TGIF Randomosity!
7 hours ago
Video footage of Warren Buffett talking about the economy with FOX Business anchor Liz Claman.
Wednesday, October 31, 2007
"Fast Money" for Thursday
Thursday's Picks
Jeff Macke is a buyer of Microsoft (MSFT). Open $36.81
Guy Adami is liked Intel (INTC). Open $26.90
Pete Najarian liked Apple (AAPL)Open $189.95
Wednesday's Results
Jeff Macke recommended buying Yahoo! (YHOO). Open $30.83 Close $31.10 GAIN
Guy Adami liked Dell (DELL). Open $29.80 Close $30.60 GAIN
Karen Finerman liked Cadbury Schweppes (CSG). Open $52.55 Close $53.24 GAIN
Pete Najarian preferred Dick’s Sporting Goods (DKS). Open $32.80 Close $33.37 GAIN
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks). The percentage is the percentage of successful picks
Guy Adami= 39-24 = 62%
John Najarian= 13-4 = 76%
Jeff Macke= 44-32 = 56%
Pete Najarian= 30-26 = 53%
Tim Seymore= 4-3 = 57%
Karen Finerman= 23-13 = 62%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Wednesday's 52 Week Low's
TWC Time Warner Cable Inc 28.13
TSCO Tractor Supply Co 41.20
RMIX U S Concrete Inc 4.98
PGC Peapack-Gladstone Fin ... 24.72
PFED Park Bancorp Inc 28.00
PACR Pacer Intl Inc Tenn 14.80
PABK PAB Bankshares, Inc 14.91
OLCB Ohio Legacy Corp 7.70
FTD Ftd Group Inc 14.40
FKFS First Keystone Financ ... 11.42
FFEX Frozen Food Express I ... 5.82
CPSI Computer Programs & S ... 24.53
CAPB Capitalsouth Bancorp 11.75
BXC Bluelinx Hldgs Inc 5.18
BTFG Banctrust Financial Gp 13.45
More Toys Recalled due To Lead Paint
This is getting out of hand.
1- Galaxy Warriors
2- Halloween Plastic Teeth
3- Elite Operations at Toys R' Us
4- Ribbit Board Games
All told, almost another 1/2 million pieces recalled today. The really scary one is the teeth because people will have them in their mouths.
Do plaintiffs currently suing Sherwin Williams (SHW), NL Industries (NL) and DuPont (DD) wonder why these suits are going nowhere? Every day current and potential jurors read the news and see these recalls and have to wonder why we are going after companies that have not made the stuff in over 1/2 a century. They want to know why these folks (mostly States like Rhode Island and Ohio) are not suing the manufacturers of toys that are today filled with lead paint. Maybe someone from the AG office of either State can get in touch with me and answer this? A lot of people want to know.
1- Galaxy Warriors
2- Halloween Plastic Teeth
3- Elite Operations at Toys R' Us
4- Ribbit Board Games
All told, almost another 1/2 million pieces recalled today. The really scary one is the teeth because people will have them in their mouths.
Do plaintiffs currently suing Sherwin Williams (SHW), NL Industries (NL) and DuPont (DD) wonder why these suits are going nowhere? Every day current and potential jurors read the news and see these recalls and have to wonder why we are going after companies that have not made the stuff in over 1/2 a century. They want to know why these folks (mostly States like Rhode Island and Ohio) are not suing the manufacturers of toys that are today filled with lead paint. Maybe someone from the AG office of either State can get in touch with me and answer this? A lot of people want to know.
Bernanke & Co Cut 25 Basis Point
The DOW and the S&P reacted enthusiastically to today's rate cut and statement by Bernake & Co.
The reason? The statement put inflation back on the table and even mentioned energy as an inflationary force. Inflation, not growth was the predominant focus of the statement. Now one has to wonder if at the Dec. 11th meeting there is even a chance of another cut. It is a definite "hawkish" view. The good news? If inflation is under control and the risk to growth vs. inflation is equal, then you have to assume there is very little risk to growth.
The statement is as follows:
"The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 4-1/2 percent.
Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance. However, the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction. Today’s action, combined with the policy action taken in September, should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and promote moderate growth over time.
Readings on core inflation have improved modestly this year, but recent increases in energy and commodity prices, among other factors, may put renewed upward pressure on inflation. In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.
The Committee judges that, after this action, the upside risks to inflation roughly balance the downside risks to growth. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Donald L. Kohn; Randall S. Kroszner;
Frederic S. Mishkin; William Poole; Eric S. Rosengren; and Kevin M. Warsh. Voting against was Thomas M. Hoenig, who preferred no change in the federal funds rate at this meeting."
The fact is was not even unanimous is ominous for those wanting another cut. One has to think now that with the economy growing at almost 4%, it would take a significant event to get another rate reduction. Going even further, growth seems to be increasing, not decreasing so the need for additional cuts is further diminished. It now seems that the previous cut was simply to provide assistance with the credit issue at the time and now that it seems to have passed, the Fed will sit on the sidelines.
Another thing, why are we even talking about recession possibilities when GDP is growing at 4%?
The reason? The statement put inflation back on the table and even mentioned energy as an inflationary force. Inflation, not growth was the predominant focus of the statement. Now one has to wonder if at the Dec. 11th meeting there is even a chance of another cut. It is a definite "hawkish" view. The good news? If inflation is under control and the risk to growth vs. inflation is equal, then you have to assume there is very little risk to growth.
The statement is as follows:
"The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 4-1/2 percent.
Economic growth was solid in the third quarter, and strains in financial markets have eased somewhat on balance. However, the pace of economic expansion will likely slow in the near term, partly reflecting the intensification of the housing correction. Today’s action, combined with the policy action taken in September, should help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and promote moderate growth over time.
Readings on core inflation have improved modestly this year, but recent increases in energy and commodity prices, among other factors, may put renewed upward pressure on inflation. In this context, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.
The Committee judges that, after this action, the upside risks to inflation roughly balance the downside risks to growth. The Committee will continue to assess the effects of financial and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Donald L. Kohn; Randall S. Kroszner;
Frederic S. Mishkin; William Poole; Eric S. Rosengren; and Kevin M. Warsh. Voting against was Thomas M. Hoenig, who preferred no change in the federal funds rate at this meeting."
The fact is was not even unanimous is ominous for those wanting another cut. One has to think now that with the economy growing at almost 4%, it would take a significant event to get another rate reduction. Going even further, growth seems to be increasing, not decreasing so the need for additional cuts is further diminished. It now seems that the previous cut was simply to provide assistance with the credit issue at the time and now that it seems to have passed, the Fed will sit on the sidelines.
Another thing, why are we even talking about recession possibilities when GDP is growing at 4%?
Wednesday's Links
Apple, Lead in Gas, Bloggystyle,
- A very interesting take on Apple as an investment.
- More harmful than lead in paint ever was....sue EXXON!!
- Adam's weekly contribution.
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- A very interesting take on Apple as an investment.
- More harmful than lead in paint ever was....sue EXXON!!
- Adam's weekly contribution.
-
The Consumer Paradox
The consumer is telling us two very different things
Results for credit card companies like Mastercard (MA) and American Express (AXP), both of whom saw significant increases in card transaction would lead you to believe the consumer is healthy and strong. \A historically low unemployment rate and a strong job market would push one to be in the "thing are good" camp, correct? The recently released Q3 GDP that saw the US economy grow at the fastest rate in nearly two year would most likely lead you to believe things are just going to get better down the road.
So, if all that is true, then why is consumer confidence falling? Is it that the consumer thinks the good life just cannot continue or that they just do not realize how good thing actually are now? Could it be uncertainty over the elections next year? Is the fact that whenever congress talk about taxes the consumer get nervous? Is everyone worried about the value of their home, even if they are not selling?
I do not know the answer but this is clear, what the consumer says and what the consumer is doing are two very different things. Maybe it is a "never believe polls" thing?
Results for credit card companies like Mastercard (MA) and American Express (AXP), both of whom saw significant increases in card transaction would lead you to believe the consumer is healthy and strong. \A historically low unemployment rate and a strong job market would push one to be in the "thing are good" camp, correct? The recently released Q3 GDP that saw the US economy grow at the fastest rate in nearly two year would most likely lead you to believe things are just going to get better down the road.
So, if all that is true, then why is consumer confidence falling? Is it that the consumer thinks the good life just cannot continue or that they just do not realize how good thing actually are now? Could it be uncertainty over the elections next year? Is the fact that whenever congress talk about taxes the consumer get nervous? Is everyone worried about the value of their home, even if they are not selling?
I do not know the answer but this is clear, what the consumer says and what the consumer is doing are two very different things. Maybe it is a "never believe polls" thing?
Is Goldman Sach's Still Profiting from CDO Debacle?
If you read the Goldman Sachs (GS) filing last month there was an interesting line.
If we put aside the stunning 72% increase in earnings that just blew the door off all the estimates, we need to look at those earning. What did it for Goldman, unlike Citigroup (C), Merrill Lynch (MER), Lehman (LEH), Morgan Stanley (MS), and other was that in June of last year they began shorting these CDO markets that have decimated earnings at the other institutions.
Here is where it gets very interesting. Goldman in their recent filing that "increases were due to unrealized gains in certain positions". Hmmm. My take is that Goldman is still short the CDO markets and if they are, that means they are still profiting handsomely from it. Consider Merrill just wrote down $8 billion of CDO's and it looks like another $4 billion is coming next quarter. Fears are now being stoked that other institutions will follow to some extent also. That may be a blessing at other places. If Chuck Prince at Citigroup forces shareholders to swallow another bitter pill after promising "Q4 will be much better" , it will be his last
Goldman also wrote down their portfolio of CDO's last quarter but the short positions negated any negative effect to earnings. It increasingly is looking like this short position may actually produce a positive in Q4 and with all Goldman's other business performing well, the recent all-time high the stock hit on Monday may be a distant memory soon enough..
If we put aside the stunning 72% increase in earnings that just blew the door off all the estimates, we need to look at those earning. What did it for Goldman, unlike Citigroup (C), Merrill Lynch (MER), Lehman (LEH), Morgan Stanley (MS), and other was that in June of last year they began shorting these CDO markets that have decimated earnings at the other institutions.
Here is where it gets very interesting. Goldman in their recent filing that "increases were due to unrealized gains in certain positions". Hmmm. My take is that Goldman is still short the CDO markets and if they are, that means they are still profiting handsomely from it. Consider Merrill just wrote down $8 billion of CDO's and it looks like another $4 billion is coming next quarter. Fears are now being stoked that other institutions will follow to some extent also. That may be a blessing at other places. If Chuck Prince at Citigroup forces shareholders to swallow another bitter pill after promising "Q4 will be much better" , it will be his last
Goldman also wrote down their portfolio of CDO's last quarter but the short positions negated any negative effect to earnings. It increasingly is looking like this short position may actually produce a positive in Q4 and with all Goldman's other business performing well, the recent all-time high the stock hit on Monday may be a distant memory soon enough..
Marriot's Holiday Party Rewards Promotion: Anyone In the Loop?
Just when i thought Dell (DELL) took the cake for customer service, Marriott (MAR) steps into the abyss.
You have probably all seen the advertisements for it. Book your Holiday Party at any Marriot and you receive 50,000 rewards points. Great!! Not so fast..
Being Marriot rewards members we call the Marlboro/Westborough Courtyard to inquire about the details (here is where the fun begins). We get transferred to the necessary person who is not is so we get voicemail. The system will not allow us to leave a message so we go back to the operator. "Let's try it again" she says so back in the loop we go. No luck and back to the operator. After convincing here this probably just is not going to work they connect us to another person who tells us "I can't help you, you need "x"".
we inform them that "x" is not in and that the voice mail is not working and say "can we get someone else in sales"? Sure and we go another sales person who says "what are you talking about?"
"You guys have been advertising a 50,000 rewards point program for holiday parties for several months now" we reply.
"We are not doing that" she replies
"But it is a national promo!?!" we retort..
"Well, I have not heard about it" she says incredulously.
"But, it has been on TV and in the local papers all fall" we reply..
"Don't know about it"
"Could you go possibly ask someone else" we say thinking maybe she is just new (she wasn't).
"Hold on" she says in a huff
After several minutes she returns and says "I talked to my GM who said we are actually doing it and she is going to talk to our sales manager because she/he did not inform us, but I do not have any details to give you."
"Do you really expect us to book a party with you when no ones knows about the program?" We ask
He we go.. ready????????
"No, I wouldn't book it with us either if I was you"... Goodbye..
A few hours later we called back and actually spoke to the GM who passed the buck and blamed the sales manager up and down so efficiently that we think she may have a wonderful career in politics ahead of her. This begs the question, what does the "general" in her manager title actually mean if she does not know about a national promotion? She must approve the ads they have been running for months, right? So after this we said, "so can you send us information so we can make a decision?" The reply will stun you....
"Your not still interested in booking the party with us are you?"
Uhhh.. Not anymore..
WOW.... you can't make this stuff up!! We called to give them business not once but twice and we essentially told to go away. I will look more into this over the next few days and get back next week but this one is real hard to believe.
Dell corporate in the end did the best they could to make an awful situation right. If anyone at Marriott wants to give me a buzz and explain this one, I'd love to hear it.
You have probably all seen the advertisements for it. Book your Holiday Party at any Marriot and you receive 50,000 rewards points. Great!! Not so fast..
Being Marriot rewards members we call the Marlboro/Westborough Courtyard to inquire about the details (here is where the fun begins). We get transferred to the necessary person who is not is so we get voicemail. The system will not allow us to leave a message so we go back to the operator. "Let's try it again" she says so back in the loop we go. No luck and back to the operator. After convincing here this probably just is not going to work they connect us to another person who tells us "I can't help you, you need "x"".
we inform them that "x" is not in and that the voice mail is not working and say "can we get someone else in sales"? Sure and we go another sales person who says "what are you talking about?"
"You guys have been advertising a 50,000 rewards point program for holiday parties for several months now" we reply.
"We are not doing that" she replies
"But it is a national promo!?!" we retort..
"Well, I have not heard about it" she says incredulously.
"But, it has been on TV and in the local papers all fall" we reply..
"Don't know about it"
"Could you go possibly ask someone else" we say thinking maybe she is just new (she wasn't).
"Hold on" she says in a huff
After several minutes she returns and says "I talked to my GM who said we are actually doing it and she is going to talk to our sales manager because she/he did not inform us, but I do not have any details to give you."
"Do you really expect us to book a party with you when no ones knows about the program?" We ask
He we go.. ready????????
"No, I wouldn't book it with us either if I was you"... Goodbye..
A few hours later we called back and actually spoke to the GM who passed the buck and blamed the sales manager up and down so efficiently that we think she may have a wonderful career in politics ahead of her. This begs the question, what does the "general" in her manager title actually mean if she does not know about a national promotion? She must approve the ads they have been running for months, right? So after this we said, "so can you send us information so we can make a decision?" The reply will stun you....
"Your not still interested in booking the party with us are you?"
Uhhh.. Not anymore..
WOW.... you can't make this stuff up!! We called to give them business not once but twice and we essentially told to go away. I will look more into this over the next few days and get back next week but this one is real hard to believe.
Dell corporate in the end did the best they could to make an awful situation right. If anyone at Marriott wants to give me a buzz and explain this one, I'd love to hear it.
Wednesday's Upgrades and Downgrades
UPGRADES
VASCO Data Security VDSI RBC Capital Mkts Underperform » Sector Perform
Gehl GEHL BMO Capital Markets Market Perform » Outperform
Imax IMAX Soleil Hold » Buy
Coca-Cola FEMSA KOF JP Morgan Neutral » Overweight
Teekay LNG Partners TGP Wachovia Mkt Perform » Outperform
Northgate Minerals NXG CIBC Wrld Mkts Sector Underperform » Sector Perform
Actuate ACTU JMP Securities Mkt Perform » Mkt Outperform
Schnitzer Steel SCHN DA Davidson Underperform » Neutral
Manpower MAN Citigroup Hold » Buy
Platinum Underwriters PTP Banc of America Sec Neutral » Buy
US BioEnergy USBE UBS Neutral » Buy
General Motors GM UBS Sell » Buy
FormFactor FORM Citigroup Hold » Buy
Acuity Brands AYI Robert W. Baird Neutral » Outperform
Suncor Energy SU Friedman Billings Underperform » Mkt Perform
Petro-Canada PCZ Friedman Billings Mkt Perform » Outperform
Nexen NXY Friedman Billings Mkt Perform » Outperform
DOWNGRADES
Portfolio Recovery Assoc. PRAA Kaufman Bros Buy » Hold
ICF International ICFI Stifel Nicolaus Buy » Hold
American Medical AMMD Stifel Nicolaus Buy » Hold
Volcom VLCM Caris & Company Above Average » Average
American Medical AMMD Piper Jaffray Outperform » Market Perform
Las Vegas Sands LVS BMO Capital Markets Outperform » Market Perform
Home Inns HMIN Brean Murray Buy » Hold
Covad DVW Jefferies & Co Buy » Hold
DJ Orthopedics DJO Susquehanna Financial Positive » Neutral
Tuesday, October 30, 2007
"Fast Money" for Wednesday
Wednesday's Picks
Jeff Macke recommended buying Yahoo! (YHOO). Open $30.83
Guy Adami liked Dell (DELL). Open $29.80
Karen Finerman liked Cadbury Schweppes (CSG). Open $52.55
Pete Najarian preferred Dick’s Sporting Goods (DKS). Open $32.80
Tuesday's Results
Jeff Macke recommended selling some EMC Corp. (EMC).Open $25.37 Close $25.12 LOSS
Guy Adami thought Gilead (GILD) is a buy. Open $45.96 Close $45.48 LOSS
Karen Finerman preferred Washington Group (WNG). Open $ 95.10 Close $96.49 GAIN
Pete Najarian thought Merrill Lynch (MER) is a buy. Open $67.42 Close $65.66 LOSS
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks). The percentage is the percentage of successful picks
Guy Adami= 38-24 = 61%
John Najarian= 13-4 = 76%
Jeff Macke= 43-32 = 55%
Pete Najarian= 29-26 = 52%
Tim Seymore= 4-3 = 57%
Karen Finerman= 22-13 = 61%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Altria Shareholders Need to Watch Exxon's Supreme Court Appeal
Chief Justice John Roberts Supreme Court has elected to increase it's review of punitive damages against corporations by hearing an appeal of a $2.5 billion award against Exxon Mobil (XOM) over the 1989 Valdez oil spill in Alaska. Altria (MO) shareholders ought to be very interested.
The award against Exxon, the largest ever by a U.S. federal court is the final major litigation left from the Valdez oil spill. To date Exxon has paid more than $3.4 billion in claims and fines tied to the spill, which dumped 258,000 barrels of oil into the Prince William Sound after the Valdez oil tanker ran aground.
The appeal, which is supported by business groups, challenges the punitive award with several legal arguments, chiefly, that a federal appeals court ignored both recent punitive damages precedent and improperly allowed the damages award under maritime law.
In recent years, the Supreme Court has put restrictions on the size of punitive damages awards and limited the use of awards to punish broader conduct outside the scope of a particular case. It is clear that there is a sea change underway in this area. Once used to punish and essentially destroy a business, the Roberts court has taken a microscope to the issue of what it views as "grossly excessive damages" and has said that these types of awards "violate due process".
The last appeal ruling the court made in this area was last February when they set aside a nearly $80 million judgment against Altria awarded to the widow of a smoker in Oregon.
This has already filtered down to the state level. On July 6, 2006, the Florida Supreme Court decertified the Engle class-action litigation and reversed the state court jury’s award of $145 billion in punitive damages because, as a matter of law, the award was "improper and excessive." The Florida Supreme Court also concluded that certain issues decided by the Engle trial jury may be considered as resolved for any potential future cases filed by former class members.
On March 22, 2002, an Oregon jury awarded a Mr. Schwarz $168,500 in compensatory damages, and $150,000,000 in punitive damages, which the court reduced to $100,000,000. On May 17, 2006, the Oregon Court of Appeals found no error in the award of compensatory damages, but vacated the punitive damages award and ordered a new trial to determine the amount of punitive damages.
The Exxon case will further define the scope of punitive damages available to plaintiffs in cases and based on history, that will be very good for Altria and its shareholders. The litigation environment has not been this good for Altria in over a decade now and the valuation cap that has been on shares for that time period is beginning to dissipate. Once the litigation risk to shares is clearly defined, and the Roberts court is slowly doing that, one can expect PE expansion in shares, lifting them higher.
The award against Exxon, the largest ever by a U.S. federal court is the final major litigation left from the Valdez oil spill. To date Exxon has paid more than $3.4 billion in claims and fines tied to the spill, which dumped 258,000 barrels of oil into the Prince William Sound after the Valdez oil tanker ran aground.
The appeal, which is supported by business groups, challenges the punitive award with several legal arguments, chiefly, that a federal appeals court ignored both recent punitive damages precedent and improperly allowed the damages award under maritime law.
In recent years, the Supreme Court has put restrictions on the size of punitive damages awards and limited the use of awards to punish broader conduct outside the scope of a particular case. It is clear that there is a sea change underway in this area. Once used to punish and essentially destroy a business, the Roberts court has taken a microscope to the issue of what it views as "grossly excessive damages" and has said that these types of awards "violate due process".
The last appeal ruling the court made in this area was last February when they set aside a nearly $80 million judgment against Altria awarded to the widow of a smoker in Oregon.
This has already filtered down to the state level. On July 6, 2006, the Florida Supreme Court decertified the Engle class-action litigation and reversed the state court jury’s award of $145 billion in punitive damages because, as a matter of law, the award was "improper and excessive." The Florida Supreme Court also concluded that certain issues decided by the Engle trial jury may be considered as resolved for any potential future cases filed by former class members.
On March 22, 2002, an Oregon jury awarded a Mr. Schwarz $168,500 in compensatory damages, and $150,000,000 in punitive damages, which the court reduced to $100,000,000. On May 17, 2006, the Oregon Court of Appeals found no error in the award of compensatory damages, but vacated the punitive damages award and ordered a new trial to determine the amount of punitive damages.
The Exxon case will further define the scope of punitive damages available to plaintiffs in cases and based on history, that will be very good for Altria and its shareholders. The litigation environment has not been this good for Altria in over a decade now and the valuation cap that has been on shares for that time period is beginning to dissipate. Once the litigation risk to shares is clearly defined, and the Roberts court is slowly doing that, one can expect PE expansion in shares, lifting them higher.
Tuesday's 52 Week Low's
RAD Rite Aid Corporation 3.86
Q Qwest Communications ... 7.16
PTSI P A M Transportation ... 16.26
PBI Pitney Bowes Inc 40.21
OPWV Openwave Sys Inc 3.90
HIAU Highlands Acquisition ... 10.00
HDL Handleman Company 2.35
GW Grey Wolf Inc 5.45
GSBC Great Southern Bancor ... 23.24
GRVY Gravity Co Ltd 3.51
DBD Diebold, Incorporated 40.25
BHS Brookfield Homes Corp 14.94
BXC Bluelinx Hldgs Inc 5.47
BRNC Bronco Drilling Co Inc 13.20
Tuesday's Links
Red Sox, Fed Cut, Festival, Google Phone
- Yes, they are
- I just find this one hard to believe.
- Here is the information for the next Festival of Stocks.
- A "Google Wireless" would be very good for all..
- Yes, they are
- I just find this one hard to believe.
- Here is the information for the next Festival of Stocks.
- A "Google Wireless" would be very good for all..
Warren Buffett's Tax Math Fuzzy at Best
Time to take "The Oracle" to task.
CNBC has an interview today in which Buffett describes the taxes on his office. He pays 17.5% tax "on average" on his income and that the rest of his office pays 32%. This is the "unfairness" in the tax system he alludes to.
Here is the flaw, the higher taxes those people pay? It is social security taxes, a "tax" for a program those people will need far more than Buffett ever will. After $85,000 in income you no longer need to pay the 7% tax on your income. Buffett takes a $100,000 income from Berkshire plus the thousands he makes from board seats and dividends in stocks he owns privately. It also does not take into account any tax free income Buffett may receive from Federal or Municipal bonds he owns which would dramatically lower his "percentage".
Now, Buffett has said 90% of his net worth is in Berkshire stock which means he has some $5 billion in other investments which could generate $10 million in income taxable at 15% if invested in dividend paying stocks that have an average 2% yield.
I do not know what the secretary in the office makes but lets say she is paid a fortune in Omaha, $85,000. Her "average" tax will average the 32%. Now Warren, will pay the same percentage of his first $85,000 and then pay only 25% on the next $15,000 since no SS tax is paid. Now, if we add the dividend stocks scenario, we lower his "average" tax rate to 15.5%.
I have no idea what Warren has the $5 billion invested in but the exercise is meant to show not that the "income" tax rates are "unfair" or tilted to the rich (although they all should be lowered) but that Warren's wealth allows him to invest vast sums in investments that lower his "average" rate easily. It is important to note that these investments are perfectly legal and available to all people and everyone can lower their average rate by using them.
The bottom line is that the only way for Warren's argument to have any real legitimacy is for him to detail his income sources. Without the details, the whole argument has no merit.
Another note: The last time congress tried to "sock it to" the fat cats, we got the AMT which is systematically now killing the middle class.. be careful what you wish for...
Just lower all the rates and we all win...
CNBC has an interview today in which Buffett describes the taxes on his office. He pays 17.5% tax "on average" on his income and that the rest of his office pays 32%. This is the "unfairness" in the tax system he alludes to.
Here is the flaw, the higher taxes those people pay? It is social security taxes, a "tax" for a program those people will need far more than Buffett ever will. After $85,000 in income you no longer need to pay the 7% tax on your income. Buffett takes a $100,000 income from Berkshire plus the thousands he makes from board seats and dividends in stocks he owns privately. It also does not take into account any tax free income Buffett may receive from Federal or Municipal bonds he owns which would dramatically lower his "percentage".
Now, Buffett has said 90% of his net worth is in Berkshire stock which means he has some $5 billion in other investments which could generate $10 million in income taxable at 15% if invested in dividend paying stocks that have an average 2% yield.
I do not know what the secretary in the office makes but lets say she is paid a fortune in Omaha, $85,000. Her "average" tax will average the 32%. Now Warren, will pay the same percentage of his first $85,000 and then pay only 25% on the next $15,000 since no SS tax is paid. Now, if we add the dividend stocks scenario, we lower his "average" tax rate to 15.5%.
I have no idea what Warren has the $5 billion invested in but the exercise is meant to show not that the "income" tax rates are "unfair" or tilted to the rich (although they all should be lowered) but that Warren's wealth allows him to invest vast sums in investments that lower his "average" rate easily. It is important to note that these investments are perfectly legal and available to all people and everyone can lower their average rate by using them.
The bottom line is that the only way for Warren's argument to have any real legitimacy is for him to detail his income sources. Without the details, the whole argument has no merit.
Another note: The last time congress tried to "sock it to" the fat cats, we got the AMT which is systematically now killing the middle class.. be careful what you wish for...
Just lower all the rates and we all win...
Big Oil Dipping Toes Into Renewables
In case you have missed it, the oil majors are quietly investing in the renewable fuel sector.
ConocoPhillips (COP) has made the largest foray with it partnership with Tyson Foods(TSN) to produce biodiesel from chicken fat and a recently announced deal with Archer Daniels Midland (ADM) to produce fuel from biomass (farm waste)
Exxon (XOM), while publicly downplaying and almost mocking the role of biofuels for years is currently funding research at Stanford University
Marathon Oil (MRO) has actually partnered with ethanol maker The Andersons (ANDE) and the two are producing ethanol from corn at a plant they plan to retrofit when additional feedstock are viable.
BP (BP) has pledged $500 million to research at the University of California at Berkeley and its partners, the University of Illinois at Urbana-Champaign and the Lawrence Berkeley National Laboratory and is attempting to make bio-butanol commercially viable.
Royal Dutch Shell PLC has two separate joint ventures, one in Germany and one in Canada, aimed at producing ethanol from noncorn sources.
Now, are the investments huge? No. Did they exist three years ago? No. Biofuels are both politically popular and extremely popular with the consumer. They big takeaway here is that the alternative energy companies are not alone in this effort today. It all but assure a permanent place for biofuels the only question that remains to be asked it what the market looks like. Currently it is extremely fragmented and consolidation is inevitable and necessary. It is becoming a global market like oil and the players who are first to begin the global consolidation will prosper. Bunge (BG) is in South America and ADM has made no secret of its desire to acquire large scale Brazilian production and has even made public pronouncements about acquiring additional US facilities.
One thing for sure, it will be exciting to watch..
ConocoPhillips (COP) has made the largest foray with it partnership with Tyson Foods(TSN) to produce biodiesel from chicken fat and a recently announced deal with Archer Daniels Midland (ADM) to produce fuel from biomass (farm waste)
Exxon (XOM), while publicly downplaying and almost mocking the role of biofuels for years is currently funding research at Stanford University
Marathon Oil (MRO) has actually partnered with ethanol maker The Andersons (ANDE) and the two are producing ethanol from corn at a plant they plan to retrofit when additional feedstock are viable.
BP (BP) has pledged $500 million to research at the University of California at Berkeley and its partners, the University of Illinois at Urbana-Champaign and the Lawrence Berkeley National Laboratory and is attempting to make bio-butanol commercially viable.
Royal Dutch Shell PLC has two separate joint ventures, one in Germany and one in Canada, aimed at producing ethanol from noncorn sources.
Now, are the investments huge? No. Did they exist three years ago? No. Biofuels are both politically popular and extremely popular with the consumer. They big takeaway here is that the alternative energy companies are not alone in this effort today. It all but assure a permanent place for biofuels the only question that remains to be asked it what the market looks like. Currently it is extremely fragmented and consolidation is inevitable and necessary. It is becoming a global market like oil and the players who are first to begin the global consolidation will prosper. Bunge (BG) is in South America and ADM has made no secret of its desire to acquire large scale Brazilian production and has even made public pronouncements about acquiring additional US facilities.
One thing for sure, it will be exciting to watch..
Target's Odd Campaign
This one had me shaking my head.
Target (TGT) plans to market its fall and winter designer apparel in a strange fashion show. Clothes and accessories will dance and prance their way down the runway without models and without actual clothing.
Instead of models or the clothing they are trying to sell, Target will stage the fashion show using holograms, two-dimensional moving images that give the illusion of having three dimensions. They will be projected in a section of Grand Central Terminal in New York City on Nov. 6 and 7 and will be repeated every 10 minutes from noon to midnight the first day and 6 a.m. to 7 p.m. the second day. Target plans to post a video of the show on Google's (GOOG) YouTube, Facebook and Target's own Web site to get more eyeballs on it.
Even Target acknowledges it is a risk. "I hope it won't creep people out," Said Laura Sandall, Target's director of events marketing and publicity.
It won't creep them out but it will be worse, ineffective. Clothing is a "visual and touchy feely" purchase for the vast majority of people and what Target is doing is taking that away from them. Folks need to see what it will look like on someone to be intrigued and "want to look like the model" in the cloths. Watching a virtual pair of pants dance across a screen won't do much to satiate the basic needs people have to be propelled them to buy clothing. In order to keep folks attention the clothing must end up doing something exciting which will then restrict the ability of people to actually make a judgment on the item. Who wants to buy but they can't see?
Target will save a bunch not paying models and actually using cloths but when compared to what they may actually end up selling from the promo, it may end up costing them dearly as the holiday season, make or break for most retailers is a very risky time to be trying such a daring, unproven and admittedly "odd" strategy.
Watching pants dance will not spur a buying decision for people... not in the numbers they need to prevent Q4 from being a bust..
Target (TGT) plans to market its fall and winter designer apparel in a strange fashion show. Clothes and accessories will dance and prance their way down the runway without models and without actual clothing.
Instead of models or the clothing they are trying to sell, Target will stage the fashion show using holograms, two-dimensional moving images that give the illusion of having three dimensions. They will be projected in a section of Grand Central Terminal in New York City on Nov. 6 and 7 and will be repeated every 10 minutes from noon to midnight the first day and 6 a.m. to 7 p.m. the second day. Target plans to post a video of the show on Google's (GOOG) YouTube, Facebook and Target's own Web site to get more eyeballs on it.
Even Target acknowledges it is a risk. "I hope it won't creep people out," Said Laura Sandall, Target's director of events marketing and publicity.
It won't creep them out but it will be worse, ineffective. Clothing is a "visual and touchy feely" purchase for the vast majority of people and what Target is doing is taking that away from them. Folks need to see what it will look like on someone to be intrigued and "want to look like the model" in the cloths. Watching a virtual pair of pants dance across a screen won't do much to satiate the basic needs people have to be propelled them to buy clothing. In order to keep folks attention the clothing must end up doing something exciting which will then restrict the ability of people to actually make a judgment on the item. Who wants to buy but they can't see?
Target will save a bunch not paying models and actually using cloths but when compared to what they may actually end up selling from the promo, it may end up costing them dearly as the holiday season, make or break for most retailers is a very risky time to be trying such a daring, unproven and admittedly "odd" strategy.
Watching pants dance will not spur a buying decision for people... not in the numbers they need to prevent Q4 from being a bust..
Tuesday's Downgrades and Upgrades
UPGRADES
Total System TSS First Analysis Sec Equal-Weight » Overweight
Atheros Communications ATHR Collins Stewart Market Perform » Buy
Convergys CVG Stifel Nicolaus Hold » Buy
Cardinal Health CAH Credit Suisse Neutral » Outperform
American Axle AXL KeyBanc Capital Mkts Buy » Aggressive Buy
ManTech MANT Cowen & Co Neutral » Outperform
Potash POT Banc of America Sec Neutral » Buy
NTT DoCoMo DCM Citigroup Sell » Hold
Western Refining WNR UBS Sell » Neutral
Harvest Natural HNR Jefferies & Co Hold » Buy
Washington Post WPO Deutsche Securities Hold » Buy
DOWNGRADES
Steel Dynamics STLD Longbow Buy » Neutral
Suntech Power STP Brean Murray Buy » Hold
Tesoro Corp. TSO BMO Capital Markets Outperform » Market Perform
Office Depot ODP JP Morgan Overweight » Neutral
EuroBancshares EUBK Kaufman Bros Buy » Hold
P.A.M. Transport PTSI Morgan Keegan Outperform » Mkt Perform
Somerset Hills Bancorp SOMH Stifel Nicolaus Buy » Hold
Office Depot ODP Credit Suisse Neutral » Underperform
Puget Energy PSD Soleil Hold » Sell
Sadia S.A. SDA HSBC Securities Overweight » Neutral
Penn Natl Gaming PENN Brean Murray Buy » Hold
PharmaNet Devlpmt PDGI Jefferies & Co Buy » Hold
VeraSun Energy VSE Calyon Securities Buy » Add
Clayton Holdings CLAY JMP Securities Mkt Outperform » Mkt Perform
NVIDIA NVDA Lehman Brothers Overweight » Equal-weight
Dvlps Divers Realty DDR Deutsche Securities Buy » Hold
Stanley Inc. SXE Citigroup Buy » Hold
LIFE TIME Fitness LTM Banc of America Sec Buy » Neutral
Kensey Nash KNSY Oppenheimer Buy » Neutral
Oil States OIS Oppenheimer Buy » Neutral
Baker Hughes BHI Friedman Billings Outperform » Mkt Perform
Puget Energy PSD Robert W. Baird Outperform » Neutral
Monday, October 29, 2007
"Fast Money" for Tuesday
Tuesday's Picks
Jeff Macke recommended selling some EMC Corp. (EMC).Open $25.37
Guy Adami thought Gilead (GILD) is a buy. Open $45.96
Karen Finerman preferred Washington Group (WNG). Open $ 95.10
Pete Najarian thought Merrill Lynch (MER) is a buy. Open $67.42
Monday's Results
Jeff Macke liked Intel (INTC). Open $25.94 Close $26.26 GAIN
Guy Adami preferred Dell (DELL). Open $28.98 Close $29.47 GAIN
Karen Finerman recommended shorting the United States Oil Fund (USO). Open $71.17 Close $72.50 LOSS
Pete Najarian said Baker Hughes (BHI) is a buy. Open $91.05 Close $87.99 LOSS
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks). The percentage is the percentage of successful picks
Guy Adami= 38-23 = 63%
John Najarian= 13-4 = 76%
Jeff Macke= 43-31 = 57%
Pete Najarian= 29-25 = 52%
Tim Seymore= 4-3 = 57%
Karen Finerman= 21-13 = 60%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Monday's 52 Week Low's
ADM Enters Chemicals
Did not see this one coming but that does not mean it is a bad thing...
Archer Daniels Midland (ADM), the world's largest biofuel producer has formed an industrial chemicals group with a focus on exponentially increasing ADM's presence in industrial markets. The new business will take advantage of ADM's processing expertise and global distribution network to expand ADM's product offerings in industrial chemicals. The goal is for ADM to commercialize additional chemicals from renewable feedstocks.
"Renewable, biobased industrial chemicals fit into two major trends that we're seeing in the marketplace: the desire to improve a product's environmental footprint and the desire to reduce the use of petroleum-based products. In the short-term, we see opportunity to commercialize direct replacements for typically petroleum-derived chemicals. And in the longer-term, we see even more opportunities to develop new chemicals which provide increased functionality and are better for the environment. As one of the world's largest processors of renewable feedstocks, ADM has a unique opportunity to succeed in this area," said John Rice, executive vice president, Commercial and Production.
Interesting Hire:
To head the new business, ADM has hired Janet Mann as general manager, Industrial Chemicals, reporting to Rice. Mann joins ADM from Chemtura (CEM) where she was vice president and general manager, Performance Specialties. Mann previously served as business director for Dow Chemical (DOW) and executive vice president of Dow's ANGUS Chemical subsidiary. She received a Master of Business Administration degree in finance from DePaul University and a Bachelor of Science degree in chemistry from Bradley University.
"The demand for biobased solutions is growing rapidly in the industrial segment. ADM has the assets and knowledge to commercialize many chemicals from renewable agricultural feedstocks, and I am very excited to join the team," said Mann.
"Janet brings a deep understanding of the chemical and plastics industry to the ADM team. She has expertise in developing and implementing successful business strategies focused on growth in the chemical industry," said Rice.
Now, two weeks ago I blogged on what Dow would find attractive in Chemtura's portfolio and this move may be a sign that Mann is getting out before Dow takes over the specialties business there. Stay tuned...
As for ADM, this is great because it is opening yet another bio-based market for its products. Currently the leader is bio-fuels and bio-plastics, ADM now will enter the bio-chemicals arena. Any "bio" is a sure winner today and ADM is the first and largest player in that market. It will muddle the field for investors though. How will we value ADM? Is is a Ag Company? Energy? Specialty Chemical? What? The answer will be determined by the composition of earnings. One thing is for sure. They cannot be just lumped in with ethanol producers or food processors anymore. That valuation inadequacy will provide great opportunities at times so be both opportunistic when it is mis-valued and do not despair when the like happens.
They are entering a category of one here and that almost always is a very good place to be.
Archer Daniels Midland (ADM), the world's largest biofuel producer has formed an industrial chemicals group with a focus on exponentially increasing ADM's presence in industrial markets. The new business will take advantage of ADM's processing expertise and global distribution network to expand ADM's product offerings in industrial chemicals. The goal is for ADM to commercialize additional chemicals from renewable feedstocks.
"Renewable, biobased industrial chemicals fit into two major trends that we're seeing in the marketplace: the desire to improve a product's environmental footprint and the desire to reduce the use of petroleum-based products. In the short-term, we see opportunity to commercialize direct replacements for typically petroleum-derived chemicals. And in the longer-term, we see even more opportunities to develop new chemicals which provide increased functionality and are better for the environment. As one of the world's largest processors of renewable feedstocks, ADM has a unique opportunity to succeed in this area," said John Rice, executive vice president, Commercial and Production.
Interesting Hire:
To head the new business, ADM has hired Janet Mann as general manager, Industrial Chemicals, reporting to Rice. Mann joins ADM from Chemtura (CEM) where she was vice president and general manager, Performance Specialties. Mann previously served as business director for Dow Chemical (DOW) and executive vice president of Dow's ANGUS Chemical subsidiary. She received a Master of Business Administration degree in finance from DePaul University and a Bachelor of Science degree in chemistry from Bradley University.
"The demand for biobased solutions is growing rapidly in the industrial segment. ADM has the assets and knowledge to commercialize many chemicals from renewable agricultural feedstocks, and I am very excited to join the team," said Mann.
"Janet brings a deep understanding of the chemical and plastics industry to the ADM team. She has expertise in developing and implementing successful business strategies focused on growth in the chemical industry," said Rice.
Now, two weeks ago I blogged on what Dow would find attractive in Chemtura's portfolio and this move may be a sign that Mann is getting out before Dow takes over the specialties business there. Stay tuned...
As for ADM, this is great because it is opening yet another bio-based market for its products. Currently the leader is bio-fuels and bio-plastics, ADM now will enter the bio-chemicals arena. Any "bio" is a sure winner today and ADM is the first and largest player in that market. It will muddle the field for investors though. How will we value ADM? Is is a Ag Company? Energy? Specialty Chemical? What? The answer will be determined by the composition of earnings. One thing is for sure. They cannot be just lumped in with ethanol producers or food processors anymore. That valuation inadequacy will provide great opportunities at times so be both opportunistic when it is mis-valued and do not despair when the like happens.
They are entering a category of one here and that almost always is a very good place to be.
Monday's Links: Another Thank you
Greenie's Book, Morningstar, Thank You, Sears Holdings
- It looks like Greenspan's book isn't going to be the big seller it was made out to be.
- Morningstar examine the investing styles a guess what comes out a winner?
- Thank you to NY Magazine for the mention.
- Here is another look at the potential real estate value in Sears Holdings (SHLD)
- It looks like Greenspan's book isn't going to be the big seller it was made out to be.
- Morningstar examine the investing styles a guess what comes out a winner?
- Thank you to NY Magazine for the mention.
- Here is another look at the potential real estate value in Sears Holdings (SHLD)
Reynold's Results Bode Well for Altria
A dig into the recently released results buy Reynolds American (RAI) should be very encouraging to Altria (MO)shareholders
Back in April I said that Altria would not make an attempt to purchase UST (UST) for it smokeless products and instead would capitalize on the Marlboro brand name a produce one themselves. In August, when Altria announced they would do just that (produce a Marlboro product) I said that the smokeless product would be a huge hit in the growing "chew" market and provide a key drive for Phillip Morris USA going forward.
So what about Reynolds results should Altria holders like? On the conference call discussing their Q3 results. Reynolds commented on their smokeless product "Conwood Company, the nation's second-largest maker of smokeless-tobacco products, had operating earnings of $90 million, up 18%, boosted by sales of Grizzly moist snuff. Conwood's moist-snuff volume grew more than 12% from the prior year quarter.
Driving Conwood's growth were additional gains on Grizzly, which continues to be the growth leader in the moist-snuff category. Grizzly's volume was up 18%, more than twice the growth rate of the moist-snuff category. As a result, Grizzly's share of market grew quarter-over-quarter and sequentially to 21.23%.
To further build on Grizzly's momentum, Conwood will begin testing two new styles, Grizzly Pouches and Grizzly Snuff."
Smokless is the only tobacco segment growing and it is growing at a very healthy clip. It is to the point now that companies are aggressively pursuing additional products to sell and the market is accepting them. Reynolds success will be Altria's. When you have the number one tobacco product in Marlboro with almost 50% market share, any new product bearing that name will be used by consumers.
On another note, after the PMI spin, can't we just change the name back to Phillip Morris?
Back in April I said that Altria would not make an attempt to purchase UST (UST) for it smokeless products and instead would capitalize on the Marlboro brand name a produce one themselves. In August, when Altria announced they would do just that (produce a Marlboro product) I said that the smokeless product would be a huge hit in the growing "chew" market and provide a key drive for Phillip Morris USA going forward.
So what about Reynolds results should Altria holders like? On the conference call discussing their Q3 results. Reynolds commented on their smokeless product "Conwood Company, the nation's second-largest maker of smokeless-tobacco products, had operating earnings of $90 million, up 18%, boosted by sales of Grizzly moist snuff. Conwood's moist-snuff volume grew more than 12% from the prior year quarter.
Driving Conwood's growth were additional gains on Grizzly, which continues to be the growth leader in the moist-snuff category. Grizzly's volume was up 18%, more than twice the growth rate of the moist-snuff category. As a result, Grizzly's share of market grew quarter-over-quarter and sequentially to 21.23%.
To further build on Grizzly's momentum, Conwood will begin testing two new styles, Grizzly Pouches and Grizzly Snuff."
Smokless is the only tobacco segment growing and it is growing at a very healthy clip. It is to the point now that companies are aggressively pursuing additional products to sell and the market is accepting them. Reynolds success will be Altria's. When you have the number one tobacco product in Marlboro with almost 50% market share, any new product bearing that name will be used by consumers.
On another note, after the PMI spin, can't we just change the name back to Phillip Morris?
Wal-Mart to Start Grocery Delivery
After witnessing the success Amazon (AMZN) has had to date with its grocery delivery program, Wal-Mart(WMT) is following that model and entering the space.
Amazon, which currently undercuts local supermarket prices by some 30% at their online site ships bulk order of non-perishable items. Wal-Mart, whose service will be almost identical to Amazon and offer items like Perrier water, trade free coffee, Campbell’s(CPB) V-8 juice, Kellogg’s (K) snack bars, dried fruit and popcorn, as well other non-food items such as dish and body soap, will ship the items from their Sam's Club division at prices 5% lower than those currently available at Amazon.
While amazon currently does not break out results of this division currently, the fact that they are testing expansion of the service to include a full line of grocery items in Seattle (HQ) would lead one to believe that it has been a success up to this point.
This is a good move for Wal-Mart as it is another growth avenue that will require minimal capital to enact. The items will be shipped by the post office or UPS (UPS) so no fleet of truck or delivery staff it needed until such a time they decide to do fresh foods (if ever). If nothing else, it is another reason for people to visit the Wal-Mart website and research has shown once there, people will buy something, even if it is not what they went there for in the first place.
Amazon, which currently undercuts local supermarket prices by some 30% at their online site ships bulk order of non-perishable items. Wal-Mart, whose service will be almost identical to Amazon and offer items like Perrier water, trade free coffee, Campbell’s(CPB) V-8 juice, Kellogg’s (K) snack bars, dried fruit and popcorn, as well other non-food items such as dish and body soap, will ship the items from their Sam's Club division at prices 5% lower than those currently available at Amazon.
While amazon currently does not break out results of this division currently, the fact that they are testing expansion of the service to include a full line of grocery items in Seattle (HQ) would lead one to believe that it has been a success up to this point.
This is a good move for Wal-Mart as it is another growth avenue that will require minimal capital to enact. The items will be shipped by the post office or UPS (UPS) so no fleet of truck or delivery staff it needed until such a time they decide to do fresh foods (if ever). If nothing else, it is another reason for people to visit the Wal-Mart website and research has shown once there, people will buy something, even if it is not what they went there for in the first place.
Monday's Upgrades and Downgrades
UPGRADES
Sierra Wireless SWIR RBC Capital Mkts Sector Perform » Outperform
Western Refining WNR Banc of America Sec Sell » Neutral
Ikanos Comms IKAN Needham & Co Hold » Buy
Vistaprint VPRT Needham & Co Hold » Buy
Aetna AET Citigroup Hold » Buy
Panacos Pharma PANC Caris & Company Average » Buy
Sierra Wireless SWIR Piper Jaffray Market Perform » Outperform
DeVRY DV Bear Stearns Peer Perform » Outperform
Cummins CMI Credit Suisse Neutral » Outperform
Digital River DRIV BMO Capital Markets Market Perform » Outperform
Cummins CMI Citigroup Sell » Hold
Alexion Pharm ALXN Credit Suisse Neutral » Outperform
Foundry Ntwks FDRY JMP Securities Mkt Underperform » Mkt Perform
Novatel Wireless NVTL JMP Securities Mkt Perform » Mkt Outperform
DeVRY DV Piper Jaffray Market Perform » Outperform
General Mills GIS Deutsche Securities Hold » Buy
Hess HES Banc of America Sec Neutral » Buy
Taiwan Semi TSM HSBC Securities Neutral » Overweight
Discover Financial Services DFS Calyon Securities Neutral » Buy
Methanex MEOH CIBC Wrld Mkts Sector Underperform » Sector Perform
Blue Nile NILE Citigroup Sell » Hold
Nuance Communications NUAN Broadpoint Capital Neutral » Buy
Banco Santander Central STD Citigroup Hold » Buy
Infinity Prpty & Casualty IPCC Ferris Baker Watts Neutral » Buy
Corp Exec Bd EXBD Deutsche Securities Hold » Buy
DOWNGRADES
Zimmer Hldgs ZMH FTN Midwest Buy » Neutral
Covance CVD First Analysis Sec Overweight » Equal-Weight
Activision ATVI Janco Partners Accumulate » Mkt Perform
LSI Logic LSI Lehman Brothers Overweight » Equal-weight
Trident Microsystems TRID Longbow Buy » Neutral
Providence Service Corp PRSC Jefferies & Co Buy » Hold
Trident Microsystems TRID Needham & Co Strong Buy » Buy
CSG Systems CSGS First Analysis Sec Equal-Weight » Underweight
Avid Tech AVID Kaufman Bros Buy » Hold
Comcast CMCSA CIBC Wrld Mkts Sector Outperform » Sector Perform
Eli Lilly LLY Banc of America Sec Buy » Neutral
Level 3 LVLT JP Morgan Overweight » Neutral
Online Resources ORCC CIBC Wrld Mkts Sector Outperform » Sector Perform
Power Integrations POWI Citigroup Buy » Hold
eTelecare ETEL JMP Securities Mkt Outperform » Mkt Perform
LIFE TIME Fitness LTM Piper Jaffray Outperform » Market Perform
Penn Natl Gaming PENN Jefferies & Co Buy » Hold
Oil States OIS RBC Capital Mkts Outperform » Sector Perform
Tumbleweed Comms TMWD Roth Capital Buy » Hold
Bunge BG HSBC Securities Overweight » Neutral
MoneyGram MGI Calyon Securities Neutral » Reduce
AXT Inc AXTI Roth Capital Buy » Hold
Diamond Offshore DO Calyon Securities Add » Neutral
Trident Microsystems TRID Jefferies & Co Buy » Hold
Sunday, October 28, 2007
Merrill Lynch's O'Neal "Decides" to Leave
I just the love the way these things are phrased
After writing off twice the amount pre-announced and having unauthorizes merger discussions with Wachovia (WB), Merill's (MER) CEO Stan O'Neal has "decided" to leave the firm according to sources. On Friday I speculated "O'Neal may have been trying to negotiate himself a nice buyout severance package knowing what was coming down the pike." It turns out there is quite a bit of truth to that. According to Merrill's proxy, O'Neal would be entitled to about $200 million in total severance were Merrill sold or merged but should he decide to leave or be fired, his renumeration would be a fraction of that. One can only assume the Wachovia overtures were a desperate attempt on O'Neal's part to walk away with as much in his pocket as possible.
For his part Wachovia CEO G. Kennedy Thompson said that "the timing was not right" as the bank is currently digesting other acquisitions.
Leading candidates for his job are Blackrock's (BLK) Larry Fink and and the NYSE exchange President and former Goldman Sachs C0-President (GS)John Thain although it is unclear if either would be interested. One would be hard pressed to think Fink would not and Thain would be as has a nice place for himself at the NYSE.
Either way, isn't nice of Fink to walk away for the mess he made without a struggle?
After writing off twice the amount pre-announced and having unauthorizes merger discussions with Wachovia (WB), Merill's (MER) CEO Stan O'Neal has "decided" to leave the firm according to sources. On Friday I speculated "O'Neal may have been trying to negotiate himself a nice buyout severance package knowing what was coming down the pike." It turns out there is quite a bit of truth to that. According to Merrill's proxy, O'Neal would be entitled to about $200 million in total severance were Merrill sold or merged but should he decide to leave or be fired, his renumeration would be a fraction of that. One can only assume the Wachovia overtures were a desperate attempt on O'Neal's part to walk away with as much in his pocket as possible.
For his part Wachovia CEO G. Kennedy Thompson said that "the timing was not right" as the bank is currently digesting other acquisitions.
Leading candidates for his job are Blackrock's (BLK) Larry Fink and and the NYSE exchange President and former Goldman Sachs C0-President (GS)John Thain although it is unclear if either would be interested. One would be hard pressed to think Fink would not and Thain would be as has a nice place for himself at the NYSE.
Either way, isn't nice of Fink to walk away for the mess he made without a struggle?
Bank of America's Over-Reaction
"While we are extremely proud of our strong track record in the wholesale business, we believe our long-term opportunity lies in maximizing our more competitive retail channels by introducing innovative products that meet the needs of Bank of America customers, " says Floyd Robinson, president of Bank of America (BAC) consumer real estate.
Last week, BAC reported third-quarter earnings of 82 cents per share, a 32% decrease from a year ago. They then announced they would cut some 3,000 jobs, representing less than 2% of the company's total employment. The majority of the layoffs will be in global corporate and investment banking. Continued disruptions in the credit market shellacked BAC's global corporate and investment banking unit, where net income fell to $100 million, a 93 percent drop from $1.43 billion a year ago.
Cutting the investment banking jobs does make sense since that sector is slowing in general and cuts are happening industry wide. But, to completely exit the wholesale business is a bit much. It can be a profitable sector is run correctly and with a certain degree of restraint. The problem is not that the business s bad, but that those running it took unnecessary risks and got nailed.
With lenders like Countrywide (CFC) and Thornburg Mortgage (TMA) predicting greener pastures in the near future (next quarter), it looks as though BAC may be exiting this business just as it begins to turn around. Contrast this to recent news out of Wachovia (WB) who witnessed similar results in these areas but vowed to stay the course and heighten risk management to improve results, not give up on the business.
Personally, I have not seen too many examples of financial institutions shrinking their way to improved growth.
Last week, BAC reported third-quarter earnings of 82 cents per share, a 32% decrease from a year ago. They then announced they would cut some 3,000 jobs, representing less than 2% of the company's total employment. The majority of the layoffs will be in global corporate and investment banking. Continued disruptions in the credit market shellacked BAC's global corporate and investment banking unit, where net income fell to $100 million, a 93 percent drop from $1.43 billion a year ago.
Cutting the investment banking jobs does make sense since that sector is slowing in general and cuts are happening industry wide. But, to completely exit the wholesale business is a bit much. It can be a profitable sector is run correctly and with a certain degree of restraint. The problem is not that the business s bad, but that those running it took unnecessary risks and got nailed.
With lenders like Countrywide (CFC) and Thornburg Mortgage (TMA) predicting greener pastures in the near future (next quarter), it looks as though BAC may be exiting this business just as it begins to turn around. Contrast this to recent news out of Wachovia (WB) who witnessed similar results in these areas but vowed to stay the course and heighten risk management to improve results, not give up on the business.
Personally, I have not seen too many examples of financial institutions shrinking their way to improved growth.
"Fast Money" for Monday
Monday's Picks
Jeff Macke liked Intel (INTC). Open $25.94
Guy Adami preferred Dell (DELL). Open $28.98
Karen Finerman recommended shorting the United States Oil Fund (USO). Open $71.17
Pete Najarian said Baker Hughes (BHI) is a buy. Open $91.05
Friday's Results
Jeff Macke recommended Activision (ATVI). Open $22.95 Close$ 23.67 GAIN
Guy Adami “still likes” Intel (INTC). Open $25.89 Close $25.94 GAIN
Karen Finerman would own Estee Lauder (EL). Open $44.72 Close $41.11 GAIN
Pete Najarian recommended Under Armour (UA). Open $56.85 Close $59.57 GAIN
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks). The percentage is the percentage of successful picks
Guy Adami= 37-23 = 62%
John Najarian= 13-4 = 76%
Jeff Macke= 42-31 = 56%
Pete Najarian= 29-24 = 54%
Tim Seymore= 4-3 = 57%
Karen Finerman= 21-12 = 62%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Berkshire Hathaway's Warren Buffett Warns on China
“We never buy stocks when we see prices soaring,” Berkshire Hathaway's (BRK.A) Warren Buffett told reporters while on a visit to northeastern China Wednesday. “We buy stocks because we’re confident of the company’s growth. People should be cautious when they see prices rising.”
He clarified the comments on CNBC saying "I, just said that we very seldom buy into a market that's gone up a whole lot, and I don't know anything real specific about the Chinese market or Chinese stocks. But I do know that when prices have gone up a whole lot then I'm more skeptical when they've gone down a whole lot. I really like the look of markets that have gone down rather than markets that have gone up. But I will say this, what I've seen in China just today, in terms of the industrial development in Dalian, is making a believer in me, certainly in the economy, but that doesn't mean that I think the stocks are attractive."
Buffett is always asked about his outlook for either a company, the US market, the dollar or just about anything else short of who will win the World Series (the Red Sox will). His almost pat answer is "I have no idea what will happen, I am smart enough to know what I do not know".
Why does this matter? When Buffett actually comes out and says something, we would be well advised to listen because the outcome most likely very closely related to his thought process. China stock, not necessarily the economy are approaching or are already in a "frothy" phase and that poses dramatic risk to investors. When you add the difficulty actually valuing securities from China, you now have a significant risk to investors. There will be a bunch of implosions of securities being sold today, that is inevitable in this environment. Buffett's warning is that the number may end up being much larger than people currently anticipate..
He clarified the comments on CNBC saying "I, just said that we very seldom buy into a market that's gone up a whole lot, and I don't know anything real specific about the Chinese market or Chinese stocks. But I do know that when prices have gone up a whole lot then I'm more skeptical when they've gone down a whole lot. I really like the look of markets that have gone down rather than markets that have gone up. But I will say this, what I've seen in China just today, in terms of the industrial development in Dalian, is making a believer in me, certainly in the economy, but that doesn't mean that I think the stocks are attractive."
Buffett is always asked about his outlook for either a company, the US market, the dollar or just about anything else short of who will win the World Series (the Red Sox will). His almost pat answer is "I have no idea what will happen, I am smart enough to know what I do not know".
Why does this matter? When Buffett actually comes out and says something, we would be well advised to listen because the outcome most likely very closely related to his thought process. China stock, not necessarily the economy are approaching or are already in a "frothy" phase and that poses dramatic risk to investors. When you add the difficulty actually valuing securities from China, you now have a significant risk to investors. There will be a bunch of implosions of securities being sold today, that is inevitable in this environment. Buffett's warning is that the number may end up being much larger than people currently anticipate..
Saturday, October 27, 2007
Largest Changes in Short Interst
Largest Increases: Betting stock will go down (number of shares)
Level Three Communications (LVLT)= 9,989,000
Network Appliance (NTAP)= 8,793,000
Yahoo!! (YHOO)= 6,303,000
RF Micro (RFMD)= 5,129,000
BEA (BEA)= 3,997,000
Largest Decreases: Covering positions in anticipation of a raise in shares
Sun Microsystems (JAVA)= 24,605,000
Nvidia (NVDA)= 6,484,000
Microsoft (MSFT)= 5,504,000
Comcast (CMCSA)= 4,912,000
Dell (DELL)= 4,236,000
Oracle (ORCL)= 2,870,000
This Week's Dividend Hikes
This Week's Insider Purchaes
The Week's Top Stories at Value Investing News
2. Fat Pitch Financial Reviews Active Value Investing
(via www.fatpitchfinancials.com)
George reviews Vitaliy's Active Value Investing.
Excerpt:"I highly recommend that you read Chapter 12: Sell Process - Make Darwin Proud, if you read anything in this book. This chapter was a wake-up call to me. I don’t have a really good sell process and the one Vitaliy presents is very logical and seems to be the key to achieving good investment performance in a range-bound market."
3. Buffett's Best Investment
(via foxnews1.a.mms.mavenapps.net)
Buffett talks about how GEICO was his best investment.
4. The Hidden Value In Sears Holdings
(via valueplays.blogspot.com)
Commentary on Sears Holdings and why Eddie Lampert can't buy back shares fast enough.
5. Mosaic Chapter 18: Risk vs. Uncertainty
(via www.siliconindia.com)
Chapter 18: Mosaic Perspectives on Investing by Mohnish Pabrai
7. Mosaic Chapter 19: Is it time to Buy Infosys?
(via www.siliconindia.com)
Chapter 19: Mosaic Perspectives on Investing by Mohnish Pabrai
8. MartketWatch Interview: Active Value Investing in Range-Bound Markets
(via www.marketwatch.com)
An interview with Vitaliy Katsenelson about his new book Active Value Investing.
9. Buffett on Bear Stearns
(via foxnews1.a.mms.mavenapps.net)
Warren Buffett tells FOX Business anchor Liz Claman the rumors he was interested in Bear Stearns were false.
10. Buffett on Succession
(via foxnews1.a.mms.mavenapps.net)
Warren Buffett tells FOX Business anchor Liz Claman a succession plan is in place. Apparently, Buffett has selected four candidates for the board to consider. All four manage large sums of money. I thought is was disappointing to hear that none of them will be starting before Buffett leaves his position.
Friday, October 26, 2007
Friday's 52 Week Lows
USAK USA Truck Inc 13.17
TSCO Tractor Supply Co 41.53
TRID Trident Microsystems Inc 7.27
TPTX Torreypines Therapeut ... 4.32
SMTK Simtek Corp 3.35
RUTH Ruths Chris Steak Hse Inc 12.75
RMIX U S Concrete Inc 5.23
RES RPC, Inc 11.02
PTEN Patterson Uti Energy Inc 19.73
MGI Moneygram Intl Inc 15.69
MFBC MFB Corp 28.25
MDS Midas Group Inc 16.43
MCRL Micrel Incorporated 8.74
MBWM Mercantile Bank Corp 18.99
MAXE Max & Ermas Restauran ... 3.75
KRO Kronos Worldwide Inc 15.25
FFSX First Fed Bankshares ... 16.07
FFEX Frozen Food Express I ... 6.27
FFBH First Federal Bancsha ... 16.60
FBIZ First Bus Finl Svcs I ... 17.66
FAV First Tr Active Divid ... 20.00
DLIA Delia S Inc New 3.48
DFT Dupont Fabros Technol ... 21.01
Friday's Links: Two More Thank You's
Krugman's "Math", Another Thank You, And another one, Music
- I love this. Paul Krugman is at best a hack and at worst an ethically depraved jerk.
- A Thank You to Hoovers Biz for the mention.
- Thank you to CNN Money for this mention.
- A very interesting point on the music industry
- I love this. Paul Krugman is at best a hack and at worst an ethically depraved jerk.
- A Thank You to Hoovers Biz for the mention.
- Thank you to CNN Money for this mention.
- A very interesting point on the music industry
Wachovia and Merrill
In a move that will most likely end up costing him his job, Merrill Lynch (MER) CEO Stan O'Neal apparently approached Wachovia (WB) with the prospect of a merger.
Wachovia, which became the second-largest retail brokerage firm after acquiring A. G. Edwards would have been catapulted into a major player as the firm melded their 25,000 prospective brokers. Wachovia would have been the perfect partner for Merrill because of their proven ability to smoothly execute mergers. If you just look at it, O'Neal was doing what would be best for Merrill shareholders, it is just the way he went about it that will cost him.
O’Neal is in hot water because he floated the possibility of a merger with Wachovia, without first getting the approval of Merrill’s board, and that is something that CEO's just do not do. This comes days after Merrill's shocking $8 billion write-down and news yesterday that another $4 billion may be chopped in Q4. It looks like O'Neal may have been trying to negotiate himself a nice buyout severance package knowing what was coming down the pike.
We just bought Wachovia shares after the last quarters results were released and would have been a fan of the merger. Merrill, while in a world of hurt now is currently a very cheap asset to acquire. The problems there are O'Neal's creation since it is his strategy in place that lead to them and ridding the bank of his "leadership" would allow for the reversing of those issues. While Wachovia had write down last quarter, they were dwarfed by those at Merrill.
Who knows, this may still happen and if nothing else, it does show that with financials being so battered and bruised, valuations are such that deal-making may be in the cards for a few firms.
Wachovia, which became the second-largest retail brokerage firm after acquiring A. G. Edwards would have been catapulted into a major player as the firm melded their 25,000 prospective brokers. Wachovia would have been the perfect partner for Merrill because of their proven ability to smoothly execute mergers. If you just look at it, O'Neal was doing what would be best for Merrill shareholders, it is just the way he went about it that will cost him.
O’Neal is in hot water because he floated the possibility of a merger with Wachovia, without first getting the approval of Merrill’s board, and that is something that CEO's just do not do. This comes days after Merrill's shocking $8 billion write-down and news yesterday that another $4 billion may be chopped in Q4. It looks like O'Neal may have been trying to negotiate himself a nice buyout severance package knowing what was coming down the pike.
We just bought Wachovia shares after the last quarters results were released and would have been a fan of the merger. Merrill, while in a world of hurt now is currently a very cheap asset to acquire. The problems there are O'Neal's creation since it is his strategy in place that lead to them and ridding the bank of his "leadership" would allow for the reversing of those issues. While Wachovia had write down last quarter, they were dwarfed by those at Merrill.
Who knows, this may still happen and if nothing else, it does show that with financials being so battered and bruised, valuations are such that deal-making may be in the cards for a few firms.
The Fed Will Cut, But How Much
I think the whether or not they will cut case is closed for next week's meeting and all that is now left to discuss is how much.
Vincent Reinhart, who was director of monetary affairs and secretary to the Federal Open Market Committee for six years before stepping down this summer to join the American Enterprise Institute, said: "I would expect them to ease another quarter point at the coming meeting," in an interview with the Financial Times.
Inflation is clearly under control at this point and recent earnings news and forward expectations have fallen indicating weakness in the overall economy. A recession is a very unlikely event but the Fed's mission is not to just avoid recession but to ensure growth. So, where do we go?
A 50 point cut I think would panic the markets in a "things must be worse than we thought" scenario. 25 points gives the markets the easing they want, takes more pressure off the financials and does not induce fear. It also leave plenty of room for further easing down the road should it warrant. The DOW and S&P will jump on the news but the main beneficiaries will be the financials.
What remains just as important as the action (or inaction) is the statement given by Bernake & Co. give. This one is simple. Now that inflation remain constrained, the Fed has the ability to go to a totally neutral stance. "The Fed remains neutral as to the risks of inflation vs growth".
That is a good place to be...
Vincent Reinhart, who was director of monetary affairs and secretary to the Federal Open Market Committee for six years before stepping down this summer to join the American Enterprise Institute, said: "I would expect them to ease another quarter point at the coming meeting," in an interview with the Financial Times.
Inflation is clearly under control at this point and recent earnings news and forward expectations have fallen indicating weakness in the overall economy. A recession is a very unlikely event but the Fed's mission is not to just avoid recession but to ensure growth. So, where do we go?
A 50 point cut I think would panic the markets in a "things must be worse than we thought" scenario. 25 points gives the markets the easing they want, takes more pressure off the financials and does not induce fear. It also leave plenty of room for further easing down the road should it warrant. The DOW and S&P will jump on the news but the main beneficiaries will be the financials.
What remains just as important as the action (or inaction) is the statement given by Bernake & Co. give. This one is simple. Now that inflation remain constrained, the Fed has the ability to go to a totally neutral stance. "The Fed remains neutral as to the risks of inflation vs growth".
That is a good place to be...
Dow Chemical's Earnings Call Notes: Eye Opening
Some very interesting things were discussed on the earnings call Thursday that, if you were disappointed over the earnings release earlier in the day, would have fixed that.
Dow Chemical (DOW) still is tied to its cyclical commodities business to a point and its transformation has been centered on getting away from that. Estimates for the next "trough" in the commodity business put EPS between $2 and $3 a share. CEO Liveris said on the call that "our confidence is increasing" that Dow would be at the top of that range and when pressed about beating the $3 ($3.50 was the number thrown out), they were of course non-committal but at the same time did nothing to dispel that thought. As many investors know, it is not what is said but what is not said at times that is more meaningful. This is important because it now means that when Dow's earnings are at their lowest shares will then trade for about 14 times earnings at today's prices vs the nearly 28 times that was estimated earlier in the year. The importance of this cannot be emphasized enough as it then means the "peak" will then be that much better.
To date Dow has repurchased 25 million shares or 2.6% of outstanding shares. Not insignificant but also not an impressive amount. The dividend was increased 12% in June and sits at 3.8% which is very nice and very safe.
Cash flow remains strong and this is a function of the JV strategy that is a self funding one, meaning the revenues from various ventures fund that costs of current and additional ones.
JV's while off for the quarter have produced earnings to date of about $825 million vs $700 million at this time last year.
The constant "transformational event" chatter was addressed. Regarding the postponed meeting in November Liveris said, "when we do decide to have a meeting, you'll hear alot from us". There was a very interesting back and forth with an analyst that went like this:
Frank Mitsch - BB&T
Now Andrew, a couple of weeks ago we saw major volatility in the share price surrounding the decision to postpone your analyst meeting. Could you expand upon the reasons why you decided to do that?
Andrew Liveris
Well, just like the Red Sox are in the World Series again Frank -- I assume that’s why you’re congratulating Kathy -- we’re playing our own World Series here and lots of people are wondering what inning we’re in. I would tell you that the Dow Chemical Company has got lots of opportunities out there.
To Dave’s question, we just don’t want to have a premature event. We don’t want to have a meeting for the sake of having a meeting. When we have a meeting, we want to be able to tell you a lot about where we are on certain of our transactions. That doesn’t mean it’s an imminent one, it just means that with a lot of things going on, it just says that we didn’t think the timing was right.
We gave some notice when we first put the data out there, we said tentative. Then we were pretty much toying with the idea of December and we said, well, let’s just wait a little bit. I would tell you that we are very active and will stay very active. But when we have a meeting, you’ll hear a lot from us.
Frank Mitsch - BB&T
It almost begs the question on how imminent the transactions will be because it does appear that you are targeting early next year. So I think some of the speculation is probably not all that off base in terms of an imminent transaction. With that said, assuming that you’re the buyer, how much dilution and for how long would you tolerate any significant transformational transaction?
Andrew Liveris
I guess I’ll give you two quick answers. One, no comment on accretion or dilution other than our whole M&A discipline is around accretion and doing the right deals for the right reasons, and we’ve been very consistent on that. Maybe the other answer, if I can be so bold, talk to me when the Red Sox win the World Series.
Frank Mitsch - BB&T
So we’re going to have to wait another 84 years?
Geoffery Merszei
Frank, let me just add on to what Andrew just said. We have been having regular dialogue with the sell side, as well as with the buy side analysts, and we’ve been listening to all of you. The bottom line is that everyone basically agrees that when we have a meeting like this, we shouldn’t have a meeting just because it’s on the calendar every three years, but we should have it at a time when it makes a lot of sense in terms of having a fruitful dialogue and to make sure that it’s an efficient use of everyone’s time. So we have been listening, and that is really truly the driver for having it at the right time.
Frank Mitsch - BB&T
Are we looking at some time in the latter part of the first quarter?
Andrew Liveris
In terms of the meeting? Is that the question?
Frank Mitsch - BB&T
Yes.
Andrew Liveris
Probably. I would say it that way, but we will not give you a firm date. But trust us, we’re listening, as Geoffery said. Our buy side, our sell side, all of you matter to us and we’re going to really time it so it’s the right time. I don’t want to be waiting a year for it, how’s that? I’ll give you an out of bound.
Could he say more without saying anything?
Liveris did say of a potential "partner", "Whatever a new entity looks like, let's call it a joint venture, will have to be a growth company...not just a consolidation play, not just an exit strategy, not a leverage play but a growth company. Secondly, it has to preserve Dow Chemical's integration, particularly in its performance plastics and chemicals businesses, and provide a petrochemical "cracker" that can support the company's broad portfolio."
He finished by saying, "A strategic partner...is almost certainly going to have access to feedstocks somewhere in the world, notably the Middle East, but not just there," Liveris said. "They are going to be able to provide us those feedstocks on an ongoing basis, not just on one project."
One can almost only determine that something is in the works and it will be quit big. It is not a question of me reading what I want to here into the comments either because if you have read my commentary of Dow, a huge event is not something I have been stumping for.
Liveris did say to the analyst in the "transformational event discussion: "talk to me when the Red Sox win the World Series". Okay Andrew, I will be in touch next week.
Bottom line is Dow is a long term ValuePlay, that means that there will be quarters like this but as long as the long term focus and fundamentals remain intact, we look past it, pick up more shares if they drop and hold on.
Dow Chemical (DOW) still is tied to its cyclical commodities business to a point and its transformation has been centered on getting away from that. Estimates for the next "trough" in the commodity business put EPS between $2 and $3 a share. CEO Liveris said on the call that "our confidence is increasing" that Dow would be at the top of that range and when pressed about beating the $3 ($3.50 was the number thrown out), they were of course non-committal but at the same time did nothing to dispel that thought. As many investors know, it is not what is said but what is not said at times that is more meaningful. This is important because it now means that when Dow's earnings are at their lowest shares will then trade for about 14 times earnings at today's prices vs the nearly 28 times that was estimated earlier in the year. The importance of this cannot be emphasized enough as it then means the "peak" will then be that much better.
To date Dow has repurchased 25 million shares or 2.6% of outstanding shares. Not insignificant but also not an impressive amount. The dividend was increased 12% in June and sits at 3.8% which is very nice and very safe.
Cash flow remains strong and this is a function of the JV strategy that is a self funding one, meaning the revenues from various ventures fund that costs of current and additional ones.
JV's while off for the quarter have produced earnings to date of about $825 million vs $700 million at this time last year.
The constant "transformational event" chatter was addressed. Regarding the postponed meeting in November Liveris said, "when we do decide to have a meeting, you'll hear alot from us". There was a very interesting back and forth with an analyst that went like this:
Frank Mitsch - BB&T
Now Andrew, a couple of weeks ago we saw major volatility in the share price surrounding the decision to postpone your analyst meeting. Could you expand upon the reasons why you decided to do that?
Andrew Liveris
Well, just like the Red Sox are in the World Series again Frank -- I assume that’s why you’re congratulating Kathy -- we’re playing our own World Series here and lots of people are wondering what inning we’re in. I would tell you that the Dow Chemical Company has got lots of opportunities out there.
To Dave’s question, we just don’t want to have a premature event. We don’t want to have a meeting for the sake of having a meeting. When we have a meeting, we want to be able to tell you a lot about where we are on certain of our transactions. That doesn’t mean it’s an imminent one, it just means that with a lot of things going on, it just says that we didn’t think the timing was right.
We gave some notice when we first put the data out there, we said tentative. Then we were pretty much toying with the idea of December and we said, well, let’s just wait a little bit. I would tell you that we are very active and will stay very active. But when we have a meeting, you’ll hear a lot from us.
Frank Mitsch - BB&T
It almost begs the question on how imminent the transactions will be because it does appear that you are targeting early next year. So I think some of the speculation is probably not all that off base in terms of an imminent transaction. With that said, assuming that you’re the buyer, how much dilution and for how long would you tolerate any significant transformational transaction?
Andrew Liveris
I guess I’ll give you two quick answers. One, no comment on accretion or dilution other than our whole M&A discipline is around accretion and doing the right deals for the right reasons, and we’ve been very consistent on that. Maybe the other answer, if I can be so bold, talk to me when the Red Sox win the World Series.
Frank Mitsch - BB&T
So we’re going to have to wait another 84 years?
Geoffery Merszei
Frank, let me just add on to what Andrew just said. We have been having regular dialogue with the sell side, as well as with the buy side analysts, and we’ve been listening to all of you. The bottom line is that everyone basically agrees that when we have a meeting like this, we shouldn’t have a meeting just because it’s on the calendar every three years, but we should have it at a time when it makes a lot of sense in terms of having a fruitful dialogue and to make sure that it’s an efficient use of everyone’s time. So we have been listening, and that is really truly the driver for having it at the right time.
Frank Mitsch - BB&T
Are we looking at some time in the latter part of the first quarter?
Andrew Liveris
In terms of the meeting? Is that the question?
Frank Mitsch - BB&T
Yes.
Andrew Liveris
Probably. I would say it that way, but we will not give you a firm date. But trust us, we’re listening, as Geoffery said. Our buy side, our sell side, all of you matter to us and we’re going to really time it so it’s the right time. I don’t want to be waiting a year for it, how’s that? I’ll give you an out of bound.
Could he say more without saying anything?
Liveris did say of a potential "partner", "Whatever a new entity looks like, let's call it a joint venture, will have to be a growth company...not just a consolidation play, not just an exit strategy, not a leverage play but a growth company. Secondly, it has to preserve Dow Chemical's integration, particularly in its performance plastics and chemicals businesses, and provide a petrochemical "cracker" that can support the company's broad portfolio."
He finished by saying, "A strategic partner...is almost certainly going to have access to feedstocks somewhere in the world, notably the Middle East, but not just there," Liveris said. "They are going to be able to provide us those feedstocks on an ongoing basis, not just on one project."
One can almost only determine that something is in the works and it will be quit big. It is not a question of me reading what I want to here into the comments either because if you have read my commentary of Dow, a huge event is not something I have been stumping for.
Liveris did say to the analyst in the "transformational event discussion: "talk to me when the Red Sox win the World Series". Okay Andrew, I will be in touch next week.
Bottom line is Dow is a long term ValuePlay, that means that there will be quarters like this but as long as the long term focus and fundamentals remain intact, we look past it, pick up more shares if they drop and hold on.
Friday's Upgrades and Downgrades
UPGRADES
Riverbed Technology RVBD Janco Partners Mkt Perform » Buy
CEC Entertainment CEC Morgan Keegan Mkt Perform » Outperform
THQ Inc THQI Janco Partners Mkt Perform » Accumulate
Mattson MTSN Needham & Co Hold
Motorola MOT Oppenheimer Neutral » Buy
Arthur J. Gallagher AJG Bear Stearns Underperform » Peer Perform
Rightnow Tech RNOW Roth Capital Hold » Buy
Skechers USA SKX Brean Murray Hold » Buy
Harley-Davidson HOG Lehman Brothers Underweight » Equal-weight
Talbots TLB Citigroup Sell » Hold
Pacific Sunwear PSUN Citigroup Hold » Buy
Ormat Tech ORA HSBC Securities Neutral » Overweight
Willis Group WSH Citigroup Hold » Buy
Computer Task CTGX Boenning & Scattergood Market Perform » Market Outperform
Northrim Bank NRIM Friedman Billings Mkt Perform » Outperform
DOWNGRADES
OmniVision OVTI AmTech Research Buy » Sell
NVIDIA NVDA AmTech Research Neutral » Sell
Natl Oilwell Varco NOV Credit Suisse Outperform » Neutral
American Commercial Lines ACLI Morgan Keegan Outperform » Mkt Perform
Cadence Design CDNS Cowen & Co Outperform » Neutral
Eli Lilly LLY Oppenheimer Buy » Neutral
Triad Guaranty TGIC Bear Stearns Peer Perform » Underperform
Palm PALM Bear Stearns Peer Perform » Underperform
Euronet EEFT Citigroup Hold » Sell
Barrett Business BBSI JMP Securities Strong Buy » Mkt Outperform
Talbots TLB Piper Jaffray Outperform » Market Perform
PF Chang's PFCB Piper Jaffray Outperform » Market Perform
Sirenza Micro SMDI Piper Jaffray Outperform » Market Perform
Applied Materials AMAT RBC Capital Mkts Outperform » Sector Perform
NOVA Chemicals NCX RBC Capital Mkts Top Pick » Outperform
Sirenza Micro SMDI Jefferies & Co Buy » Hold
Kendle KNDL UBS Buy » Neutral
Cincinnati Fincl CINF KeyBanc Capital Mkts Buy » Hold
Vitran VTNC Stifel Nicolaus Buy » Hold
F5 Networks FFIV Stifel Nicolaus Buy » Hold
Celadon Group CLDN Stifel Nicolaus Buy » Hold
TranSwitch TXCC Dawson James Speculative Buy » Buy
Harman HAR Banc of America Sec Buy » Neutral
Symantec SYMC Robert W. Baird Outperform » Neutral
Merrill Lynch MER Wachovia Outperform » Mkt Perform
UAL Corp. UAUA JP Morgan Overweight » Neutral
Moody's MCO JP Morgan Neutral » Underweight
Merrill Lynch MER UBS Buy » Neutral
Thursday, October 25, 2007
"Fast Money" for Friday
Friday's Picks
Jeff Macke recommended Activision (ATVI). Open $22.95
Guy Adami “still likes” Intel (INTC). Open $25.89
Karen Finerman would own Estee Lauder (EL). Open $44.72
Pete Najarian recommended Under Armour (UA). Open $56.85
Thursday's Results
Jeff Macke still likes Yahoo! (YHOO). Open $30.68 Close $31.34 GAIN
Guy Adami recommended Microsoft (MSFT). Open $31.25 Close $31.99 GAIN
Karen Finerman preferred Altria (MO). Open $72.36 Close $72.26 LOSS
Pete Najarian said Manitowoc Company (MTW) is a buy. Open $44.11 Close $43.36 LOSS
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks). The percentage is the percentage of successful picks
Guy Adami= 36-23 = 61%
John Najarian= 13-4 = 76%
Jeff Macke= 41-31 = 55%
Pete Najarian= 28-24 = 53%
Tim Seymore= 4-3 = 57%
Karen Finerman= 20-12 = 61%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Sherwin Williams: Denied Due Process In RI
The state of Rhode Island is holding Sherwin Williams (SHW) and it shareholders hostage. Isn't there something called "due process"? Isn't it supposed to guarantee "fundamental fairness"? Does Rhode Island recognize it?
In perusing my Lead Paint information site, Jane Genova's Law and More, I cam across this stunning post.
"I had a hunch that the defendants' and the plaintiff's [the state is appealing the ARCO acquittal] appeal to the Rhode Island Supreme Court in the RI Lead Paint Trial II would be slow. One reason is that when I spoke to Superior Court Judge Michael Silverstein's clerk about the official transcript around April 2006, she indicated that some afternoon sessions were not available. Therefore, I could not purchase from the Court a complete official transcript.
Well, here it is October 25, 2007, and my sources inform me that as of a week or so ago, that transcript had not been completed. That is the first necessary step in processing the appeal. Therefore, no dates or anything - briefs or arguments - have been set."
What is the problem? How can it possibly take over a year to type up a transcript? Send me the tapes guys, I'll get it done next week for you. Here is where is gets really outrageous and unconscionable. Despite the fact that his office cannot get their act together, Silverstein is forcing both the State and the companies including Sherwin and NL Industries (NL) to go ahead and argue the abatement plan. This action is costing RI taxpayers and Sherwin Williams shareholders hundred of thousand of dollars for legal proceedings, that will not even be necessary if as expected the RI Supreme Court tosses the prior verdict due to Silverstein's essentially directed verdict and a host of other trial issues.
How can this be acceptable? Silverstein is essentially denying Sherwin shareholders, as owners of the company their due process rights. We cannot begin our appeal until his office actually does its job and because we cannot get an appeal and a ruling, we must spend thousands in legal fees!! Sherwin asked for the abatement proceeding to be out off until after the Supreme Court ruled but of course Silverstein denied the motion. At least he got to that one right away.
What is the time limit for a transcript of court proceeding? I am guessing over a year would not be considered acceptable to most reasonable people. Can't Sherwin file for an injunction barring any more action from Silverstein until the appeal is heard?
Silverstein is on a one man crusade to attempt to get Sherwin and other to pay for the RI plan. His actions or lack there of are morally unacceptable and I cannot believe for a minute the RI Bar could find them "legally ethical".
This is "judicial tyranny" at its best...
In perusing my Lead Paint information site, Jane Genova's Law and More, I cam across this stunning post.
"I had a hunch that the defendants' and the plaintiff's [the state is appealing the ARCO acquittal] appeal to the Rhode Island Supreme Court in the RI Lead Paint Trial II would be slow. One reason is that when I spoke to Superior Court Judge Michael Silverstein's clerk about the official transcript around April 2006, she indicated that some afternoon sessions were not available. Therefore, I could not purchase from the Court a complete official transcript.
Well, here it is October 25, 2007, and my sources inform me that as of a week or so ago, that transcript had not been completed. That is the first necessary step in processing the appeal. Therefore, no dates or anything - briefs or arguments - have been set."
What is the problem? How can it possibly take over a year to type up a transcript? Send me the tapes guys, I'll get it done next week for you. Here is where is gets really outrageous and unconscionable. Despite the fact that his office cannot get their act together, Silverstein is forcing both the State and the companies including Sherwin and NL Industries (NL) to go ahead and argue the abatement plan. This action is costing RI taxpayers and Sherwin Williams shareholders hundred of thousand of dollars for legal proceedings, that will not even be necessary if as expected the RI Supreme Court tosses the prior verdict due to Silverstein's essentially directed verdict and a host of other trial issues.
How can this be acceptable? Silverstein is essentially denying Sherwin shareholders, as owners of the company their due process rights. We cannot begin our appeal until his office actually does its job and because we cannot get an appeal and a ruling, we must spend thousands in legal fees!! Sherwin asked for the abatement proceeding to be out off until after the Supreme Court ruled but of course Silverstein denied the motion. At least he got to that one right away.
What is the time limit for a transcript of court proceeding? I am guessing over a year would not be considered acceptable to most reasonable people. Can't Sherwin file for an injunction barring any more action from Silverstein until the appeal is heard?
Silverstein is on a one man crusade to attempt to get Sherwin and other to pay for the RI plan. His actions or lack there of are morally unacceptable and I cannot believe for a minute the RI Bar could find them "legally ethical".
This is "judicial tyranny" at its best...
Thursday's 52 Week Lows
WM Washington Mutual Inc 27.17
TWX Time Warner Inc 17.71
TWP Trex Inc 9.93
TWC Time Warner Cable Inc 30.09
TUES Tuesday Morning Corp 6.97
TSCO Tractor Supply Co 42.35
TRID Trident Microsystems Inc 12.24
TR Tootsie Roll Inds Inc 24.68
PFCB P F Changs China Bist ... 27.66
PEIX Pacific Ethanol Inc 7.40
LPX Louisiana Pac Corp 16.11
LKFN Lakeland Finl Corp 19.96
LIZ Liz Claiborne, Inc 28.10
ETH Ethan Allen Interiors Inc 30.66
EPIC Epicor Software Corp 11.17
DBD Diebold, Incorporated 40.79
CYBI Cybex International 4.23
CSK Chesapeake Corporation 7.52
CPKI California Pizza Kitc ... 15.99
COO The Cooper Companies, Inc 42.48
COH Coach Inc 35.29
C Citigroup, Inc 40.76
Thursday's Links - A Thank You
Freeze your Credit,iPhone Security, WSJ, Peridot Capitalist
- A way for you to almost guarantee someone cannot open credit in your name.
- If Apple (AAPL) is going to tout its iPhone as the mobile internet, why did they do this?
- Another thank you to the Wall St. Journal for the mention yesterday.
- Welcome Chad Brand and his fine newsletter to the fold.
- A way for you to almost guarantee someone cannot open credit in your name.
- If Apple (AAPL) is going to tout its iPhone as the mobile internet, why did they do this?
- Another thank you to the Wall St. Journal for the mention yesterday.
- Welcome Chad Brand and his fine newsletter to the fold.
Dow Chemical's "Sound", Not Great Quarter
Hard to come up with anything really positive on this one other than "at least it wasn't worse".
Dow Chemical (DOW), unlike DuPont (DD) earlier this week posted earnings that impressed no one. It was not a disaster but shareholders are not dancing either this morning. After DuPont reported increased earnings and raised full year guidance, expectations for Dow were elevated. DuPont got significant contributions from its agricultural division and Dow's did see dramatic improvement of EBIT of $65 million ($15 million after acquisition charges) up from $0 last year but like I said yesterday, this segment is not yet large enough to carry the day for Dow like DuPont's is for them. Soon enough...
Profits fell dramatically in the Q3 due to changes in German tax laws, higher domestic tax rates and R&D charges. Despite sales increasing to $13.59 billion from $12.36 billion last year, Dow posted net income after paying preferred dividends of $403 million, or 42 cents per share, compared with a year-earlier profit of $512 million, or 53 cents per share. Dragging Q3 results was a provision for income taxes of $659 million, 5 times larger than the $137 million put aside last year. Excluding items, Dow reported profit of 84 cents per share.
The area I was most interested in was the equity earnings and even there the news was less than encouraging as earnings for Q3 were $296 million – down compared with the record $317 million posted in the same period last year.
There was some good news as Dow reported price increases in every geographic area and across all operating segments, outpacing an increase of almost $400 million in feedstock and energy costs.
Even Dow CEO Andrew Liveris was less than enthusiastic in his comments saying, "Global economic conditions remain reasonably healthy, even though there may be some concerns about the resilience of the U.S. economy going forward." He continued "This was another sound quarter for Dow. We posted record quarterly sales with substantial growth in Europe, Asia Pacific and Latin America; we achieved solid price increases across every business and in every geographic region; we saw strong volume improvements in all but one of our operating segments; and our equity earnings were once again outstanding."
Equity results were good, not outstanding. Outstanding would have been an increase over last year.
Sales are at record levels but feedstock costs are mitigating that. Dow is in the process of moving production to areas where these costs are a fraction of where they are now but that will take time. It will happen and the end results will be fantastic, but until then we have to wait. One good thing about buying shares this cheap now is that there isn't really anywhere for them to go down unless the wheels completely fall off, which is unlikely. Any good news will cause an immediate jump..
Dow is transitioning and doing a great job at it and shareholder need to expect quarters like this every so often. My outlook has not changed long term.
The call today will be interesting...
Dow Chemical (DOW), unlike DuPont (DD) earlier this week posted earnings that impressed no one. It was not a disaster but shareholders are not dancing either this morning. After DuPont reported increased earnings and raised full year guidance, expectations for Dow were elevated. DuPont got significant contributions from its agricultural division and Dow's did see dramatic improvement of EBIT of $65 million ($15 million after acquisition charges) up from $0 last year but like I said yesterday, this segment is not yet large enough to carry the day for Dow like DuPont's is for them. Soon enough...
Profits fell dramatically in the Q3 due to changes in German tax laws, higher domestic tax rates and R&D charges. Despite sales increasing to $13.59 billion from $12.36 billion last year, Dow posted net income after paying preferred dividends of $403 million, or 42 cents per share, compared with a year-earlier profit of $512 million, or 53 cents per share. Dragging Q3 results was a provision for income taxes of $659 million, 5 times larger than the $137 million put aside last year. Excluding items, Dow reported profit of 84 cents per share.
The area I was most interested in was the equity earnings and even there the news was less than encouraging as earnings for Q3 were $296 million – down compared with the record $317 million posted in the same period last year.
There was some good news as Dow reported price increases in every geographic area and across all operating segments, outpacing an increase of almost $400 million in feedstock and energy costs.
Even Dow CEO Andrew Liveris was less than enthusiastic in his comments saying, "Global economic conditions remain reasonably healthy, even though there may be some concerns about the resilience of the U.S. economy going forward." He continued "This was another sound quarter for Dow. We posted record quarterly sales with substantial growth in Europe, Asia Pacific and Latin America; we achieved solid price increases across every business and in every geographic region; we saw strong volume improvements in all but one of our operating segments; and our equity earnings were once again outstanding."
Equity results were good, not outstanding. Outstanding would have been an increase over last year.
Sales are at record levels but feedstock costs are mitigating that. Dow is in the process of moving production to areas where these costs are a fraction of where they are now but that will take time. It will happen and the end results will be fantastic, but until then we have to wait. One good thing about buying shares this cheap now is that there isn't really anywhere for them to go down unless the wheels completely fall off, which is unlikely. Any good news will cause an immediate jump..
Dow is transitioning and doing a great job at it and shareholder need to expect quarters like this every so often. My outlook has not changed long term.
The call today will be interesting...
Berkshire Hathaway vs Sears Holdings: The Early Years
The comparisons have been rampant about Warren Buffett's Berkshire Hathaway (BRK.A) and Eddie Lampert's Sears Holdings (SHLD). Let's look and rather than comparing the 42 year old Berkshire with the 2 year old Sears in both their current states, let's look at Berkshire's beginnings and take an apples to apples approach when making the comparison.
First things first. This is not a "who is better" look between Buffett and Lampert but a look at the beginning of both businesses and the investment by both owners. Most people do not know about Berkshire's beginnings and if we are going to make the comparison, we need to look back at Warren early experiences so that we can look at Lampert's and draw honest conclusions. One cannot look at the finished product of Berkshire and then look at Sears Holdings, still in its infancy and draw any meaningful comparison. Doing that is a bit like one neighbor with a kid in kindergarten contrasting their child to the neighbors child, a 27 year old doctor and making an effort to discern their own child's future from that. Can't be done.
Given the recent stock slide of Sears Holdings from $190 to $130, many people have jumped ship on Lampert and given up on Sears and their Chairman. Gone now are the Buffett comparisons and the doubters have surfaced. However, if one looks at the history of Berkshire one also sees dramatic price drops. In 1973-74 the stock dropped from $90 to $40 a share. After the '87 stock crash it fell from $4,000 to $3,000. In 1990-91 it fell from $8,900 to $5,500 and from mid-1998 to 2000 the stock slid from $80,000 to $40,800. A drop in the share price of the has very little to do with the ability of either Buffett or Lampert to do what they so best. As a matter of fact at the turn of the century, Buffett was deluged with doubters who said he was "out of touch" and did not understand the "new paradigm" of business. I think we all know how that turned out.
If we look closer at the beginnings, Berkshire was bought by Warren is 1965 for about $16 a share and, according to Buffett "had no net cash". In fact, according to Buffett in the previous 10 years, the business had earned "less than nothing". After two years of ownership (the same time period Lampert has owned Sears) shares fetched between $17 and $21 in 1967, virtually flat. Sears, shares conversely have gone from $50 when the deal was announced to the $130 they sit at today. At the end of the 4th year Buffett owned Berkshire it traded between $32 and $39 a share.
Earnings:
In 1965 and 1966 Berkshire was profitable but in 1967 saw a dramatic downturn in earnings and at that point Buffett used Berkshire cash and acquired National Indemnity Insurance in the spring of 1967. It was an attempt by him to level out the cyclical earnings of the textile industry and Buffett thought the insurance float would provide a buffer for the erratic textile operations. Soon after that was See's Candy, Wesco, Illinois National Bank ans Sun Newspapers.
When Lampert acquired Sears it had lost almost $5 billion the previous 4 years and since he took over it has earned about $3.7 billion in just two and a half years and more importantly produces near $2 billion a year in cash for Lampert to invest in the business (that number will clearly be down this year due to the retail environment).
Lampert doubters will point to this years profit decline as their proof what he is doing at Sears is not working. However, if one looks at Berkshire in the last decade, one will see earnings large declines in 1999, 2001 and 2004 due to a challenging insurance environment. With retailers like Target (TGT), Home Depot (HD), Lowes (LOW), Macy's (M) and JC Penney (JCP)all lowering expectations recently, 2007 has
shaped up to be a similar environment for retailers. An earnings decline is not proof what he is not doing is not working nor is the Berkshire declines in those years meant to absolve any issues at Sears but it is meant to illustrate that not all earning go up in perpetuity and a bad year does not mean disaster. What Berkshire fans always point to is the cash available for Buffett to use for investment in years that earnings suffer. Lampert devotees point to the same metric and how it is being used. Sears is so young compared to Berkshire that Lampert followers currently are focused on his use of that cash within Sears (repurchases, debt reduction, IT investment) and how those actions will maximize its production later on.
Shares:
Like Buffett in his early Berkshire years Lampert is using weakness to buy more shares. Buffett began buying Berkshire shares in 1962 and took control in 1965. He kept buying in 1965 until he had 70% of Berkshire shares and did not become chairman until 1970. Lampert first bough Sears in 2004 and 2005 and has kept buying and estimates are that he control almost 60% of Sears shares after the current buyback is done. Sound familiar?
The business:
Buffett was very judicious in his use of Berkshire's cash in the early years just as Lampert has been with Sears. Unlike Berkshire, Sears is in a business that will continue to earn Lampert money and produce large amount of cash and will not eventually be forced to close like Berkshire was in 1985 (the textile mill). That being said Lampert, also unlike Buffett is sitting on a fortune in real estate in Sears Holdings and also billions of dollars in licensing fees from the valuable Craftsman and Kenmore should he opt to monetize them. Just because he has not, doesn't mean he won't, that is where the "value" lies.
Track Record:
Both Buffett and Lampert ran private investment operations before the big acquisition. Both had track records that trounced the markets as a whole and made themselves and investor very wealthy. Both were long term value investors who kept their thoughts close to the vest and invested with a time frame unlike their peers. Both experienced difficulties in the early years of their ownership of the business and used that difficulty to increase their ownership in that business.
In short, Sears is a better "business" than Berkshire was in 1965, what remains to be seen is what Lampert's next move will be with that business. I do not think anyone has ever got very rich betting against either Buffett or Lampert.
Why start trying now?
First things first. This is not a "who is better" look between Buffett and Lampert but a look at the beginning of both businesses and the investment by both owners. Most people do not know about Berkshire's beginnings and if we are going to make the comparison, we need to look back at Warren early experiences so that we can look at Lampert's and draw honest conclusions. One cannot look at the finished product of Berkshire and then look at Sears Holdings, still in its infancy and draw any meaningful comparison. Doing that is a bit like one neighbor with a kid in kindergarten contrasting their child to the neighbors child, a 27 year old doctor and making an effort to discern their own child's future from that. Can't be done.
Given the recent stock slide of Sears Holdings from $190 to $130, many people have jumped ship on Lampert and given up on Sears and their Chairman. Gone now are the Buffett comparisons and the doubters have surfaced. However, if one looks at the history of Berkshire one also sees dramatic price drops. In 1973-74 the stock dropped from $90 to $40 a share. After the '87 stock crash it fell from $4,000 to $3,000. In 1990-91 it fell from $8,900 to $5,500 and from mid-1998 to 2000 the stock slid from $80,000 to $40,800. A drop in the share price of the has very little to do with the ability of either Buffett or Lampert to do what they so best. As a matter of fact at the turn of the century, Buffett was deluged with doubters who said he was "out of touch" and did not understand the "new paradigm" of business. I think we all know how that turned out.
If we look closer at the beginnings, Berkshire was bought by Warren is 1965 for about $16 a share and, according to Buffett "had no net cash". In fact, according to Buffett in the previous 10 years, the business had earned "less than nothing". After two years of ownership (the same time period Lampert has owned Sears) shares fetched between $17 and $21 in 1967, virtually flat. Sears, shares conversely have gone from $50 when the deal was announced to the $130 they sit at today. At the end of the 4th year Buffett owned Berkshire it traded between $32 and $39 a share.
Earnings:
In 1965 and 1966 Berkshire was profitable but in 1967 saw a dramatic downturn in earnings and at that point Buffett used Berkshire cash and acquired National Indemnity Insurance in the spring of 1967. It was an attempt by him to level out the cyclical earnings of the textile industry and Buffett thought the insurance float would provide a buffer for the erratic textile operations. Soon after that was See's Candy, Wesco, Illinois National Bank ans Sun Newspapers.
When Lampert acquired Sears it had lost almost $5 billion the previous 4 years and since he took over it has earned about $3.7 billion in just two and a half years and more importantly produces near $2 billion a year in cash for Lampert to invest in the business (that number will clearly be down this year due to the retail environment).
Lampert doubters will point to this years profit decline as their proof what he is doing at Sears is not working. However, if one looks at Berkshire in the last decade, one will see earnings large declines in 1999, 2001 and 2004 due to a challenging insurance environment. With retailers like Target (TGT), Home Depot (HD), Lowes (LOW), Macy's (M) and JC Penney (JCP)all lowering expectations recently, 2007 has
shaped up to be a similar environment for retailers. An earnings decline is not proof what he is not doing is not working nor is the Berkshire declines in those years meant to absolve any issues at Sears but it is meant to illustrate that not all earning go up in perpetuity and a bad year does not mean disaster. What Berkshire fans always point to is the cash available for Buffett to use for investment in years that earnings suffer. Lampert devotees point to the same metric and how it is being used. Sears is so young compared to Berkshire that Lampert followers currently are focused on his use of that cash within Sears (repurchases, debt reduction, IT investment) and how those actions will maximize its production later on.
Shares:
Like Buffett in his early Berkshire years Lampert is using weakness to buy more shares. Buffett began buying Berkshire shares in 1962 and took control in 1965. He kept buying in 1965 until he had 70% of Berkshire shares and did not become chairman until 1970. Lampert first bough Sears in 2004 and 2005 and has kept buying and estimates are that he control almost 60% of Sears shares after the current buyback is done. Sound familiar?
The business:
Buffett was very judicious in his use of Berkshire's cash in the early years just as Lampert has been with Sears. Unlike Berkshire, Sears is in a business that will continue to earn Lampert money and produce large amount of cash and will not eventually be forced to close like Berkshire was in 1985 (the textile mill). That being said Lampert, also unlike Buffett is sitting on a fortune in real estate in Sears Holdings and also billions of dollars in licensing fees from the valuable Craftsman and Kenmore should he opt to monetize them. Just because he has not, doesn't mean he won't, that is where the "value" lies.
Track Record:
Both Buffett and Lampert ran private investment operations before the big acquisition. Both had track records that trounced the markets as a whole and made themselves and investor very wealthy. Both were long term value investors who kept their thoughts close to the vest and invested with a time frame unlike their peers. Both experienced difficulties in the early years of their ownership of the business and used that difficulty to increase their ownership in that business.
In short, Sears is a better "business" than Berkshire was in 1965, what remains to be seen is what Lampert's next move will be with that business. I do not think anyone has ever got very rich betting against either Buffett or Lampert.
Why start trying now?
Wal-Mart Commits To International Expantion, Not Buybacks
Some more notes from day one of Wal-Mart's (WMT) analyst meeting on Tuesday. Not exactly what I was looking for.
Wal-Mart stated it will keep capex at its current level of approximately $15 billion a year but that there would be a shift in that spending to its international division. By January 2010, over 40% of its spending on new stores will be internationally, up from less than 30% currently. Wal-Mart’s international sales currently account for almost 25% of its revenues, with about 40% of that coming from the UK’s Asda supermarkets.
The expenditures should add almost 30 million additional square feet to the international store base during its fiscal year ending in January 2010, some 50% more than the additional 20 million sq ft forecast for the current year.
Regarding the announced Japanese investment Wal-Mart addmitted, “it is going to be a while” before Wal-Mart can turn Seiyu around, but that they expected “significant progress” in the coming three to five years. Another area that was stressed was the potential of India, where Wal-Mart is expected to open its first wholesale market with Bharti next year.
They also acknowledged investors were concerned “about trading-off high returns at Wal-Mart US, for lower returns at Wal-Mart international”, but argued for the a balance between long and short term thinking. “We have to be making these investments for the long-term health of the business,”.
Sales and profits are surging internationally for Wal-Mart and the redirection of funds is long overdue. Wal-Mart is a cash cow and smart use of those funds could make shareholders very happy. Buying back shares by the truck load would have been a big step in the right direction. Pushing internationally is the right thing to do but if we are going to do it, then lets go. The "Best of Both Worlds" scenario would have been a cut to $12 billion in capex with 60% of that going overseas and the $3 billion savings going to additional share repurchases.
This is kind of a taking the band-aid off slowly approach... that does not make anyone happy..
Wal-Mart stated it will keep capex at its current level of approximately $15 billion a year but that there would be a shift in that spending to its international division. By January 2010, over 40% of its spending on new stores will be internationally, up from less than 30% currently. Wal-Mart’s international sales currently account for almost 25% of its revenues, with about 40% of that coming from the UK’s Asda supermarkets.
The expenditures should add almost 30 million additional square feet to the international store base during its fiscal year ending in January 2010, some 50% more than the additional 20 million sq ft forecast for the current year.
Regarding the announced Japanese investment Wal-Mart addmitted, “it is going to be a while” before Wal-Mart can turn Seiyu around, but that they expected “significant progress” in the coming three to five years. Another area that was stressed was the potential of India, where Wal-Mart is expected to open its first wholesale market with Bharti next year.
They also acknowledged investors were concerned “about trading-off high returns at Wal-Mart US, for lower returns at Wal-Mart international”, but argued for the a balance between long and short term thinking. “We have to be making these investments for the long-term health of the business,”.
Sales and profits are surging internationally for Wal-Mart and the redirection of funds is long overdue. Wal-Mart is a cash cow and smart use of those funds could make shareholders very happy. Buying back shares by the truck load would have been a big step in the right direction. Pushing internationally is the right thing to do but if we are going to do it, then lets go. The "Best of Both Worlds" scenario would have been a cut to $12 billion in capex with 60% of that going overseas and the $3 billion savings going to additional share repurchases.
This is kind of a taking the band-aid off slowly approach... that does not make anyone happy..
Free Taco's From Taco Bell
YUM! Brands (YUM) Taco Bell chain has a World Series promotion that was talked about all throughout the game last night.
If a player steals a base during the World Series, American's can go to Taco Bell on Oct. 30th from 2-5 pm and receive a free Taco. It is a great idea and the best part of the promotion was the constant chatter about it during the game. There was actually a hysterical exchange caught between Coco Crisp and Royce Clayton as they attempted to explain the intricacies (there aren't any) of the promotion to each other on the Boston bench. If anyone can find it on YouTube, please send it to me, it was priceless.
In a gamer that was a blowout after the 5th inning, there wasn't interesting for the announcers to talk about and they filled much of the time dreaming and chatting about taco's.
YUM is getting every pennies worth out of this one.
If a player steals a base during the World Series, American's can go to Taco Bell on Oct. 30th from 2-5 pm and receive a free Taco. It is a great idea and the best part of the promotion was the constant chatter about it during the game. There was actually a hysterical exchange caught between Coco Crisp and Royce Clayton as they attempted to explain the intricacies (there aren't any) of the promotion to each other on the Boston bench. If anyone can find it on YouTube, please send it to me, it was priceless.
In a gamer that was a blowout after the 5th inning, there wasn't interesting for the announcers to talk about and they filled much of the time dreaming and chatting about taco's.
YUM is getting every pennies worth out of this one.
Thursday's Upgrades and Downgrades
UPGRADES
Riverbed Technology RVBD Collins Stewart Market Perform » Buy
Western Union WU DA Davidson Neutral » Buy
BTU Int'l BTUI Needham & Co Hold » Buy
Novellus NVLS Needham & Co Hold » Buy
QLogic QLGC Caris & Company Average » Above Average
Amgen AMGN Credit Suisse Neutral » Outperform
Symmetricom SYMM Cantor Fitzgerald Hold » Buy
Weatherford WFT Credit Suisse Neutral » Outperform
Dominion D Credit Suisse Neutral » Outperform
Smith Intl SII Calyon Securities Neutral » Add
Vodafone PLC VOD JP Morgan Neutral » Overweight
FirstMerit Corp FMER JP Morgan Underweight » Neutral
QLogic QLGC RBC Capital Mkts Sector Perform » Outperform
Citrix Systems CTXS Friedman Billings Mkt Perform » Outperform
STMicroelectronics STM Robert W. Baird Neutral » Outperform
Pactiv Corp PTV Deutsche Securities Hold » Buy
DOWNGRADES
XM Satellite XMSR Janco Partners Buy » Accumulate
Broadcom BRCM AmTech Research Buy » Sell
Range Resources RRC Friedman Billings Outperform » Mkt Perform
Petrosearch Energy PTSG Friedman Billings Outperform » Mkt Perform
PetroQuest Energy PQ Friedman Billings Outperform » Mkt Perform
Pogo Producing PPP Friedman Billings Outperform » Mkt Perform
Newfield Expl NFX Friedman Billings Outperform » Mkt Perform
Noble Energy NBL Friedman Billings Outperform » Mkt Perform
Mariner Energy ME Friedman Billings Outperform » Mkt Perform
CNX Gas CXG Friedman Billings Outperform » Mkt Perform
Comstock CRK Friedman Billings Outperform » Mkt Perform
Brigham Exploration BEXP Friedman Billings Outperform » Mkt Perform
SAVVIS Comm SVVS Stanford Research Buy » Hold
Trimble Navigation TRMB Needham & Co Buy » Hold
Charles & Colvard CTHR Northland Securities Outperform » Market Perform
C.R. Bard BCR Piper Jaffray Outperform » Market Perform
Prosperity Bancshares PRSP Stifel Nicolaus Buy » Hold
Buffalo Wild Wings BWLD Morgan Keegan Outperform » Mkt Perform
Eli Lilly LLY Cowen & Co Outperform » Neutral
C.R. Bard BCR Bear Stearns Outperform » Peer Perform
Burl Nrth Santa Fe BNI Credit Suisse Outperform » Neutral
Excel Maritime Carriers EXM Oppenheimer Buy » Neutral
Blockbuster BBI JP Morgan Overweight » Neutral
Biogen Idec BIIB HSBC Securities Overweight » Neutral
Wachovia WB Banc of America Sec Buy » NeutraL
Wednesday, October 24, 2007
"Fast Money" for Thursday
Thursday's Picks
Jeff Macke still likes Yahoo! (YHOO). Open $30.68
Guy Adami recommended Microsoft (MSFT). Open $31.25
Karen Finerman preferred Altria (MO). Open $72.36
Pete Najarian said Manitowoc Company (MTW) is a buy. Open $44.11
Wednesday's Results
Jeff Macke recommended Microsoft (MSFT). Open $30.90 Close $31.25 GAIN
Guy Adami said Wal-Mart (WMT) was beginning to look interesting after it got hit Tuesday. Open $43.93 Close $43.87 LOSS
Karen Finerman recommended Washington Group (WNG). Open $95.35 Close $92.96 GAIN
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks). The percentage is the percentage of successful picks
Guy Adami= 35-23 = 61%
John Najarian= 13-4 = 76%
Jeff Macke= 40-31 = 54%
Pete Najarian= 28-24 = 53%
Tim Seymore= 4-3 = 57%
Karen Finerman= 20-12 = 61%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Wedenesday's 52 Week Lows
USBE US Bioenergy Corp 6.31
USAK USA Truck Inc 13.96
UPFC United Panam Financial Cp 6.46
UIS Unisys Corporation 5.90
TUES Tuesday Morning Corp 7.12
TSCO Tractor Supply Co 43.74
TRID Trident Microsystems Inc 13.11
TM Toyota Motor Corp 104.97
TLB The Talbots, Inc 14.49
RUTH Ruths Chris Steak Hse Inc 13.15
ROX Castle Brands Inc 3.09
RL Polo Ralph Lauren Corp 65.99
RDN Radian Group Inc 12.96
RAD Rite Aid Corporation 3.94
MTB M & T Bk Corp 96.74
MNI McClatchy Newspapers, Inc 16.49
MMPI Meruelo Maddux Proper ... 3.87
MGYR Magyar Bancorp Inc 10.20
MGPI Mgp Ingredients Inc 8.50
MER Merrill Lynch & Co., Inc 63.70
MCBI Metrocorp Bancshares Inc 13.68
MBWM Mercantile Bank Corp 19.36
MAXE Max & Ermas Restauran ... 4.00
MAR Marriott Intl Inc New 39.61
LVLT Level 3 Communication ... 3.03
LUV Southwest Airlines Co. 13.83
DSL Downey Financial Corp ... 39.61
DFS Discover Finl Svcs 18.23
CTBK City Bk Lynnwood Wash 22.61
CRFT Craftmade Internation ... 9.27
CHRS Charming Shoppes Inc 7.22
CAKE The Cheesecake Factor ... 22.11
CACB Cascade Bancorp 18.14
C Citigroup, Inc 41.80
Watch Papelbon Dance
Wednesday's Links
Cell Phones, Bloggystyle, Swans, Religion vs Poverty
- This article is just great in describing the monopolistic hold cell phone carries have on our devices.
- Adam Warner is out with his "bloggystyle" post that I enjoy so much.... no mention of the Red Sox?
- Challenging modern thinking is always very interesting
- It looks like religion can help win this battle.
- This article is just great in describing the monopolistic hold cell phone carries have on our devices.
- Adam Warner is out with his "bloggystyle" post that I enjoy so much.... no mention of the Red Sox?
- Challenging modern thinking is always very interesting
- It looks like religion can help win this battle.
An Expensive Winter for Oil Users Ahead
Back in August I urged readers to lock in home heating oil prices or potentially face a huge heating bill this winter. For those who didn't, the news today is not looking good.
Last week, heating-oil futures hit a record of $2.36 a gallon, up more than 40% since the start of the year.
With weather forecasters predicting a colder winter than last year, despite the unseasonably warm October in the Northeast, heating costs will rise no matter what fuel a homeowner uses. Now, we know we can trust weather forecaster about as much as a crack addict but oil fundamentals are strained currently and ANY disruption to the system will cause prices to rocket even higher.
Consumers who use heating oil will feel the most pain as their winter heating bill for the season according to the US Department of Energy is expected to average $1,785 vs. $891 for households that use natural gas. Unlike crude oil, natural-gas prices have been relatively restrained in the U.S. this year. In fact, it would seem there is a glut of natural gas out there with more coming online as Middle East and Asian operations come online.
The reason? No it is not market manipulation from Exxon (XOM), BP (BP) or Chevron (CVX) or other oil majors, it is Economics 101. Supplies of refined products have become historically tight, due to economic growth in developing countries like China and India. Any extra capacity that existed in the system when heating oil sold for $.90 cents a gallon has been absorbed and in fact several studies have shown it may be at equilibrium meaning supply and demand are equal. The problem here is that supply cannot be increased at the same rate demand is and that means that price have to go up.
Last week, heating-oil futures hit a record of $2.36 a gallon, up more than 40% since the start of the year.
With weather forecasters predicting a colder winter than last year, despite the unseasonably warm October in the Northeast, heating costs will rise no matter what fuel a homeowner uses. Now, we know we can trust weather forecaster about as much as a crack addict but oil fundamentals are strained currently and ANY disruption to the system will cause prices to rocket even higher.
Consumers who use heating oil will feel the most pain as their winter heating bill for the season according to the US Department of Energy is expected to average $1,785 vs. $891 for households that use natural gas. Unlike crude oil, natural-gas prices have been relatively restrained in the U.S. this year. In fact, it would seem there is a glut of natural gas out there with more coming online as Middle East and Asian operations come online.
The reason? No it is not market manipulation from Exxon (XOM), BP (BP) or Chevron (CVX) or other oil majors, it is Economics 101. Supplies of refined products have become historically tight, due to economic growth in developing countries like China and India. Any extra capacity that existed in the system when heating oil sold for $.90 cents a gallon has been absorbed and in fact several studies have shown it may be at equilibrium meaning supply and demand are equal. The problem here is that supply cannot be increased at the same rate demand is and that means that price have to go up.
Dow Chemical Earnings Preveiw
Dow Chemical (DOW), whose share are up 9% to date this year and pay a near 4% dividend reports earnings tomorrow. What are we looking for?
-Health of Joint Venture (JV) Strategy:
We are going to be looking at the "equity earnings" to see how well the joint ventures are performing vs last year and what percentage of earnings they represent. To see the current JV's and understand how to read the earnings of them, please visit here: This will become more important every quarter and in after 2008 this section should take real prominence as the slew of JV's announced this year begin coming online. Last quarter this segment produced 11% earnings growth and are up 30% year to date.
- Share Repurchases / Dividends / Debt:
Earlier in the summer Dow increased the dividend so do not expect any news on this front (although it would be nice). What is most likely the best use currently would be an acceleration of the share repurchases and decreasing the debt which has fallen $3.5 billion or 30% the past 3 years.
Earnings:
DuPont (DD) reported increased earnings yesterday and that has put the pressure on Dow. Much of DuPont's increase was due to their strong agribusiness division. Dow, which is expending very aggressively into this area, is not big enough here to allow this divisions expected increase to affect earnings to the same degree as DuPont. That being said the overall analyst estimates are for $.90 cents a share. I would expect Dow to beat that and come in at $.95 to $.96 cents a share.
My feeling s the JV strategy and its contributions is not yet being fully incorporated into estimates. This strategy is a self funding one and its success is allowing Dow to produce about $1 billion a quarter from operations. This has enabled Dow to make the above mention decreases in debt at the same time raising its cash balance to near $4 billion. The debt reduction alone has decreased annual expenses $100 million a year or has added $.10 a share to earnings.
Input costs have skyrockets in this sector in the last year and Dow is in the process of moving operation to areas that raw material are exponentially cheaper. What is important to look for is how these cost are being managed in the short term because in the long term ,we know they will fall dramatically.
Every since Dow canceled it appearance at a meeting last week, rumor have been running rampant. Lehman Brothers (LEH) analyst Sergey Vasnetsov said the announcement might indicate that Dow Chemical is planning a "significant transformation" in the near-term. Vasnetsov noted major moves by companies elsewhere in the sector. PPG Industries Inc. (PPG) purchased SigmaKalon Group, a Dutch paint and coatings producer, and Rohm & Haas Co. (ROH) said it will buy back $2 billion in stock.
"Dow is likely to undergo a significant transformation in the near-term, perhaps using the recent PPG and Rohm & Haas actions as a roadmap," Vasnetsov wrote in a client note.
Honestly, do not expect much in the way of earth shattering news. It is not Liveris's style.
Just results..
-Health of Joint Venture (JV) Strategy:
We are going to be looking at the "equity earnings" to see how well the joint ventures are performing vs last year and what percentage of earnings they represent. To see the current JV's and understand how to read the earnings of them, please visit here: This will become more important every quarter and in after 2008 this section should take real prominence as the slew of JV's announced this year begin coming online. Last quarter this segment produced 11% earnings growth and are up 30% year to date.
- Share Repurchases / Dividends / Debt:
Earlier in the summer Dow increased the dividend so do not expect any news on this front (although it would be nice). What is most likely the best use currently would be an acceleration of the share repurchases and decreasing the debt which has fallen $3.5 billion or 30% the past 3 years.
Earnings:
DuPont (DD) reported increased earnings yesterday and that has put the pressure on Dow. Much of DuPont's increase was due to their strong agribusiness division. Dow, which is expending very aggressively into this area, is not big enough here to allow this divisions expected increase to affect earnings to the same degree as DuPont. That being said the overall analyst estimates are for $.90 cents a share. I would expect Dow to beat that and come in at $.95 to $.96 cents a share.
My feeling s the JV strategy and its contributions is not yet being fully incorporated into estimates. This strategy is a self funding one and its success is allowing Dow to produce about $1 billion a quarter from operations. This has enabled Dow to make the above mention decreases in debt at the same time raising its cash balance to near $4 billion. The debt reduction alone has decreased annual expenses $100 million a year or has added $.10 a share to earnings.
Input costs have skyrockets in this sector in the last year and Dow is in the process of moving operation to areas that raw material are exponentially cheaper. What is important to look for is how these cost are being managed in the short term because in the long term ,we know they will fall dramatically.
Every since Dow canceled it appearance at a meeting last week, rumor have been running rampant. Lehman Brothers (LEH) analyst Sergey Vasnetsov said the announcement might indicate that Dow Chemical is planning a "significant transformation" in the near-term. Vasnetsov noted major moves by companies elsewhere in the sector. PPG Industries Inc. (PPG) purchased SigmaKalon Group, a Dutch paint and coatings producer, and Rohm & Haas Co. (ROH) said it will buy back $2 billion in stock.
"Dow is likely to undergo a significant transformation in the near-term, perhaps using the recent PPG and Rohm & Haas actions as a roadmap," Vasnetsov wrote in a client note.
Honestly, do not expect much in the way of earth shattering news. It is not Liveris's style.
Just results..
Merrill Lynch Does The Impossible
Merrill Lynch (MER) this morning actually may have done the impossible, they made Citigroup (C) shareholders sit back and say "at least we are not them"..
Merrill had warned in early October that it would post a net loss of up to $.50 a share because of writing down $4.5 billion in collateralized debt obligations and subprime mortgages. Merrill today reported a net loss of $2.24 billion, or $2.82 a share, compared with net income of $3.05 billion, or a $3.17 share last year. The actual amount if write downs? $7.9 billion.
Okay, here is the deal. When you come out a pre-announce, you are then required to come in very close to this number. A few hundred million would have been acceptable but to almost double to estimate and be off by a almost $4 billion, heads will roll.
CEO Stan O'Neal said the company reviewed its remaining CDO positions "with more conservative assumptions," resulting in the write down amount almost doubling.
He continued, "We expect market conditions for subprime mortgage-related assets to continue to be uncertain and we are working to resolve the remaining impact from our positions. Away from the mortgage-related areas, we continue to believe that secular trends in the global economy are favorable and that our businesses can perform well, as they have all year." In July, O'Neal claimed in a letter to employees that the company's risk control procedures were "under control".
I never thought that I would say this but as a Citigroup shareholder I am really glad we have Chuck Prince and not Stan O'Neal as our CEO. That is how bad things are are Merrill..........
Merrill had warned in early October that it would post a net loss of up to $.50 a share because of writing down $4.5 billion in collateralized debt obligations and subprime mortgages. Merrill today reported a net loss of $2.24 billion, or $2.82 a share, compared with net income of $3.05 billion, or a $3.17 share last year. The actual amount if write downs? $7.9 billion.
Okay, here is the deal. When you come out a pre-announce, you are then required to come in very close to this number. A few hundred million would have been acceptable but to almost double to estimate and be off by a almost $4 billion, heads will roll.
CEO Stan O'Neal said the company reviewed its remaining CDO positions "with more conservative assumptions," resulting in the write down amount almost doubling.
He continued, "We expect market conditions for subprime mortgage-related assets to continue to be uncertain and we are working to resolve the remaining impact from our positions. Away from the mortgage-related areas, we continue to believe that secular trends in the global economy are favorable and that our businesses can perform well, as they have all year." In July, O'Neal claimed in a letter to employees that the company's risk control procedures were "under control".
I never thought that I would say this but as a Citigroup shareholder I am really glad we have Chuck Prince and not Stan O'Neal as our CEO. That is how bad things are are Merrill..........
Wal-Mart Lowers CapEx Outlook: Good, If Used for Repurchases
Wal-Mart (WMT) shares are selling off today because they announced they are reducing CapEx plans to $14.4 to$15.4 billion. Good..
Originally Wal-Mart had forecast capex of $17 billion for 2007 and then in July lowered that number to $15.5 billion when they also announced a $15 billion share repurchase plan. Chief Administrative Officer John Menzer said recently the retailer's goal was to beat that $15.5 billion figure. They will. For the first 8 months of this fiscal year, comparable sales at U.S. stores were up 1.5%, compared with a year-earlier gain of 2.6%. For its fiscal years 2009 and 2010, Wal-Mart forecast capital expenditures of $13.5 billion to $15.2 billion.
Investor apparently wanted more of a reduction but if the past is any predictor of the future, these new numbers are the upper limit of what we can expect. The good news is that they are steadily going down.
What really needs to be watched are the share repurchases. The last quarter $1 billion was bought and while a large number, it is a "base" level of what one would expect from a $178 billion company. Wal-Mart shares have not been this low in over 1/2 a decade now. One would expect them to be tripping over themselves to repurchase shares at these depressed prices like Sears Holdings (SHLD) Eddie Lampert is. I am looking for at least $1.5 to $2 billion in the current quarter, anything less is unacceptable. If current management is serious about shareholders, the almost $3 billion reduction in capex spending ought to go directly to repurchasing stock.
Originally Wal-Mart had forecast capex of $17 billion for 2007 and then in July lowered that number to $15.5 billion when they also announced a $15 billion share repurchase plan. Chief Administrative Officer John Menzer said recently the retailer's goal was to beat that $15.5 billion figure. They will. For the first 8 months of this fiscal year, comparable sales at U.S. stores were up 1.5%, compared with a year-earlier gain of 2.6%. For its fiscal years 2009 and 2010, Wal-Mart forecast capital expenditures of $13.5 billion to $15.2 billion.
Investor apparently wanted more of a reduction but if the past is any predictor of the future, these new numbers are the upper limit of what we can expect. The good news is that they are steadily going down.
What really needs to be watched are the share repurchases. The last quarter $1 billion was bought and while a large number, it is a "base" level of what one would expect from a $178 billion company. Wal-Mart shares have not been this low in over 1/2 a decade now. One would expect them to be tripping over themselves to repurchase shares at these depressed prices like Sears Holdings (SHLD) Eddie Lampert is. I am looking for at least $1.5 to $2 billion in the current quarter, anything less is unacceptable. If current management is serious about shareholders, the almost $3 billion reduction in capex spending ought to go directly to repurchasing stock.
Dow Chemical and Chemtura: Some, Not All
Dow Chemical (DOW) will not purchase all of Chemtura (CEM) as rumored but, look for an acquisition of portions of it.
Dow has said "our strategy involves growing the Company's performance portfolio - both through organic growth and through carefully targeted acquisitions - while, at the same time, lightening our basics portfolio - principally through joint ventures. And we've made no secret of the fact that, right now, we're looking at dozens of opportunities and potential ventures around the world to advance that strategy. Some are in an early assessment phase, others are further advanced."
So, what does Chemtura have that Dow could want? For starters it is currently a very willing seller. Earlier this year the company put itself up for sale but the auction failed. That does not mean it is still not for sale as Trian Fund Management LP, run by activist hedge fund investor Nelson Peltz, sported a 4% stake in the company as of June and has his firm's co-founder on Chemtura's board. Pelts's MO is to sell off assets of companies he invests in like he did with his investment in Wendy's (WEN) and the Tim Horton's (THC) chain sale. Additionally, Apollo Management, the private equity firm that owns nearly 2 percent of the company was rumored to be the lead bidder in the Chemtura auction before dropping out.
Chemtura does have a specialty chemical business growing profits at 35% YOY (year over year) and a crop protection business growing profits at 14% YOY. Dow has been aggressive in both areas in both acquisitions and joint ventures like the recent Monsanto (MON) announcement. Neither segment will be a large contributor to earnings (sales of roughly $600 million in the first 6 months of 2007) but at current level could be had for a song and would be accredive to earnings almost immediately (one of CEO Liveris's determinant factors). Q3 earning come out 11/2.
It would not be a blockbuster deal for Dow but one that would add steady profits in growing areas for Dow and best of all could be had a very reasonable prices.
Dow has said "our strategy involves growing the Company's performance portfolio - both through organic growth and through carefully targeted acquisitions - while, at the same time, lightening our basics portfolio - principally through joint ventures. And we've made no secret of the fact that, right now, we're looking at dozens of opportunities and potential ventures around the world to advance that strategy. Some are in an early assessment phase, others are further advanced."
So, what does Chemtura have that Dow could want? For starters it is currently a very willing seller. Earlier this year the company put itself up for sale but the auction failed. That does not mean it is still not for sale as Trian Fund Management LP, run by activist hedge fund investor Nelson Peltz, sported a 4% stake in the company as of June and has his firm's co-founder on Chemtura's board. Pelts's MO is to sell off assets of companies he invests in like he did with his investment in Wendy's (WEN) and the Tim Horton's (THC) chain sale. Additionally, Apollo Management, the private equity firm that owns nearly 2 percent of the company was rumored to be the lead bidder in the Chemtura auction before dropping out.
Chemtura does have a specialty chemical business growing profits at 35% YOY (year over year) and a crop protection business growing profits at 14% YOY. Dow has been aggressive in both areas in both acquisitions and joint ventures like the recent Monsanto (MON) announcement. Neither segment will be a large contributor to earnings (sales of roughly $600 million in the first 6 months of 2007) but at current level could be had for a song and would be accredive to earnings almost immediately (one of CEO Liveris's determinant factors). Q3 earning come out 11/2.
It would not be a blockbuster deal for Dow but one that would add steady profits in growing areas for Dow and best of all could be had a very reasonable prices.
Wednesday's Upgrades and Downgrades
UPGRRADES
Occidental Petro OXY JP Morgan Neutral » Overweight
Murphy Oil MUR JP Morgan Underweight » Neutral
Apple AAPL Caris & Company Above Average » Buy
Zoran ZRAN Needham & Co Hold » Buy
Arcelor Mittal MT HSBC Securities Underweight » Overweight
THQ Inc THQI Kaufman Bros Hold » Buy
Texas Instruments TXN Caris & Company Above Average » Buy
Tribune TRB Barrington Research Underperform » Mkt Perform
Assurant AIZ KeyBanc Capital Mkts Hold » Buy $65
Sunpower SPWR Lehman Brothers Equal-weight » Overweight
Frontier Airlines FRNT JP Morgan Underweight » Overweight
AmSurg AMSG Jefferies & Co Hold » Buy
Jarden JAH Citigroup Hold » Buy
Teradyne TER Citigroup Hold » Buy
Zoran ZRAN CIBC Wrld Mkts Sector Perform » Sector Outperform
Apollo Group APOL Robert W. Baird Neutral » Outperform
Watsco WSO Robert W. Baird Neutral » Outperform
Pall Corp PLL Robert W. Baird Neutral » Outperform
DOWNGRADES
ConocoPhillips COP JP Morgan Neutral » Underweight
Marathon Oil MRO JP Morgan Overweight » Neutral
Veeco Instruments VECO FTN Midwest Buy » Neutral
Texas Instruments TXN Credit Suisse Outperform » Neutral
Zions Bancorp ZION UBS Buy » Neutral
Vineyard Natl VNBC Oppenheimer Buy » Neutral
Ultra Clean Holdings UCTT Piper Jaffray Outperform » Market Perform
Air Tran Holdings AAI JP Morgan Overweight » Neutral
Texas Instruments TXN Lehman Brothers Overweight » Equal-weight
Texas Instruments TXN JP Morgan Overweight » Neutral
TorreyPines Therapeutics TPTX JMP Securities Strong Buy » Mkt Outperform
Texas Instruments TXN Jefferies & Co Buy » Hold
Mobile Mini MINI Deutsche Securities Buy » Hold
Kellogg K Citigroup Buy » Hold
Texas Instruments TXN UBS Buy » Neutral
Check Point Sftwr CHKP Jefferies & Co Buy » Hold
Hub Group HUBG Robert W. Baird Outperform » Neutral
Tuesday, October 23, 2007
"Fast Money" for Wednesday
Wednesday's Picks
Jeff Macke recommended Microsoft (MSFT). Open $30.90
Guy Adami said Wal-Mart (WMT) was beginning to look interesting after it got hit Tuesday. Open $43.93
Karen Finerman recommended Washington Group (WNG). Open $95.35
Tuesday's Results
Jeff Macke recommended buying Short Dow30 ProShares (DOG). Open $58.44 Close $57.94 LOSS
Guy Adami preferred Intel (INTC). Open $26.64 Close $26.80 GAIN
Karen Finerman liked Covidien, Ltd (COV). Open $40.71 Close $40.77 GAIN
Pete said Yahoo! (YHOO) is a buy. Open $29.85 Close $30.64 GAIN
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks). The percentage is the percentage of successful picks
Guy Adami= 35-22 = 63%
John Najarian= 13-4 = 76%
Jeff Macke= 39-31 = 53%
Pete Najarian= 28-24 = 53%
Tim Seymore= 4-3 = 57%
Karen Finerman= 19-12 = 60%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Tuesday's 52 Week Lows
VM Virgin Mobile Usa Inc 11.80
USBE US Bioenergy Corp 6.63
TMTA Transmeta Corp Del 4.27
SMTK Simtek Corp 3.67
SMRT Stein Mart Inc 6.71
PFB PFF Bancorp Inc 11.54
PEIX Pacific Ethanol Inc 7.92
PCS Metropcs Communicatio ... 19.48
PACR Pacer Intl Inc Tenn 16.15
MU Micron Technology Inc 9.94
MTG MGIC Investment Corpo ... 19.30
MRTN Marten Transport Ltd 13.55
MER Merrill Lynch & Co., Inc 65.11
LVLT Level 3 Communication ... 3.54
KYO Kyocera Corporation 83.06
KOSS Koss Corporation 18.10
EDS Electronic Data Syste ... 21.19
DWRI Design Within Reach Inc 4.38
DBRN Dress Barn Inc 15.32
CAG ConAgra Inc 23.50
CAC Camden Natl Corp 32.64
ALUS Alsius Corporation 4.02
RIMM To Enter China
Nothing like having the ability to offer your phones to a billion people to juice up your stock..
Research In Motion (RIMM) said it has signed an agreement with Alcatel-Lucent (ALU.PA) to distribute the BalckBerry in China.
From the Press release:
The announcement coincides with the first shipment of smartphones to distribution networks in China and availability for Chinese enterprise customers in key markets is expected to begin later this year. Alcatel-Lucent achieved certification of the 8700 model for the Chinese market through partnership with TCL Communications, a major mobile device manufacturer in China that holds the Alcatel brand for mobile handsets. RIM and TCL Communications are showcasing BlackBerry smartphones at the PT EXPO COMM CHINA 2007 show in Beijing this week.
“This strategic partnership perfectly matches Alcatel-Lucent’s global presence and strength in the Chinese market with the global awareness and popularity of RIM’s BlackBerry brand,” said Frederic Rose, President of Alcatel Shanghai Bell and President of Alcatel-Lucent’s Asia Pacific activities. “This agreement strengthens the distribution frame agreement that Alcatel-Lucent and RIM signed last year covering Africa, the Middle East, South East Asia and now extends to China.”
“Following our launch of the BlackBerry service with China Mobile, we are very pleased to now enter this smartphone distribution agreement with Alcatel-Lucent and Alcatel Shanghai Bell. Our partnership with Alcatel-Lucent has been very productive in other regions and has been key in our progress to import smartphones into the Chinese market,” said Jim Balsillie, Co-CEO of Research In Motion. “The BlackBerry platform offers robust and unmatched benefits for enterprise customers that wish to enhance mobile productivity and competitive advantage. We look forward to building on the early interest and momentum we are experiencing in China with both multinational and domestic corporations.”
RIMM shares, up 2000% in the last 5 years spiked another 12% on the news today. The Blackbery vs iPhone battle has been the topic of much conversation the past 6 months. If you put aside the phone and their features, one has to wonder how many more iPhone would be sold if Sprint (S) or Verizon (VZ) subscribers were able to buy them like they can a Blackberry.
I know Steve Jobs held out for the best deal for Apple (AAPL) he could get when he shopped the iPhone around and tried to re-invent the cell phone paradigm but one has to wonder now of any deal he got could really be worth it. He already had to drop the price $200 far earlier than he wanted to juice sales and now word is less people are planning to switch to AT&T than 6 months before the iPhone was released. If they do not switch, they are not buying the iPhone. Could any deal he may have gotten from AT&T be better than offering the iPhone to the 100 million plus subscribers at the #2 and #3 wireless companies? I doubt it and because AT&T snagged the iPhone for the next 4 1/2 years, it will be along time before we find out.
Meanwhile Blackberry fans can get their phone from every carrier out there...
Research In Motion (RIMM) said it has signed an agreement with Alcatel-Lucent (ALU.PA) to distribute the BalckBerry in China.
From the Press release:
The announcement coincides with the first shipment of smartphones to distribution networks in China and availability for Chinese enterprise customers in key markets is expected to begin later this year. Alcatel-Lucent achieved certification of the 8700 model for the Chinese market through partnership with TCL Communications, a major mobile device manufacturer in China that holds the Alcatel brand for mobile handsets. RIM and TCL Communications are showcasing BlackBerry smartphones at the PT EXPO COMM CHINA 2007 show in Beijing this week.
“This strategic partnership perfectly matches Alcatel-Lucent’s global presence and strength in the Chinese market with the global awareness and popularity of RIM’s BlackBerry brand,” said Frederic Rose, President of Alcatel Shanghai Bell and President of Alcatel-Lucent’s Asia Pacific activities. “This agreement strengthens the distribution frame agreement that Alcatel-Lucent and RIM signed last year covering Africa, the Middle East, South East Asia and now extends to China.”
“Following our launch of the BlackBerry service with China Mobile, we are very pleased to now enter this smartphone distribution agreement with Alcatel-Lucent and Alcatel Shanghai Bell. Our partnership with Alcatel-Lucent has been very productive in other regions and has been key in our progress to import smartphones into the Chinese market,” said Jim Balsillie, Co-CEO of Research In Motion. “The BlackBerry platform offers robust and unmatched benefits for enterprise customers that wish to enhance mobile productivity and competitive advantage. We look forward to building on the early interest and momentum we are experiencing in China with both multinational and domestic corporations.”
RIMM shares, up 2000% in the last 5 years spiked another 12% on the news today. The Blackbery vs iPhone battle has been the topic of much conversation the past 6 months. If you put aside the phone and their features, one has to wonder how many more iPhone would be sold if Sprint (S) or Verizon (VZ) subscribers were able to buy them like they can a Blackberry.
I know Steve Jobs held out for the best deal for Apple (AAPL) he could get when he shopped the iPhone around and tried to re-invent the cell phone paradigm but one has to wonder now of any deal he got could really be worth it. He already had to drop the price $200 far earlier than he wanted to juice sales and now word is less people are planning to switch to AT&T than 6 months before the iPhone was released. If they do not switch, they are not buying the iPhone. Could any deal he may have gotten from AT&T be better than offering the iPhone to the 100 million plus subscribers at the #2 and #3 wireless companies? I doubt it and because AT&T snagged the iPhone for the next 4 1/2 years, it will be along time before we find out.
Meanwhile Blackberry fans can get their phone from every carrier out there...
Countrywide's Brilliant Move
Even though I think CEO Mozillo sold shares based on the upcoming credit issue and will be found guilty of doing so, this move by Countrywide (CFC) will buy them a level of goodwill with consumers that will benefit them for years.
Countrywide has enacted a "Home Preservation" program aimed at helping some 82,000 customers holding approximately $11.4 billion in loans. There are three facets to the program for customers who qualified for a subprime, adjustable-rate loan and are facing a rate rest through the end of 2008.
The first, aimed at Countrywide customers with a strong payment history, will offer borrowers options to refinance into prime or Federal Housing Administration loans. For those with credit issues, Countrywide will offer Fannie Mae or Freddie Mac's expanded criteria programs.
The second is for for Countrywide borrowers who have both prime and subprime loans, but are unable to qualify for a refinance and are likely to have difficulty affording an upcoming reset. Countrywide will supplement its early notification letter to borrowers by calling no later than three months prior to the reset to determine their financial circumstances and develop affordable solutions.
Finally, for subprime borrowers who are currently delinquent and are experiencing financial difficulties as a result of a recent reset, Countrywide has a simplified loan modification process, and is in the process of sending letters to these borrowers offering a pre-determined and pre-approved rate reduction.
Think about it. Is there anyone out there who will not at least contact and inquire into a Countrywide mortgage next time they are looking? Countrywide is the first lender to voluntarily offer to assist homeowners facing resets that will eventually cause them to lose their homes. It is a double win for Countrywide because they can stop foreclosure on a home, a situation in which nobody wins, and they now become the "lender who helped people save their homes". That is a reputation that you just cannot place a price tag on.
It will also force the other banks now to follow suit to help additional borrowers. If this effort takes hold at other banks, it actually buys Countrywide even more goodwill as the effort will gain even more publicity and Countrywide's actions will become known to more people as every news story about it will undoubtedly mention Countrywide's leadership in the effort.
I do not have a subprime loan nor am I am a subprime borrower but if I do decide to refinance when rates fall, I will take a look at what Countrywide has to offer. I will do this not because I fell my ability to repay would be at risk but I do recognize that bad things happen to people all the time and having my largest monthly obligations in the hands of people who have demonstrated a willingness to help people would give me a certain level of comfort. Like I have said before, most people tend to think similarly and I would be willing to bet there a a whole bunch of folks out there who, when the time comes will at least see what countrywide is offering for mortgages.
Brilliant.... I wonder how long it will take Bank of Amercia (BAC), Citigroup (C), Washington Mutual (WM) and other to respond in kind?
Countrywide has enacted a "Home Preservation" program aimed at helping some 82,000 customers holding approximately $11.4 billion in loans. There are three facets to the program for customers who qualified for a subprime, adjustable-rate loan and are facing a rate rest through the end of 2008.
The first, aimed at Countrywide customers with a strong payment history, will offer borrowers options to refinance into prime or Federal Housing Administration loans. For those with credit issues, Countrywide will offer Fannie Mae or Freddie Mac's expanded criteria programs.
The second is for for Countrywide borrowers who have both prime and subprime loans, but are unable to qualify for a refinance and are likely to have difficulty affording an upcoming reset. Countrywide will supplement its early notification letter to borrowers by calling no later than three months prior to the reset to determine their financial circumstances and develop affordable solutions.
Finally, for subprime borrowers who are currently delinquent and are experiencing financial difficulties as a result of a recent reset, Countrywide has a simplified loan modification process, and is in the process of sending letters to these borrowers offering a pre-determined and pre-approved rate reduction.
Think about it. Is there anyone out there who will not at least contact and inquire into a Countrywide mortgage next time they are looking? Countrywide is the first lender to voluntarily offer to assist homeowners facing resets that will eventually cause them to lose their homes. It is a double win for Countrywide because they can stop foreclosure on a home, a situation in which nobody wins, and they now become the "lender who helped people save their homes". That is a reputation that you just cannot place a price tag on.
It will also force the other banks now to follow suit to help additional borrowers. If this effort takes hold at other banks, it actually buys Countrywide even more goodwill as the effort will gain even more publicity and Countrywide's actions will become known to more people as every news story about it will undoubtedly mention Countrywide's leadership in the effort.
I do not have a subprime loan nor am I am a subprime borrower but if I do decide to refinance when rates fall, I will take a look at what Countrywide has to offer. I will do this not because I fell my ability to repay would be at risk but I do recognize that bad things happen to people all the time and having my largest monthly obligations in the hands of people who have demonstrated a willingness to help people would give me a certain level of comfort. Like I have said before, most people tend to think similarly and I would be willing to bet there a a whole bunch of folks out there who, when the time comes will at least see what countrywide is offering for mortgages.
Brilliant.... I wonder how long it will take Bank of Amercia (BAC), Citigroup (C), Washington Mutual (WM) and other to respond in kind?
Tuesday's Links
Long term, Cramer, Myths, Busters
- Here is a nice piece on the advantages to long term investing.
- Adam does a great job detailing this call by Cramer.
- Here is a fantastic post about how myths get started, and how hard it then becomes to get the truth out.
- Speaking of myths, if you do not watch this show you are missing out. These guys take and debunk the myths show after show.
- Here is a nice piece on the advantages to long term investing.
- Adam does a great job detailing this call by Cramer.
- Here is a fantastic post about how myths get started, and how hard it then becomes to get the truth out.
- Speaking of myths, if you do not watch this show you are missing out. These guys take and debunk the myths show after show.
Sherwin Williams Defies the Consumer
With the whole retail landscape like Home Depot (HD), Target (TGT), Lowes (LOW) and others reducing estimates and facing trouble, Sherwin Williams (SHW) just keeps increasing sales and earnings. Sherwin, far from reducing estimates is looking at 13% EPS growth for 2007.
First, the results:
* Net sales increased to $2.20 billion in the quarter and $6.15 billion in nine months
*Diluted earnings per share increased to $1.55 in the quarter and $3.88 in nine months
* Opened 76 net new stores in nine months: 59 in Paint Stores Group, 17 in Global Group
* Completed four acquisitions during the quarter including Columbia Paint & Coatings Co.
* Raising guidance for full year diluted net income per share to between $4.70 to $4.75 per share
*Four acquisitions completed in the third quarter, including Columbia Paint & Coatings Co. completed at the end of the quarter, and two acquisitions completed during the second quarter, including M. A. Bruder & Sons Incorporated, increased
consolidated sales by 2.0% in the quarter and by 1.0% in nine months. Acquisition costs reduced EPS by $.02
*The Company acquired 5,550,000 shares of its common stock through open market purchases during the quarter at an average price of $67 a share.
Here are the numbers that ultimately matter. Diluted net income per common share increased 19.2% in Q3 to $1.55 per share from $1.30 per share in 2006 and 12.1% in nine months to $3.88 per share from $3.46 per share last year. Now Sherwin also raised full year guidance and based on history, not only can investors count on that number, but expect them to come in ahead of it. shares sport a near 2% dividend and trade at a paltry PE of 15 which is lower than the S&P average of 16.7 despite growing earnings almost twice as much this year. Add to this the recent 30 million share repurchase plan that represents 23% of the outstanding shares, and you got the prefect conditions for appreciation. More insight was given into the repurchase plan on the call. Sherwin has been repurchasing about 10 million a year based on previous repurchase plans so expect about 10 million to be bought in 2008 and that alone will boost EPS 8% next year.
CEO Christopher Connor said "We are pleased that all our operating segments continue to achieve segment profit growth on a year-over-year basis. Our Consumer Group management continues to drive efficiencies that have helped to partially offset that Group’s sales reductions. Consolidated gross margins continue to improve as our operating segment teams strive to return our gross margins to more normal run rates after being pressured by the significant rise in raw material costs over the past three years. We expect the businesses and product lines acquired during 2007 to contribute to our sales and profit goals in the future."
Back in July I said that the expansion in both globally and in the domestic paint store segment was going to enable Sherwin to brush off the US housing market. So, the question now has to be, how did these segments do? The Global Group’s segment profit improved $5.3 million, or 12.4%, to $48.0 million in the quarter and $23.1 million, or 21.1%, to $132.3 million in nine months. Global Group's EPS is expected to grow at "high single to low double digits for the foreseeable future." Paint Stores Group segment profit increased $21.7 million, or 9.6%, to $248.4 million in the quarter and $51.7 million, or 9.3%, to $608.9 million in nine months. Case closed.
Leap Paint litigation. Rhode Island "proceeding slowly". Ohio, "all lawsuits have been filed and motions to dismiss have been submitted". That is it, a 2 minute review by the spokesperson. Translation? The litigation no longer merits serious discussion. For day to day updates on all the lead paint litigation please visit Jane Genova's Law and More
Sherwin is firing on all cylinders in an challenging US environment and is selling at a discount to the market despite growing much faster than it. When housing turns (it will) Sherwin 's earnings will jump much faster than the 13% they are now. Currently Sherwin is a great ValuePlay
First, the results:
* Net sales increased to $2.20 billion in the quarter and $6.15 billion in nine months
*Diluted earnings per share increased to $1.55 in the quarter and $3.88 in nine months
* Opened 76 net new stores in nine months: 59 in Paint Stores Group, 17 in Global Group
* Completed four acquisitions during the quarter including Columbia Paint & Coatings Co.
* Raising guidance for full year diluted net income per share to between $4.70 to $4.75 per share
*Four acquisitions completed in the third quarter, including Columbia Paint & Coatings Co. completed at the end of the quarter, and two acquisitions completed during the second quarter, including M. A. Bruder & Sons Incorporated, increased
consolidated sales by 2.0% in the quarter and by 1.0% in nine months. Acquisition costs reduced EPS by $.02
*The Company acquired 5,550,000 shares of its common stock through open market purchases during the quarter at an average price of $67 a share.
Here are the numbers that ultimately matter. Diluted net income per common share increased 19.2% in Q3 to $1.55 per share from $1.30 per share in 2006 and 12.1% in nine months to $3.88 per share from $3.46 per share last year. Now Sherwin also raised full year guidance and based on history, not only can investors count on that number, but expect them to come in ahead of it. shares sport a near 2% dividend and trade at a paltry PE of 15 which is lower than the S&P average of 16.7 despite growing earnings almost twice as much this year. Add to this the recent 30 million share repurchase plan that represents 23% of the outstanding shares, and you got the prefect conditions for appreciation. More insight was given into the repurchase plan on the call. Sherwin has been repurchasing about 10 million a year based on previous repurchase plans so expect about 10 million to be bought in 2008 and that alone will boost EPS 8% next year.
CEO Christopher Connor said "We are pleased that all our operating segments continue to achieve segment profit growth on a year-over-year basis. Our Consumer Group management continues to drive efficiencies that have helped to partially offset that Group’s sales reductions. Consolidated gross margins continue to improve as our operating segment teams strive to return our gross margins to more normal run rates after being pressured by the significant rise in raw material costs over the past three years. We expect the businesses and product lines acquired during 2007 to contribute to our sales and profit goals in the future."
Back in July I said that the expansion in both globally and in the domestic paint store segment was going to enable Sherwin to brush off the US housing market. So, the question now has to be, how did these segments do? The Global Group’s segment profit improved $5.3 million, or 12.4%, to $48.0 million in the quarter and $23.1 million, or 21.1%, to $132.3 million in nine months. Global Group's EPS is expected to grow at "high single to low double digits for the foreseeable future." Paint Stores Group segment profit increased $21.7 million, or 9.6%, to $248.4 million in the quarter and $51.7 million, or 9.3%, to $608.9 million in nine months. Case closed.
Leap Paint litigation. Rhode Island "proceeding slowly". Ohio, "all lawsuits have been filed and motions to dismiss have been submitted". That is it, a 2 minute review by the spokesperson. Translation? The litigation no longer merits serious discussion. For day to day updates on all the lead paint litigation please visit Jane Genova's Law and More
Sherwin is firing on all cylinders in an challenging US environment and is selling at a discount to the market despite growing much faster than it. When housing turns (it will) Sherwin 's earnings will jump much faster than the 13% they are now. Currently Sherwin is a great ValuePlay
The Wal-Mart International Push Continues
Wal-Mart (WMT) announced Monday it will spend $875 million to purchase the remaining 49.1% it currently does not own of its money losing Japanese subsidiary, Seiyu Ltd. The plan is too speed up management changes and reverse slumping performance.
Seiyu's board supports the 100 billion yen tender offer. The Japanese retailer will be delisted from the Tokyo Stock Exchange if the offer, set to run from Oct. 23 to Dec. 4., is successful, it said. "Today's announcement is a reaffirmation of our commitment to Japan, the second largest economy in the world," Wal-Mart Vice Chairman Mike Duke said in the statement. Rumors were that Wal-Mart would exit the market but when you consider they have made significant investments setting up a distribution facility, introducing its computerized systems, remodeling stores and opening large-scale supermarkets in the country, an exit was unlikely.
Wal-Mart first entered the Japanese market in 2002 and has been consistently raising its stake in the Japanese retailer, which has some 400 stores nationwide. Wal-Mart stuck with the Seiyu brand, familiar to Japanese, instead of using the Wal-Mart name. Surprisingly, Seiyu has struggled amid intense competition from smaller retail chains and major local companies that are introducing large Wal-Mart-style stores and price-cutting. Essentially, they out Wal-Marted Wal-Mart.
Hopefully, the first thing Wal-Mart will do is change the name and run as a Wal-Mart. If competitors are running their businesses like a Wal-Mart and it is working, why not let folks know the gloves are off and if its Wal-Mart style stores you want, you got it? Give then what they want.
On another note it is great to see the international commitment from management. I have been beating this drum more than once since we first bought shares in June and then again in August. If the company wants to expand its footprint, overseas is the place to do it now.
Seiyu's board supports the 100 billion yen tender offer. The Japanese retailer will be delisted from the Tokyo Stock Exchange if the offer, set to run from Oct. 23 to Dec. 4., is successful, it said. "Today's announcement is a reaffirmation of our commitment to Japan, the second largest economy in the world," Wal-Mart Vice Chairman Mike Duke said in the statement. Rumors were that Wal-Mart would exit the market but when you consider they have made significant investments setting up a distribution facility, introducing its computerized systems, remodeling stores and opening large-scale supermarkets in the country, an exit was unlikely.
Wal-Mart first entered the Japanese market in 2002 and has been consistently raising its stake in the Japanese retailer, which has some 400 stores nationwide. Wal-Mart stuck with the Seiyu brand, familiar to Japanese, instead of using the Wal-Mart name. Surprisingly, Seiyu has struggled amid intense competition from smaller retail chains and major local companies that are introducing large Wal-Mart-style stores and price-cutting. Essentially, they out Wal-Marted Wal-Mart.
Hopefully, the first thing Wal-Mart will do is change the name and run as a Wal-Mart. If competitors are running their businesses like a Wal-Mart and it is working, why not let folks know the gloves are off and if its Wal-Mart style stores you want, you got it? Give then what they want.
On another note it is great to see the international commitment from management. I have been beating this drum more than once since we first bought shares in June and then again in August. If the company wants to expand its footprint, overseas is the place to do it now.
Tuesday's Upgrades and Downgrades
UPGRADES
Green Bankshares GRNB Stanford Research Hold » Buy
Cirrus Logic CRUS Longbow Neutral » Buy
Hershey Foods HSY Bernstein Underperform » Mkt Perform
Novatel Wireless NVTL Morgan Joseph Hold » Buy
RadiSys RSYS Cantor Fitzgerald Hold » Buy
Xerox XRX Citigroup Sell » Hold
Interpublic IPG Bear Stearns Peer Perform » Outperform
Stericycle SRCL JP Morgan Neutral » Overweight
Overstock.com OSTK Piper Jaffray Underperform » Market Perform
Altria MO UBS Neutral » Buy
IMS Health RX Friedman Billings Mkt Perform » Outperform
Clearwire CLWR Jefferies & Co Hold » Buy
Citrix Systems CTXS Deutsche Securities Hold » Buy
DOWNGRADES
Radiation Therapy Services RTSX Dougherty & Company Buy » Neutral
Popular Inc BPOP B. Riley & Co Buy » Neutral
Met-Pro Corp MPR Brean Murray Buy » Hold
Ashland ASH Credit Suisse Neutral » Underperform
DuPont DD Citigroup Buy » Hold
Robt Half RHI Banc of America Sec Buy » Neutral
Rio Tinto PLC RTP Citigroup Buy » Hold
BHP Limited BHP Citigroup Buy » Hold
Anglo American AAUK Citigroup Buy » Hold
Dollar Tree DLTR JP Morgan Neutral » Underweight
PMI Group PMI Lehman Brothers Overweight » Underweight
Washington Mutual WM Lehman Brothers Overweight » Equal-weight
IndyMac Banc IMB Lehman Brothers Equal-weight » Underweight
Countrywide CFC Lehman Brothers Equal-weight » Underweight
Universal Technical Institute UTI Lehman Brothers Equal-weight » Underweight
Discover Financial Services DFS Lehman Brothers Overweight » Equal-weight
Capital One COF Lehman Brothers Overweight » Equal-weight
American Express AXP Lehman Brothers Overweight » Equal-weight
Angiotech Pharm ANPI RBC Capital Mkts Outperform » Sector Perform
Sepracor SEPR UBS Neutral » Sell
Ritchie Bros. RBA CIBC Wrld Mkts Sector Perform » Sector Underperform
Monday, October 22, 2007
"Fast Money" for Tuesday
Tuesday's Picks
Jeff Macke recommended buying Short Dow30 ProShares (DOG). Open $58.44
Guy Adami preferred Intel (INTC). Open $26.64
Karen Finerman liked Covidien, Ltd (COV). Open $40.71
Pete said Yahoo! (YHOO) is a buy. Open $29.85
Monday's Results
Jeff Macke recommended getting long Intel (INTC). Open $26.30 Close $26.64 GAIN
Guy Adami told the panel to short Exxon Mobil (XOM). Open $92.14 Close $90.91 GAIN
Karen Finerman preferred to play defense with Altria (MO).Open $70.50 Close $71.47 GAIN
Pete Najarian said Apple (AAPL) was a buy. Open $170.42 Close $174.36 GAIN
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks). The percentage is the percentage of successful picks
Guy Adami= 34-22 = 61%
John Najarian= 13-4 = 76%
Jeff Macke= 39-30 = 55%
Pete Najarian= 27-24 = 52%
Tim Seymore= 4-3 = 57%
Karen Finerman= 18-12 = 59%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Monday's 52 Week Lows
WOS Wolseley Plc 15.89
WAVE Nextwave Wireless Inc 5.35
WAG Walgreen Co. 37.25
VVTV ValueVision Internati ... 6.47
USBE US Bioenergy Corp 6.75
TM Toyota Motor Corp 105.83
TER Teradyne, Inc 12.22
TARG Targanta Therapeutics ... 7.79
SYMM Symmetricom Inc 4.33
SXI Standex International ... 20.21
RMIX U S Concrete Inc 5.39
RF Regions Financial Cor ... 26.14
RBS Royal Bk Scotland Gro ... 10.29
POOL Pool Corporation 23.85
PMTI Palomar Med Technolog ... 24.91
PGR The Progressive Corpo ... 18.29
PFBC Preferred Bank 32.80
MWA Mueller Wtr Prods Inc 11.40
MTG MGIC Investment Corpo ... 20.57
MEG Media General 26.58
MDT Medtronic, Inc 47.22
GEHL Gehl Co 19.83
GCI Gannett Co., Inc 41.02
ERIC Ericsson L M Tel Co 28.45
DKS Dicks Sporting Goods Inc 32.05
DFS Discover Finl Svcs 19.38
CAG ConAgra Inc 23.88
CACB Cascade Bancorp 18.78
CAB Cabelas Inc 19.43
C Citigroup, Inc 42.26
Monday's Links
A Thank you, Rush, Torre, JD Drew, Defendants Internet Strategy
- I always like to thank those who link to me when I am aware of it. My video post on the Buffet interview was link to here.
- It must have killed Democrats to actually say something nice about Limbaugh.
- Cashman and Stienbrenner are just idiots...... Red Sox fans rejoice at Torre telling them where to go. He, unlike them is a class act.
- As soon as JD hit the grand slam for the Red Sox Saturday night, I had the same thought as to how it pertained to investing. Roger, however beat me to it with this nice post
- More and more corporate defendants want to know the answer to this from their law firms.
- I always like to thank those who link to me when I am aware of it. My video post on the Buffet interview was link to here.
- It must have killed Democrats to actually say something nice about Limbaugh.
- Cashman and Stienbrenner are just idiots...... Red Sox fans rejoice at Torre telling them where to go. He, unlike them is a class act.
- As soon as JD hit the grand slam for the Red Sox Saturday night, I had the same thought as to how it pertained to investing. Roger, however beat me to it with this nice post
- More and more corporate defendants want to know the answer to this from their law firms.
AT&T : An iPhone Sales Anchor
A recent poll show customers planning on switching to the AT&T (T) network has not been this low since 2006. Since one can only buy an iPhone on this network, isn't that bad news for Apple's (AAPL) US iPhone sales>?
The survey show those planning to switch to the AT&T network peaked in June, just prior to the release of the iPhone and fell off a cliff in October.
The explanations for this are obvious. The folks who were going to by the phone no matter what the cost where the reason for the run-up in June. Since that pent up demand was satisfied, we are now into the people who will by the phone based not just because it is an Apple product, but because of value considerations. Those consideration are only two things, the cost of the product and the cost of switching plans. Apple has slightly relieved the first dropping the price from initially insane $599 to a slightly more reasonable $399. While,this angered those folks who paid the $599, Apple did try to kiss and make up by refunding these folks $100.
If you remember back in early May I said that the iPhone would not gain mass acceptance chiefly because of the price and the fact that it is available only on one network, AT&T. The #1 complaint among Apple users? The painfully slow AT&T network.
With Apple devotees not happy with AT&T and the number of current cell user planning to switch to AT&T dropping like a stone, that all adds up to US iPhone demand falling fast also. Worse is the fact that those planning to switch to Verizon (VZ) is on the rise. Could this mean that with Verizon unveiling its iPhone competitor in time for the holidays, people are choosing the network over the phone? It is a little early to tell for sure but that is what it looks like initially.
Apple has sold 1.3 million units to date so far which puts it about 40% behind the pace (2.5 million per quarter) it needs to be at to sell the 10 million unit goal CEO Jobs set before the launch. I know a few folks who have the phone and like it but lament the network it is on. The problem for Apple is word is getting around and my guess is folks who may be buyers are sitting back waiting for another price drop OR, the phone to be available on other networks before making the purchase.
Will this kill Apple? No. Mac sales are taking off and the is not viable competition to the iPod. It will show that Apple is not perfect and that may scare a few folks. Apple releases earning tonight after the bell so we will know so enough. No skin off my back either way but it will be interesting to watch
The survey show those planning to switch to the AT&T network peaked in June, just prior to the release of the iPhone and fell off a cliff in October.
The explanations for this are obvious. The folks who were going to by the phone no matter what the cost where the reason for the run-up in June. Since that pent up demand was satisfied, we are now into the people who will by the phone based not just because it is an Apple product, but because of value considerations. Those consideration are only two things, the cost of the product and the cost of switching plans. Apple has slightly relieved the first dropping the price from initially insane $599 to a slightly more reasonable $399. While,this angered those folks who paid the $599, Apple did try to kiss and make up by refunding these folks $100.
If you remember back in early May I said that the iPhone would not gain mass acceptance chiefly because of the price and the fact that it is available only on one network, AT&T. The #1 complaint among Apple users? The painfully slow AT&T network.
With Apple devotees not happy with AT&T and the number of current cell user planning to switch to AT&T dropping like a stone, that all adds up to US iPhone demand falling fast also. Worse is the fact that those planning to switch to Verizon (VZ) is on the rise. Could this mean that with Verizon unveiling its iPhone competitor in time for the holidays, people are choosing the network over the phone? It is a little early to tell for sure but that is what it looks like initially.
Apple has sold 1.3 million units to date so far which puts it about 40% behind the pace (2.5 million per quarter) it needs to be at to sell the 10 million unit goal CEO Jobs set before the launch. I know a few folks who have the phone and like it but lament the network it is on. The problem for Apple is word is getting around and my guess is folks who may be buyers are sitting back waiting for another price drop OR, the phone to be available on other networks before making the purchase.
Will this kill Apple? No. Mac sales are taking off and the is not viable competition to the iPod. It will show that Apple is not perfect and that may scare a few folks. Apple releases earning tonight after the bell so we will know so enough. No skin off my back either way but it will be interesting to watch
The Dow Chemical (DOW), DuPont (DD) Drama Deepens
The drama between Dow Chemical (DOW), DuPont (DD) and JP Morgan (JPM) won't go away ands if anything, looks to become a fascinating read.
In May I wrote about an upcoming SEC investigation in the mess, "The investigation might also probe Dow's attempt last autumn to buy DuPont (DD)in a deal worth over $40 billion. At the time, neither company disclosed that Dow had approached DuPont. DuPont turned Dow down, but its stock rose 15% between September and December. The SEC is also examining the unusual trading that resulted from their actions in both companies stocks. Another question that will need to be answered is who at JP Morgan let the "cat out of the bag" to folks who then piled into shares of DuPont or, was it only Krienbeg and Reinhard since it appears JP Morgan was working both deals simultaneously?"
Romeo Kreinberg, former head of the specialty plastics and chemicals units and one of the executives fired , claimed in a court filing recently that JPMorgan CEO Jamie Dimon implicated him in the dealings to "curry favor" with Dow Chemical, a client.
"JPMorgan was intimately aware -- and in fact acted as the driver of -- leveraged buyout efforts targeting Dow," Kreinberg said in court papers. "At all relevant times, the bank owed Dow a fiduciary duty that was breached when it participated in leveraged buyout efforts that it failed to disclose."
Kreinberg requested in his court filing last Friday that Dimon and JP Morgan be added as defendants on the suit, claiming any breach of fiduciary duty committed was by the bank, not him.
JPMorgan provided Dow with a so-called sum-of-the-parts study that analyzed the value of the company's various businesses, Dow spokesman Chris Huntley said. Huntley added that study was unsolicited and that "it's the sort of thing we routinely receive from investment banks, and we did nothing with it."
This is going to get good. I postulated in May that Dimon and JP Morgan were playing both sides of the fence and most likely had much more culpability here than initially thought. This is just beginning and ought to get very interesting. It is good that Kreinburg is focusing on Dimon and JP Morgan. It would lead us to believe as I have said that Dow CEO Andrew Liveris indeed reacted to event and did not participate in them.
I would love to see the "sum of the parts" study Morgan provided DOW though..
In May I wrote about an upcoming SEC investigation in the mess, "The investigation might also probe Dow's attempt last autumn to buy DuPont (DD)in a deal worth over $40 billion. At the time, neither company disclosed that Dow had approached DuPont. DuPont turned Dow down, but its stock rose 15% between September and December. The SEC is also examining the unusual trading that resulted from their actions in both companies stocks. Another question that will need to be answered is who at JP Morgan let the "cat out of the bag" to folks who then piled into shares of DuPont or, was it only Krienbeg and Reinhard since it appears JP Morgan was working both deals simultaneously?"
Romeo Kreinberg, former head of the specialty plastics and chemicals units and one of the executives fired , claimed in a court filing recently that JPMorgan CEO Jamie Dimon implicated him in the dealings to "curry favor" with Dow Chemical, a client.
"JPMorgan was intimately aware -- and in fact acted as the driver of -- leveraged buyout efforts targeting Dow," Kreinberg said in court papers. "At all relevant times, the bank owed Dow a fiduciary duty that was breached when it participated in leveraged buyout efforts that it failed to disclose."
Kreinberg requested in his court filing last Friday that Dimon and JP Morgan be added as defendants on the suit, claiming any breach of fiduciary duty committed was by the bank, not him.
JPMorgan provided Dow with a so-called sum-of-the-parts study that analyzed the value of the company's various businesses, Dow spokesman Chris Huntley said. Huntley added that study was unsolicited and that "it's the sort of thing we routinely receive from investment banks, and we did nothing with it."
This is going to get good. I postulated in May that Dimon and JP Morgan were playing both sides of the fence and most likely had much more culpability here than initially thought. This is just beginning and ought to get very interesting. It is good that Kreinburg is focusing on Dimon and JP Morgan. It would lead us to believe as I have said that Dow CEO Andrew Liveris indeed reacted to event and did not participate in them.
I would love to see the "sum of the parts" study Morgan provided DOW though..
Harley Davidson (HOG)....... Not Yet
Harley Davidson (HOG) released Q3 results Friday and said it expects its current "weakness" to persist into 2008.
Q3 profit fell 15.3 percent due to weak sales of its motorcycles in the U.S. Net income totaled $265 million, or $1.07 per share, compared with a profit of $312.7 million, or $1.20 per share, a year ago. Revenue dropped 5.8 percent to $1.54 billion from $1.64 billion last year.
Worldwide retail sales of Harley-Davidson motorcycles were flat in the quarter, down 0.2 percent ans shipments were down 10.8 percent to 86,535 units. Domestically, sales were down 2.5 percent, while the overall U.S. heavyweight market fell 4.4 percent. International sales were up 8.8 percent.
HOG maintained its earnings expectations for the year, which it lowered last month due to slumping U.S. sales. They expect 2007 net income to drop 4 percent to 6 percent, to a range of $3.69 to $3.77 per share
They also repurchased 9.7 million shares of stock, at a cost of $509 million, during the quarter. YTD, the company has repurchased 17.3 million shares at a cost of $1 billion.
BUY? No. Not yet. In February, I posted that the price then at $75 would fall and at $60, would present a good value. As the credit situation worsened throughout the spring and summer I updated HOG shares in June and lowered my target price to $54 dollars a share. Then, after a trio to Laconia, NH, based on my observations and after talking to the sales staff, I posted in August that Harley was going to experience more sales declines and that the price, then in the mid $50's was going to reach into the $40's before the year was out. Harley confirmed my observations a few weeks later and at that point I said "anything below $45 is a no brainer buy".
Shares today sit at $47, 37% off their highs. Buy? Just wait. There does not seem to be a impetus for shares and bike sales in the US anytime soon. Many Harley's recently were bought with home equity money or through Harley financing much of which was "subprime". Those financing avenues have dried up and do not look to rebound in the near future. This issue was addressed on the recent conference call when CFO Larry Hund said, "Consistent with previous quarters, HDFS continues to operate in a challenging consumer credit environment. Regarding past due accounts, the 30-day delinquency rate for managed retail motorcycle loans at the end of the third quarter was 4.91% compared to 4.46% for the third quarter of 2006. Managed retail loans include both those which we keep and those which we sell through securitization.
As expected, credit losses on managed retail motorcycle loans increased in the first nine months of 2007 compared to 2006. Losses totaled 1.65% on an annualized basis, compared to 1.18% for the first nine months of 2006. The increased losses are due to continued pressure on recovery values for repossessed motorcycles as well as a higher incidence of loss, primarily driven by the increase in delinquent accounts."
International sales will make up the difference and cause earnings to just stagnate rather than fall dramatically as witnessed in the last quarter. In Q3 international shipments of 20,779 units were up 24.8% compared to the same quarter last year. This international shipment mix represented 24% of our total third quarter shipment volumes compared to 17.2% in the third quarter 2006.
For the first nine months of the year, domestic shipments represented 73.2% of the total shipments, down from 77.5% compared to the same period last year. International shipments for the first nine months of the year represented 26.8% of the mix, up from 22.5% in the first nine months of 2006.
Impatient investors will get sick of sitting on dead money and begin to sell. We will see a share price below $45 if not this year, then early next. I am going to go even further and say we could get it for $42.
I do not see mush more downside unless the economy worsens further. If you need to own HOG shares, buy then here, your downside isn't not too great. If you can be patient, there is another 10% or more downside to shares.
I want to own Harley shares and think I just may get a great deal soon enough.
Q3 profit fell 15.3 percent due to weak sales of its motorcycles in the U.S. Net income totaled $265 million, or $1.07 per share, compared with a profit of $312.7 million, or $1.20 per share, a year ago. Revenue dropped 5.8 percent to $1.54 billion from $1.64 billion last year.
Worldwide retail sales of Harley-Davidson motorcycles were flat in the quarter, down 0.2 percent ans shipments were down 10.8 percent to 86,535 units. Domestically, sales were down 2.5 percent, while the overall U.S. heavyweight market fell 4.4 percent. International sales were up 8.8 percent.
HOG maintained its earnings expectations for the year, which it lowered last month due to slumping U.S. sales. They expect 2007 net income to drop 4 percent to 6 percent, to a range of $3.69 to $3.77 per share
They also repurchased 9.7 million shares of stock, at a cost of $509 million, during the quarter. YTD, the company has repurchased 17.3 million shares at a cost of $1 billion.
BUY? No. Not yet. In February, I posted that the price then at $75 would fall and at $60, would present a good value. As the credit situation worsened throughout the spring and summer I updated HOG shares in June and lowered my target price to $54 dollars a share. Then, after a trio to Laconia, NH, based on my observations and after talking to the sales staff, I posted in August that Harley was going to experience more sales declines and that the price, then in the mid $50's was going to reach into the $40's before the year was out. Harley confirmed my observations a few weeks later and at that point I said "anything below $45 is a no brainer buy".
Shares today sit at $47, 37% off their highs. Buy? Just wait. There does not seem to be a impetus for shares and bike sales in the US anytime soon. Many Harley's recently were bought with home equity money or through Harley financing much of which was "subprime". Those financing avenues have dried up and do not look to rebound in the near future. This issue was addressed on the recent conference call when CFO Larry Hund said, "Consistent with previous quarters, HDFS continues to operate in a challenging consumer credit environment. Regarding past due accounts, the 30-day delinquency rate for managed retail motorcycle loans at the end of the third quarter was 4.91% compared to 4.46% for the third quarter of 2006. Managed retail loans include both those which we keep and those which we sell through securitization.
As expected, credit losses on managed retail motorcycle loans increased in the first nine months of 2007 compared to 2006. Losses totaled 1.65% on an annualized basis, compared to 1.18% for the first nine months of 2006. The increased losses are due to continued pressure on recovery values for repossessed motorcycles as well as a higher incidence of loss, primarily driven by the increase in delinquent accounts."
International sales will make up the difference and cause earnings to just stagnate rather than fall dramatically as witnessed in the last quarter. In Q3 international shipments of 20,779 units were up 24.8% compared to the same quarter last year. This international shipment mix represented 24% of our total third quarter shipment volumes compared to 17.2% in the third quarter 2006.
For the first nine months of the year, domestic shipments represented 73.2% of the total shipments, down from 77.5% compared to the same period last year. International shipments for the first nine months of the year represented 26.8% of the mix, up from 22.5% in the first nine months of 2006.
Impatient investors will get sick of sitting on dead money and begin to sell. We will see a share price below $45 if not this year, then early next. I am going to go even further and say we could get it for $42.
I do not see mush more downside unless the economy worsens further. If you need to own HOG shares, buy then here, your downside isn't not too great. If you can be patient, there is another 10% or more downside to shares.
I want to own Harley shares and think I just may get a great deal soon enough.
Buying Wachovia
After 6 years of increasing profits, Wachovia (WB) missed a quarter. The stock has been hammered and presented a great buying opportunity and a 5.5% yield so we picked up shares late Friday.
The 4th largest U.S. bank reported last week net income of $1.69 billion, or 89 cents a share, compared with $1.88 billion, or $1.17 a share, a year earlieQ3 net income dropped 10% as loan-loss provisions quadrupled and the company recorded $1.3 billion in losses and write-downs. Wachovia also signaled increasing credit troubles ahead. CEO G. Kennedy Thompson said "trends in mortgage credit are deteriorating faster than we would have expected. Our statistics remain better for consumer assets than those of most of our peers". Revenues rose 4.3% to $7.35 billion.
The capital-markets business, which includes brokerage and asset-management operations, posted a 19% rise in earnings as revenues climbed 14%. At the beginning of October, Wachovia closed its $6.8 billion acquisition of broker A.G. Edwards and created the nation's second-largest brokerage behind Merrill Lynch (MER). Commenting on this, Thompson said "Even with no closed end-fund syndicate activity in this quarter and, even with a $40 million evaluation loss on commercial paper investments, they generated 18% year-over-year growth. And their poised for even more success now that our new AG Edwards colleagues are on board. It’s admittedly early days, but the AG Edwards integration is proceeding as we had planned to date."
Helping to mitigate the mortgage related issues should be the 2006 Golden West Financial acquisition. The deal gives WB a national presence, with significant branch
additions in the key markets of California, Florida and Texas. It also adds higher returning assets to WB's balance sheet with minimal risk exposure. The revenue synergies will be significant, as GoldenWest Financial's branches begin offering WB's diverse products. 2007's earning from GoldenWest are expected to be significantly higher than 2006 and growth for 2008 is also expected.
Thompson said the summer's fixed-income markets "clearly had a disappointing impact on the results of market-oriented businesses, but the strength in our core banking and brokerage businesses continued to serve us very well." He then said something that I first began saying in August about the mortgage markets survivors, "We’re very optimistic about our growth prospects in these fast-growing western markets and we believe we’re well positioned for opportunities in a now much less crowded mortgage industry." Look for earning here to rebound nicely as mortgage applicants have vastly fewer place to go.
Allin all not real bad result given what we have sen from banks in general lately. what was most reassuring were comments from CEO Thompson. While "deeply disappointed" in the company's Q3 results, Mr. Thompson said investors shouldn't be looking for major strategic changes at the bank. He said the investment bank is focused on cutting costs through reducing headcount and curbing incentives and discretionary spending.
"We remain firmly committed to these businesses," Mr. Thompson said. Overall, he said, "you will not see substantial shifts in our business model."
I was torn between Bank of America (BAC) and Wachovia but what convinced me was Thompson's commitment to its model that clearly is not broken but just had a bad quarter. Six years a solid results need not be thrown out due to a bad quarter. When you contrast this to comments from Bank of America that may lead one to believe there may be wholesale changes, Wachovia was the clear pick.
WB has grown its dividend dividend 71% since 2003 and earnings 46% in the same time frame. Shares, at their lowest levels since August 2004 trade at 9 times earnings and yield a solid 5.5%. It may be a while before any real appreciation comes into play for the shares but the downside from here is minimal and I will gladly take the 5.5% to wait.
Read the latest earnings call transcript here:
The 4th largest U.S. bank reported last week net income of $1.69 billion, or 89 cents a share, compared with $1.88 billion, or $1.17 a share, a year earlieQ3 net income dropped 10% as loan-loss provisions quadrupled and the company recorded $1.3 billion in losses and write-downs. Wachovia also signaled increasing credit troubles ahead. CEO G. Kennedy Thompson said "trends in mortgage credit are deteriorating faster than we would have expected. Our statistics remain better for consumer assets than those of most of our peers". Revenues rose 4.3% to $7.35 billion.
The capital-markets business, which includes brokerage and asset-management operations, posted a 19% rise in earnings as revenues climbed 14%. At the beginning of October, Wachovia closed its $6.8 billion acquisition of broker A.G. Edwards and created the nation's second-largest brokerage behind Merrill Lynch (MER). Commenting on this, Thompson said "Even with no closed end-fund syndicate activity in this quarter and, even with a $40 million evaluation loss on commercial paper investments, they generated 18% year-over-year growth. And their poised for even more success now that our new AG Edwards colleagues are on board. It’s admittedly early days, but the AG Edwards integration is proceeding as we had planned to date."
Helping to mitigate the mortgage related issues should be the 2006 Golden West Financial acquisition. The deal gives WB a national presence, with significant branch
additions in the key markets of California, Florida and Texas. It also adds higher returning assets to WB's balance sheet with minimal risk exposure. The revenue synergies will be significant, as GoldenWest Financial's branches begin offering WB's diverse products. 2007's earning from GoldenWest are expected to be significantly higher than 2006 and growth for 2008 is also expected.
Thompson said the summer's fixed-income markets "clearly had a disappointing impact on the results of market-oriented businesses, but the strength in our core banking and brokerage businesses continued to serve us very well." He then said something that I first began saying in August about the mortgage markets survivors, "We’re very optimistic about our growth prospects in these fast-growing western markets and we believe we’re well positioned for opportunities in a now much less crowded mortgage industry." Look for earning here to rebound nicely as mortgage applicants have vastly fewer place to go.
Allin all not real bad result given what we have sen from banks in general lately. what was most reassuring were comments from CEO Thompson. While "deeply disappointed" in the company's Q3 results, Mr. Thompson said investors shouldn't be looking for major strategic changes at the bank. He said the investment bank is focused on cutting costs through reducing headcount and curbing incentives and discretionary spending.
"We remain firmly committed to these businesses," Mr. Thompson said. Overall, he said, "you will not see substantial shifts in our business model."
I was torn between Bank of America (BAC) and Wachovia but what convinced me was Thompson's commitment to its model that clearly is not broken but just had a bad quarter. Six years a solid results need not be thrown out due to a bad quarter. When you contrast this to comments from Bank of America that may lead one to believe there may be wholesale changes, Wachovia was the clear pick.
WB has grown its dividend dividend 71% since 2003 and earnings 46% in the same time frame. Shares, at their lowest levels since August 2004 trade at 9 times earnings and yield a solid 5.5%. It may be a while before any real appreciation comes into play for the shares but the downside from here is minimal and I will gladly take the 5.5% to wait.
Read the latest earnings call transcript here:
Monday's Upgrades and Downgrades
UPGRADES
Arbitron ARB CL King Neutral » Accumulate
Brinker EAT Bear Stearns Peer Perform » Outperform
Bank of NY BK Punk, Ziegel & Co Mkt Perform » Buy
Packeteer PKTR Ferris Baker Watts Sell » Neutral
King Pharms KG Citigroup Sell » Hold
First Horizon FHN Citigroup Hold » Buy
American Financial Realty Trust AFR Stifel Nicolaus Sell » Buy
CyberSource CYBS Needham & Co Hold » Buy
InfoSpace INSP Needham & Co Hold » Buy
Centene CNC Jefferies & Co Hold » Buy
WNS WNS Credit Suisse Neutral » Outperform
Computer Sciences CSC Credit Suisse Underperform » Neutral
Harmonic HLIT Friedman Billings Mkt Perform » Outperform
LaSalle Hotel LHO RBC Capital Mkts Outperform » Top Pick
Teradyne TER JP Morgan Neutral » Overweight
Old Dominion ODFL Bear Stearns Underperform » Peer Perform
SunTrust Banks STI Bernstein Underperform » Mkt Perform
Overseas Shipholding OSG Banc of America Sec Neutral » Buy
Parker-Hannifin PH CIBC Wrld Mkts Sector Underperform » Sector Perform
J. Crew JCG CIBC Wrld Mkts Sector Perform » Sector Outperform
DOWNGRADES
Wachovia WB Punk, Ziegel & Co Buy » Mkt Perform
SunTrust Banks STI Punk, Ziegel & Co Buy » Mkt Perform
Zions Bancorp ZION Stifel Nicolaus Buy » Hold
Wesco WCC CIBC Wrld Mkts Sector Outperform » Sector Perform
Hershey Foods HSY Piper Jaffray Market Perform » Underperform
IntercontinentalExchange ICE BMO Capital Markets Outperform » Market Perform
Pilgrim's Pride PPC BMO Capital Markets Outperform » Market Perform
Syntel SYNT Credit Suisse Outperform » Neutral
ExlService EXLS Credit Suisse Outperform » Neutral
EDS EDS Credit Suisse Outperform » Underperform
St. Jude Medical STJ HSBC Securities Overweight » Neutral
Vertex Pharm VRTX Cowen & Co Outperform » Neutral
Mohawk MHK Morgan Keegan Outperform » Mkt Perform
Bankunited Fin BKUNA Friedman Billings Outperform » Mkt Perform
FirstFed Financial FED Friedman Billings Mkt Perform » Underperform
Preferred Bank PFBC Friedman Billings Outperform » Underperform
Talbots TLB CIBC Wrld Mkts Sector Outperform » Sector Perform
AMR Corp AMR Calyon Securities Buy » Add
Capital One COF Friedman Billings Outperform » Mkt Perform
AstraZeneca AZN UBS Neutral » Sell
Hess HES UBS Buy » Neutral
HSBC Holdings HBC UBS Buy » Neutral
Southern Copper PCU UBS Buy » Neutral
Host Hotels HST RBC Capital Mkts Top Pick » Outperform
Cabela's CAB Robert W. Baird Outperform » Neutral
DaVita DVA Oppenheimer Buy » Neutral
Hansen Natural HANS JP Morgan Overweight » Neutral
Sunday, October 21, 2007
"Fast Money" for Monday
Here are results to date and Monday's picks..
Monday's Picks
Jeff Macke recommended getting long Intel (INTC). Open $26.30
Guy Adami told the panel to short Exxon Mobil (XOM). Open $92.14
Karen Finerman preferred to play defense with Altria (MO).Open $70.50
Pete Najarian said Apple (AAPL) was a buy. Open $170.42
Friday's Results
Jeff Macke recommended Intel (INTC). Open $26.97 Close $26.30 LOSS
“Short Exxon Mobil (XOM)” said Guy Adami. Open $95.05 Close $92.14 GAIN
Karen Finerman thought investors should get long Limited Brands (LTD). Open $21.95 Close $21.39 LOSS
Pete Najarian said Cypress Semi (CY) is a buy. Open $32.94 Close $32.73 LOSS
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks). The percentage is the percentage of successful picks
Guy Adami= 33-22 = 60%
John Najarian= 13-4 = 76%
Jeff Macke= 38-30 = 54%
Pete Najarian= 26-24 = 51%
Tim Seymore= 4-3 = 57%
Karen Finerman= 17-12 = 58%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Monday's Picks
Jeff Macke recommended getting long Intel (INTC). Open $26.30
Guy Adami told the panel to short Exxon Mobil (XOM). Open $92.14
Karen Finerman preferred to play defense with Altria (MO).Open $70.50
Pete Najarian said Apple (AAPL) was a buy. Open $170.42
Friday's Results
Jeff Macke recommended Intel (INTC). Open $26.97 Close $26.30 LOSS
“Short Exxon Mobil (XOM)” said Guy Adami. Open $95.05 Close $92.14 GAIN
Karen Finerman thought investors should get long Limited Brands (LTD). Open $21.95 Close $21.39 LOSS
Pete Najarian said Cypress Semi (CY) is a buy. Open $32.94 Close $32.73 LOSS
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks). The percentage is the percentage of successful picks
Guy Adami= 33-22 = 60%
John Najarian= 13-4 = 76%
Jeff Macke= 38-30 = 54%
Pete Najarian= 26-24 = 51%
Tim Seymore= 4-3 = 57%
Karen Finerman= 17-12 = 58%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
The Hidden Value In Sears Holdings
Barron's did a piece this weekend on Sears Holdings (SHLD). In it the author detailed several value metrics which shed light on why Chairman Eddie Lampert apparently cannot buy shares fast enough this summer at these prices.
Here is the gist of the article:
Time Frame:
- It took retail veteran Allen Questrom five years to revive then dead JC Penny (JCP) from 2000 to 2004. Lampert purchased Sears in 2005.
Retail Operations
- Margins are only at 4.7%, half those of competitors JC Penny, Target and Kohl's
- The Lands End "store-in-a-store" concept will increase margins
- Kenmore appliances (high margin) are now being moved into Kmart locations
- Lampert could increase cash flow $3 billion a year lust by delaying payments to suppliers like other retailers do.
Real Estate:
- Sears owns 518 of the 861 legacy general merchandise stores located in the best malls in America. Those not owned currently pay well below market rents.
- Kmart leases 1,194 out of 1,333 locations at rock bottom rates and the 100 year agreements essentially give Sears ownership control of the location.
- The company recently added to its "land bank" when it absorbed excess Macy's (M) and Mervyn's locations.
- Bill Ackman, who recently took a stake in the company says that at the current share price of $132, the market essentially values this rich real estate at $33 per sq. ft.. By comparison, Target (TGT) sells for $341 /sq. ft, Home Depot (HD) for $277/ sq. ft, JC Penny for $144/ sq. ft, Kohl's (KSS) for $319 /sq. ft and Simon Properties (SPG)(Ackman uses this because he argues Seas Holdings is a conglomerate much like Simon) for $698/ sq.ft.
- The management of Target has made it publicly know that it has the desire to take over "hundreds" of Sears current locations either on or off mall.
- Mall owners would pay dearly to take over Sears locations and put in stores like Cheesecake Factory (CAKE), Barnes and Noble (BKS) or PF Chang's (PFCB). There is nothing to stop Lampert and Sears from becoming their own leasing and development operation with these locations.
Back in February I said that "Sears Holdings is in the infancy of what it will eventually become" and the Barron's article, if nothing else should illustrate the tremendous options Lampert has at his disposal to enhance shareholder value.
How could you bet long term against this guys track record?
Here is the gist of the article:
Time Frame:
- It took retail veteran Allen Questrom five years to revive then dead JC Penny (JCP) from 2000 to 2004. Lampert purchased Sears in 2005.
Retail Operations
- Margins are only at 4.7%, half those of competitors JC Penny, Target and Kohl's
- The Lands End "store-in-a-store" concept will increase margins
- Kenmore appliances (high margin) are now being moved into Kmart locations
- Lampert could increase cash flow $3 billion a year lust by delaying payments to suppliers like other retailers do.
Real Estate:
- Sears owns 518 of the 861 legacy general merchandise stores located in the best malls in America. Those not owned currently pay well below market rents.
- Kmart leases 1,194 out of 1,333 locations at rock bottom rates and the 100 year agreements essentially give Sears ownership control of the location.
- The company recently added to its "land bank" when it absorbed excess Macy's (M) and Mervyn's locations.
- Bill Ackman, who recently took a stake in the company says that at the current share price of $132, the market essentially values this rich real estate at $33 per sq. ft.. By comparison, Target (TGT) sells for $341 /sq. ft, Home Depot (HD) for $277/ sq. ft, JC Penny for $144/ sq. ft, Kohl's (KSS) for $319 /sq. ft and Simon Properties (SPG)(Ackman uses this because he argues Seas Holdings is a conglomerate much like Simon) for $698/ sq.ft.
- The management of Target has made it publicly know that it has the desire to take over "hundreds" of Sears current locations either on or off mall.
- Mall owners would pay dearly to take over Sears locations and put in stores like Cheesecake Factory (CAKE), Barnes and Noble (BKS) or PF Chang's (PFCB). There is nothing to stop Lampert and Sears from becoming their own leasing and development operation with these locations.
Back in February I said that "Sears Holdings is in the infancy of what it will eventually become" and the Barron's article, if nothing else should illustrate the tremendous options Lampert has at his disposal to enhance shareholder value.
How could you bet long term against this guys track record?
Saturday, October 20, 2007
This Week's Dividend Increases
Largest Changes in Short Interest
An increase means people are betting against the stock, a decrease means those who were betting against are getting out of those positions. Notice the short covering in Wells Fargo and Wachovia..
INCREASES- number of shares
Washington Mutual (WM)= +12,483,000
EMC (EMC)= +11,205,000
Target (TGT)= +5,720,000
Pulte Homes (PHM)= +5,392,000
Beazer Homes (BZH)= +5,209,000
Mylan (MYL)= +5,001,000
DECREASES- number of shares
Wells Fargo (WFC)= -9.180,000
Wachovia (WB)= -8,394,000
Commerce Bank (CBH) = -8,002,000
Express Jet (XJT)= -7,409,000
McDonalds (MCD)= -6,569,000
INCREASES- number of shares
Washington Mutual (WM)= +12,483,000
EMC (EMC)= +11,205,000
Target (TGT)= +5,720,000
Pulte Homes (PHM)= +5,392,000
Beazer Homes (BZH)= +5,209,000
Mylan (MYL)= +5,001,000
DECREASES- number of shares
Wells Fargo (WFC)= -9.180,000
Wachovia (WB)= -8,394,000
Commerce Bank (CBH) = -8,002,000
Express Jet (XJT)= -7,409,000
McDonalds (MCD)= -6,569,000
This Week's Insider Buys
Sears Holdings Opens 200th Lands End Store
Well that did not take long at all.
Just two week ago I commented that the Lands end store in a store concept was on track and Sears Holdings (SHLD) announced this past week that they have reached to 200 store goal ahead of schedule.
To celebrate the opening of the 200th Lands' End Shop at Sears , the company is asking customers to share where they'd like to see the next Shop located. click here
"We've had an overwhelming response from customers to the Lands' End Shops at Sears," said David McCreight, president, Lands' End. "People write to tell us how thrilled they are to have us in their communities. We also receive a number of letters saying 'we hear you are in Sears -- when are you coming to my town?'"
Lands' End will accept customer suggestions for the location of the next Lands' End Shop at Sears between September 25 and December 31, 2007. Customers can send their suggestions to nextshop@landsend.com, by calling 1-800-800-5800
"We've had an overwhelming response from customers to the Lands' End Shops at Sears," said David McCreight, president, Lands' End. "People write to tell us how thrilled they are to have us in their communities. We also receive a number of letters saying 'we hear you are in Sears -- when are you coming to my town?'"
I have been saying since February that the future of Sears retailing is the Land's End concept. Now, that being said we need some more information when earnings are released. For instance, we know that Lands end will report another record year for sales and earnings. But, when you double your locations sales and earning are bound to produce record results. Now that Lands End is becoming a more dominant earnings driver for Sears Holdings, we need to know how it is doing.
While I agree with Lampert that same store sales are not the end all be all metric for retailers, if Lands End is going to be the future, we need to know how the stores with the store-in-a-store (SIS) concept are performing vs those that do not have it. Are the retail operation at these locations experiencing positive results? If they are not, at least is the decline less that those without them?
My opinion is that those stores with the SIS concept are experiencing much better results than those without. Even if sales are level, profitability should be far greater. Lampert could easily boost shares and quell the naysayers out there by releasing this information. But, he may keep the results under wraps while he finishes buying the $2 billion worth or stock he wants at the current low prices.
I do not expect them to break it out at the next earnings announcement but I would like to see it when the annual results are released. If the results are what I anticipate them to be, it would illustrate positive momentum on the retailing level and really go along way to help shareholders (of which Lampert is the largest).
On another note. It is real satisfying to see Lampert not let anything stop him from accomplishing stated goals to shareholders. It would have been real easy to slow down the expansion given the current retail environment and just focus on share repurchases. As a shareholder it is nice to know that when the Chairman says "we are going to do "X"", it gets done.
Just two week ago I commented that the Lands end store in a store concept was on track and Sears Holdings (SHLD) announced this past week that they have reached to 200 store goal ahead of schedule.
To celebrate the opening of the 200th Lands' End Shop at Sears , the company is asking customers to share where they'd like to see the next Shop located. click here
"We've had an overwhelming response from customers to the Lands' End Shops at Sears," said David McCreight, president, Lands' End. "People write to tell us how thrilled they are to have us in their communities. We also receive a number of letters saying 'we hear you are in Sears -- when are you coming to my town?'"
Lands' End will accept customer suggestions for the location of the next Lands' End Shop at Sears between September 25 and December 31, 2007. Customers can send their suggestions to nextshop@landsend.com, by calling 1-800-800-5800
"We've had an overwhelming response from customers to the Lands' End Shops at Sears," said David McCreight, president, Lands' End. "People write to tell us how thrilled they are to have us in their communities. We also receive a number of letters saying 'we hear you are in Sears -- when are you coming to my town?'"
I have been saying since February that the future of Sears retailing is the Land's End concept. Now, that being said we need some more information when earnings are released. For instance, we know that Lands end will report another record year for sales and earnings. But, when you double your locations sales and earning are bound to produce record results. Now that Lands End is becoming a more dominant earnings driver for Sears Holdings, we need to know how it is doing.
While I agree with Lampert that same store sales are not the end all be all metric for retailers, if Lands End is going to be the future, we need to know how the stores with the store-in-a-store (SIS) concept are performing vs those that do not have it. Are the retail operation at these locations experiencing positive results? If they are not, at least is the decline less that those without them?
My opinion is that those stores with the SIS concept are experiencing much better results than those without. Even if sales are level, profitability should be far greater. Lampert could easily boost shares and quell the naysayers out there by releasing this information. But, he may keep the results under wraps while he finishes buying the $2 billion worth or stock he wants at the current low prices.
I do not expect them to break it out at the next earnings announcement but I would like to see it when the annual results are released. If the results are what I anticipate them to be, it would illustrate positive momentum on the retailing level and really go along way to help shareholders (of which Lampert is the largest).
On another note. It is real satisfying to see Lampert not let anything stop him from accomplishing stated goals to shareholders. It would have been real easy to slow down the expansion given the current retail environment and just focus on share repurchases. As a shareholder it is nice to know that when the Chairman says "we are going to do "X"", it gets done.
Top Stories This Week at Value Investing News
There was some great stuff this week at VIN. Check out George's post on the 52 Week Low List.
2. 52-Week Low List Packed with Quality Names
(via www.fatpitchfinancials.com)
I was looking at the front page of Value Investing News last night (October 17, 2007), and the New 52-Week Lows list jumped out at me. This list is packed with top quality companies, many of which have sustainable competitive advantages.
3. Foolish Book Review: "Active Value Investing"
(via www.fool.com)
Katsenelson's style is straightforward enough to keep a rookie investor engaged, and in-depth enough to retain the interest of old pros, which makes this a great book for those of all skill levels.
4. Learning From Eddie Lampert
(via streetcapitalist.com)
I’ve been doing more research on Lampert by looking through some old newspaper articles. I’ve gleaned the following by reading a few older articles on Eddie Lampert, specifically a 1995 Washington Post article.
5. Is Nutrisystem Healthy?
(via www.fwallstreet.com)
This article provides an interesting valuation and warning. "Nutrisystem must contend with its direct competitors, and must ward off big pharmaceutical companies developing cheap weight loss drugs. NTRI has to fight for every penny, and has a finite future."
Friday, October 19, 2007
Friday's 52 Week Lows
When the Dow drops 350 points, the list gets big
WM Washington Mutual Inc 28.82
WLK Westlake Chem Corp 23.40
WL Wilmington Trust Corp ... 36.07
TRY Triarc Companies, Inc ... 11.86
TRX Tronox Inc 8.12
TRK Speedway Motorsports, Inc 35.80
RF Regions Financial Cor ... 26.57
RDN Radian Group Inc 14.03
RCII Rent A Ctr Inc New 16.12
PSS Collective Brands Inc 18.07
PMTI Palomar Med Technolog ... 25.91
PMI The PMI Group, Inc 20.89
PLAB Photronics Inc 11.16
PFBC Preferred Bank 33.15
PEIX Pacific Ethanol Inc 8.33
PBKS Provident Bankshares Corp 26.05
PACR Pacer Intl Inc Tenn 16.84
ORI Old Republic Internat ... 16.71
OLCB Ohio Legacy Corp 7.78
NTRI Nutri Sys Inc New 27.97
MAT Mattel, Inc 20.78
LZB La-Z-Boy Incorporated 7.06
LIZ Liz Claiborne, Inc 28.95
HTLD Heartland Express Inc 13.65
HSY Hershey Co 42.22
HMNF HMN Financial Inc 27.50
HIBB Hibbett Sports Inc 21.87
HHS Harte-Hanks Communica ... 17.98
HD Home Depot, Inc 30.62
GYMB The Gymboree Corp 32.95
GW Grey Wolf Inc 6.10
GPI Group 1 Automotive Inc 30.95
GLYT Genlyte Group Incorported 59.28
GHS Gatehouse Media Inc 11.38
GCI Gannett Co., Inc 41.28
DITC Ditech Networks Inc 4.50
DFS Discover Finl Svcs 19.80
DEIX Directed Electronics Inc 2.93
CZFC Citizens First Corp 11.81
CTRN Citi Trends Inc 18.03
CTCT Constant Contact Inc 21.80
CSK Chesapeake Corporation 8.11
CRFT Craftmade Internation ... 9.95
C Citigroup, Inc 42.75
WM Washington Mutual Inc 28.82
WLK Westlake Chem Corp 23.40
WL Wilmington Trust Corp ... 36.07
TRY Triarc Companies, Inc ... 11.86
TRX Tronox Inc 8.12
TRK Speedway Motorsports, Inc 35.80
RF Regions Financial Cor ... 26.57
RDN Radian Group Inc 14.03
RCII Rent A Ctr Inc New 16.12
PSS Collective Brands Inc 18.07
PMTI Palomar Med Technolog ... 25.91
PMI The PMI Group, Inc 20.89
PLAB Photronics Inc 11.16
PFBC Preferred Bank 33.15
PEIX Pacific Ethanol Inc 8.33
PBKS Provident Bankshares Corp 26.05
PACR Pacer Intl Inc Tenn 16.84
ORI Old Republic Internat ... 16.71
OLCB Ohio Legacy Corp 7.78
NTRI Nutri Sys Inc New 27.97
MAT Mattel, Inc 20.78
LZB La-Z-Boy Incorporated 7.06
LIZ Liz Claiborne, Inc 28.95
HTLD Heartland Express Inc 13.65
HSY Hershey Co 42.22
HMNF HMN Financial Inc 27.50
HIBB Hibbett Sports Inc 21.87
HHS Harte-Hanks Communica ... 17.98
HD Home Depot, Inc 30.62
GYMB The Gymboree Corp 32.95
GW Grey Wolf Inc 6.10
GPI Group 1 Automotive Inc 30.95
GLYT Genlyte Group Incorported 59.28
GHS Gatehouse Media Inc 11.38
GCI Gannett Co., Inc 41.28
DITC Ditech Networks Inc 4.50
DFS Discover Finl Svcs 19.80
DEIX Directed Electronics Inc 2.93
CZFC Citizens First Corp 11.81
CTRN Citi Trends Inc 18.03
CTCT Constant Contact Inc 21.80
CSK Chesapeake Corporation 8.11
CRFT Craftmade Internation ... 9.95
C Citigroup, Inc 42.75
Sherwin Willliams (SHW) To Repurchase 23% of Shares
Sherwin Williams (SHW) today declared a dividend and announced a huge share repurchase plan.
SHW declared a regular quarterly dividend of $0.315 per common share, payable on December 7, 2007 to shareholders of record on November 16, 2007. In addition, Sherwin-Williams's board of directors authorized the Company to purchase, in the aggregate, 30,000,000 shares of stock.
With only 130 million shares outstanding, the authorization amounts to 23% of the outstanding shares. Now the question begs, when will it be finished? Let's look. In the past three years Sherwin has repurchased about $230 million a year worth of stock and for the first 6 months of 2007, that number sits far ahead of that pace at $250 million. If we use a $67 share price the 30 million shares comes to $2 billion dollars needed to finish the authorization. Of course there will be variations as the stock price fluctuates but we need to pick a number.
That means at the current rate of the past three years, it will take about 8 years to complete the repurchase. Now based on the fact Sherwin will probably repurchase in excess of $350 million this year alone, the eight year number is a worse case scenario. That being said, we are looking at about 4% a year being added to earnings from the repurchase plan. Not bad..
The nice part about the history of current management is that unlike the recent Home Depot (HD) buyback, the company will not be sunk deep into debt to accomplish it. In fact, long term debt at Sherwin has fallen from $506 million in 2002 to $291 million last year. Fiscally speaking, despite the housing recession we are in the company is in it best shape in years.
SHW declared a regular quarterly dividend of $0.315 per common share, payable on December 7, 2007 to shareholders of record on November 16, 2007. In addition, Sherwin-Williams's board of directors authorized the Company to purchase, in the aggregate, 30,000,000 shares of stock.
With only 130 million shares outstanding, the authorization amounts to 23% of the outstanding shares. Now the question begs, when will it be finished? Let's look. In the past three years Sherwin has repurchased about $230 million a year worth of stock and for the first 6 months of 2007, that number sits far ahead of that pace at $250 million. If we use a $67 share price the 30 million shares comes to $2 billion dollars needed to finish the authorization. Of course there will be variations as the stock price fluctuates but we need to pick a number.
That means at the current rate of the past three years, it will take about 8 years to complete the repurchase. Now based on the fact Sherwin will probably repurchase in excess of $350 million this year alone, the eight year number is a worse case scenario. That being said, we are looking at about 4% a year being added to earnings from the repurchase plan. Not bad..
The nice part about the history of current management is that unlike the recent Home Depot (HD) buyback, the company will not be sunk deep into debt to accomplish it. In fact, long term debt at Sherwin has fallen from $506 million in 2002 to $291 million last year. Fiscally speaking, despite the housing recession we are in the company is in it best shape in years.
Friday's Links
Apple-holics, CAT, Oil, Red Sox
- James Cullen, who had the audacity to suggest Apple is not the single best investment in the history of man (please note sarcasm) brilliantly answers the critics of his stance that actually had the ability to do it without hurling insults, a rare event for Apple lovers.
- The Stockmasters absolutely nail it on the importance of Caterpillar's upcoming earnings.
- Some interesting thoughts on crude oil as it sits at $88 a barrel.
- Just a reminder for those who bought furniture at Jordan's this spring. If the Sox continue, you may be getting your money back.
- James Cullen, who had the audacity to suggest Apple is not the single best investment in the history of man (please note sarcasm) brilliantly answers the critics of his stance that actually had the ability to do it without hurling insults, a rare event for Apple lovers.
- The Stockmasters absolutely nail it on the importance of Caterpillar's upcoming earnings.
- Some interesting thoughts on crude oil as it sits at $88 a barrel.
- Just a reminder for those who bought furniture at Jordan's this spring. If the Sox continue, you may be getting your money back.
The Viewing Day
So, here is how things are beginning to shape up between CNBC and FOX
It looks like the morning is pure CNBC. "Squawk" with Kernan and Co. decimates anything the newbie network has to offer (not that the FOX show is bad, it is getting better) and I am such a Mark Haines fan that FOX would have to come up with something awfully special to make me switch channels.
But, it is increasingly looking like the afternoon may belong to the folks at FOX. CNBC seems to have sensed this and the afternoon offerings and placement of people there have been jumping around the past few weeks. FOX has a solid crew in place (most of them are from the weekend shows that have been on for years) and the addition of Liz Claymen (and her Buffett connection) will only serve to strengthen the line up. The shows flow well and the personalities work well together either when they agree or disagree.
Also, they do spend more time on segments which means they do tend to get more in depth than CNBC does into the subject at hand. This is both good and bad, if you are into the conversation, it is a plus but if it is about a topic that bores you, you may be more likely to change the channel. Personally, I like it.
Week one is in the books for FOX and despite a real shaky Day 1, it appears as though they are finding their footing and at least in the afternoon, will provide CNBC some real competition.
It looks like the morning is pure CNBC. "Squawk" with Kernan and Co. decimates anything the newbie network has to offer (not that the FOX show is bad, it is getting better) and I am such a Mark Haines fan that FOX would have to come up with something awfully special to make me switch channels.
But, it is increasingly looking like the afternoon may belong to the folks at FOX. CNBC seems to have sensed this and the afternoon offerings and placement of people there have been jumping around the past few weeks. FOX has a solid crew in place (most of them are from the weekend shows that have been on for years) and the addition of Liz Claymen (and her Buffett connection) will only serve to strengthen the line up. The shows flow well and the personalities work well together either when they agree or disagree.
Also, they do spend more time on segments which means they do tend to get more in depth than CNBC does into the subject at hand. This is both good and bad, if you are into the conversation, it is a plus but if it is about a topic that bores you, you may be more likely to change the channel. Personally, I like it.
Week one is in the books for FOX and despite a real shaky Day 1, it appears as though they are finding their footing and at least in the afternoon, will provide CNBC some real competition.
Berkshire's Warren Buffett On Fox Business News
This was one of the best and most detailed interviews I have seen if Berkshire's Chairman (BRK.A) in recent years. Liz Clayman landed on Fox Business News with a big splash yesterday. If anyone knows were the whole interview can be found, please let me know.
Buffett, in the live interview commented a quit a few thing. Watch videos:
On his best investment
On the economy.
On the HY Times "erroneous" Bears Sterns story.
On his Petro China sale.
Finally, on succession.
Buffett, in the live interview commented a quit a few thing. Watch videos:
On his best investment
On the economy.
On the HY Times "erroneous" Bears Sterns story.
On his Petro China sale.
Finally, on succession.
Barnes and Noble...... Hmmm
Anytime the largest shareholder of a company goes on a buying spree like Barnes and Noble's (BKS) Leonard Riggio did recently, I have to look closer.
Riggio, who bought 100,000 shares both in August and September, bought an additional $11.3 (approximately 420,000 shares) million dollars worth in October. This bring his total stake in the company to 24%. Much like Sear Holding's (SHLD) Eddie Lampert's buying spree this summer, when people intimately involved in the company cannot seem to buy enough shares, you have to be interested.
If you recall Barnes and Noble in August predicted a more optimistic outlook than was previously thought and about this time Riggio began his buying spree. On has to infer from this that the future for BKS may be even rosier that predicted in August. For those hoping for a Barnes and Noble and Borders (BGP) merger, this news ought to put a damper on those expectations. Were a merger or other collaboration to be announced anytime in the near future, Riggio's purchases was be reduced to simple insider trading ahead of the announcement. That does not mean it will not happen, just that it will not happen anytime soon.
I am going to look closer here over the weekend and get back next week..... I am very intrigued though..
Riggio, who bought 100,000 shares both in August and September, bought an additional $11.3 (approximately 420,000 shares) million dollars worth in October. This bring his total stake in the company to 24%. Much like Sear Holding's (SHLD) Eddie Lampert's buying spree this summer, when people intimately involved in the company cannot seem to buy enough shares, you have to be interested.
If you recall Barnes and Noble in August predicted a more optimistic outlook than was previously thought and about this time Riggio began his buying spree. On has to infer from this that the future for BKS may be even rosier that predicted in August. For those hoping for a Barnes and Noble and Borders (BGP) merger, this news ought to put a damper on those expectations. Were a merger or other collaboration to be announced anytime in the near future, Riggio's purchases was be reduced to simple insider trading ahead of the announcement. That does not mean it will not happen, just that it will not happen anytime soon.
I am going to look closer here over the weekend and get back next week..... I am very intrigued though..
Friday's Upgrades and Downgrades
UPGRADES
Seacoast Banking SBCF Stifel Nicolaus Sell » Hold
Gramercy Capital GKK Stifel Nicolaus Hold » Buy
Thornburg Mortg TMA Keefe Bruyette Underperform » Mkt Perform
Empresa Ncnl Elec EOC Bear Stearns Peer Perform » Outperform
Anworth Mortgage ANH JMP Securities Mkt Outperform » Strong Buy
Mattel MAT Credit Suisse Neutral » Outperform
CryptoLogic CRYP Roth Capital Hold » Buy
DOWNGRADES
Washington Mutual WM DA Davidson Neutral » Underperform
Lincare LNCR Stanford Research Hold » Sell
Washington Mutual WM Punk, Ziegel & Co Buy » Sell
Citrix Systems CTXS MKM Partners Buy » Neutral
Knight Transportation KNX Stifel Nicolaus Buy » Hold
MBT Financial MBTF FTN Midwest Neutral » Sell
Carrizo Oil & Gas CRZO Sun Trust Rbsn Humphrey Buy » Neutral
Citrix Systems CTXS Needham & Co Buy » Hold
Bright Horiz Family BFAM BMO Capital Markets Outperform » Market Perform
Bluelinx BXC CIBC Wrld Mkts Sector Outperform » Sector Perform
Building Materials BLG CIBC Wrld Mkts Sector Outperform » Sector Perform
Beacon Roofing Supply BECN CIBC Wrld Mkts Sector Outperform » Sector Perform
CEMEX S.A. CX Credit Suisse Outperform » Neutral
Net 1 UEPS Techs UEPS JP Morgan Overweight » Neutral
Everest Re RE Citigroup Buy » Hold
Flagstone Reinsurance FSR Citigroup Buy » Hold
Platinum Underwriters PTP Citigroup Buy » Hold
RenaissanceRe RNR Citigroup Hold » Sell
Clear Channel Outdoor CCO Bear Stearns Outperform » Peer Perform
Lamar Advertising LAMR Bear Stearns Outperform » Peer Perform
EW Scripps SSP Bear Stearns Outperform » Peer Perform
Nalco NLC UBS Neutral » Sell
Eagle Bulk Shipping EGLE UBS Buy » Neutral
eBay EBAY Deutsche Securities Hold » Sell
LoJack LOJN JP Morgan Neutral » Underweight
E*TRADE ETFC Deutsche Securities Buy » Hold
Downey Fincl DSL Friedman Billings Mkt Perform » Underperform
LeapFrog Pre-Announces: Still Waiting for Q4
LeapFrog (LF) announced preliminary results and, well, not much to be happy about and not much to be upset about
LeapFrog said it expects to report net sales for the third quarter ended September 30, 2007 of approximately $143 million and a net loss of approximately $(0.05) per share. The Company expects to report cash and investments of approximately $95 million and inventories, net of allowances, of approximately $110 million at September 30, 2007, consistent with LeapFrog's plan.
President and CEO Jeffrey G. Katz stated, "The sales performance of our portfolio overall was weaker than we expected during the third quarter, largely driven by declines in legacy products. Reported weakness in the retail economy and lingering bad news regarding the toy sector certainly hasn't helped. However, we are seeing good results with several new products, such as ClickStart(TM) My First Computer, and our Leapster(R) handheld educational gaming business continues to perform well. Our new FLY Fusion(TM) Pentop Computer performed at plan for the third quarter and shipments should increase during the fourth quarter driven by on-air advertising, which began in October. Inventory levels and gross margin continued to improve in the third quarter."
"Fourth quarter is typically our strongest and we expect to see sales improve from third quarter levels," Katz continued. "Nevertheless, due to third quarter weakness, we expect that full year 2007 revenues will be down by approximately 10% to 15% compared to 2006. As we've said before, 2007 is a 'Reload' year and we are on track to roll out a substantially new product line next year as planned. We will host our first-ever Investor and Analyst Day on Thursday, November 8 and we hope investors will see for themselves the progress we've made and the implications for next year and beyond."
Kinda of like eating a so-so meal at a cheap restaurant, when you leave you think "could have been better but at least I did not pay too much." That is the way I feel about LeapFrog. Shares make up .5% of the portfolio and are there for a little risk and adventure. If it works out, we do really well, if not, we don't lose much of anything. For this company, Q4 is the whole ball of wax. If things do not get better then, we cut and run. If they improve, we hold on more.
I have seen the new products and they are great. I think LeapFrog will come through this just fine. Their items are good quality and a little pricey (a good value though). My guess is folks are holding off making the more expensive purchases to see what types of bargains will be had closer to Christmas. Let's not forget Toys R'Us gave LeapFrog top billing for it's "Hot Toys For Christmas" list.
People may also be a little freaked out about the whole toy recall thing now and even though Leapfrog has not had a single toy recalled, when folks are worried, nobody is safe.
Stay tuned...
LeapFrog said it expects to report net sales for the third quarter ended September 30, 2007 of approximately $143 million and a net loss of approximately $(0.05) per share. The Company expects to report cash and investments of approximately $95 million and inventories, net of allowances, of approximately $110 million at September 30, 2007, consistent with LeapFrog's plan.
President and CEO Jeffrey G. Katz stated, "The sales performance of our portfolio overall was weaker than we expected during the third quarter, largely driven by declines in legacy products. Reported weakness in the retail economy and lingering bad news regarding the toy sector certainly hasn't helped. However, we are seeing good results with several new products, such as ClickStart(TM) My First Computer, and our Leapster(R) handheld educational gaming business continues to perform well. Our new FLY Fusion(TM) Pentop Computer performed at plan for the third quarter and shipments should increase during the fourth quarter driven by on-air advertising, which began in October. Inventory levels and gross margin continued to improve in the third quarter."
"Fourth quarter is typically our strongest and we expect to see sales improve from third quarter levels," Katz continued. "Nevertheless, due to third quarter weakness, we expect that full year 2007 revenues will be down by approximately 10% to 15% compared to 2006. As we've said before, 2007 is a 'Reload' year and we are on track to roll out a substantially new product line next year as planned. We will host our first-ever Investor and Analyst Day on Thursday, November 8 and we hope investors will see for themselves the progress we've made and the implications for next year and beyond."
Kinda of like eating a so-so meal at a cheap restaurant, when you leave you think "could have been better but at least I did not pay too much." That is the way I feel about LeapFrog. Shares make up .5% of the portfolio and are there for a little risk and adventure. If it works out, we do really well, if not, we don't lose much of anything. For this company, Q4 is the whole ball of wax. If things do not get better then, we cut and run. If they improve, we hold on more.
I have seen the new products and they are great. I think LeapFrog will come through this just fine. Their items are good quality and a little pricey (a good value though). My guess is folks are holding off making the more expensive purchases to see what types of bargains will be had closer to Christmas. Let's not forget Toys R'Us gave LeapFrog top billing for it's "Hot Toys For Christmas" list.
People may also be a little freaked out about the whole toy recall thing now and even though Leapfrog has not had a single toy recalled, when folks are worried, nobody is safe.
Stay tuned...
Thursday, October 18, 2007
"Fast Money" for Friday
Friday's Picks
Jeff Macke recommended Intel (INTC). Open $26.97
“Short Exxon Mobil (XOM)” said Guy Adami. Open $95.05
Karen Finerman thought investors should get long Limited Brands (LTD). Open $21.95
Pete Najarian said Cypress Semi (CY) is a buy. Open $32.94
THURSDAY'S RESULTS
Jeff Macke recommended eBay (EBAY). Open $40.60 Close $38.10 LOSS
Guy Adami said the play is shorting Exxon Mobil (XOM). Open $94.80 Close $95.05 LOSS
Karen Finerman takes the other side of Adami’s trade and recommended ConocoPhillips (COP). Open $87.46 Close $88.01 GAIN
Pete Najarian liked Evergreen Solar (ESLR). Open $9.44 Close $9.98 GAIN
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks). The percentage is the percentage of successful picks
Guy Adami= 32-22 = 59%
John Najarian= 13-4 = 76%
Jeff Macke= 38-29 = 56%
Pete Najarian= 26-23 = 53%
Tim Seymore= 4-3 = 57%
Karen Finerman= 17-11 = 60%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Thursday's 52 Week Lows
WOS Wolseley Plc 16.21
WM Washington Mutual Inc 30.53
WLK Westlake Chem Corp 23.80
WAL Western Alliance Bancorp 21.19
WAG Walgreen Co. 38.05
SPSN Spansion Inc 7.44
SPF Standard Pacific Corp 3.78
SOV Sovereign Bancorp Inc 15.06
RVI Retail Ventures Inc 8.76
ROX Castle Brands Inc 3.37
RF Regions Financial Cor 27.17
PZZA Papa John's International 22.80
PMI The PMI Group, Inc 23.29
PGR The Progressive Corpo 18.57
LZB La-Z-Boy Incorporated 7.17
LIZ Liz Claiborne, Inc 29.80
LENB Lennar Corp 20.07
KNX Knight Transportation Inc 16.08
JWN Nordstrom Inc 39.79
JCP Penney (J.C.) Company 57.28
HSY Hershey Co 42.50
HSWI Hsw International Inc 6.34
HMNF HMN Financial Inc 28.50
HD Home Depot, Inc 31.43
FRE Freddie Mac 54.88
FNSR Finisar 2.66
FL Foot Locker Inc 14.32
BC Brunswick Corporation 20.84
BBND Bigband Networks Inc 5.56
AYIWI Acuity Brands Inc 39.02
CLDN Celadon Group Inc 9.58
CHS Chico's FAS Inc 12.74
Bank of America Saves Citigroup's Prince
I challenge anyone to find me a person more relived at the poor results posted by Bank of America (BAC) today than Citi's (C) besieged CEO Chuck Prince.
Although not as bad as Citi's results, BAC post a 32% decline in earnings (Citi posted a 57% decline) due to more than $1.4 billion in trading losses in its investment bank and about $2 billion in additional provisions for credit losses. Earnings dropped to $3.7 billion, or 82 cents a share, from $5.42 billion, or $1.18 a share, a year earlier. Revenue fell 12% to $16.3 billion.
Also unlike Citi, it marked the first time since 2005 that BAC failed to raise year over year profits.
Add to this the bad earnings at Washington Mutual (WM) and Prince now can point fingers and claim events, not his management caused the disastrous Q3. While it does not eliminate the need for him to produce in Q4 or leave, it will, for the time being quiet to "get him out now" chants that were beginning to reach a crescendo yesterday.
I think I could here his sigh or a relief all the way up here in Massachusetts...
Although not as bad as Citi's results, BAC post a 32% decline in earnings (Citi posted a 57% decline) due to more than $1.4 billion in trading losses in its investment bank and about $2 billion in additional provisions for credit losses. Earnings dropped to $3.7 billion, or 82 cents a share, from $5.42 billion, or $1.18 a share, a year earlier. Revenue fell 12% to $16.3 billion.
Also unlike Citi, it marked the first time since 2005 that BAC failed to raise year over year profits.
Add to this the bad earnings at Washington Mutual (WM) and Prince now can point fingers and claim events, not his management caused the disastrous Q3. While it does not eliminate the need for him to produce in Q4 or leave, it will, for the time being quiet to "get him out now" chants that were beginning to reach a crescendo yesterday.
I think I could here his sigh or a relief all the way up here in Massachusetts...
Thursday's Links
Greenspan, Bush Could Refuse to Leave, Exposure,
- Another good take on the Greenspan era.
- Here is one that would make the Dems just sob.
- The is a thing called over exposure and he is testing those limits
- Another good take on the Greenspan era.
- Here is one that would make the Dems just sob.
- The is a thing called over exposure and he is testing those limits
Altria Buyback Confirmed
Altria (MO) assured investors that there would be share repurchases today on the earnings conference call.
Atria VP Dinny Devitre said "The Altria board will specify the share buy-back program and we will announce it sometime before the spin."
There was the following exchange between Devitre and JP Morgan's (JPM) Erik Bloomquist.
Dinny Devitre
The only thing clarification I can give is I'm talking about the current Altria board.
Erik Bloomquist - JP Morgan
Okay, and so that will be a buyback pertaining to Altria’s post spin?
Dinny Devitre
Altria and PMI post spin
Erik Bloomquist - JP Morgan
Okay so the announcement will discuss the aggregate buyback for the entire Altria group and then how that's allocated between PMI and PM USA will be clarified post spin?
Dinny Devitre
No, it will talk about the buyback plans for PMI separately and Altria separately.
Erik Bloomquist - JP Morgan
Okay, and that will be announced prior to the spin being completed?
Dinny Devitre
Yes.
Erik Bloomquist - JP Morgan
Okay. But post the announcement of details on the spin on January 30?
Dinny Devitre
Yes.
So the buyback plans are official and the timing and amounts will be announced after the Jan. 30th board meeting but before the spin of PMI is actually goes into effect.
Atria VP Dinny Devitre said "The Altria board will specify the share buy-back program and we will announce it sometime before the spin."
There was the following exchange between Devitre and JP Morgan's (JPM) Erik Bloomquist.
Dinny Devitre
The only thing clarification I can give is I'm talking about the current Altria board.
Erik Bloomquist - JP Morgan
Okay, and so that will be a buyback pertaining to Altria’s post spin?
Dinny Devitre
Altria and PMI post spin
Erik Bloomquist - JP Morgan
Okay so the announcement will discuss the aggregate buyback for the entire Altria group and then how that's allocated between PMI and PM USA will be clarified post spin?
Dinny Devitre
No, it will talk about the buyback plans for PMI separately and Altria separately.
Erik Bloomquist - JP Morgan
Okay, and that will be announced prior to the spin being completed?
Dinny Devitre
Yes.
Erik Bloomquist - JP Morgan
Okay. But post the announcement of details on the spin on January 30?
Dinny Devitre
Yes.
So the buyback plans are official and the timing and amounts will be announced after the Jan. 30th board meeting but before the spin of PMI is actually goes into effect.
JP Morgan's Results Put More Heat On Citigroup's Prince
I thought this was the quarter all the banks suffered? It looks like it might be just Chuck Prince's Citi (C).
On Tuesday, the historically conservative Wells Fargo (WFC) reported a 4% increase in earnings amid the tumultuous environment of the past two months. Eyebrows were raised among Citi shareholders given the 57% drop they experienced the day before. Those raised eyebrows have now turned into churning stomach acid after the results at JP Morgan (JPM) this morning. It is beginning to look like the quarter may not have been that tough for all the banks, just Citi.
JP Morgan actually posted a 2.3% increase in third-quarter net income despite $1.3 billion in write downs on loans and increasing credit loss provisions as the company's asset management business had record results. Net income was $3.37 billion, or 97 cents a share, compared with $3.3 billion, or 92 cents a share, last year. Revenue increased 3.6% to $16
On Tuesday, the historically conservative Wells Fargo (WFC) reported a 4% increase in earnings amid the tumultuous environment of the past two months. Eyebrows were raised among Citi shareholders given the 57% drop they experienced the day before. Those raised eyebrows have now turned into churning stomach acid after the results at JP Morgan (JPM) this morning. It is beginning to look like the quarter may not have been that tough for all the banks, just Citi.
JP Morgan actually posted a 2.3% increase in third-quarter net income despite $1.3 billion in write downs on loans and increasing credit loss provisions as the company's asset management business had record results. Net income was $3.37 billion, or 97 cents a share, compared with $3.3 billion, or 92 cents a share, last year. Revenue increased 3.6% to $16