late 2001. Further, The International Council of Shopping Centers expects year-over-year growth of 1.5% to 2% for same store sales in June, 1/2 the growth rate seen earlier in the expansion.

Let's also not forget that last year had the Memorial Day shopping weekend in June and it was in May this year. What we will really need to do is average the two months together to get a more accurate number.

So, what happens? Who cares. Expectations are low so if they do not do well, we expected that. If they surprise to the upside, shares run up on the news. If they completely disappoint, because expectations are not that hight to begin with, the downside is not that far. The perverse reality is that any further downside will only stoke already simmering merger and buyout rumors which will buoy shares, the old "bad news is good news scenario".

Just sit tight, a lot of people have lost a lot of money over the years betting against the consumer. Will there be a blip sooner or later? Sure, there has to be, but long term, the trend is up.

Top Stories at Value Investing News

Here are this weeks top picks at VIN


1- Martin Whitmans 3rd Avenue Letter Tickers TM, BAM, BRK.A, FCE-A, NBR, JOE

2- Value Creation or Destruction Tickers AGL

3- On Disney, Pixar and Ratatouille Tickers DIS

4- DNA Of A Superinvestor

5- On Dangers of Homogeneity

Buffett and Johnson & Johnson

Here is a post that was emailed to me about Buffett and Johnson & Johnson (JNJ). It is well worth the read. Here is the first paragraph:

"As of March 31, 2007, Warren Buffett's company, Berkshire Hathaway (BRK.A), reportedly increased its holding in Johnson & Johnson (JNJ) to 48.7 million shares-an increase of 24 million shares in three months. And it's no surprise. Forget Wall Street's earnings, JNJ knows how to generate cash!

Buffett tells us we should look at 4- and 5-year histories to judge the performance of a company and that we should look primarily at the intrinsic value of a company and pay a fair or bargain price. Let's follow the lead of this investing genius:"

You can read the wholepost here.

Sprint Admits They Are "Unable Meet Your Current Wireless Needs"

I have posted in the past about the customer service at Sprint Nextel (S) since the merger. Here is another shining example of what has turned from incompetence to what can only be described as self flagulation? If I was a shareholder, I would be seething. Since I am not, I am still laughing.


The site Blackberry Cool has posted a letter from Sprint "cutting the cord" with a customer and this apparently is something Sprint is doing more regularly. Here is the line that made me laugh out loud "the number of inquiries you have made to us during this time has led us to determine we are unable to meet your current wireless needs."

Like what? Connecting their calls and billing them properly?

Just in case I was not laughing hard enough they then informed the customer that they would generously "not require you to pay an early termination fee". Honestly, you cannot make this up!!

To put the icing on the cake, they then told the customer if they had any questions they should..... you guessed it..... "call the customer care department". Isn't that why they jettisoned them in the first place? AT&T (T) and Verizon (VZ) must be smiling watching this implosion.

This is a stunning admission from a company bleeding customers on a quarterly basis. I think they have the whole "customer service" thing backwards, it is not us who is supposed to serve them...

Macy's Into Sears Holdings?

Sears Holdings (SHLD) shares jumped over $5.68 Friday as rumors bounced around that Lampert may be getting ready to use some of the $4 billion plus he has sitting around in Sears coffers. Analysts said Macy's (M) investors seemed to be positioning for a possible merger, reflected by a sharp rise in the department store's options call volume as rumors of a deal percolated.

"There is some renewed takeover speculation in Macy's heading into the weekend. Therefore, investors are buying shares and some options in case something happens," said William Lefkowitz, options strategist at brokerage firm vFinance Investments in New York.

"The latest chatter today in dealing rooms is that super-investor Eddie Lampert may be looking to tie Macy's and Sears Holdings together," said Andrew Wilkinson, senior market analyst at Interactive Brokers Group, in an e-mailed report.

Shares of Macy's, that had been trading 15% below their YTD high have jumped on the rumors. Does the deal make sense? Hell yes. With a value of about 1/2 Sears Holdings, Macy's would fit perfectly under the Sears umbrella. Not only that, the folks currently running things at Macy's, who have have done a wonderful job the last 4 years with the Macy's brand, could offer Lampert's team assistance in revitalizing both Sears and Kmart. Macy's has had problems with it's May's chain acquired in 2005 and I would be willing to bet if Lampert bought Macy's, May's would be gutted and sold to provide operating cash. How much? Consider Macy's converted more than 400 former May's locations to its namesake chain in September, about a year after buying the rival for $11 billion. The retailer owns more than half of its 858 Macy's and Bloomingdale's stores. The rest the company leases or owns on leased land. That would give Lampert a plethora of options the finance the deal and make it accredive to earnings almost immediately.

But, this is not the true "valueplay" Lampert has become known for and Macy's is not currently selling at a bargain. Consider also that it only sits on only $500 million in cash and over $9 billion in debt. This alone would force Lampert to sell huge chunks of real estate to pay down existing debt and any debt added in the acquisition. Macy's has repurchased over $3 billion in stock the last 28 weeks but has added $1.5 billion in debt doing so. Losing the dividend would save Lampert another $275 million a year and help reduce debt.

Should we root for this? Yes. If Lampert goes for it, he is seeing value in the assets and name far in excess of the current price. The plus of having Lampert buy it? He will have the ability to quickly extract that value for shareholders, of which, we must always remember, he will be the largest one.

If he doesn't and this is all just another baseless rumor, oh well, the exercise was fun in an otherwise painfully monotonous news summer to date.

Did anyone hear anything about some new phone?

This Weeks Notable Insider buys

As Peter Lynch said "There are a multitude of reasons insiders sell shares, but only one reason they buy, they think the stock price is going up". With that in minds, here is this weeks list. You'll notice a reoccurring name.


1- Chesapeake Energy (CHK)= $3,500,000- Third week in a row in top 3.

2- Chelsea Therapeutics (CHTP)= $2,800,000

3- Titanium Metals (TIE)= $1,500,000

4- Intrusion Corp (INTZ)= $500,000

5- Capital Lease Funding (LSE)= $217,000

Another Mystifying Analyst Call: Starbucks

A Bear Stearns (BSC) analyst cut his price target on gourmet coffee retailer Starbucks (SBUX) Monday, saying it's still a good time to buy the stock, but the shares may not rise as quickly as he previously thought.

The analyst, Joseph Buckley lowered his price target to $35 from $47 and said recent cautious statements by company management indicate sales may be lower than the company's own expectations with higher dairy costs pressuring margins. Where have we heard that one before? Another thing, how can you drop your "price target" 25% and still go out and tell people to buy shares? Isn't there some Hippocratic oath these guy have to take? Something like "don't blow smoke up people's a**" or is it more like "stick some lipstick on that pig"?

Investors, he added, may focus on those negative aspects rather than sales growth, lowering the chance that its Aug. 1 earnings release will serve as a catalyst for the stock. That and the fact they may actually miss those estimates and, when can I ask did sales growth become more important than earnings? Are we flashing back to 1999?

"Overall market sentiment seems very focused on the near-term negatives and ill-focused on this company's strengths and growth prospects," he said. "This, in our view, is a more appropriate time to buy than sell." But just do not expect to make very much. The very fact they do this "price target" game is a joke. Nobody knows what shares will trade at a year from now, why bother telling people?

Really you just cannot make this stuff up..

Are Starbucks shares a "value" now? No, but they are getting close. If they miss earnings this quarter or guide lower for the future, shares will get creamed and they just may hit the $22 price I would be willing to pay.... just might.

Today's Upgrades / Downgrades

Here are the late Thursday and early Friday calls

UPGRADES:

BP BP Deutsche Securities Hold » Buy

Union Drilling UDRL Bear Stearns Underperform » Peer Perform
Raymond James RJF Wachovia Mkt Perform » Outperform

Overseas Shipholding OSG JP Morgan Neutral » Overweight

Royal Dutch Shell RDS.A Deutsche Securities Hold » Buy

Magna MGA JMP Securities MktPerform » Mkt Outperform

Parker Drilling PKD Morgan Keegan Mkt Perform » Outperform

Tecumseh Prods TECUA Robert W. Baird Neutral » Outperform

Microsemi MSCC Caris & Company Above Average » Buy

Steel Dynamics STLD Longbow Neutral » Buy



DOWNGRADES:

Hilton Hotels HLT Calyon Securities Buy » Neutral

Hilton Hotels HLT Bear Stearns Outperform » Peer Perform

Hilton Hotels HLT\ Susquehanna Financial Positive » Neutral

Hilton Hotels HLT Jefferies & Co Buy » Hold

Hilton Hotels HLT Citigroup Buy » Hold

Sierra Wireless SWIR Avondale Partners Mkt Outperform » Mkt Perform

Hilton Hotels HLT AG Edwards Buy » SelL

"Fast Money" Picks for Friday

In tonight’s Final Trade the guys recommend the best US companies exposed to global growth. These are not really "tomorrows trades" so I will not included toiday's results in the tracking. Based on the show, these are more investments.

Jeff Macke recommends Intel (INTC) because the world needs computers.

Pete Najarian likes Peabody Energy (BTU) as a coal play.

Guy Adami prefers Caterpillar (CAT) because heavy equipment is needed to get commodities out of the ground.

Eric Bolling says Hewlett-Packard (HPQ) because 70% of the company’s exposure is international.


Thursday's results from Tuesday's show:

Jeff Macke recommends Disney (DIS) going into the holiday weekend because of its theme parks and that rat movie. Open $34.54 Close $34.63, Gain $.09

Pete Najarian says watch Hilton (HLT) this weekend because “someone is looking” at the hotel chain. Open $36.05 Close $45.39, Gain $9.34

Guy Adami reiterates his bullishness on Freeport-McMoRan (FCX) Open $85.10 Close $85.66, Gain $.56

Eric Bolling calls Chevron (CVX), the “best energy name on the board.” Open $86.33 Close $86.57 Gain $.24



Records:

Since my tracking began on 6/21 (1-1 means one up pick and one down pick)

Adami= 6-4 Gain $30.28
Bolling= 6-3 Loss $6.44
John Najarian= 7-3 Gain $11.61
Macke= 10-5 Gain $6.83
Pete Najarian=3-0 Gain $20.20
Seymore= 1-0 Gain $.35
Finerman= 0-1 Loss $.18

Kiplingers Interview With Bill Miller

Like fellow Baltimorean Cal Ripken, Bill Miller will forever be defined by the streak. Miller's streak -- beating the return of Standard & Poor's 500-stock index for 15 straight years -- ended with a thud in 2006. His Legg Mason Value Trust trailed the index by ten percentage points. His newer, more-flexible fund, Legg Mason Opportunity Trust, a member of the Kiplinger 25, also lagged, but by only two percentage points.

So is Miller, at age 57, past his prime? Did the pressure of continuing his remarkable run drain him of the zeal to deliver the kind of returns that made him the most famous mutual fund manager on the planet?

Hardly. The streak was overblown to start with. It was partly an accident of the January-through-December calendar year -- Legg Mason trailed the market during a number of other 12-month periods. Still, Miller remains one of the sharpest, most innovative thinkers in the investing game, as we were reminded during a recent interview at Legg Mason's headquarters, next to Baltimore's striking Inner Harbor.

Miller is particularly impressive when he argues about the foibles of most value investors and defends his own approach. In the late 1990s, he was criticized for being a value investor in name only because he owned shares of AOL, Dell and Amazon.com. Today, his big stake in Google once again leads some to question his credentials as a bargain hunter. But Miller turns the tables on his critics.

KIPLINGER'S: How does it feel now that you no longer have to defend your streak?

MILLER: Unfortunately, I still have to bear the burden of competing against the S&P 500. I just have to bear it now without the advantage of the streak.

You've said that you like to take advantage of errors that others make. What are today's big errors? At the broadest level, the big error is in how mega-cap stocks in the U.S. are being valued. I'm talking about companies like General Electric (GE), Microsoft (MSFT), AIG (AIG).

You're not the only one saying this. What will it take to get the mega caps to move? Time. My guess is that they will move this year because they've been cheap for several years, and they haven't done anything in all that time. I expect the economy to slow this year, and historically, that kind of environment has been good for mega caps. In a slowing economy, they're perceived to be safer. And they are safer. The top 50 names in the S&P 500 have lower price-earnings ratios, higher dividend yields, higher returns on equity and capital, better balance sheets, and more-balanced earnings than the bottom 450 names.

Do you make portfolio decisions based on this big-picture analysis? No. We don't have a forecast-and-trend approach -- meaning we don't make a forecast of what we think is likely to happen, or what trends are likely to occur, and then adjust our portfolio to conform to the forecasts. We estimate the intrinsic value of our companies and invest where we can get the greatest discount to intrinsic value. Then we try to understand the environment we're operating in. But we start with valuation -- that's always number one. We're saying that large-cap stocks are cheap historically. Then the questions are: Why are they cheap? What does the environment look like? What's happened in the past? What's caused things to change? We invest where we think we can get the best risk-adjusted rate of return. So we're adding to GE and AIG in Value Trust, establishing a position in GM, and cutting back on stocks with smaller market caps. Opportunity is different because its mandate is so broad.

You'll consider stocks that most value investors won't touch. How do you justify owning a Google? This is what I call the value conundrum. Look at what have been the biggest wealth-creating companies: Microsoft, Wal-Mart (WMT), GE, Johnson & Johnson (JNJ). You could have bought Microsoft in 1991 at 35 times earnings and made 40 times your money over the next ten years. If you had bought Wal-Mart when it went public, you would have paid 20 times earnings and you would have made 10,000%. If a stock goes up 30 or 40 times in ten years, it has to have been grossly underpriced to begin with. So Microsoft was not expensive at 35 times earnings. It was one of the best bargains out there.

In retrospect. Yes, in retrospect. So was Cisco Systems (csco). So were a lot of companies. What are value investors supposed to do? They're supposed to be able to find the bargains. The conundrum is, why do the greatest value-creating companies almost never find their way into value investors' portfolios? And the answer is that value investors won't look at those companies when they're actual bargains because it's hard to tell the difference between them and companies that are valued similarly that aren't going to do that well. So value investors have systematically ignored companies that could have made them huge amounts of money over time because the companies looked expensive on the surface, even though they weren't.

Getting back to Google (GOOG), what is its P/E? The consensus earnings estimate for 2007 is nearly $15, so the P/E is in the low 30s.

But you think its growth potential and its future cash flow make it cheap today? Yes. It trades at 24 times next year's earnings estimates. We can't find any other company in the market with a faster revenue growth rate and higher profit margins, and that dominates its business like Google but has a lower P/E multiple. MasterCard now has a higher 2008 P/E than Google!

It's that unique? Google trades at a lower multiple than Starbucks (SBUX). Now, Starbucks is a great company, but Starbucks is growing at half Google's rate. On next year's estimated earnings, Google's P/E is six points higher than Coca-Cola's, but Coke long term is only an 8% grower.

At the other extreme, you have a huge stake in Eastman Kodak (EK). That seems to be a value trap. It has been.

Why do you have faith in it? We don't have faith; we have beliefs based on evidence. Kodak has been a value trap because the time required to make the transition from where it was to where it will be at the end of this year was a lot longer than we thought it would be. And we underestimated the cultural change that was required of the company. It had a 100-year history of dominating a super-profitable business with almost no technological change. When Antonio Perez became CEO a couple of years ago, he pointed out that there's a certain mind-set that goes with that: complacency, and a tendency to move slowly because decisions don't have to be made quickly.

Is your case based on Kodak's entry into the inkjet-printer business? The new printer business is part of the thesis, which is that Kodak has introduced a technology that has the potential to disrupt the entire industry because it will be able to charge a lot less for ink cartridges -- about half the current price.

What's the rest of the thesis? It's simple. Throughout this entire transition, during which sales from film have dropped by almost two-thirds, Kodak has continued to generate about $1 billion in free cash flow before restructuring charges. That's because as film sales have dropped, its graphic-communications and digital businesses have improved. Investors today are valuing $1 billion of free cash flow at $14 billion to $15 billion in the marketplace. But Kodak's market value is just $6 billion. Why is it so low? Because for each of the past four or five years, Kodak had cash restructuring costs -- for environmental-cleanup liabilities, for the costs of closing plants, for severance when there were layoffs -- that have totaled roughly $600 million to $700 million per year at the peak. There will be $500 million to $600 million in additional restructuring charges this year related to closing film plants and the sale of Kodak's health-care business. Next year, there will be no restructuring charges. Unless the business gets a lot worse in the next year or so, Kodak will do $1 billion to $1.2 billion of free cash flow in 2008. And if that happens, the stock should be up 50% to 100% in that period of time.

How much of Kodak do you own? Legg Mason owns 24%. We and three other firms own half the company.

Which stock in Opportunity has the greatest potential? Over the next three years, MannKind. It is a biotechnology company started by a guy named Al Mann. Mann is eightysomething years old and is worth a couple of billion dollars. He's made all of his money starting and selling medical companies of one sort or another. One of my analysts came to me a year ago and said there's a little biotech company and there's insider buying of its shares by the CEO. I said, "That can't be right because there's never any insider buying at biotech companies, only insider selling." I looked, and sure enough, the CEO was buying stock. MannKind is developing an inhalable version of insulin for diabetes, which is a rapidly growing disease of affluence. The drug is now in stage-III trials. Pfizer already has a product out called Exubera, but it looks like a mini saxophone. The MannKind product looks like a little asthma inhaler. You pop it out, take a hit and put it back in your pocket. So far, there are no side effects whatsoever. If it in fact goes through these trials and wins approval, it could be as big as Lipitor, which is a $13-billion-a-year drug. That's worth $50 billion or $60 billion in market capitalization, and MannKind's market cap is just $1.5 billion. So that's a pretty good risk-reward situation.

Is it true you require members of your team to participate in a book club? Yes.

What's the theory behind this requirement? There are important things that we, as investors, need to understand. And it's valuable to have everyone on the same page by reading the same book, then have authors come in and talk about their ideas. For example, we've had Peter Bernstein, who wrote Against the Gods: The Remarkable Story of Risk, come in and talk about notions of risk and return.

What are you reading now? A book by Katrina Firlik called Another Day in the Frontal Lobe: A Brain Surgeon Exposes Life on the Inside. It's basically an inside look at what it's like to be a neurosurgeon and a little bit about the brain. Upcoming books are The Halo Effect, by Phil Rosenzweig, and The Difference, by University of Michigan professor Scott Page. It's about diversity theory.

Today's 52 Week Lows

Here are today's new lows, look familiar?

Meritage Homes (MTH)

KB Homes (KBH)

Beazer Homes (BZH)

Providant Financial Services (PFS)

New Century Bancorp (NCBC)



Everyday we have 2 or 3 homebuilders hitting new lows. sooner or later they have to bottom. I think folks are betting on later... much later

Today's Upgrades / Downgrades

Here late Tuesday's and this mornings early analyst calls

UPGRADES:

Huntsman HUN BB&T Capital Mkts Hold » Buy

Albemarle ALB KeyBanc Capital Mkts / McDonald Buy » Aggressive Buy

DSW DSW Matrix Research Sell » Hold

Lawson Software LWSN Matrix Research Strong Sell » Sell

Trump Entertainment TRMP Brean Murray Hold » Buy

Avon Products AVP Bernstein Underperform » Mkt Perform

Siemens AG SI Lehman Brothers Equal-weight » Overweight



DOWNGRADES:

Monsanto MON Matrix Research Strong Buy » Buy

Arris ARRS UBS Buy » Neutral

Greenbrier Comp GBX Bear Stearns Outperform » Peer Perform

General Motors GM Bear Stearns Outperform » Peer Perform

Dobson Comm DCEL RBC Capital Mkts Outperform » Sector Perform

CNH Global CNH UBS Neutral » Reduce

MRV Comms MRVC Needham & Co Buy » Hold

Brown-Forman BF.B Matrix Research Buy » Hold

Movie Gallery MOVI Soleil Hold » Sell

Martin Whitman On Investment Risk

This is a great letter from Martin Whitman on avoiding investment risk. It is long and well worth the read.

AVOIDING INVESTMENT RISK

During the quarter, I read an interesting book, The Great Risk Shift, by Jacob S. Hacker, a Political Science Professor at Yale University. The gravamen of the book is that in recent years – the George Bush years – various risks, i.e., job risk, family stability risk, retirement risk and healthcare risk, have been shifted increasingly from corporations and governments onto the backs of individuals. The raison d’etre for The Great Risk Shift is to foster the creation of an ownership society where the beneficiaries of say, pension plans and health plans, take the risks that go with ownership by being responsible for investing funds with no guarantees of minimum returns.

What the proponents of this type of ownership risk fail to recognize is that the most successful owners do not take risks. They lay off the risks onto someone else. Professor Hacker’s thesis got me to thinking about investment risk in the financial community and in American business in general. Put simply, the vast majority of great individual fortunes built in this country, especially by Wall Streeters and corporate executives, were not built by people who took investment risks. Rather, the secret to building a great fortune is to avoid, as completely as possible, the taking of any investment risk. Investment risk consists of factors peculiar to a business itself, or the securities issued by that business. Investment risk is a risk separate and apart from market risk. Market risk involves fluctuations in the prices of securities and other readily tradable assets.

A directory of those in the financial community who build great fortunes by avoiding risk include the following:

• Corporate executives who receive stock options or restricted stock. If the common stock appreciates, the executive builds a substantial net worth. If the common stock does not appreciate, the executive loses nothing. Indeed, he may obtain new options at the lower strike price, or new restricted common stock.

• Members of the Plaintiffs’ Bar who bring class action lawsuits in order to earn contingency fees. The expenses involved in financing such lawsuits are minimal, and it is remote that Plaintiffs’ attorneys ever incur costs for sanctions or for paying defendant’s costs and fees. The fee awards obtained tend to be huge upon settlement of such lawsuits, or less frequently, obtaining a favorable verdict for the plaintiffs after trial.

• Initial Public Offering (“IPO”) underwriters and sales personnel. If you run a promising private company and desire to go public, you will find that many potential underwriters will compete for your business. However, as a general rule they will not compete on price. The price will be a 7% gross spread plus expenses. Thus, on a $10 IPO, the gross spread will be $0.70 per share. In contrast, to buy a $10 stock in a secondary market like the New York Stock Exchange, a customer can negotiate a commission rate of, say, $0.02 to $0.05 per share.

• Bankruptcy Professionals; Lawyers and Investment Bankers. Chapter 11 is now set up so that bankruptcy professionals have to be paid in cash, on a pay as you go basis (with only minor holdbacks), where such payments are given a super priority so that these professionals very rarely have any credit risk at all. Attorneys’ fees billed at up to $900 per hour, and investment banking fees of over $300,000 per month (plus success fees) are not uncommon.

• Money Managers, Mutual Fund Managers, Private Equity and Hedge Fund Managers. Normal fees might range from 1% of Assets Under Management (“AUM”) to 2% of AUM plus 20% of annual realized or unrealized capital gains (after a bogey, of say 6%, paid or accrued to limited partners). These fees are paid to entities which receive the cash fees without incurring any credit risk in business entities which have few physical assets and very little necessary overhead. Most hedge funds are Limited Partnerships (“LPs”) where the money manager is the General Partner (“GP”) and Outside Passive Minority Investors (“OPMIs”) are the LPs. An LP has been waggishly described as a business association where at the beginning the GP brings experience and the LPs bring money. At the end of the business association, the GP has the money and the LP has the experience.

• Venture Capitalists. These people finance a portfolio of start-ups, and then are able to realize astronomic prices on some of the portfolio companies when they occur, as they always seem to do from time to time, IPO speculative booms.

• Real Estate Entrepreneurs, especially investment builders. Two keys to making fortunes in large scale real estate projects are the availability of long-term, fixed interest rates, non-recourse financing, and income tax shelters. In terms of understanding corporate finance, economists have it all wrong when they say “there is no free lunch”. Rather, the more appropriate comment ought to be “somebody has to pay for lunch – and it isn’t going to be me.” Third Avenue is basically an OPMI. As such, it seems impossible to avoid investment risk. The methods by which TAVF attempts to alleviate investment risk are described in the remainder of this letter.

1. Buy Cheap. Warren Buffett, the Chairman of Berkshire Hathaway (BRK.A), describes his investment technique as trying to buy good companies at reasonable prices. Warren, however, is a control investor, and while a reasonable price standard has worked remarkably well for Berkshire Hathaway, that standard is not good enough for TAVF, an OPMI. The Fund has to try to buy at bargain prices, i.e., cheap. The definition of “cheap” for TAVF in acquiring common stocks in the vast majority of cases is acquiring issues at prices that reflect substantial discounts from readily ascertainable NAVs. Further, the Fund acquires such NAV common stocks only when Fund management believes that the prospects are reasonable that over the long term such NAVs will increase by not less than 10% per year compounded.

Common stock holdings which met these standards when acquired by the Fund include Toyota Industries (TM), Forest City Enterprises (FCE-A), Brookfield Asset Management (BAM), Cheung Kong Holdings, Posco and Wheelock. I doubt very much if those discount prices would have existed if any of those issues were likely to be subject to a change of control. That type of cheapness is one of the advantages of being an OPMI. Readily ascertainable NAVs means that the Third Avenue common stock portfolio is, to a large extent, concentrated in financial institutions and companies involved with income-producing real estate. Third Avenue’s portfolio contains almost no common stocks of companies engaged in old-line manufacturing.

Control investors can afford to pay up versus TAVF because control investors are in a position to undertake financial engineering, and to cause management changes. Third Avenue leaves companies as-is, and places particular efforts into buying into well-managed businesses with stable, but clearly superior, managements. This seems to have been achieved in establishing relatively large positions in the companies mentioned in the previous paragraph, as well as in acquiring large positions in Nabors Industries (NBR), Power Corp., St. Joe (JOE) and Mellon Financial. “In terms of understanding corporate finance, economists have it all wrong when they say ‘there is no free lunch’. Rather, the more appropriate comment ought to be ‘somebody has to pay for lunch – and it isn’t going to be me.’”

2. Buy Equity Interests Only in High Quality Businesses. The Fund does not knowingly acquire the common stock of any company unless that company enjoys a super strong financial position. TAVF tries to buy into reasonably well-managed companies. Fund management appreciates the fact that any relationship between al statements. OPMIs and corporate managements combine communities of interests and conflicts of interest; Third Avenue Management tries to restrict itself to situations where the communities of interest seem to outweigh the conflicts of interest. Third Avenue restricts its common stock investments to companies whose businesses are understandable to Fund management and where there exists full documentary disclosure, including audited financing

3. TAVF tries to operate on a low cost basis for its shareholders. The fiscal 2006 expense ratio was 1.08%. Third Avenue has no 12-b(1) charges, is a no-load fund and imposes no redemption fees on long-term shareholders. Since portfolio turnover is low, transaction, i.e., trading, costs, too, are low.

4. The Fund ignores market risk. Fluctuations in market prices are mostly a random walk with changes in market prices not in any way a measure of long-term investment risk, or investment potential. It is as Ben Graham used to say, “In the short run the market is a voting machine. In the long run the market is a weighing machine.” Most competent control investors, again like Warren Buffett, pretty much ignore market risk also in that little, or no, weight is given to daily, or even annual, marks to market for portfolio holdings.

5. Buy growth, but don’t pay for it. In the financial community, growth is a misused word. Most market participants don’t mean growth, but rather, mean generally recognized growth. In so far as growth receives general recognition, a market participant has to pay up. To my mind, Cheung Kong Holdings, Forest City Enterprises, Covanta and Toyota Industries are growth companies. When the common stocks were acquired, none of these issues enjoyed general recognition as having growth potential.

6. TAVF is a buy-and-hold investor. Although our entry point into a common stock is a bargain price, the Fund will continue to hold a security where Fund management believes that the business has reasonable prospects that it can, over the long run, increase annual NAV by a double digit number; and where Fund management does not
believe it made a mistake. Mistakes are measured by beliefs that there has occurred a permanent impairment in underlying value or financial position. The Fund will also sell if there is a belief that the security is grossly overpriced. Finally, the Fund will sell for portfolio considerations; i.e., where there are massive enough redemptions of Fund shares so that the liquidity of the Fund is threatened. As one can see by our sales activity during the quarter, most of our sales occur when a company is taken over.

7. The Fund does not borrow money and, thus, invests without financial leverage. Furthermore, the TAVF portfolio has a cash cushion. Usually 10% to 20% of Fund assets are in cash or credit instruments without credit risk. Obviously, an investment by you in TAVF does entail investment risk. Fund management, however, is doing the best it can to try to minimize investment risk. Toward this end, and as our business continues to grow, we thought it would be prudent to charge a senior member of our investment team with the responsibility of preserving the integrity of our research process. I am pleased to inform you that portfolio manager, Yang Lie, has been named Director of Research for Third Avenue Management. Yang has been with Third Avenue more than ten years, as both an analyst and portfolio manager, and is extremely well qualified to assist Curtis Jensen and me, as co-Chief Investment Officers, in leading the team. Research has always been at the core of what we do here at Third Avenue. Each of the 21 members of our research team is an analyst first and foremost, whether or not he or she also manages portfolios. In this new role, Yang will add structure to the organization, enabling us to manage the assets you have entrusted to us even more effectively.

I will write to you again when the report for the period to end July 31, 2007 is published.

Marin J. Whitman

"Fast Money" Picks and Results

Here are the picks for Thursday and Tuesday's results


Jeff Macke recommends Disney (DIS) going into the holiday weekend because of its theme parks and that rat movie. Open $34.54

Pete Najarian says watch Hilton (HLT) this weekend because “someone is looking” at the hotel chain. Open $36.05

Guy Adami reiterates his bullishness on Freeport-McMoRan (FCX) Open $85.10.

Eric Bolling calls Chevron (CVX), the “best energy name on the board.” Open $86.33



Here is how Monday's picks fared Tuesday:


Jeff Macke liked McDoanld’s (MCD) Open $51.38 Close $41.40 Gain $.02

Pete Najarian recommended Quiksilver (ZQK) because he thinks they’re a takeover target. Open $14.36 Close $14.32 Loss $.04

Guy Adami recommended Freeport-McMoRan (FCX). Open $84.68 Close $85.10 Gain $.42

Eric Bolling liked Synchronoss Technologies (SNCR) which he thinks is as a takeover target. Open $28.59 Close $33.04 Gain $4.45


Records:

Since my tracking began on 6/21 (1-1 means one up pick and one down pick)

Adami= 5-4 Gain $29.72
Bolling= 5-3 Loss $6.18
John Najarian= 6-3 Gain $2.57
Macke= 9-5 Gain $6.74
Pete Najarian=3-0 Gain $20.20
Seymore= 1-0 Gain $.35
Finerman= 0-1 Loss $.18

The Declaration Of Independence

In the honor of our great nation's birth, this will be the only post today

IN CONGRESS, July 4, 1776.

The unanimous Declaration of the thirteen united States of America,

When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature's God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.--That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, --That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.--Such has been the patient sufferance of these Colonies; and such is now the necessity which constrains them to alter their former Systems of Government. The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States. To prove this, let Facts be submitted to a candid world.

He has refused his Assent to Laws, the most wholesome and necessary for the public good.
He has forbidden his Governors to pass Laws of immediate and pressing importance, unless suspended in their operation till his Assent should be obtained; and when so suspended, he has utterly neglected to attend to them.
He has refused to pass other Laws for the accommodation of large districts of people, unless those people would relinquish the right of Representation in the Legislature, a right inestimable to them and formidable to tyrants only.
He has called together legislative bodies at places unusual, uncomfortable, and distant from the depository of their public Records, for the sole purpose of fatiguing them into compliance with his measures.
He has dissolved Representative Houses repeatedly, for opposing with manly firmness his invasions on the rights of the people.
He has refused for a long time, after such dissolutions, to cause others to be elected; whereby the Legislative powers, incapable of Annihilation, have returned to the People at large for their exercise; the State remaining in the mean time exposed to all the dangers of invasion from without, and convulsions within.
He has endeavoured to prevent the population of these States; for that purpose obstructing the Laws for Naturalization of Foreigners; refusing to pass others to encourage their migrations hither, and raising the conditions of new Appropriations of Lands.
He has obstructed the Administration of Justice, by refusing his Assent to Laws for establishing Judiciary powers.
He has made Judges dependent on his Will alone, for the tenure of their offices, and the amount and payment of their salaries.
He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance.
He has kept among us, in times of peace, Standing Armies without the Consent of our legislatures.
He has affected to render the Military independent of and superior to the Civil power.
He has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his Assent to their Acts of pretended Legislation:
For Quartering large bodies of armed troops among us:
For protecting them, by a mock Trial, from punishment for any Murders which they should commit on the Inhabitants of these States:
For cutting off our Trade with all parts of the world:
For imposing Taxes on us without our Consent:
For depriving us in many cases, of the benefits of Trial by Jury:
For transporting us beyond Seas to be tried for pretended offences
For abolishing the free System of English Laws in a neighbouring Province, establishing therein an Arbitrary government, and enlarging its Boundaries so as to render it at once an example and fit instrument for introducing the same absolute rule into these Colonies:
For taking away our Charters, abolishing our most valuable Laws, and altering fundamentally the Forms of our Governments:
For suspending our own Legislatures, and declaring themselves invested with power to legislate for us in all cases whatsoever.
He has abdicated Government here, by declaring us out of his Protection and waging War against us.
He has plundered our seas, ravaged our Coasts, burnt our towns, and destroyed the lives of our people.
He is at this time transporting large Armies of foreign Mercenaries to compleat the works of death, desolation and tyranny, already begun with circumstances of Cruelty & perfidy scarcely paralleled in the most barbarous ages, and totally unworthy the Head of a civilized nation.
He has constrained our fellow Citizens taken Captive on the high Seas to bear Arms against their Country, to become the executioners of their friends and Brethren, or to fall themselves by their Hands.
He has excited domestic insurrections amongst us, and has endeavoured to bring on the inhabitants of our frontiers, the merciless Indian Savages, whose known rule of warfare, is an undistinguished destruction of all ages, sexes and conditions.

In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury. A Prince whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people.

Nor have We been wanting in attentions to our Brittish brethren. We have warned them from time to time of attempts by their legislature to extend an unwarrantable jurisdiction over us. We have reminded them of the circumstances of our emigration and settlement here. We have appealed to their native justice and magnanimity, and we have conjured them by the ties of our common kindred to disavow these usurpations, which, would inevitably interrupt our connections and correspondence. They too have been deaf to the voice of justice and of consanguinity. We must, therefore, acquiesce in the necessity, which denounces our Separation, and hold them, as we hold the rest of mankind, Enemies in War, in Peace Friends.

We, therefore, the Representatives of the united States of America, in General Congress, Assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do, in the Name, and by Authority of the good People of these Colonies, solemnly publish and declare, That these United Colonies are, and of Right ought to be Free and Independent States; that they are Absolved from all Allegiance to the British Crown, and that all political connection between them and the State of Great Britain, is and ought to be totally dissolved; and that as Free and Independent States, they have full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do. And for the support of this Declaration, with a firm reliance on the protection of divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor.

The 56 signatures on the Declaration appear in the positions indicated:

Column 1
Georgia:
Button Gwinnett
Lyman Hall
George Walton

Column 2
North Carolina:
William Hooper
Joseph Hewes
John Penn
South Carolina:
Edward Rutledge
Thomas Heyward, Jr.
Thomas Lynch, Jr.
Arthur Middleton

Column 3
Massachusetts:
John Hancock
Maryland:
Samuel Chase
William Paca
Thomas Stone
Charles Carroll of Carrollton
Virginia:
George Wythe
Richard Henry Lee
Thomas Jefferson
Benjamin Harrison
Thomas Nelson, Jr.
Francis Lightfoot Lee
Carter Braxton

Column 4
Pennsylvania:
Robert Morris
Benjamin Rush
Benjamin Franklin
John Morton
George Clymer
James Smith
George Taylor
James Wilson
George Ross
Delaware:
Caesar Rodney
George Read
Thomas McKean

Column 5
New York:
William Floyd
Philip Livingston
Francis Lewis
Lewis Morris
New Jersey:
Richard Stockton
John Witherspoon
Francis Hopkinson
John Hart
Abraham Clark

Column 6
New Hampshire:
Josiah Bartlett
William Whipple
Massachusetts:
Samuel Adams
John Adams
Robert Treat Paine
Elbridge Gerry
Rhode Island:
Stephen Hopkins
William Ellery
Connecticut:
Roger Sherman
Samuel Huntington
William Williams
Oliver Wolcott
New Hampshire:
Matthew Thornton

Today's 52 Week lows

Here is the list of today's cellar dwellers


Bold means repeat offenders:


Lennar (LEN)

Hovnanian Homes (HOV)

Beazer Homes (BZH)

Discover Financial Services (DFS)

Standard Pacific (SPF)

Movie Gallery (MOVI)

Dow Chemical Completes Acquisition

If Liveris says it will happen, it will.

Dow Chemical(DOW) announced on Monday it has completed the purchase German chemical maker Bayer AG's (BAY) Wolff Walsrode cellulosics business for about $725 million including the assumption of debt and pension commitments. They also announced the launch of a new specialty business unit, Dow Wolff Cellulosics, a specialty business unit with over $1 billion in annual sales. It is a combination of the Wolff Walsrode business and Dow's water-soluble polymers business.

The acquisition, which is expected to add to earnings within a year, is in-line with Midland, Michigan-based Dow's strategy of growing its specialty chemicals business.

This is yet another move by CEO Andrew Liveis that is perfectly in keeping with his announced strategy for DOW. In April he said on CNBC to David Faber, "We have put the company back in charge of its own future which includes, acquisitions. Now, acquisitions of what companies or what businesses? You've read the strategy I am sure and you just implied it when you referred to GE plastics, we are looking for downstream businesses that provide earnings growth and earnings momentum that compliment our own businesses....."

".... I won't comment on any specific deal (after being asked about his interest in GE Plastics) but with over 60 deals in the works, we are looking at everything. It is the deals we haven't done that are the most instructive. This is a company that financial discipline and making sure that the deals we do do, fit our strategy and we are not just going to come around and buy whatever is available. Now, having said that, look at the profiles, look at the downstream businesses, we are not interested in more commodities, we are interested in technology rich downstream businesses."

Liveris has also said the any acquisition Dow would make "must be immediately accredive to earnings" and this one again fits the bill perfectly.

Liveris has said he wants a coatings and a water business of $3 to $4 billions each. This only means one thing, more Dow acquisitions in the near future using it's growing cash pile. How can I be so sure?

To date, everything Liveris has said has come to fruition, there is no reason to start doubting him now.

Today's Upgrades & Downgrades

Here is late yesterday's and this mornings analyst calls

Upgrades:


Trump Entertainment TRMP Brean Murray Hold » Buy

Avon Products AVP Bernstein Underperform » Mkt Perform

Siemens AG SI Lehman Brothers Equal-weight » Overweight

Northstar Realty NRF Wachovia Mkt Perform » Outperform

Business Objects BOBJ UBS Neutral » Buy




Downgrades:

Toll Brothers TOL Citigroup- Buy » Hold

Ryland Group RYL Citigroup- Buy » Hold

Pulte Homes PHM Citigroup- Buy » Hold

Lennar LEN Citigroup- Buy » Hold

KB Home KBH Citigroup- Buy » Hold

DR Horton DHI Citigroup- Buy » Hold

Hovnanian Enterprises HOV Citigroup- Buy » Hold

Camden Property CPT UBS- Buy » Neutral

BRE Properties BRE UBS- Buy » Neutral

Cache CACH Sun Trust Rbsn Humphrey Buy » Neutral

HCR Manor Care HCR Wachovia Outperform » Mkt Perform

Caterpillar CAT UBS Neutral » Reduce

Blockbuster Shareholders Now Have Hope

Finally, Blockbuster (BBI) gives investors a reason to smile. In a Carl Icahn lead revolt, John Antioco was finally fired as chief executive officer and chairman of Blockbuster on Monday, ending a tenure that was highly criticized from the billionaire investor who owns 9.6% of the outstanding shares. Antioco's leadership was marked by company shares plummeting 82.9% over the past five years.

James Keyes, who will replace Antioco previously served as president and chief executive of 7-Eleven. Shares of the Blockbuster jumped 3.5%, or 15 cents, to close at $4.46 on the news. Said Icahn, "Jim is results-oriented, strategic and able to identify practical, yet highly creative solutions to complicated business problems,"

In an apparent change to Antioco's reluctance to close stores, Keyes said "as the technology continues to evolve it will be my job to have Blockbuster front and center as a player in those areas of technology".

Under Keyes' leadership as president and CEO of 7-Eleven from 2000 to 2005, the company experienced record sales and profits and implemented new retail systems technology that improved product assortment decisions in every store. He also ushered in a new era for 7-Eleven through the introduction of a host of new electronic services, which helped the convenience-store chain become as well known for its cutting-edge use of technology as for Slurpees®. Additionally, he collaborated with manufacturers across all merchandise categories to develop new products, enabling the company to introduce as many as 50 new items each week in advance of the competition. When Keyes retired upon the sale of the company in 2005, 7-Eleven had produced 36 consecutive quarters of same-store sales increases and had some 6,000 franchised and company-owned stores in the U.S. and Canada with 30,000 stores worldwide.

This is a move that could really pay off for shareholders. If nothing else, he cannot screw things up there any more than they are now. For under $5 a share, it just might be worth taking a gander. I want to see what Keyes will do, I want to see more that 290 stores closed this year. Double it and I become a buyer.

"Fast Money" 7/2

Here are today's picks and results to date:

Jeff Macke likes McDoanld’s (MCD) Open $51.38.

Pete Najarian recommends Quiksilver (ZQK) because he thinks they’re a takeover target. Open $14.36

Guy Adami recommends Freeport-McMoRan (FCX). Open $84.68

Eric Bolling likes Synchronoss Technologies (SNCR) which he thinks is as a takeover target. Open $28.59





Here is how Friday's picks fared Monday:

Jeff Macke recommended adding tech positions and says Hewlett Packard (HPQ), Open- $44.62 Close $45.19- Gain $.57, Dell (DELL) Open- $28.55 Close $28.93- Gain $.38 and Intel (INTC) Open- $23.74 Close $24.27-Gain $.53

Pete Najarian likes China through the Beijing Olympics. He recommends China Mobile (CHL) Open- $53.90 Close $55.27- Gain $1.37, China Unicom (CHU) Open- $17.23 Close $17.63- Gain $.40 and Baidu.com (BIDU) Open- 167.98 Close $186.41- Gain $18.43.

Guy Adami recommends Cisco (CSCO) Open $27.85 Close$37.89- Gain $.04

Jon Najarian liked Disney (DIS) Open $34.14 Close $34.52- Gain $.38


Records:

Since my tracking began on 6/21 (1-1 means one up pick and one down pick)

Adami= 4-4 Gain $29.28
Bolling= 4-3 Loss $1.73
John Najarian= 6-2 Gain $2.61
Macke= 8-5 Gain $6.72
Pete Najarian=3-0 Gain $20.20
Seymore= 1-0 Gain $.35
Finerman= 0-1 Loss $.18

Today's 52 Week Lows

Here are today's cellar dwellers. It is a homebuilding deluxe...


Meritage Homes- MTH

Lennar- LEN

Hovnanaian- HOV

Beazer Homes- BZH

American Home Mtg.- AHM

New Century Bancorp- NCBC

Leesport Financial- LFPB

DJIA Leaders & Laggards Year To Date

Here are the top and bottom five performers year to date on the DJIA


LEADERS:

1- Alcoa (AA)= 35.1%

2- Caterpillar (CAT)= 27.7%

3- Honeywell (HON)= 24.4%

4- General Motors (GM)= 23.1%

5- AT&T (T)= 16.1%

LAGGARDS:

1- Citigroup (C)= -7.9%

2- Johnson & Johnson