TGIF Randomosity!
7 hours ago
Todd Sullivan makes the case that Sears does not need to make the "big splash"
Friday, November 30, 2007
Friday's 52 Week Lows
WAG Walgreen Co. 36.87
UXG US Gold Corporation 3.50
NVGN Novogen Limited 6.10
NOBL Noble Intl Ltd 16.10
NOA North Amern Energy Pa ... 12.55
SOLD Housevalues Inc 3.42
SMTK Simtek Corp 2.05
IIG Imergent Inc 12.79
IHC Independence Holding ... 13.90
BMJ Birks & Mayors Inc 6.15
BIG Big Lots Inc 19.00
ANEU American Cmnty Newspa ... 4.00
ACME Acme Communication Inc 3.05
Sears Holdings Eddie Lampert's Letter To Employees
Sears Holdings (SHLD) Chairman Eddie Lampert issued the following letter to employees yesterday.
To our Associates:
Yesterday, Sears Holdings announced our results for the third quarter of 2007. While we were not pleased with these results, much of the commentary in the media and on Wall Street following the results ignores the strength of our company and the progress that we have made. In fact, over the past several years, we are one of the few retail companies that have actually reduced our overall debt levels, while at the same time investing over $1 billion on capital expenditures, making investments in inventory for our customers, contributing significantly to our pension plans for our past and future retirees and repurchasing over $3 billion of our shares.
As Aylwin said yesterday, we cannot blame our results entirely on the retail and macro-economic environments, and we need to continue our quest to improve. At the same time, it is also the case that many retailers, including Home Depot (HD), Lowe’s (LOW), Macy’s (M), Kohl’s (KSS) and JC Penney (JCP), have suffered from the economic environment of the past year and have had disappointing sales and earnings results. Much of the commentary following their results focused on the difficulties in the housing markets, the overall macro environment, and the highly promotional nature of the retail environment that has existed recently. An analyst for Fitch, the credit rating agency, reacting to JC Penney’s new store openings was cited as praising JC Penney for keeping expenses under control. When other companies manage expenses carefully, it is often characterized as a sign of good management and prudence. In the case of Sears Holdings, meanwhile, expense controls are often cited as a root cause of poor performance.
Sears Holdings sells a large variety of merchandise. Many of our merchandise categories, including home appliances, tools, and lawn and garden equipment are directly related to home improvement, home maintenance and home turnover related activities. As Mike Ullman, CEO of JC Penney, was quoted recently as saying, “It’s hard to sell window coverings to homes that aren’t being built.” JC Penney reported lower income in its most recent quarter compared to last year. Kohl’s Corp. reported that its income for the past quarter was lower as well. The same goes for Home Depot and Lowe’s. All of these companies have spent enormous amounts to open new stores and to remodel existing stores and still ended up with lower earnings. Spending lots of money doesn’t always lead to the results people expect.
In fact, Sears Holdings has made significant investments and taken measured risks, including the increase in our inventory position over the past couple of years. Not all of these risks pan out and, in the case of our inventory investment, the additional inventory has not resulted in improved sales and profitability. Had the economic environment been different, certain actions may have led to different results. We are taking actions to adjust our inventory position so that, by the end of our fiscal year, we expect our inventory levels will be below the levels of the prior year.
Retail is a fickle business. Nevertheless, like any other business, by focusing on the long term, making decisions based on facts and logic, and appreciating that all decisions are based on many possible future scenarios, companies can navigate the ups and downs of the economy and the stock market to create long term value for their shareholders. That is our focus, and our goal, at Sears Holdings. We will take the actions we believe are necessary to drive value over the long term and manage the business closely and opportunistically in the short term.
We thank you for your hard work and are committed to working to deliver better results in the future. Remember, not everybody likes rooting for the underdog. It is up to us to earn their respect by our performance on the retail playing field.
Respectfully,
Edward S. Lampert
Chairman
Sears Holdings
To our Associates:
Yesterday, Sears Holdings announced our results for the third quarter of 2007. While we were not pleased with these results, much of the commentary in the media and on Wall Street following the results ignores the strength of our company and the progress that we have made. In fact, over the past several years, we are one of the few retail companies that have actually reduced our overall debt levels, while at the same time investing over $1 billion on capital expenditures, making investments in inventory for our customers, contributing significantly to our pension plans for our past and future retirees and repurchasing over $3 billion of our shares.
As Aylwin said yesterday, we cannot blame our results entirely on the retail and macro-economic environments, and we need to continue our quest to improve. At the same time, it is also the case that many retailers, including Home Depot (HD), Lowe’s (LOW), Macy’s (M), Kohl’s (KSS) and JC Penney (JCP), have suffered from the economic environment of the past year and have had disappointing sales and earnings results. Much of the commentary following their results focused on the difficulties in the housing markets, the overall macro environment, and the highly promotional nature of the retail environment that has existed recently. An analyst for Fitch, the credit rating agency, reacting to JC Penney’s new store openings was cited as praising JC Penney for keeping expenses under control. When other companies manage expenses carefully, it is often characterized as a sign of good management and prudence. In the case of Sears Holdings, meanwhile, expense controls are often cited as a root cause of poor performance.
Sears Holdings sells a large variety of merchandise. Many of our merchandise categories, including home appliances, tools, and lawn and garden equipment are directly related to home improvement, home maintenance and home turnover related activities. As Mike Ullman, CEO of JC Penney, was quoted recently as saying, “It’s hard to sell window coverings to homes that aren’t being built.” JC Penney reported lower income in its most recent quarter compared to last year. Kohl’s Corp. reported that its income for the past quarter was lower as well. The same goes for Home Depot and Lowe’s. All of these companies have spent enormous amounts to open new stores and to remodel existing stores and still ended up with lower earnings. Spending lots of money doesn’t always lead to the results people expect.
In fact, Sears Holdings has made significant investments and taken measured risks, including the increase in our inventory position over the past couple of years. Not all of these risks pan out and, in the case of our inventory investment, the additional inventory has not resulted in improved sales and profitability. Had the economic environment been different, certain actions may have led to different results. We are taking actions to adjust our inventory position so that, by the end of our fiscal year, we expect our inventory levels will be below the levels of the prior year.
Retail is a fickle business. Nevertheless, like any other business, by focusing on the long term, making decisions based on facts and logic, and appreciating that all decisions are based on many possible future scenarios, companies can navigate the ups and downs of the economy and the stock market to create long term value for their shareholders. That is our focus, and our goal, at Sears Holdings. We will take the actions we believe are necessary to drive value over the long term and manage the business closely and opportunistically in the short term.
We thank you for your hard work and are committed to working to deliver better results in the future. Remember, not everybody likes rooting for the underdog. It is up to us to earn their respect by our performance on the retail playing field.
Respectfully,
Edward S. Lampert
Chairman
Sears Holdings
Friday's Links
Buffett's success, Blogsport, Rove, Censorship
- Here is one of the best articles to date about what makes Warren so good at what he does.
- Great name Adam.
- If you can't get 'em legally, just cheat.
- Starbucks apparently has some thin skin
- Here is one of the best articles to date about what makes Warren so good at what he does.
- Great name Adam.
- If you can't get 'em legally, just cheat.
- Starbucks apparently has some thin skin
EPA Ethanol Mandate: A Joke
Why "mandate" refiners use less ethanol they are already using? Shouldn't a "mandate" require they use more than they already are? Isn't that the point?
Regulators on Tuesday set the new renewable fuels standard of nearly 4.7% for next year to meet a federal mandate that at least 5.4 billion gallons of ethanol be blended into transportation gasoline in 2008.
The standard for 2007 was slightly more than 4 percent, which amounted to roughly 4.7 billion gallons, according to the Environmental Protection Agency. The volume target increases every year until reaching 7.5 billion gallons in 2012. Why is this a joke? The U.S. currently has 134 operating ethanol plants with a total capacity of 7.2 billion gallons. That means the "mandate" could have been raised another 20% to 30% and current capacity could have easily handled it.
With producers like ADM (ADM) currently undergoing capacity upgrades that will have it producing 1.6 billion gallons itself annually, if congress and the EPA are indeed serious about making a dent in our oil consumption and the strangle hold it has on us, more aggressive target are required. Verasun (VSE) has put expansion on hold chiefly due to uncertainty over Congressional legislation.
The industry is currently subdued after it meteoric rise in early 2006. Unless congress want the inevitable consolidation that will occur, concentrating production in only a few companies, action is required. We are at a crossroads. We have the production available but unless we force refiners like Exxon (XOM), BP (BP) and Chevron (CVX) to use it, they will not as it ultimately threatens them.
Ethanol currently sells for $1.96 a gallon and every car in the US can run on a 10% blend. Currently several states have not yet enacted the 10% blend level and this EPA "mandate" only assures that will not happen anytime soon.
Almost 8 million of autos and trucks can run on the E85 blend. My Suburban can, but I cannot buy the fuel here. Supply it and you can bet I will. I would gladly support an Iowa farmer over a Saudi Shiek and smile while doing it.
Down the road, Konrad Imielinski reports:
"The U.S. House of Representatives could vote on a wide-ranging energy bill next week that would triple the use of ethanol. There is speculation that legislation will require 20.5 billion gallons of ethanol by 2015, with 5.5 billion gallons of that coming from cellulosic ethanol. The bill is also speculated to set short-term targets of 9.5 billion gallons by 2008 and 11.6 billion gallons by 2009. Back in June, the Senate passed a proposal to require 36 billion gallons of ethanol use by 2022. Democrats will also attempt to hit the oil industry with $15 billion in taxes and require utilities to get 15 percent of their electricity from wind, solar and other renewable sources."
Congress needs to act and the party that takes the lead may just get credit years from now for saving us from oil. Isn't that enough motivation?
Regulators on Tuesday set the new renewable fuels standard of nearly 4.7% for next year to meet a federal mandate that at least 5.4 billion gallons of ethanol be blended into transportation gasoline in 2008.
The standard for 2007 was slightly more than 4 percent, which amounted to roughly 4.7 billion gallons, according to the Environmental Protection Agency. The volume target increases every year until reaching 7.5 billion gallons in 2012. Why is this a joke? The U.S. currently has 134 operating ethanol plants with a total capacity of 7.2 billion gallons. That means the "mandate" could have been raised another 20% to 30% and current capacity could have easily handled it.
With producers like ADM (ADM) currently undergoing capacity upgrades that will have it producing 1.6 billion gallons itself annually, if congress and the EPA are indeed serious about making a dent in our oil consumption and the strangle hold it has on us, more aggressive target are required. Verasun (VSE) has put expansion on hold chiefly due to uncertainty over Congressional legislation.
The industry is currently subdued after it meteoric rise in early 2006. Unless congress want the inevitable consolidation that will occur, concentrating production in only a few companies, action is required. We are at a crossroads. We have the production available but unless we force refiners like Exxon (XOM), BP (BP) and Chevron (CVX) to use it, they will not as it ultimately threatens them.
Ethanol currently sells for $1.96 a gallon and every car in the US can run on a 10% blend. Currently several states have not yet enacted the 10% blend level and this EPA "mandate" only assures that will not happen anytime soon.
Almost 8 million of autos and trucks can run on the E85 blend. My Suburban can, but I cannot buy the fuel here. Supply it and you can bet I will. I would gladly support an Iowa farmer over a Saudi Shiek and smile while doing it.
Down the road, Konrad Imielinski reports:
"The U.S. House of Representatives could vote on a wide-ranging energy bill next week that would triple the use of ethanol. There is speculation that legislation will require 20.5 billion gallons of ethanol by 2015, with 5.5 billion gallons of that coming from cellulosic ethanol. The bill is also speculated to set short-term targets of 9.5 billion gallons by 2008 and 11.6 billion gallons by 2009. Back in June, the Senate passed a proposal to require 36 billion gallons of ethanol use by 2022. Democrats will also attempt to hit the oil industry with $15 billion in taxes and require utilities to get 15 percent of their electricity from wind, solar and other renewable sources."
Congress needs to act and the party that takes the lead may just get credit years from now for saving us from oil. Isn't that enough motivation?
Ethanol Consolidation Begins
It was just matter of time.
Verasun (VSE) and US Bioenergy (USBE), both trading around 52 week lows, have agreed to merge.
Under the agreement, 0.81 share of VeraSun common stock will be issued for each outstanding share of US BioEnergy common stock, representing a premium of approximately 11% based on 11/23, closing prices. Existing VeraSun shares will remain outstanding and will represent approximately 60% of the shares outstanding after the merger.
VeraSun Chairman, CEO and President Donald L. Endres will remain CEO of the combined company, and US BioEnergy President and CEO Gordon Ommen will serve as chairman following the closing of the merger. VeraSun Senior Vice President and Chief Financial Officer Danny C. Herron will become president of the combined company. The combined entity will retain the VeraSun name and trade under VeraSun’s existing ticker symbol, VSE.
Upon completion, the new company will have nine ethanol production facilities in operation and seven additional facilities under construction. By the end of 2008, the company is expected to have a total production capacity of more than 1.6 billion gallons per year (BGY) and 16 facilities constructed by Fagen, Inc. and utilizing ICM process technology. Through the merger, the employees of both companies will be integrated into a combined work force.
VeraSun will then be the or equal to ADM (ADM) as the largest public ethanol producer in the US. With valuation of producers at record lows, do not expect this to be the last merger or buyout you read about in the coming months. Prime targets are Pacific Ethanol (PEIX) for its west coast monopoly and The Andersons (ANDE) because it is still profitable and has a fertilizer segment that is doing very well.
Verasun (VSE) and US Bioenergy (USBE), both trading around 52 week lows, have agreed to merge.
Under the agreement, 0.81 share of VeraSun common stock will be issued for each outstanding share of US BioEnergy common stock, representing a premium of approximately 11% based on 11/23, closing prices. Existing VeraSun shares will remain outstanding and will represent approximately 60% of the shares outstanding after the merger.
VeraSun Chairman, CEO and President Donald L. Endres will remain CEO of the combined company, and US BioEnergy President and CEO Gordon Ommen will serve as chairman following the closing of the merger. VeraSun Senior Vice President and Chief Financial Officer Danny C. Herron will become president of the combined company. The combined entity will retain the VeraSun name and trade under VeraSun’s existing ticker symbol, VSE.
Upon completion, the new company will have nine ethanol production facilities in operation and seven additional facilities under construction. By the end of 2008, the company is expected to have a total production capacity of more than 1.6 billion gallons per year (BGY) and 16 facilities constructed by Fagen, Inc. and utilizing ICM process technology. Through the merger, the employees of both companies will be integrated into a combined work force.
VeraSun will then be the or equal to ADM (ADM) as the largest public ethanol producer in the US. With valuation of producers at record lows, do not expect this to be the last merger or buyout you read about in the coming months. Prime targets are Pacific Ethanol (PEIX) for its west coast monopoly and The Andersons (ANDE) because it is still profitable and has a fertilizer segment that is doing very well.
Friday's Upgrades and Downgrades
UPGRADES
MGP Ingredients MGPI Northland Securities Under Perform » Market Perform
InterActive IACI Piper Jaffray Neutral » Buy
General Maritime GMR Citigroup Sell » Hold
Sigma Designs SIGM RBC Capital Mkts Sector Perform » Outperform
Natl Oilwell Varco NOV Citigroup Hold » Buy
Patterson Companies PDCO Lehman Brothers Equal-weight » Overweight
Nalco NLC Jefferies & Co Hold » Buy
Red Robin Gourmet RRGB CIBC Wrld Mkts Sector Perform » Sector Outperform
Dollar Tree DLTR Friedman Billings Mkt Perform » Outperform
Range Resources RRC Friedman Billings Mkt Perform » Outperform
General Motors GM Bear Stearns Underperform » Peer Perform
TiVo TIVO JP Morgan Underweight » Overweight
Double Hull Tankers DHT UBS Neutral » Buy
Nuvelo NUVO UBS Neutral » Buy
DOWNGRADES
Rogers Comms RCI BMO Capital Markets Outperform » Market Perform
Men's Wearhouse MW Caris & Company Above Average » Average
Transocean RIG Sterne Agee Buy » Hold
Rogers Comms RCI Bear Stearns Outperform » Peer Perform
Sierra Pacific SRP Credit Suisse Outperform » Neutral
State Auto Fin STFC Piper Jaffray Neutral » Sell
Donegal Group DGICA Piper Jaffray Neutral » Sell
Piper Jaffray PJC Wachovia Outperform » Mkt Perform
Tyler Tech TYL Banc of America Sec Buy » Neutral
Rogers Comms RCI CIBC Wrld Mkts Sector Outperform » Sector Perform
Aeropostale ARO Sun Trust Rbsn Humphrey Buy » Neutral
Thursday, November 29, 2007
"Fast Money" for Friday
Friday's Picks
Tim Seymour recommended Sears Holdings (SHLD). Open $104.09
Guy Adami would buy E*TRADE (ETFC). Open $4.82
Karen Finerman went with Domtar (UFS). Open $7.23
Pete Najarian agreed with Guy: Buy E*TRADE (ETFC). Open $4.82
Thursday's Results
Tim Seymour recommended Stillwater Mining (SWC). Open $9.81 Close $9.76 LOSS
Guy Adami likes US Steel (X). Open $96.16 Close $97.67 GAIN
Karen Finerman prefers Pzena (PZN) as a value play. Open $12.00 Close $11.85 LOSS
Pete Najarian says Isis (ISIS) is a buy. Open $17.48 Close $17.53 GAIN
Guy Adami= 47-41 = 53%
John Najarian= 13-4 = 76%
Jeff Macke= 54-35 = 60%
Pete Najarian= 37-36 = 51%
Tim Seymore= 5-6 = 45%
Karen Finerman= 29-23 = 55%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Thursday's 52 Week Low's
TSH Teche Holding Company 37.90
TSC Stephan Company , The 3.25
SOLD Housevalues Inc 3.50
SMTK Simtek Corp 2.10
SMSI Smith Micro Software Inc 7.72
SMRT Stein Mart Inc 5.41
SHLD Sears Hldgs Corp 102.13
PBY The Pep Boys-Manny, M ... 10.86
PAL North Amern Palladium Ltd 5.40
PAGI Pemco Aviation Inc 3.01
NYT New York Times Company 16.73
NVGN Novogen Limited 6.36
NUTR Nutraceutical Intl Corp 11.34
MW Mens Wearhouse Inc 34.81
MTLK Metalink Ltd 4.90
CTR Cato Corp New 14.63
CRED Credo Petroleum Corpo ... 8.45
Did Lampert Dump Burnett?
Jesus, what did Sears Holdings (SHLD) Eddie Lampert do to CNBC's Erin Burnett? Did they date when she worked at Goldman Sachs (GS) or did he rebuff her advances? Perhaps she is miffed that she did not get an interview she wanted?
She has been joyously drubbing this quarters performance all day today on CNBC. She does is with this sick little smile on her face too. Odd...
Now, I am not saying this was a good quarter, it sucked. But, Burnett has taking it a bit farther. She spent this morning comparing his Citigroup (C) purchases to that of Saudi Prince Alwaleed's. Now, it is one thing to compare two investors purchase price but is it really legitimate or the slightest bit honest to compare purchases of a company made 17 years apart? Am I the only one who finds that embarrassingly transparent?
Then she jumps into the "how much time does Lampert have left" doomsday scenario. Okay,,,,,, let's just forget the 20 year and 28% annual return Lampert has produced for investors. That track record alone places him in a handful of investors. I mean, I am sure anyone who has made a fortune with Lampert is jumping ship now because of a bad year. Let's also forget the 5 year lockup people give him when they fork over their $10 million minimum to invest with him. Let's also ignore the fact that folks who have $10 million to give someone for 5 years to invest, did not get that type of money by pissing their pants at every bump in the road.
Sears. Burnett clearly has no grasp of the situation. It is a retail turnaround story. Those take years. Sears is not losing money and still is producing billions for Lampert to repurchase shares. Has Burnett seen the stock price and performance of other comparable retailers like JC Penny (JCP) down 48% from its high and Macy's (M) down 30% from its high? Apparently not. Check out the one year chart of all three here. Look similar?
What Burnett casually glosses over is that when Lampert took control of both Sears and Kmart, they were careening toward extinction (Kmart actually was bankrupt). Now they produce about $1 billion in cash and every quarter that goes buy, Lampert increases our ownership percentage.
Awful job Eddie.... (please detect the sarcasm)
Erin, get over it "he just not that into you"
She has been joyously drubbing this quarters performance all day today on CNBC. She does is with this sick little smile on her face too. Odd...
Now, I am not saying this was a good quarter, it sucked. But, Burnett has taking it a bit farther. She spent this morning comparing his Citigroup (C) purchases to that of Saudi Prince Alwaleed's. Now, it is one thing to compare two investors purchase price but is it really legitimate or the slightest bit honest to compare purchases of a company made 17 years apart? Am I the only one who finds that embarrassingly transparent?
Then she jumps into the "how much time does Lampert have left" doomsday scenario. Okay,,,,,, let's just forget the 20 year and 28% annual return Lampert has produced for investors. That track record alone places him in a handful of investors. I mean, I am sure anyone who has made a fortune with Lampert is jumping ship now because of a bad year. Let's also forget the 5 year lockup people give him when they fork over their $10 million minimum to invest with him. Let's also ignore the fact that folks who have $10 million to give someone for 5 years to invest, did not get that type of money by pissing their pants at every bump in the road.
Sears. Burnett clearly has no grasp of the situation. It is a retail turnaround story. Those take years. Sears is not losing money and still is producing billions for Lampert to repurchase shares. Has Burnett seen the stock price and performance of other comparable retailers like JC Penny (JCP) down 48% from its high and Macy's (M) down 30% from its high? Apparently not. Check out the one year chart of all three here. Look similar?
What Burnett casually glosses over is that when Lampert took control of both Sears and Kmart, they were careening toward extinction (Kmart actually was bankrupt). Now they produce about $1 billion in cash and every quarter that goes buy, Lampert increases our ownership percentage.
Awful job Eddie.... (please detect the sarcasm)
Erin, get over it "he just not that into you"
Thursday's Links
Thank-You, Shopping, Mutual funds, 1,000%
- Here is a great read from Minyanville about children and the Holidays
- Even better than that, how to make Christmas shopping an educational experience.
- If you invest in mutual funds, here is how to do it.
- Not a bad year?!?
- Here is a great read from Minyanville about children and the Holidays
- Even better than that, how to make Christmas shopping an educational experience.
- If you invest in mutual funds, here is how to do it.
- Not a bad year?!?
Sears Holdings Results
Going to be an ugly day for Lampert and compnay.
Sears (SHLD) today reported net income of $2 million, or $0.01 per diluted share, for
the Q3 ended November 3, 2007, compared with net income of $196 million, or $1.27 per diluted share, for the Q3 ended October 28, 2006. The Q3 2006 results included $101 million in pre-tax gains ($64 million after tax or $0.42 per diluted share) on total return swap investments outstanding during that period.
Excluding these gains, earnings per diluted share were $0.85 for the Q3 of fiscal 2006. The year-over-year decline in income is primarily the result of a $223
million decline in gross margin, reflecting both sales declines, as well as an overall decline in our gross margin rate for the quarter due to discounting.
Operating income for the quarter decreased $230 million to $46 million in 2007, as compared to $276 million in the third quarter of 2006, mainly due to lower gross margin generated at both Kmart and Sears. For the quarter, Sears Holdings generated $3.2 billion in total gross margin as compared to $3.4 billion in the third quarter last year.
Lampert had cash and cash equivalents of $1.5 billion at 11/3 (of which $0.8 billion was domestic and $0.7 billion was at Sears Canada) as compared to $2.1 billion at October 28, 2006. The $1.1 billion net decline in cash for the quarter primarily reflects $0.9 billion used for share repurchases and $0.9 billion used to build inventories for the holiday selling season, partially offset by $0.6 billion of cash generated through short-term borrowings that have been repaid as of 11/27.
Lampert repurchased 6.7 million common shares at a total cost of $0.9 billion (or $131.72 per share) under our share repurchase program during Q3. As of November 27, he had remaining authorization to repurchase $736 million of common shares under the program.
The bright spot was November month-to-date period (Sunday, November 4, 2007
through Tuesday, November 27, 2007) domestic comparable store sales
at Sears increasing 1.9%.
Good? Hell no. Sucks actually. But, did you really expect any better? Sears is going to get hit hard today and that is fine as I will be a buyer when shares drop below $110. Retails stories are long term ones ans Lampert is only in act two. Act one was getting both companies off the bankruptcy express, act two is determining the format which appears to be a brand central one. Act three will be the roll out of this (this will happen over the next year) and then we wait.
The good news is share count is decreasing rapidly, now down to about 137 million so the turnaround earnings will be excellerated for those holding shares.
View release here:
Sears (SHLD) today reported net income of $2 million, or $0.01 per diluted share, for
the Q3 ended November 3, 2007, compared with net income of $196 million, or $1.27 per diluted share, for the Q3 ended October 28, 2006. The Q3 2006 results included $101 million in pre-tax gains ($64 million after tax or $0.42 per diluted share) on total return swap investments outstanding during that period.
Excluding these gains, earnings per diluted share were $0.85 for the Q3 of fiscal 2006. The year-over-year decline in income is primarily the result of a $223
million decline in gross margin, reflecting both sales declines, as well as an overall decline in our gross margin rate for the quarter due to discounting.
Operating income for the quarter decreased $230 million to $46 million in 2007, as compared to $276 million in the third quarter of 2006, mainly due to lower gross margin generated at both Kmart and Sears. For the quarter, Sears Holdings generated $3.2 billion in total gross margin as compared to $3.4 billion in the third quarter last year.
Lampert had cash and cash equivalents of $1.5 billion at 11/3 (of which $0.8 billion was domestic and $0.7 billion was at Sears Canada) as compared to $2.1 billion at October 28, 2006. The $1.1 billion net decline in cash for the quarter primarily reflects $0.9 billion used for share repurchases and $0.9 billion used to build inventories for the holiday selling season, partially offset by $0.6 billion of cash generated through short-term borrowings that have been repaid as of 11/27.
Lampert repurchased 6.7 million common shares at a total cost of $0.9 billion (or $131.72 per share) under our share repurchase program during Q3. As of November 27, he had remaining authorization to repurchase $736 million of common shares under the program.
The bright spot was November month-to-date period (Sunday, November 4, 2007
through Tuesday, November 27, 2007) domestic comparable store sales
at Sears increasing 1.9%.
Good? Hell no. Sucks actually. But, did you really expect any better? Sears is going to get hit hard today and that is fine as I will be a buyer when shares drop below $110. Retails stories are long term ones ans Lampert is only in act two. Act one was getting both companies off the bankruptcy express, act two is determining the format which appears to be a brand central one. Act three will be the roll out of this (this will happen over the next year) and then we wait.
The good news is share count is decreasing rapidly, now down to about 137 million so the turnaround earnings will be excellerated for those holding shares.
View release here:
Ackman Increases Stake in Borders: Why?
I am trying to understand what Bill Ackman sees in Borders (BGP)
According to a filing with the SEC, Bill Ackman's Pershing Square Capital Management disclosed an increased 17.1% stake in bookseller Borders Group, up from 12%. Last week management said Q4 earnings, excluding restructuring charges, will exceed last year's earnings from continuing operations of around $1.48 per share. Now that improvement is only about $1 million dollars, it is not like they knocked it out of the park here. They attributed the difference to both the fear of lead in toys and a strong best-seller lineup.
I noted this "no toy" trend last week in a "Black Friday" post that I observed very few toys being taken to the register at several locations.
Now, in an Oct. 9 SEC filing, Ackman's Pershing Square said it did not believe its
"activities would effect a change of control" at the book seller. Simply put, Ackman is playing this as a ValuePlay story, not as an activist investor pushing for change at the top.
What to see in Borders? Shares trade at 1/2 their 52 week high and sit at $12 a each and CEO George Jones has ponied up $1.2 million for 100,000 shares in the past two months. After that? I just cannot find much. They sold off their UK operations, big box discounters like Wal-Mart (WMT) and Target (TGT) are crushing margins and online retailers like Amazon (AMZN) and Ebay (EBAY) are taking traffic the thought of a meaningful online business away from them. The only reason I can find to buy shares is in the hope they merge with Barnes and Nobel (BKS) who is actually making money. But, why would BKS want it? Borders does have almost no debt and about $1.10 a share in cash. Taking it over would not hinder the balance sheet at Barnes and Nobel.
It would enable them to sell off duplicate locations and effectively eliminate foot traffic competition. The FTC might have something to say about it but they so far have been unable to stop anyone who wants to merge so it is doubtful they would be able to actually do anything even if they did object.
Now, there must be something else there or Ackman knows something we don't. The merger of the two have been rumored for about a year now and with both CEO's buying shares in the company, that assures it is far off. The SEC would be all over both companies were a merger announced anytime soon after insiders were seen buying large amounts of shares on the open market.
Borders is a non-factor in the online game so that cannot be it. FY 2008 ending in Jan. will mark the second consecutive year the retailer has lost money and FY 2009 does not look all that much brighter. Sales for the past three years have been essentially stagnant. Personally, I love to read but book are the last thing I want to go to the store for. My first stop is online and borders.com does not even come to mind. This simply means that the economics of the company do not have a huge impetus to change anytime soon.
The environment they operate in is getting tougher, not easier and that does not bode well for a "turnaround" story. More digging is in order to find out what Ackman is thinking.
According to a filing with the SEC, Bill Ackman's Pershing Square Capital Management disclosed an increased 17.1% stake in bookseller Borders Group, up from 12%. Last week management said Q4 earnings, excluding restructuring charges, will exceed last year's earnings from continuing operations of around $1.48 per share. Now that improvement is only about $1 million dollars, it is not like they knocked it out of the park here. They attributed the difference to both the fear of lead in toys and a strong best-seller lineup.
I noted this "no toy" trend last week in a "Black Friday" post that I observed very few toys being taken to the register at several locations.
Now, in an Oct. 9 SEC filing, Ackman's Pershing Square said it did not believe its
"activities would effect a change of control" at the book seller. Simply put, Ackman is playing this as a ValuePlay story, not as an activist investor pushing for change at the top.
What to see in Borders? Shares trade at 1/2 their 52 week high and sit at $12 a each and CEO George Jones has ponied up $1.2 million for 100,000 shares in the past two months. After that? I just cannot find much. They sold off their UK operations, big box discounters like Wal-Mart (WMT) and Target (TGT) are crushing margins and online retailers like Amazon (AMZN) and Ebay (EBAY) are taking traffic the thought of a meaningful online business away from them. The only reason I can find to buy shares is in the hope they merge with Barnes and Nobel (BKS) who is actually making money. But, why would BKS want it? Borders does have almost no debt and about $1.10 a share in cash. Taking it over would not hinder the balance sheet at Barnes and Nobel.
It would enable them to sell off duplicate locations and effectively eliminate foot traffic competition. The FTC might have something to say about it but they so far have been unable to stop anyone who wants to merge so it is doubtful they would be able to actually do anything even if they did object.
Now, there must be something else there or Ackman knows something we don't. The merger of the two have been rumored for about a year now and with both CEO's buying shares in the company, that assures it is far off. The SEC would be all over both companies were a merger announced anytime soon after insiders were seen buying large amounts of shares on the open market.
Borders is a non-factor in the online game so that cannot be it. FY 2008 ending in Jan. will mark the second consecutive year the retailer has lost money and FY 2009 does not look all that much brighter. Sales for the past three years have been essentially stagnant. Personally, I love to read but book are the last thing I want to go to the store for. My first stop is online and borders.com does not even come to mind. This simply means that the economics of the company do not have a huge impetus to change anytime soon.
The environment they operate in is getting tougher, not easier and that does not bode well for a "turnaround" story. More digging is in order to find out what Ackman is thinking.
Gazprom and Dow Chemical: Wow
The potential here is just stunning for Dow (DOW).
Russian natural gas monopoly OAO Gazprom and Dow signed a memorandum of understanding that outlines potential cooperation on projects in Russia and Germany. Gazprom said the companies will consider creating a joint venture based on Dow's new petrochemical facilities in Germany and cooperating in refining gas from Russia's Yamalo-Nemets autonomous district, and study other possibilities.
CEO Andrew Liveris has long lamented high natural gas prices and the US policy (or lack thereof) has lead to the expedited JV strategy at Dow over the past two years.
Some backround here is now necessary. In late October Gazprom announced an agreement with Statoilhydro.
From the Release:
"The Shtokman gas and condensate field is located in the central part of the Russian sector of the Barents Sea offshore.
Approved by the RF Nature Ministry’s State Commission for Mineral Resources in January 2006, Shtokman’s C1+C2 reserves make up 3.7 tcm of gas and over 31 mln t of gas condensate.
In October 2006, the Gazprom Management Committee decided that pipeline gas deliveries from the Shtokman field to the European market would take priority over LNG shipments. Shtokman was identified as the resource base for Russian gas export to Europe via the Nord Stream Gas pipeline.
Phase 1 stipulates production of 23.7 bcm of natural gas per annum, gas and LNG supplies via the gas pipeline will start in 2013 and 2014, respectively."
A massive deal, but what to so with it all.
Fast forward To Dow and Gazprom:
The potential JV would give Gazprom access to new petrochemical facilities set up by Dow in Germany. In return Dow would refine gas at Gazprom's fields in the Yamalo-Nemets region in the north of Russia. Essentially Dow would have the inside track in building the Russian petrochemical industry. This follows similar deals for Dow in both Saudi Arabia and China.
See where this is going?
Russian natural gas monopoly OAO Gazprom and Dow signed a memorandum of understanding that outlines potential cooperation on projects in Russia and Germany. Gazprom said the companies will consider creating a joint venture based on Dow's new petrochemical facilities in Germany and cooperating in refining gas from Russia's Yamalo-Nemets autonomous district, and study other possibilities.
CEO Andrew Liveris has long lamented high natural gas prices and the US policy (or lack thereof) has lead to the expedited JV strategy at Dow over the past two years.
Some backround here is now necessary. In late October Gazprom announced an agreement with Statoilhydro.
From the Release:
"The Shtokman gas and condensate field is located in the central part of the Russian sector of the Barents Sea offshore.
Approved by the RF Nature Ministry’s State Commission for Mineral Resources in January 2006, Shtokman’s C1+C2 reserves make up 3.7 tcm of gas and over 31 mln t of gas condensate.
In October 2006, the Gazprom Management Committee decided that pipeline gas deliveries from the Shtokman field to the European market would take priority over LNG shipments. Shtokman was identified as the resource base for Russian gas export to Europe via the Nord Stream Gas pipeline.
Phase 1 stipulates production of 23.7 bcm of natural gas per annum, gas and LNG supplies via the gas pipeline will start in 2013 and 2014, respectively."
A massive deal, but what to so with it all.
Fast forward To Dow and Gazprom:
The potential JV would give Gazprom access to new petrochemical facilities set up by Dow in Germany. In return Dow would refine gas at Gazprom's fields in the Yamalo-Nemets region in the north of Russia. Essentially Dow would have the inside track in building the Russian petrochemical industry. This follows similar deals for Dow in both Saudi Arabia and China.
See where this is going?
Thursday's Upgrades and Downgrades
UPGRADES
Prospect Energy PSEC Ferris Baker Watts Sell » Neutral
Verigy VRGY Stifel Nicolaus Hold » Buy
Overstock.com OSTK Stifel Nicolaus Sell » Hold
Novellus NVLS Stifel Nicolaus Sell » Hold
DuPont DD Soleil Hold » Buy
Cepheid CPHD Piper Jaffray Neutral » Buy
Anheuser-Busch BUD UBS Neutral » Buy
Ceradyne CRDN Morgan Joseph Hold » Buy
Blue Coat BCSI Roth Capital Hold » Buy
Holly HOC Friedman Billings Mkt Perform » Outperform
ICT Group ICTG Friedman Billings Underperform » Mkt Perform
UBS AG UBS Credit Suisse Neutral » Outperform
AptarGroup ATR Lehman Brothers Underweight » Equal-weight
AGL Resources ATG UBS Neutral » Buy
Molson Coors Brewing TAP UBS Neutral » Buy
Alpha Natural Resources ANR UBS Neutral » Buy
Potash POT JP Morgan Neutral » Overweight
Banco Santander SAN Deutsche Securities Hold » Buy
DOWNGRADES
Finlay Enterprises FNLY B. Riley & Co Neutral » Sell
SourceForge LNUX Dougherty & Company Buy » Neutral
Sonic Solutions SNIC Kaufman Bros Buy » Hold
Casual Male CMRG Stifel Nicolaus Buy » Hold
Ariad Pharm ARIA JP Morgan Overweight » Neutral
Astronics Corporation ATRO Boenning & Scattergood Market Outperform » Market Perform
New York Times NYT Banc of America Sec Neutral » Sell
Advanta Corp ADVNB Friedman Billings Mkt Perform » Underperform
Ryanair Hldgs RYAAY Deutsche Securities Buy » Hold
Air France KLM AKH Deutsche Securities Buy » Hold
Genlyte GLYT Banc of America Sec Buy » Neutral
Wednesday, November 28, 2007
"Fast Money" for Thursday
Thursday's Picks
Tim Seymour recommended Stillwater Mining (SWC). Open $9.81
Guy Adami likes US Steel (X). Open $96.16
Karen Finerman prefers Pzena (PZN) as a value play. Open $12.00
Pete Najarian says Isis (ISIS) is a buy. Open $17.48
Wednesday's Results
No "First Trade" Picks
Records: Since 6/21/2007
Guy Adami= 46-41 = 52%
John Najarian= 13-4 = 76%
Jeff Macke= 54-35 = 60%
Pete Najarian= 36-36 = 50%
Tim Seymore= 5-5 = 50%
Karen Finerman= 29-22 = 57%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Wednesday's 52 Week Low's
SRG Seanergy Maritime Corp 9.41
SMTK Simtek Corp 2.25
SMSI Smith Micro Software Inc 7.57
SMMF Summit Financial Grou ... 16.40
PBY The Pep Boys-Manny, M ... 13.05
PAL North Amern Palladium Ltd 5.60
NYT New York Times Company 16.27
NVGN Novogen Limited 6.43
MTLK Metalink Ltd 4.98
MRVL Marvell Technology Gr ... 14.98
KUB Kubota Corporation 34.78
KTV Corts Tr First Un Ins ... 25.53
KDE 4 Kids Entertainment Inc 12.20
Ackman Raises Target Stake
Wednesday's Links
Mobile Web, Buybacks or Dividends, Iran, UK iPhone issues
- AT&T "Edge" network is disappointing iPhone users
- Interesting post about buybacks and dividends
- It must be weird being the party in which good news is bad for you.
- For $600, you'd expect to not see these issues.
- AT&T "Edge" network is disappointing iPhone users
- Interesting post about buybacks and dividends
- It must be weird being the party in which good news is bad for you.
- For $600, you'd expect to not see these issues.
Markets Misinterpreting Kohn's Remarks
People are seizing on Fed Vice Chairman Donald L. Kohn's speech today as evidence a rate cut is a sure thing on 12/11. Not so fast.
Here is the sentence people are focused on:
"...such a repricing in the form of wider spreads and tighter credit standards at banks and other lenders would make some types of credit more expensive and discourage some spending, developments that would require offsetting policy actions, other things being equal."
The key words? "other things being equal"
Simply put, if inflation were to jump, a cut is off the table. Should credit and financial institutions conditions improve (Citigroup's (C) have), a rate cut is dead. Think about it. Kohn referred to "recent weeks" in the statement several times. So, essentially if things turn around or stabilize in the next couple weeks until the next meeting, Kohn's entire speech is rendered moot.
The Dow and S&P were both up about 1% early today and I fear it is a matter of people hearing what they want to hear rather than listening to what Kohn said.
A careful read of Kohn's speech really does not shine a new light on anything. His statements are discussion are really nothing that have not already been discussed and when you condition a statement on "things being equal" you are essentially saying "if we had to act today". Since they do not, everything he said prior to that is rendered meaningless as tomorrow is not today and next month is definitely not today.
What to think? The last rate cut by the Fed was a close call. Bernanke has said repeatedly that inflation is his main concern. That is what we need to watch first. Growth second. If inflation remains stable or falls then he will act to cut rates should conditions warrant it. If it jumps, Bernanke will be more than happy to let the economy slow even more to stop it. Think Paul Volcker.
Be very careful investing based on Fed statements because once the day they are issued has passed, their relevance pases also.
Here is the sentence people are focused on:
"...such a repricing in the form of wider spreads and tighter credit standards at banks and other lenders would make some types of credit more expensive and discourage some spending, developments that would require offsetting policy actions, other things being equal."
The key words? "other things being equal"
Simply put, if inflation were to jump, a cut is off the table. Should credit and financial institutions conditions improve (Citigroup's (C) have), a rate cut is dead. Think about it. Kohn referred to "recent weeks" in the statement several times. So, essentially if things turn around or stabilize in the next couple weeks until the next meeting, Kohn's entire speech is rendered moot.
The Dow and S&P were both up about 1% early today and I fear it is a matter of people hearing what they want to hear rather than listening to what Kohn said.
A careful read of Kohn's speech really does not shine a new light on anything. His statements are discussion are really nothing that have not already been discussed and when you condition a statement on "things being equal" you are essentially saying "if we had to act today". Since they do not, everything he said prior to that is rendered meaningless as tomorrow is not today and next month is definitely not today.
What to think? The last rate cut by the Fed was a close call. Bernanke has said repeatedly that inflation is his main concern. That is what we need to watch first. Growth second. If inflation remains stable or falls then he will act to cut rates should conditions warrant it. If it jumps, Bernanke will be more than happy to let the economy slow even more to stop it. Think Paul Volcker.
Be very careful investing based on Fed statements because once the day they are issued has passed, their relevance pases also.
Walmart.com Blows Away Competition
Walmart.com (WMT) has almost double the online share of it nearest competitor in the brick and mortar retail space.
Through the week ending 11/17 (% equals share):
1. www.walmart.com (WMT) =7.2%
2. www.target.com (TGT) =4.86%
3. www.bestbuy.com (BBY) =2.91%
4. www.jcpenney.com (JCP) =2.48%
5. www.circuitcity.com (CC) =2.34%
6. www.toysrus.com (private) =2.32%
7. www.sears.com (SHLD)= 2.16%
8. www.kohls.com (KSS) =1.39%
9. www.lowes.com (LOW) =1.29%
10. www.homedepot.com (HD)= 1.29%
I have chronicled Wal-Mart's online success before and these results only add to the proof. Wal-Mart is clearly the leader here and their "site to store" program has been a huge hit. I have used it myself and it is very easy to use and when you consider the shipping charges you save, it really adds up very quickly.
More bad news for Home Depot and Lowes as they tied for last on the list. To make matters worse, Sears is well ahead of them and with more visits to Sears.com, you can bet additional tool and appliance sales are going there rather than to either HD or Lowes.
Through the week ending 11/17 (% equals share):
1. www.walmart.com (WMT) =7.2%
2. www.target.com (TGT) =4.86%
3. www.bestbuy.com (BBY) =2.91%
4. www.jcpenney.com (JCP) =2.48%
5. www.circuitcity.com (CC) =2.34%
6. www.toysrus.com (private) =2.32%
7. www.sears.com (SHLD)= 2.16%
8. www.kohls.com (KSS) =1.39%
9. www.lowes.com (LOW) =1.29%
10. www.homedepot.com (HD)= 1.29%
I have chronicled Wal-Mart's online success before and these results only add to the proof. Wal-Mart is clearly the leader here and their "site to store" program has been a huge hit. I have used it myself and it is very easy to use and when you consider the shipping charges you save, it really adds up very quickly.
More bad news for Home Depot and Lowes as they tied for last on the list. To make matters worse, Sears is well ahead of them and with more visits to Sears.com, you can bet additional tool and appliance sales are going there rather than to either HD or Lowes.
Lead Paint Defendants Attack RI Abatement Plan
Filed from Jane Genova. Through their attorneys, the three defendants in the Rhode Island Lead Paint Trial II - Sherwin-Williams (SHW), Millennium Holdings and NL Industries (NL) - filed a motion today in RI Superior Court.
The motion seeks to strike the plaintiff's proposed lead-abatement plan [that is, the state Attorney General's plan] in its entirety. Alternatively, defendants move the court to strike each part of the Attorney General's plan that
*Constitutes improper equitable relief
*Exceeds the court's jurisdiction and authority
*Affects the rights of persons not a party to this proceeding
*Is constitutionally improper
*And, is unsupported by the prior record in this proceedings.
This particular motion is separate from the defendants' response to that abatement plan which is due December 15, 2007.
Specifically, here are more details on the defendants' claim that the abatement plan is on its face defective for five basic reasons:
It seeks money damages that cannot be awarded in equity. The court is constitutionally precluded from awarding money damages, a form of relief exclusively reserved for the jury. Moreover, the plan confirms that an adequate remedy at law exists for the Attorney General through RI's ability to bring future claims for money damages and because the relief sought is or was compensable in charges. As a matter of law, no remedy can now include the payment of money or the creation of a fund.
It is premised on abatement of individual properties. No remedy can include the inspection or abatement of individual properties because those properties were not part of the trial and verdict, and property owners were neither given notice nor permitted to participate in the proceedings. Ordering abatement of individual properties would exceed the court's jurisdiction and authority, would be improper in a parens patriae action, and would violate property owners' constitutional rights.
It includes a request for prospective injunctive relief to prevent future harm, but the RI AG filed to prove his right to such equitable relief. The jury never decided, as it was constitutionally required to do, the predicate facts for mandatory injunctive relief by clear and convincing evidence. Not did the RI AG prove under the proper standard of proof that any harm from properly maintained lead paint is practically certain to occur in the future. Therefore, there is no basis on which the court can enter a mandatory injunction.
It improperly seeks relief for properties and environmental conditions that were never part of the trial or verdict, ranging from playgrounds to public buildings. Similarly, no relief can include the abatement of intact, well-maintained lead paint because the AG conceded (and the legislature declared) that such paint does not present an immediate hazard.
It purports to supplant existing statutory and regulatory requirements for addressing lead-based paint hazards. This court cannot properly enter an order that conflicts with or is inconsistent with the General Assembly's enactments. Any permissible remedy may only fill a gap in those requirements beyond that which can be achieved through compliance with, and enforcement of, existing laws and regulations.
You can receive a complimentary copy of this 38-page motion by contacting Mgenova981@aol.com.
More commentary an be found here.
The long and short of it is Lynch can file his motions that make a nice neat little press release and play well in the local papers while the defendants will eventually win with a little called the law.
The motion seeks to strike the plaintiff's proposed lead-abatement plan [that is, the state Attorney General's plan] in its entirety. Alternatively, defendants move the court to strike each part of the Attorney General's plan that
*Constitutes improper equitable relief
*Exceeds the court's jurisdiction and authority
*Affects the rights of persons not a party to this proceeding
*Is constitutionally improper
*And, is unsupported by the prior record in this proceedings.
This particular motion is separate from the defendants' response to that abatement plan which is due December 15, 2007.
Specifically, here are more details on the defendants' claim that the abatement plan is on its face defective for five basic reasons:
It seeks money damages that cannot be awarded in equity. The court is constitutionally precluded from awarding money damages, a form of relief exclusively reserved for the jury. Moreover, the plan confirms that an adequate remedy at law exists for the Attorney General through RI's ability to bring future claims for money damages and because the relief sought is or was compensable in charges. As a matter of law, no remedy can now include the payment of money or the creation of a fund.
It is premised on abatement of individual properties. No remedy can include the inspection or abatement of individual properties because those properties were not part of the trial and verdict, and property owners were neither given notice nor permitted to participate in the proceedings. Ordering abatement of individual properties would exceed the court's jurisdiction and authority, would be improper in a parens patriae action, and would violate property owners' constitutional rights.
It includes a request for prospective injunctive relief to prevent future harm, but the RI AG filed to prove his right to such equitable relief. The jury never decided, as it was constitutionally required to do, the predicate facts for mandatory injunctive relief by clear and convincing evidence. Not did the RI AG prove under the proper standard of proof that any harm from properly maintained lead paint is practically certain to occur in the future. Therefore, there is no basis on which the court can enter a mandatory injunction.
It improperly seeks relief for properties and environmental conditions that were never part of the trial or verdict, ranging from playgrounds to public buildings. Similarly, no relief can include the abatement of intact, well-maintained lead paint because the AG conceded (and the legislature declared) that such paint does not present an immediate hazard.
It purports to supplant existing statutory and regulatory requirements for addressing lead-based paint hazards. This court cannot properly enter an order that conflicts with or is inconsistent with the General Assembly's enactments. Any permissible remedy may only fill a gap in those requirements beyond that which can be achieved through compliance with, and enforcement of, existing laws and regulations.
You can receive a complimentary copy of this 38-page motion by contacting Mgenova981@aol.com.
More commentary an be found here.
The long and short of it is Lynch can file his motions that make a nice neat little press release and play well in the local papers while the defendants will eventually win with a little called the law.
Wednesday's Upgrades and Downgrades
UPGRADES
Citigroup C Punk, Ziegel & Co Mkt Perform » Buy
Semtech SMTC Caris & Company Below Average » Average
Affiliated Computer ACS Stifel Nicolaus Hold » Buy
American Science & Engineering ASEI Jefferies & Co Hold » Buy
Techtarget TTGT Oppenheimer Neutral » Buy
Cavium Networks CAVM Lehman Brothers Equal-weight » Overweight
BP BP Bear Stearns Peer Perform » Outperform
BB&T Corp BBT Punk, Ziegel & Co Mkt Perform » Buy
PNC Bank PNC Punk, Ziegel & Co Mkt Perform » Buy
Regions Fincl RF Punk, Ziegel & Co Mkt Perform » Buy
Washington Mutual WM Punk, Ziegel & Co Sell » Mkt Perform
KeyCorp KEY Punk, Ziegel & Co Sell » Mkt Perform
Marathon Oil MRO Bear Stearns Underperform » Peer Perform
Chevron CVX Bear Stearns Peer Perform » Outperform
AXA AXA Credit Suisse Neutral » Outperform
Emageon EMAG Friedman Billings Mkt Perform » Outperform
DOWNGRADES
Genlyte GLYT BB&T Capital Mkts Buy » Hold
Axcan Pharma AXCA BMO Capital Markets Market Perform » Underperform
Advanced Micro AMD AmTech Research Buy » Neutral
First American FAF Keefe Bruyette Outperform » Mkt Perform
Arbitron ARB Bear Stearns Outperform » Peer Perform
Equity Res EQR UBS Neutral » Sell
BRE Properties BRE UBS Neutral » Sell
AvalonBay AVB UBS Buy » Neutral
NovaGold Resources NG Bear Stearns Outperform » Peer Perform
Tuesday, November 27, 2007
"Fast Money" for Wednesday
Wednesday's Picks
No "First Trade" Picks
Tuesday's Results
Jeff Macke is buying S&P 500 Index “Spiders” (SPY) with a tight stop. If the S&P drops 1% to 1395 -- sell. Open $140.95 Close $142.57 GAIN
Guy Adami preferred JetBlue (JBLU). Open $6.78 Close $6.77 LOSS
Karen Finerman recommended shorting Big Lots (BIG).Open $20.32 Close $19.82 LOSS
Pete Najarian said Arch Coal (ACI) is a buy. Open $36.18 Close $36.86 GAIN
Records: Since 6/21/2007
Guy Adami= 46-41 = 52%
John Najarian= 13-4 = 76%
Jeff Macke= 54-35 = 60%
Pete Najarian= 36-36 = 50%
Tim Seymore= 5-5 = 50%
Karen Finerman= 29-22 = 57%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Tuesday's 52 Week Low's
ZLC Zale Corporation 18.47
WOLF Great Wolf Resorts Inc 10.49
TWC Time Warner Cable Inc 23.74
TWB Tween Brands Inc 24.61
TSH Teche Holding Company 38.20
TSC Stephan Company , The 3.25
TRY Triarc Companies, Inc ... 8.09
S Sprint Nextel Corporation 14.40
NBR Nabors Industries Ltd 26.32
NBBC Newbridge Bancorp 10.20
MXWL Maxwell Technologies Inc 8.10
LZB La-Z-Boy Incorporated 6.02
LYV Live Nation Inc 13.14
HD Home Depot, Inc 26.97
COO The Cooper Companies, Inc 41.39
COBR Cobra Electronics Cor ... 5.15
COA Coachmen Industries, Inc 5.32
ADY American Dairy Inc 14.97
ACC American Campus Cmnty ... 24.06
ACAT Arctic Cat Inc 11.17
Restoration Answers Sears Holdings
Restoration Hardware (RSTO) answered Sears Holdings (SHLD) today only a day after Sears reminded it who was "it largest shareholder".
The release below:
PRNewswire-FirstCall/ -- "In response to media and other inquiries concerning the Schedule 13D amendment filed by Sears Holdings Corporation on Monday, November 26, 2007, the Independent Committee of Restoration Hardware's Board of Directors stated if Sears will agree to execute the customary confidentiality and standstill agreement on substantially the same terms that other parties have signed, it would be pleased to provide Sears with the confidential information it requested.
"While Sears has announced its willingness to sign a confidentiality agreement, there is no agreement on terms and, to date, instead of agreeing to the standstill agreement to which other interested parties have agreed, Sears has proposed to reserve the right to launch a tender offer outside the process," the Independent Committee said in a statement today.
The Committee stated that it is encouraged by Sears' current proposal at $6.75 per share based upon publicly available information, which is a vast improvement over its prior proposal at $4.00 per share. At the same time, the Committee stated that it believes that stockholder value will be maximized if Sears participates inside the process with other interested parties.
"Sears is an American icon," said Ray Hemmig, Chairman of the Independent Committee. "We are flattered that it is interested in learning more about our company. We welcome its participation in the process along with the other interested parties. However, the Committee is firmly committed to a fair process that will yield the best results for all stockholders and believes that process is best served through all parties agreeing to the proposed standstill terms without preferential treatment of one party over another."
On November 8, 2007, Restoration Hardware announced a merger agreement with Catterton Partners. In that announcement, the Company said that under the terms of the agreement, the Independent Committee of the Company's Board of Directors, consistent with its fiduciary duties, would be soliciting competing proposals from third parties during a 35 day period ending December 13, 2007. On November 19, 2007, Sears filed a Schedule 13D with the SEC indicating that it had accumulated shares equaling just under a 14% ownership position in the Company."
The whole release is a bit self-serving at best. Why? The other "bidders" in this situation is management itself! What unfair advantage could Sears possibly get over the people currently running the company? Answer? None. Restoration is trying to save face.
Restoration got bitch slapped by Lampert & Co. the other day when they reminded them that as the "largest shareholder" they actually owned more of the company than the current bidders and the Board or Directors themselves and that as such, deserved consideration in the process in getting the information they wanted. It is no coincidence that this information was forthcoming immediately.
There is nothing to stop Lampert from acquiring more shares on the open market during this process, he just cannot launch an official tender offer for shares. Semantics.
Where do we go from here? Lampert gets what he wants (information) and either two things happen. He ends up buying the company OR management raises it offer above that of what Sears would be willing to pay and Lampert cashes out at a profit. Either way Sears shareholders win.
The release below:
PRNewswire-FirstCall/ -- "In response to media and other inquiries concerning the Schedule 13D amendment filed by Sears Holdings Corporation on Monday, November 26, 2007, the Independent Committee of Restoration Hardware's Board of Directors stated if Sears will agree to execute the customary confidentiality and standstill agreement on substantially the same terms that other parties have signed, it would be pleased to provide Sears with the confidential information it requested.
"While Sears has announced its willingness to sign a confidentiality agreement, there is no agreement on terms and, to date, instead of agreeing to the standstill agreement to which other interested parties have agreed, Sears has proposed to reserve the right to launch a tender offer outside the process," the Independent Committee said in a statement today.
The Committee stated that it is encouraged by Sears' current proposal at $6.75 per share based upon publicly available information, which is a vast improvement over its prior proposal at $4.00 per share. At the same time, the Committee stated that it believes that stockholder value will be maximized if Sears participates inside the process with other interested parties.
"Sears is an American icon," said Ray Hemmig, Chairman of the Independent Committee. "We are flattered that it is interested in learning more about our company. We welcome its participation in the process along with the other interested parties. However, the Committee is firmly committed to a fair process that will yield the best results for all stockholders and believes that process is best served through all parties agreeing to the proposed standstill terms without preferential treatment of one party over another."
On November 8, 2007, Restoration Hardware announced a merger agreement with Catterton Partners. In that announcement, the Company said that under the terms of the agreement, the Independent Committee of the Company's Board of Directors, consistent with its fiduciary duties, would be soliciting competing proposals from third parties during a 35 day period ending December 13, 2007. On November 19, 2007, Sears filed a Schedule 13D with the SEC indicating that it had accumulated shares equaling just under a 14% ownership position in the Company."
The whole release is a bit self-serving at best. Why? The other "bidders" in this situation is management itself! What unfair advantage could Sears possibly get over the people currently running the company? Answer? None. Restoration is trying to save face.
Restoration got bitch slapped by Lampert & Co. the other day when they reminded them that as the "largest shareholder" they actually owned more of the company than the current bidders and the Board or Directors themselves and that as such, deserved consideration in the process in getting the information they wanted. It is no coincidence that this information was forthcoming immediately.
There is nothing to stop Lampert from acquiring more shares on the open market during this process, he just cannot launch an official tender offer for shares. Semantics.
Where do we go from here? Lampert gets what he wants (information) and either two things happen. He ends up buying the company OR management raises it offer above that of what Sears would be willing to pay and Lampert cashes out at a profit. Either way Sears shareholders win.
Tuesday's Links
Sears, CDO's, USG, Capitalism
- Like I was saying, this is true.
- They are all over the news. Now you can find out what they are.
- If you want to play a housing rebound, forget the homebuilders, go with this company.
- Here is a great piece on Capitalism
- Like I was saying, this is true.
- They are all over the news. Now you can find out what they are.
- If you want to play a housing rebound, forget the homebuilders, go with this company.
- Here is a great piece on Capitalism
Sears Holdings Ups Ante for Restoration
The key paragraph here in the letter filed today from Sears Holdings (SHLD) is the last one where it calls out management and the board of Restoration (RSTO) and states that "as your largest stockholder, we are concerned by certain aspects of the management and director-led buyout."
Dear Mr. Hemmig:
We are disappointed that our numerous requests to receive confidential information have not yet been granted by the Special Committee of the Board of Directors (the “Special Committee”) of Restoration Hardware, Inc. (the “Company”). As you know, we have sought such information to enable us to determine whether to submit a binding proposal to acquire the Company on terms superior to the insider buyout contemplated by the Agreement and Plan of Merger (the “Current Merger Agreement”), dated as of November 8, 2007, among the Company, Home Holdings, LLC, and Home Merger Sub, Inc.
As you know we have been discussing the terms of a confidentiality agreement with you and your advisors and in this regard you have asked us to provide you with a proposal to acquire the Company. While we do not understand your requirement that we submit such a proposal prior to providing us with due diligence information during the “go shop” period, we are prepared to inform you that, based on the public information currently available to us, we would be prepared to enter into an agreement to offer your stockholders $6.75 per share in cash via tender offer. We would contemplate entering into a merger agreement on terms substantially similar to the Current Merger Agreement, modified as necessary to accommodate the tender offer structure and with a lower, more reasonable break-up fee than contained in the Current Merger Agreement.
We believe that this proposal, if agreed, would provide a compelling opportunity for your stockholders to realize significant value for their shares in an all cash transaction. The structure of our proposal would enable all of your stockholders to realize value for their shares sooner with less execution and other risk than the transaction contemplated by the Current Merger Agreement. Accordingly, we believe that the Special Committee should as soon as practicable designate Sears Holdings Corporation and its subsidiaries as “Excluded Parties,” as defined in the Current Merger Agreement and should exempt the transactions contemplated by our proposal, including the tender offer, from Section 203 of the Delaware General Corporation Law.
As noted above, our proposal is based solely on publicly available information (including the projections contained in your August 30 press release but not including the results of your most recent quarter, which we expect to be announced shortly), and would require access to the due diligence information we have been seeking. To that end, we again request that you allow us to enter into a confidentiality agreement with the Company on terms permissible under the Current Merger Agreement. Moreover, as you have requested we would be willing to agree to a customary “standstill” provision in such confidentiality agreement, subject to the exception we have discussed with you and your advisors which would enable us to commence a tender offer for all of the shares of the Company only at a price greater than that offered pursuant to the Current Merger Agreement.
We believe that providing us with information and the opportunity to offer all stockholders more consideration than they would receive pursuant to the Current Merger Agreement would be in their best interest. As your largest stockholder, we would similarly encourage you to provide this “superior tender offer” exception to other persons, if any, who might also be interested in receiving confidential information in order to submit a superior proposal, whether as part of a “process” or otherwise.
Additionally, as your largest stockholder, we are concerned by certain aspects of the management and director-led buyout. We note in this regard that you entered into a confidentiality agreement with the private equity leader of the insider group on July 20, 2007 and apparently have been focused exclusively on the insider deal since that time rather than exploring our known interest (first expressed to you in June of this year and repeatedly reiterated). Notwithstanding our known interest, you did not provide us with either guidance or information which could potentially have enabled us to submit a superior proposal to the insider deal in advance of its execution. Our concerns have been increased by the delays we’ve encountered during the “go shop” period which have served to further exacerbate the procedural, contractual advantages (including break-up fees, match rights, and new change of control benefits) and informational superiority which the insider group enjoys.
We hope that you will recognize the benefits of a transaction along the lines that we have proposed and quickly grant us access to the information we have requested as we believe that this would be in the best interests of the Company, its stockholders, customers and employees. We stand ready and willing to complete this transaction quickly, and look forward to doing so.
Sincerely,
/s/ William C. Crowley
Now, it should also be noted that Sears upped its offer from $4 an share to $6.75 a share. Sears, being the largest shareholder (double that of the next largest shareholder) here does have management in a precarious situation. I would bet Lampert has been buying more shares recently (or soon will be) and will up his ownership percentage. At that point, what management wants to do could become essentially irrelevant
One has to think management is stonewalling Sears in order to keep their jobs since they are the one trying to buy the company currently. If Lampert gets control of more shares, it will become a moot point. Currently share trade about 25 cents over Lampert's offer price indicating folks feel Lampert will eventually pay more. That being said, Lampert could double his ownership to 27.4% for about $1.5 million more than he would pay if the offer price was accepted. It would be a rather cheap premium to pay to all but assure a deal.
Also, the letter twice refers to Sears as "your largest stockholder". It is a veiled way of saying "hey, we own more of this sucker than you do, want to get ugly?
Go ahead."
Now, Restoration management has done the right thing in waiting this out until now to get a higher price. However, there now comes a point where they will be viewed as obstructing the process rather than getting the best deal. This is especially apparent since the are the other bidder for the company and their offer is now inferior to the one Sears has made. Sears, being the "largest stockholder" does have the the upper hand should things get contentious.
Dear Mr. Hemmig:
We are disappointed that our numerous requests to receive confidential information have not yet been granted by the Special Committee of the Board of Directors (the “Special Committee”) of Restoration Hardware, Inc. (the “Company”). As you know, we have sought such information to enable us to determine whether to submit a binding proposal to acquire the Company on terms superior to the insider buyout contemplated by the Agreement and Plan of Merger (the “Current Merger Agreement”), dated as of November 8, 2007, among the Company, Home Holdings, LLC, and Home Merger Sub, Inc.
As you know we have been discussing the terms of a confidentiality agreement with you and your advisors and in this regard you have asked us to provide you with a proposal to acquire the Company. While we do not understand your requirement that we submit such a proposal prior to providing us with due diligence information during the “go shop” period, we are prepared to inform you that, based on the public information currently available to us, we would be prepared to enter into an agreement to offer your stockholders $6.75 per share in cash via tender offer. We would contemplate entering into a merger agreement on terms substantially similar to the Current Merger Agreement, modified as necessary to accommodate the tender offer structure and with a lower, more reasonable break-up fee than contained in the Current Merger Agreement.
We believe that this proposal, if agreed, would provide a compelling opportunity for your stockholders to realize significant value for their shares in an all cash transaction. The structure of our proposal would enable all of your stockholders to realize value for their shares sooner with less execution and other risk than the transaction contemplated by the Current Merger Agreement. Accordingly, we believe that the Special Committee should as soon as practicable designate Sears Holdings Corporation and its subsidiaries as “Excluded Parties,” as defined in the Current Merger Agreement and should exempt the transactions contemplated by our proposal, including the tender offer, from Section 203 of the Delaware General Corporation Law.
As noted above, our proposal is based solely on publicly available information (including the projections contained in your August 30 press release but not including the results of your most recent quarter, which we expect to be announced shortly), and would require access to the due diligence information we have been seeking. To that end, we again request that you allow us to enter into a confidentiality agreement with the Company on terms permissible under the Current Merger Agreement. Moreover, as you have requested we would be willing to agree to a customary “standstill” provision in such confidentiality agreement, subject to the exception we have discussed with you and your advisors which would enable us to commence a tender offer for all of the shares of the Company only at a price greater than that offered pursuant to the Current Merger Agreement.
We believe that providing us with information and the opportunity to offer all stockholders more consideration than they would receive pursuant to the Current Merger Agreement would be in their best interest. As your largest stockholder, we would similarly encourage you to provide this “superior tender offer” exception to other persons, if any, who might also be interested in receiving confidential information in order to submit a superior proposal, whether as part of a “process” or otherwise.
Additionally, as your largest stockholder, we are concerned by certain aspects of the management and director-led buyout. We note in this regard that you entered into a confidentiality agreement with the private equity leader of the insider group on July 20, 2007 and apparently have been focused exclusively on the insider deal since that time rather than exploring our known interest (first expressed to you in June of this year and repeatedly reiterated). Notwithstanding our known interest, you did not provide us with either guidance or information which could potentially have enabled us to submit a superior proposal to the insider deal in advance of its execution. Our concerns have been increased by the delays we’ve encountered during the “go shop” period which have served to further exacerbate the procedural, contractual advantages (including break-up fees, match rights, and new change of control benefits) and informational superiority which the insider group enjoys.
We hope that you will recognize the benefits of a transaction along the lines that we have proposed and quickly grant us access to the information we have requested as we believe that this would be in the best interests of the Company, its stockholders, customers and employees. We stand ready and willing to complete this transaction quickly, and look forward to doing so.
Sincerely,
/s/ William C. Crowley
Now, it should also be noted that Sears upped its offer from $4 an share to $6.75 a share. Sears, being the largest shareholder (double that of the next largest shareholder) here does have management in a precarious situation. I would bet Lampert has been buying more shares recently (or soon will be) and will up his ownership percentage. At that point, what management wants to do could become essentially irrelevant
One has to think management is stonewalling Sears in order to keep their jobs since they are the one trying to buy the company currently. If Lampert gets control of more shares, it will become a moot point. Currently share trade about 25 cents over Lampert's offer price indicating folks feel Lampert will eventually pay more. That being said, Lampert could double his ownership to 27.4% for about $1.5 million more than he would pay if the offer price was accepted. It would be a rather cheap premium to pay to all but assure a deal.
Also, the letter twice refers to Sears as "your largest stockholder". It is a veiled way of saying "hey, we own more of this sucker than you do, want to get ugly?
Go ahead."
Now, Restoration management has done the right thing in waiting this out until now to get a higher price. However, there now comes a point where they will be viewed as obstructing the process rather than getting the best deal. This is especially apparent since the are the other bidder for the company and their offer is now inferior to the one Sears has made. Sears, being the "largest stockholder" does have the the upper hand should things get contentious.
Circuit City: Please Come Back!!
Circuit City (CC) has now regressed into the guy in high school that dumps his girlfriend only to beg her to come back after he realizes what a huge mistake he made.
Circuit City Spokesman Bill Cimino said last week that Circuit City invited former U.S. workers to apply for jobs, a practice he said was not uncommon in retail, given the typically high turnover. It should be noted here that many of these folks are that same ones that in March, Circuit City let go. More than 3,000 workers were fired and replaced them with lower-paid staff. Cimino added that Circuit City would likely invite more ex-staffers to return next year.
"In a lot of cases, we've completely changed how our stores operate; the roles of our associates within the stores," Cimino told Reuters. "We've got a better career path now for associates." By career path do you mean you will not fired them unexpectedly?
Now, what does Circuit City really hope to accomplish? The good one they let go because the were "too expensive" will already have jobs and those who are still unemployed 6 months after they were let go, do they really want them back? The timing of this is terrible too. They now have themselves competing with the holiday hiring spree that happens every years in retailing.
This is just another in a long line of management failures that has shares snuggled comfortably at 4 year lows. There has been a lot of talk in the blogsphere about shares being a bargain and by most mathematical metrics, they are. Big problem though. In order for those metrics to translate into a retail turnaround and thus have shareholders reap the benefits of that value, management needs to do its job.
Circuit City could carve itself out a niche among the monsters out there like Best Buy (BBY) and Wal-Mart (WMT) much like Julian Day at RadioShack (RSH) has done. It would need to be done on service and a more professional shopping experience. Getting rid of the best folks you have to do that based on their pay scale was just inexplicably short-sighted.
If current management has shown anything, they are just not up to the job and until new management is there, Circuit City will continue to be a value-trap for investors that if it is not bought out soon (next 8 months), will most likely be driven into bankruptcy a sentiment I first expressed in June.
On a side note, why haven't any of these electronics retailers with "help desks" inside like City's "Firedog" or Best Buy's "Geek Squad" jumped at the chance to associate somehow with the hit show "Chuck"? It is a natural association.
Circuit City Spokesman Bill Cimino said last week that Circuit City invited former U.S. workers to apply for jobs, a practice he said was not uncommon in retail, given the typically high turnover. It should be noted here that many of these folks are that same ones that in March, Circuit City let go. More than 3,000 workers were fired and replaced them with lower-paid staff. Cimino added that Circuit City would likely invite more ex-staffers to return next year.
"In a lot of cases, we've completely changed how our stores operate; the roles of our associates within the stores," Cimino told Reuters. "We've got a better career path now for associates." By career path do you mean you will not fired them unexpectedly?
Now, what does Circuit City really hope to accomplish? The good one they let go because the were "too expensive" will already have jobs and those who are still unemployed 6 months after they were let go, do they really want them back? The timing of this is terrible too. They now have themselves competing with the holiday hiring spree that happens every years in retailing.
This is just another in a long line of management failures that has shares snuggled comfortably at 4 year lows. There has been a lot of talk in the blogsphere about shares being a bargain and by most mathematical metrics, they are. Big problem though. In order for those metrics to translate into a retail turnaround and thus have shareholders reap the benefits of that value, management needs to do its job.
Circuit City could carve itself out a niche among the monsters out there like Best Buy (BBY) and Wal-Mart (WMT) much like Julian Day at RadioShack (RSH) has done. It would need to be done on service and a more professional shopping experience. Getting rid of the best folks you have to do that based on their pay scale was just inexplicably short-sighted.
If current management has shown anything, they are just not up to the job and until new management is there, Circuit City will continue to be a value-trap for investors that if it is not bought out soon (next 8 months), will most likely be driven into bankruptcy a sentiment I first expressed in June.
On a side note, why haven't any of these electronics retailers with "help desks" inside like City's "Firedog" or Best Buy's "Geek Squad" jumped at the chance to associate somehow with the hit show "Chuck"? It is a natural association.
Tuesday's Upgrades and Downgrades
UPGRADES
Five Star Quality Care FVE Davenport Neutral » Buy
SI International SINT BB&T Capital Mkts Hold » Buy
Forest Labs FRX AmTech Research Neutral » Buy
Vaxgen VXGN Punk, Ziegel & Co Mkt Perform » Accumulate
ITT Industries ITT Credit Suisse Neutral » Outperform
Teradyne TER HSBC Securities Neutral » Overweight
Boeing BA Wachovia Mkt Perform » Outperform
Laboratory Corp LH Wachovia Mkt Perform » Outperform
Virgin Mobile USA VM Soleil Sell » Hold
Bankrate RATE Bear Stearns Peer Perform » Outperform
Celgene CELG Banc of America Sec Neutral » Buy
FEMSA FMX JP Morgan Neutral » Overweight
National Grid NGG Lehman Brothers Equal-weight » Overweight
Kimberly-Clark KMB Lehman Brothers Underweight » Equal-weight
Deere DE Banc of America Sec Neutral » Buy
Aetna AET JP Morgan Neutral » Overweight
DIRECTV DTV Bernstein Underperform » Mkt Perform
Grant Prideco GRP UBS Neutral » Buy
Air France KLM AKH Citigroup Hold » Buy
Royal Philips Electronics PHG Deutsche Securities Hold » Buy
Tidewater TDW Jefferies & Co Hold » Buy
OmniVision OVTI Robert W. Baird Underperform » Neutral
DOWNGRADES
Buckeye Partners BPL SMH Capital Buy » Sell
Sasol SSL Bear Stearns Outperform » Peer Perform
Public Storage PSA Wachovia Outperform » Mkt Perform
Amer. 1st Tax Exempt Inv. ATAXZ RBC Capital Mkts Outperform » Sector Perform
Intersil ISIL Jefferies & Co Buy » Hold
Casey's General CASY Friedman Billings Outperform » Mkt Perform
Freddie Mac FRE UBS Buy » Neutral
Fannie Mae FNM UBS Buy » Neutral
Sierra Pacific SRP Deutsche Securities Buy » Hold
First Marblehead FMD Friedman Billings Mkt Perform » Underperform
Monday, November 26, 2007
"Fast Money" for Tuesday
Tuesday's Picks
Jeff Macke is buying S&P 500 Index “Spiders” (SPY) with a tight stop. If the S&P drops 1% to 1395 -- sell. Open $140.95
Guy Adami preferred JetBlue (JBLU). Open $6.78
Karen Finerman recommended shorting Big Lots (BIG).Open $20.32
Pete Najarian said Arch Coal (ACI) is a buy. Open $36.18
Records: Since 6/21/2007
Guy Adami= 46-40 = 60%
John Najarian= 13-4 = 76%
Jeff Macke= 53-35 = 62%
Pete Najarian= 35-36 = 48%
Tim Seymore= 5-5 = 50%
Karen Finerman= 29-21 = 59%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Wachovia Insiders Can't Stop Buying
Wachovia (WB) insiders are buying shares in their bank by the truck load.
After chronicling the latest purchases on November 20th, Wachovia director John Baker decided to part with $558,000 of his own cash to buy more shares.
This latest activity brings the total purchases from insiders since the "banking crisis" began to near $7 million. It also happens to be the most shares bought by insiders at a financial institution during that time frame.
Good news? Sure. Does it mean the stock is destined to turn around and begin an ascent tomorrow? No. It does mean that those folks with intimate knowledge of the firm operations are in a hurry to get shares faster than their employee stock plans will provide them. That is very good.
If you are a long term holder getting in bed with insiders buying shares is rarely a bad idea, especially when the buying is this heavy.
After chronicling the latest purchases on November 20th, Wachovia director John Baker decided to part with $558,000 of his own cash to buy more shares.
This latest activity brings the total purchases from insiders since the "banking crisis" began to near $7 million. It also happens to be the most shares bought by insiders at a financial institution during that time frame.
Good news? Sure. Does it mean the stock is destined to turn around and begin an ascent tomorrow? No. It does mean that those folks with intimate knowledge of the firm operations are in a hurry to get shares faster than their employee stock plans will provide them. That is very good.
If you are a long term holder getting in bed with insiders buying shares is rarely a bad idea, especially when the buying is this heavy.
Monday's 52 Week Low's
LZB La-Z-Boy Incorporated 6.28
LSTR Landstar System Inc 37.41
LRY Liberty Property Trust 30.64
LPX Louisiana Pac Corp 14.01
LOW Lowe's Companies, Inc 22.05
TRY Triarc Companies, Inc ... 8.60
TPGI Thomas Pptys Group Inc 10.29
TOH Hicks Acquisition Co ... 8.96
MNRO Monro Muffler Brake Inc 20.29
CAR Avis Budget Group 14.21
CAC Camden Natl Corp 30.90
BXXX Brooke Corp 7.65
BBIB Blockbuster Inc 3.22
BBBY Bed Bath & Beyond Inc 29.65
Monday's Links
Texting, Old Barrista?, Sue RI, Bill Miller
- You can now legally "text" in sick?
- Go away lady, just because you did not get the job, it does not mean you are discriminated against.
- Yes, Yes, Yes!!!!!!!!!
- How can you not listen to this guy?
- You can now legally "text" in sick?
- Go away lady, just because you did not get the job, it does not mean you are discriminated against.
- Yes, Yes, Yes!!!!!!!!!
- How can you not listen to this guy?
Another Bad Analyst Call: Starbucks
Odlum Brown analyst Felix Narhi had an interesting call on Starbucks (SBUX)last week.
Recently Starbucks' projected earnings per share growth of 17% to 21%, while previous guidance was 20% to 22% for FY 2008. Narhi said of this "While this performance and outlook would have been stellar for most companies, apparently some Starbucks investors were expecting even more, nevertheless, this reduction in earnings guidance is hardly a disaster, in our view."
"Starbucks shares are cheap", said Mr. Narhi, and they are trading at their lowest level since going pubic in 1992 (26.6 times trailing 12 months as of Friday). He rates Starbucks a “buy” with a $35 price target, down $1 from his previous forecast and he recommends aggressive buying in the low $20-range.
Here is the problem and it is a question of looking at price and implying value from it.
EPS Growth for Starbucks.
2004- 41%
2005- 29%
2006- 20%
2007- 19%
2008- 17%-21% (company provided)
So, we have 4 consecutive years of EPS decline. The last time that happened? Uh, never?!? Investors think there may be a fifth and that is a VERY good chance. That is the reason they are fleeing the stock. It is not due to a "temporary" disruption.
In those previous years Starbucks faced competition on a national scale from, um, nobody. Now they have the juggernaut that is McDonald's (MCD) gunning from them and regional goliath Dunkin' Donuts taking direct aim at Starbucks' business. When one look at the results from those operations, the only deduction that can be made is that it is working. As McDonalds introduces espresso drink nationwide in 2008, that competition will only get more intense, putting more pressure on Starbucks earnings growth.
Mr. Narhi mentions the stock being at its lowest levels since 1992, well in 1992 the company was growing EPS at over 50% a year and there was almost 100 million LESS shares outstanding. Comparing the pure dollar value of a stock is just meaningless unless other factors are also considered.
I have said it here countless times and it has yet not to be true. As earnings growth slows, the premium investors will pay for a stock also decreases. That is simply what is happening with Starbucks. At 26 times trailing EPS, shares are by no means a bargain or an "aggressive buy". A low share price does not automatically equate to value. Investors are not sure where the bottom is because they cannot get a handle on how much slower things will get. This is in part because of the fierce competition that the company has now it did not have even two years ago AND the lack of honesty or disclosure from management. Donald and Schultz seem to be in denial about their business and with the rest of us seeing it, we doubt everything coming out of Seattle HQ.
The fact they did not address milk costs until almost 2 months after I did ought to make current or potential investors very nervous. It is like they are closing their eyes hoping it will just go away and be ok.
In August management addressed the store traffic issue and said "we expect it to be short term issue". Now we find out it will take until halfway through 2008 at best to get that straightened out. A "short term" year?
Back in May I said "With all the uncertainty surrounding the company at this point, I could not even begin to consider shares at any price other than the lowest end of the range, $22 or another 21% lower than current prices as I expect EPS growth to slow more."
That price point now looks too optimistic, high teens are the range now. Those who blindly follow Mr. Narhi's advice will be disappointed to say the least.
Think it is just Mr. Narhi? Check out the other analyst calls that would have had you throwing you money away in 2007 alone.
20-Nov-07 Friedman Billings Upgraded Mkt Perform to Outperform
16-Nov-07 McAdams,Wright,Ragen Reiterated Buy
16-Nov-07 UBS Reiterated Buy
16-Nov-07 RBC Capital Mkts Reiterated Outperform
16-Nov-07 Friedman Billings Reiterated Mkt Perform
16-Nov-07 CIBC Wrld Mkts Reiterated Sector Outperform
16-Nov-07 Robert W. Baird Downgraded Outperform to Neutral
12-Nov-07 UBS Reiterated Buy
08-Oct-07 Lehman Brothers Reiterated Overweight
27-Sep-07 Banc of America Sec Downgraded Neutral to Sell
02-Aug-07 JMP Securities Reiterated Mkt Outperform
02-Aug-07 McAdams,Wright,Ragen Reiterated Buy
02-Aug-07 RBC Capital Mkts Reiterated Outperform
02-Aug-07 CIBC Wrld Mkts Reiterated Sector Outperform
19-Jul-07 CIBC Wrld Mkts Reiterated Sector Outperform
18-Jul-07 Lehman Brothers Reiterated Overweight
02-Jul-07 Bear Stearns Reiterated Outperform
22-Jun-07 Friedman Billings Downgraded Outperform to Mkt Perform
15-Jun-07 Lehman Brothers Reiterated Overweight
08-Jun-07 Deutsche Securities Reiterated Hold
21-May-07 CIBC Wrld Mkts Reiterated Sector Outperform
02-May-07 CIBC Wrld Mkts Reiterated Sector Outperform
18-Apr-07 Lehman Brothers Reiterated Overweight
01-Mar-07 Prudential Reiterated Neutral
30-Jan-07 JP Morgan Upgraded Neutral to Overweight
Only 1 sell in the whole bunch..... sad
Recently Starbucks' projected earnings per share growth of 17% to 21%, while previous guidance was 20% to 22% for FY 2008. Narhi said of this "While this performance and outlook would have been stellar for most companies, apparently some Starbucks investors were expecting even more, nevertheless, this reduction in earnings guidance is hardly a disaster, in our view."
"Starbucks shares are cheap", said Mr. Narhi, and they are trading at their lowest level since going pubic in 1992 (26.6 times trailing 12 months as of Friday). He rates Starbucks a “buy” with a $35 price target, down $1 from his previous forecast and he recommends aggressive buying in the low $20-range.
Here is the problem and it is a question of looking at price and implying value from it.
EPS Growth for Starbucks.
2004- 41%
2005- 29%
2006- 20%
2007- 19%
2008- 17%-21% (company provided)
So, we have 4 consecutive years of EPS decline. The last time that happened? Uh, never?!? Investors think there may be a fifth and that is a VERY good chance. That is the reason they are fleeing the stock. It is not due to a "temporary" disruption.
In those previous years Starbucks faced competition on a national scale from, um, nobody. Now they have the juggernaut that is McDonald's (MCD) gunning from them and regional goliath Dunkin' Donuts taking direct aim at Starbucks' business. When one look at the results from those operations, the only deduction that can be made is that it is working. As McDonalds introduces espresso drink nationwide in 2008, that competition will only get more intense, putting more pressure on Starbucks earnings growth.
Mr. Narhi mentions the stock being at its lowest levels since 1992, well in 1992 the company was growing EPS at over 50% a year and there was almost 100 million LESS shares outstanding. Comparing the pure dollar value of a stock is just meaningless unless other factors are also considered.
I have said it here countless times and it has yet not to be true. As earnings growth slows, the premium investors will pay for a stock also decreases. That is simply what is happening with Starbucks. At 26 times trailing EPS, shares are by no means a bargain or an "aggressive buy". A low share price does not automatically equate to value. Investors are not sure where the bottom is because they cannot get a handle on how much slower things will get. This is in part because of the fierce competition that the company has now it did not have even two years ago AND the lack of honesty or disclosure from management. Donald and Schultz seem to be in denial about their business and with the rest of us seeing it, we doubt everything coming out of Seattle HQ.
The fact they did not address milk costs until almost 2 months after I did ought to make current or potential investors very nervous. It is like they are closing their eyes hoping it will just go away and be ok.
In August management addressed the store traffic issue and said "we expect it to be short term issue". Now we find out it will take until halfway through 2008 at best to get that straightened out. A "short term" year?
Back in May I said "With all the uncertainty surrounding the company at this point, I could not even begin to consider shares at any price other than the lowest end of the range, $22 or another 21% lower than current prices as I expect EPS growth to slow more."
That price point now looks too optimistic, high teens are the range now. Those who blindly follow Mr. Narhi's advice will be disappointed to say the least.
Think it is just Mr. Narhi? Check out the other analyst calls that would have had you throwing you money away in 2007 alone.
20-Nov-07 Friedman Billings Upgraded Mkt Perform to Outperform
16-Nov-07 McAdams,Wright,Ragen Reiterated Buy
16-Nov-07 UBS Reiterated Buy
16-Nov-07 RBC Capital Mkts Reiterated Outperform
16-Nov-07 Friedman Billings Reiterated Mkt Perform
16-Nov-07 CIBC Wrld Mkts Reiterated Sector Outperform
16-Nov-07 Robert W. Baird Downgraded Outperform to Neutral
12-Nov-07 UBS Reiterated Buy
08-Oct-07 Lehman Brothers Reiterated Overweight
27-Sep-07 Banc of America Sec Downgraded Neutral to Sell
02-Aug-07 JMP Securities Reiterated Mkt Outperform
02-Aug-07 McAdams,Wright,Ragen Reiterated Buy
02-Aug-07 RBC Capital Mkts Reiterated Outperform
02-Aug-07 CIBC Wrld Mkts Reiterated Sector Outperform
19-Jul-07 CIBC Wrld Mkts Reiterated Sector Outperform
18-Jul-07 Lehman Brothers Reiterated Overweight
02-Jul-07 Bear Stearns Reiterated Outperform
22-Jun-07 Friedman Billings Downgraded Outperform to Mkt Perform
15-Jun-07 Lehman Brothers Reiterated Overweight
08-Jun-07 Deutsche Securities Reiterated Hold
21-May-07 CIBC Wrld Mkts Reiterated Sector Outperform
02-May-07 CIBC Wrld Mkts Reiterated Sector Outperform
18-Apr-07 Lehman Brothers Reiterated Overweight
01-Mar-07 Prudential Reiterated Neutral
30-Jan-07 JP Morgan Upgraded Neutral to Overweight
Only 1 sell in the whole bunch..... sad
RIMM's iBerry?
I was thinking about getting a new blackberry from Research in Motion (RIMM) for my birthday next year and just in time, a neat little device is being planned.
From Unstrung:
The 9000-series is described by Carmi Levy, an analyst at AR Communications Inc. , as "the future of the BlackBerry franchise," a complete breakaway from the device's business roots. Instead, the new series targets the consumer space served by the Pearl and Curve models.
"The 9000 is supposed to be a touch-screen device, very similar in form factor to the iPhone," Levy says. "Which means that it is not an enterprise-friendly device."
The 9000 series will break from the traditional half-screen, half-keyboard look of the BlackBerry. The handsets will also incorporate an upgraded multimedia system, along with the standard push email capabilities. Better MP3 and video capabilities are crucial if RIM is to take on Apple, Google, and others.
Levy speculates that RIM will introduce the 9000-series in the first quarter of next year. "They were originally shooting for the second half of 2007," he notes.
The touch-screen devices, however, won't mean the end of the line for the 8000 series, because businesses will still need devices with proper QWERTY keyboards. "There will be incremental updates. They won't disappear," Levy says.
Among the updates will be "a Curve with WiFi," according to Levy. These devices may have other updates like GPS location tracking and higher resolution onboard cameras as well
I have toyed with folk's iPhone from Apple (APPL) but just disdain At&T (T) slightly more than my carrier Sprint(S) so that rules out Mr. Jobs' (had he not tried to screw every penny out of the device he would have sold millions more of them). Since I am pretty sure the price of my leaving them would be a child, I am going to stay with Sprint for now. That and their network is leap and bounds better than the "T's" is.
I am very intrigued by this phone and cannot wait to see and try it. A new phone is in the cards for the bday and this just might fit the bill.
From Unstrung:
The 9000-series is described by Carmi Levy, an analyst at AR Communications Inc. , as "the future of the BlackBerry franchise," a complete breakaway from the device's business roots. Instead, the new series targets the consumer space served by the Pearl and Curve models.
"The 9000 is supposed to be a touch-screen device, very similar in form factor to the iPhone," Levy says. "Which means that it is not an enterprise-friendly device."
The 9000 series will break from the traditional half-screen, half-keyboard look of the BlackBerry. The handsets will also incorporate an upgraded multimedia system, along with the standard push email capabilities. Better MP3 and video capabilities are crucial if RIM is to take on Apple, Google, and others.
Levy speculates that RIM will introduce the 9000-series in the first quarter of next year. "They were originally shooting for the second half of 2007," he notes.
The touch-screen devices, however, won't mean the end of the line for the 8000 series, because businesses will still need devices with proper QWERTY keyboards. "There will be incremental updates. They won't disappear," Levy says.
Among the updates will be "a Curve with WiFi," according to Levy. These devices may have other updates like GPS location tracking and higher resolution onboard cameras as well
I have toyed with folk's iPhone from Apple (APPL) but just disdain At&T (T) slightly more than my carrier Sprint(S) so that rules out Mr. Jobs' (had he not tried to screw every penny out of the device he would have sold millions more of them). Since I am pretty sure the price of my leaving them would be a child, I am going to stay with Sprint for now. That and their network is leap and bounds better than the "T's" is.
I am very intrigued by this phone and cannot wait to see and try it. A new phone is in the cards for the bday and this just might fit the bill.
Citigroup Gets $7.5 Billion Investment
I have been saying for weeks now that big banks like Citigroup (C), Bank of America (BAC) and Wachovia (WB) were screaming buys at these levels. Insiders are buying like crazy at Wachovia and now Abu Dhabi has invested $7.5 billion in Citi.
"This investment, from one of the world's leading and most sophisticated equity investors, provides further capital to allow Citi to pursue attractive opportunities to grow its business," said Win Bischoff, Citi's Acting Chief Executive Officer. "It builds on a series of actions we have taken over the past several months to strengthen our capital base, which have included sales of certain non-strategic assets, the issuance of trust preferred securities, and the previously announced plan to use common stock to purchase 32% of Nikko Cordial in Japan. In addition, ADIA is a significant participant in alternative investments and emerging markets financial services, two areas in which we have major positions and have been expanding."
For its investment, Abu Dhabi will receive convertible stock in Citigroup yielding 11% annually. The shares are required to be converted into common stock at a conversion price of between $31.83 and $37.24 a share over a period of time between March 2010 and September 2011. The investment, which took about a week to put together, is expected to close within days. The payment rate reflects market terms based on the conversion premium as well as Citi's current dividend yield.
American's current pessimism about banks is not shared by the outside world. Why? They recognize large international banking operations will not be toppled by the US housing market. Will they be hurt? Sure. Will they recover yes. Those who have the guts to buy in when most are fleeing and ride out the storm will be handsomely rewarded just like every other financial "crisis" from the dawn of man.
If you only listen to one piece of advice during your investment career, make it Berkshire Hathaway's (BRK.A) Warren Buffett's, "buy fear and sell greed".
"This investment, from one of the world's leading and most sophisticated equity investors, provides further capital to allow Citi to pursue attractive opportunities to grow its business," said Win Bischoff, Citi's Acting Chief Executive Officer. "It builds on a series of actions we have taken over the past several months to strengthen our capital base, which have included sales of certain non-strategic assets, the issuance of trust preferred securities, and the previously announced plan to use common stock to purchase 32% of Nikko Cordial in Japan. In addition, ADIA is a significant participant in alternative investments and emerging markets financial services, two areas in which we have major positions and have been expanding."
For its investment, Abu Dhabi will receive convertible stock in Citigroup yielding 11% annually. The shares are required to be converted into common stock at a conversion price of between $31.83 and $37.24 a share over a period of time between March 2010 and September 2011. The investment, which took about a week to put together, is expected to close within days. The payment rate reflects market terms based on the conversion premium as well as Citi's current dividend yield.
American's current pessimism about banks is not shared by the outside world. Why? They recognize large international banking operations will not be toppled by the US housing market. Will they be hurt? Sure. Will they recover yes. Those who have the guts to buy in when most are fleeing and ride out the storm will be handsomely rewarded just like every other financial "crisis" from the dawn of man.
If you only listen to one piece of advice during your investment career, make it Berkshire Hathaway's (BRK.A) Warren Buffett's, "buy fear and sell greed".
Sunday, November 25, 2007
This Weeks Dividend Increases
This Weeks Insider Buys
Monday's Upgrades and Downgrades
UPGRADES
US BioEnergy USBE Soleil Sell » Hold
TIBCO Software TIBX Bear Stearns Underperform » Peer Perform
PetroChina PTR Bear Stearns Underperform » Peer Perform
Omega Health OHI UBS Sell » Neutral
Anglo American AAUK HSBC Securities Neutral » Overweight
CNOOC Ltd CEO Citigroup Hold » Buy
DOWNGRADES
Hecla Mining HL CIBC Wrld Mkts Sector Perform » Sector Underperform
Saturday, November 24, 2007
This Week's Top Stories at Value Investing News
Here are the week's top stories at Value Investing News. It is a Lampert /Buffett buffet.
2. Buying American Eagle Outfitters
(via www.controlledgreed.com)
Excerpt: "The company has a market cap of approximately $4.76 billion with nearly 215 million shares outstanding. The dividend yield is less than 2%. The balance sheet is strong, and there’s nearly $3 a share of cash."
I agree that AEO looks cheap I own Jan 2010 Calls.
3. Wow
(via mikesnewsletterinvesting.blogspot.com)
I review my portoflio and briefly look over some new ideas
4. Picks from a Patient Investor - David Katz, Matrix Advisors Value
(via www.morningstar.com)
Justin Fuller of Morningstar meets with the CIO of the Matrix Advisors Value Fund, David Katz, to discuss some of his stock picks.
6. First Eagle Funds Update Call featuring Jean-Marie Eveillard (Transcript)
(via www.firsteaglefunds.com)
First Eagle Funds Update Call featuring Jean-Marie Eveillard.
7. The Berkshire Hathaway Portfolio
(via news.morningstar.com)
Justin Fuller, equity strategist and manager of Morningstar's Ultimate Stock-Picker's Portfolio, checks in with Berkshire's holdings for the Ultimate Stock-Picker's Portfolio.
8. Bill Ackman's Presentation at 2007 Ira Sohn Conf. - Who’s Holding the Bag?
(via www.valueinvestingcongress.com)
Bill Ackman's Presentation at 2007 Ira Sohn Investing Conference.
9. A Buffett investment that wasn't
(via money.cnn.com)
Stories about the Berkshire billionaire buying into CarMax were not quite what they seemed, reports Fortune's Alex Taylor III.
10. Freddie Mac new casualty of US mortgage crisis
(via business.timesonline.co.uk)
Shares in Freddie Mac lost almost a quarter of their value today after the mammoth American mortgage giant plunged into a $2 billion quarterly loss and hired Lehman Brothers and Goldman Sachs to explore "very near term" opportunities to raise cash.
Friday, November 23, 2007
"Black Friday" Observations
So, the initial early reports from Friday morning (pre 7am). Observations taken from locations in 4 separate towns in Massachusetts. Please leave your observations in the comments section.
Mobs:
Wal-Mart (WMT): Parking lot filled past capacity well before the 5am opening. Wal-Mart.com also makes them a bug winner today. I was able to pick up some things at the sale prices before I left the house this morning at 4:30am and saved a trip there to shop, enabling me to go to other stores. I used the "site-to -store" program and received free shipping.
Best Buy (BBY): Very impressive. Had its lot and the lot of the strip mall next to it filled and a huge line out front before 5 am opening
Moderate:
Target (TGT): A 6 am opening may have hurt as folks may have went to Best Buy or Wal-Mart for items prior to or instead of going to Target. Still had an impressive wait but an earlier opening probably would have brought in more shoppers. Left sales in the parking lot.
Sears (SHLD): Better that both JC Penny and Macy's but behind Best Buy, Target and Wal-Mart. The good news for Sears? The Craftsmen tool and home appliance departments were filled to capacity and then some meaning they were selling high margin items. Sales staff said traffic was, and I quote, "wicked better than last year" (that is good). A 5am opening here helped.
Losers:
JC Penny (JCP) and Macy's (M): In the same mall as Sears but their parking lots (the three store are spaced one in the middle and the other two are on either end) left much to be desired. Macy's lot would have allowed a shopper to virtually park in front of the doors and JC's was not much better. Not good.
Linens and Things:
Probably would have done better if they opened much later, at least they would have saved some money on labor and electricity. Since I could not see anyone shopping
Borders (BDG) / Barnes and Nobel (BKS): Most of these locations now have coffee shops in them both I passed were closed early. How well could they have done selling coffee to those waiting in line at the other locations? Think they could have lured some in? It was very cold in the Northeast this morning. File this under "opportunity lost"
Mattel (MAT): People were not buying toys probably due to the lead paint issues. Learning and video games were flying off the shelves (good for Leapfrog (LF)).
Other winners:
Microsoft (MSFT): The "Zune" was sold out at most locations and those that still had it where getting top dollar for it (and it was still selling).
50/50 Results:
Apple (APPL): 8GB iPods were sitting on the shelves but the 4GB were all gone at most locations (nanos). iTouch sales were, again I quote, "not as good as the Zune". It should be noted though that these observation are NOT at Apple stores but other retailers so one cannot commit either way. Mac's were selling "very well".
Mobs:
Wal-Mart (WMT): Parking lot filled past capacity well before the 5am opening. Wal-Mart.com also makes them a bug winner today. I was able to pick up some things at the sale prices before I left the house this morning at 4:30am and saved a trip there to shop, enabling me to go to other stores. I used the "site-to -store" program and received free shipping.
Best Buy (BBY): Very impressive. Had its lot and the lot of the strip mall next to it filled and a huge line out front before 5 am opening
Moderate:
Target (TGT): A 6 am opening may have hurt as folks may have went to Best Buy or Wal-Mart for items prior to or instead of going to Target. Still had an impressive wait but an earlier opening probably would have brought in more shoppers. Left sales in the parking lot.
Sears (SHLD): Better that both JC Penny and Macy's but behind Best Buy, Target and Wal-Mart. The good news for Sears? The Craftsmen tool and home appliance departments were filled to capacity and then some meaning they were selling high margin items. Sales staff said traffic was, and I quote, "wicked better than last year" (that is good). A 5am opening here helped.
Losers:
JC Penny (JCP) and Macy's (M): In the same mall as Sears but their parking lots (the three store are spaced one in the middle and the other two are on either end) left much to be desired. Macy's lot would have allowed a shopper to virtually park in front of the doors and JC's was not much better. Not good.
Linens and Things:
Probably would have done better if they opened much later, at least they would have saved some money on labor and electricity. Since I could not see anyone shopping
Borders (BDG) / Barnes and Nobel (BKS): Most of these locations now have coffee shops in them both I passed were closed early. How well could they have done selling coffee to those waiting in line at the other locations? Think they could have lured some in? It was very cold in the Northeast this morning. File this under "opportunity lost"
Mattel (MAT): People were not buying toys probably due to the lead paint issues. Learning and video games were flying off the shelves (good for Leapfrog (LF)).
Other winners:
Microsoft (MSFT): The "Zune" was sold out at most locations and those that still had it where getting top dollar for it (and it was still selling).
50/50 Results:
Apple (APPL): 8GB iPods were sitting on the shelves but the 4GB were all gone at most locations (nanos). iTouch sales were, again I quote, "not as good as the Zune". It should be noted though that these observation are NOT at Apple stores but other retailers so one cannot commit either way. Mac's were selling "very well".
Friday's Links
Sears, Oprah, , Hysteria, Verizon
- Chad Brand has a great piece on Sears
- TV in a fridge, an attempt to get more men in the kitchen?
- Felix Salmon has a notable piece on those who push hysteria.
- Another reason to hate Verizon.
- Chad Brand has a great piece on Sears
- TV in a fridge, an attempt to get more men in the kitchen?
- Felix Salmon has a notable piece on those who push hysteria.
- Another reason to hate Verizon.
Attoney Opines on RI Supreme Court & Sherwin Williams
Jane Genova has this tidbit from an attorney on the Rhode Island Supreme Court on Sherwin Williams (SHW) litigation.
The last paragraph is the most interesting:
"Our Midwest attorney lead-paint watcher who doesn't encourage the third gen in the family to enter law differs with my take on the Rhode Island Supreme Court. This attorney opines, off the record:
"I respectfully disagree with your perception that the Rhode Island Supreme Court will not overturn the lower court's decision. There are so issues which are under appeal. Surely, the Rhode Island Supreme Court will sense that it's called upon to address and correct some of what might have been errors from the original trial. At the top of that list are the instructions which were given to the jury.
"As I see it, it would be best for Rhode Island if the Supreme Court there corrects all or at least most of all that. Therefore, the damage of those rulings could be fixed in the eyes of those who reside outside of the state.
"If this winds up going to the U.S. Federal Court, it will take decades for Rhode Island to re-brand itself. That will only occur with a complete political overhaul. In addition, if this goes to the U.S. Supreme Court, it will be a major embarrassment for Motley Rice, the lower court and even the Rhode Island Supreme Court. Due process was never afforded to the defendants and legal interpretations were of one man's mind.
"Furthermore, I am not sure if everyone realizes that if nothing is overturned and if all goes forward, each property to be abated is technically a separate trial. Plus, the defendant bar is in a position to use the dysfunctional rulings used against them to sue each local city and landlord for contributing to the public nuisance. That is the strange thing: Rhode Island can collect their money as does Motley Rice and then each city can be sued for not enforcing laws already in the books. These cities have fewer resources and have a great chance of losing and/or depleting their resources fighting each case."
The last paragraph is the most interesting:
"Our Midwest attorney lead-paint watcher who doesn't encourage the third gen in the family to enter law differs with my take on the Rhode Island Supreme Court. This attorney opines, off the record:
"I respectfully disagree with your perception that the Rhode Island Supreme Court will not overturn the lower court's decision. There are so issues which are under appeal. Surely, the Rhode Island Supreme Court will sense that it's called upon to address and correct some of what might have been errors from the original trial. At the top of that list are the instructions which were given to the jury.
"As I see it, it would be best for Rhode Island if the Supreme Court there corrects all or at least most of all that. Therefore, the damage of those rulings could be fixed in the eyes of those who reside outside of the state.
"If this winds up going to the U.S. Federal Court, it will take decades for Rhode Island to re-brand itself. That will only occur with a complete political overhaul. In addition, if this goes to the U.S. Supreme Court, it will be a major embarrassment for Motley Rice, the lower court and even the Rhode Island Supreme Court. Due process was never afforded to the defendants and legal interpretations were of one man's mind.
"Furthermore, I am not sure if everyone realizes that if nothing is overturned and if all goes forward, each property to be abated is technically a separate trial. Plus, the defendant bar is in a position to use the dysfunctional rulings used against them to sue each local city and landlord for contributing to the public nuisance. That is the strange thing: Rhode Island can collect their money as does Motley Rice and then each city can be sued for not enforcing laws already in the books. These cities have fewer resources and have a great chance of losing and/or depleting their resources fighting each case."
Fed Minutes: Do Not Expect Another Cut on 12/11
The recent Fed meeting minuted were released today and for those counting on another rate cut in 3 weeks, you might want to rethink that.
From the Meeting:
"In their discussion of individual sectors of the econ-omy, participants noted that the recent declines in housing activity—while substantial—had largely been anticipated. Nonetheless, the potential for significant further weakening in housing activity and home prices represented a downside risk to the economic outlook. Most participants pointed to the deterioration in non-prime mortgage markets as well as higher interest rates and tighter credit standards for prime nonconforming mortgages as factors that had exacerbated the deterio-ration in housing markets, and they noted that these developments could further limit the availability of mortgage credit and depress the demand for housing.
Some participants also pointed to downside risks to the housing market stemming from the large volume of substantial upward interest-rate resets that were likely on subprime mortgages in coming quarters, which could lead to a faster pace of foreclosures in the near term, thereby intensifying the downward pressure on house prices. Participants generally agreed that the available data suggested that consumer spending had been well main-tained over the past several months and that spillovers from the strains in the housing market had apparently been quite limited to date. Nevertheless, a number of participants cited notable declines in survey measures of consumer confidence since the onset of financial turbulence in mid-summer, along with sharply higher oil prices, declines in house prices, and tighter under-writing standards for home equity loans and some types of consumer loans, as factors likely to restrain con-sumer spending going forward.
Moreover, anecdotal reports by business contacts suggested a softening in retail sales in some regions of the country. Participants expressed a concern that larger-than-expected declines in house prices could further sap consumer confidence as well as net worth, causing a pullback in consumer spending. All told, however, participants envisioned that the most likely scenario was for consumer spend-ing to continue to advance at a moderate rate in com-ing quarters, supported by the generally strong labor market and further gains in real personal income. Meeting participants noted that capital expenditures had grown at a solid pace in recent months and that the financial turmoil generally appeared to have had a limited effect on business capital spending plans to date. Nevertheless, business sentiment appeared to have eroded somewhat amid heightened economic and financial uncertainty, potentially restraining investment outlays in some industries.
However, participants noted that conditions in corporate bond markets had improved since the September FOMC meeting, and that credit availability generally appeared to be ample, albeit on somewhat tighter terms. Participants judged that moderate growth of investment outlays going for-ward was the most likely outcome. A number of par-ticipants saw downside risk to the outlook for nonresidential building activity, reflecting elevated spreads on commercial-mortgage-backed securities and a further tightening of banks’ lending standards for commercial real estate loans.
Data on economic growth outside the United States indicated that the global expansion, though likely to slow somewhat in coming quarters, was nevertheless on a firm footing. The continued strength of global growth and the recent decline in the foreign exchange value of the dollar were seen as likely to support U.S. exports going forward. Readings on core inflation received during the inter-meeting period continued to be generally favorable, and meeting participants agreed that the recent moderation in core inflation would likely be sustained.
The slower pace of economic expansion anticipated for the next few quarters would help ease inflationary pressures. Nonetheless, participants expressed concern about the upside risks to the outlook for inflation. The recent increases in the prices of energy and other commodities, along with the significant decline in the foreign exchange value of the dollar, were cited as factors that could exert upward pressure on prices of some core goods and services in the near term. Increases in unit labor costs also could add to inflationary pressures.
Moreover, participants expressed concern that some measures of inflation compensation calculated from TIPS securities had risen this year, although they viewed inflation expectations generally as remaining contained. Participants were concerned that if headline inflation remained above core measures for a sustained period, then longer-term inflation expectations could move higher, a development that could lead to greater inflation pressures over the longer term and be costly to reverse."
Energy prices have to eventually find their way into the CPI number and when they do, any chance of a rate cut is zero. What the Fed may choose to do instead rather than have their hands tied when that eventually happens is keep rates where they are now to force a mild slowdown and let that take the pressure off oil demand and thus its impact on consumers. This then leaves them the flexibility they want down the road should growth slow dramatically to cut rates to spur it.
Bank stocks like Citigroup (C), Bank of America (BAC), Wachovia (WB) and Wells Fargo (WFC) may get hit again on the news but they are all in fine shape and any additional selling will be a great chance to pick up more cheap.
The only way I see another rate cut in December is if there is another dramatic shock to the system. Barring that count on the status quo..
From the Meeting:
"In their discussion of individual sectors of the econ-omy, participants noted that the recent declines in housing activity—while substantial—had largely been anticipated. Nonetheless, the potential for significant further weakening in housing activity and home prices represented a downside risk to the economic outlook. Most participants pointed to the deterioration in non-prime mortgage markets as well as higher interest rates and tighter credit standards for prime nonconforming mortgages as factors that had exacerbated the deterio-ration in housing markets, and they noted that these developments could further limit the availability of mortgage credit and depress the demand for housing.
Some participants also pointed to downside risks to the housing market stemming from the large volume of substantial upward interest-rate resets that were likely on subprime mortgages in coming quarters, which could lead to a faster pace of foreclosures in the near term, thereby intensifying the downward pressure on house prices. Participants generally agreed that the available data suggested that consumer spending had been well main-tained over the past several months and that spillovers from the strains in the housing market had apparently been quite limited to date. Nevertheless, a number of participants cited notable declines in survey measures of consumer confidence since the onset of financial turbulence in mid-summer, along with sharply higher oil prices, declines in house prices, and tighter under-writing standards for home equity loans and some types of consumer loans, as factors likely to restrain con-sumer spending going forward.
Moreover, anecdotal reports by business contacts suggested a softening in retail sales in some regions of the country. Participants expressed a concern that larger-than-expected declines in house prices could further sap consumer confidence as well as net worth, causing a pullback in consumer spending. All told, however, participants envisioned that the most likely scenario was for consumer spend-ing to continue to advance at a moderate rate in com-ing quarters, supported by the generally strong labor market and further gains in real personal income. Meeting participants noted that capital expenditures had grown at a solid pace in recent months and that the financial turmoil generally appeared to have had a limited effect on business capital spending plans to date. Nevertheless, business sentiment appeared to have eroded somewhat amid heightened economic and financial uncertainty, potentially restraining investment outlays in some industries.
However, participants noted that conditions in corporate bond markets had improved since the September FOMC meeting, and that credit availability generally appeared to be ample, albeit on somewhat tighter terms. Participants judged that moderate growth of investment outlays going for-ward was the most likely outcome. A number of par-ticipants saw downside risk to the outlook for nonresidential building activity, reflecting elevated spreads on commercial-mortgage-backed securities and a further tightening of banks’ lending standards for commercial real estate loans.
Data on economic growth outside the United States indicated that the global expansion, though likely to slow somewhat in coming quarters, was nevertheless on a firm footing. The continued strength of global growth and the recent decline in the foreign exchange value of the dollar were seen as likely to support U.S. exports going forward. Readings on core inflation received during the inter-meeting period continued to be generally favorable, and meeting participants agreed that the recent moderation in core inflation would likely be sustained.
The slower pace of economic expansion anticipated for the next few quarters would help ease inflationary pressures. Nonetheless, participants expressed concern about the upside risks to the outlook for inflation. The recent increases in the prices of energy and other commodities, along with the significant decline in the foreign exchange value of the dollar, were cited as factors that could exert upward pressure on prices of some core goods and services in the near term. Increases in unit labor costs also could add to inflationary pressures.
Moreover, participants expressed concern that some measures of inflation compensation calculated from TIPS securities had risen this year, although they viewed inflation expectations generally as remaining contained. Participants were concerned that if headline inflation remained above core measures for a sustained period, then longer-term inflation expectations could move higher, a development that could lead to greater inflation pressures over the longer term and be costly to reverse."
Energy prices have to eventually find their way into the CPI number and when they do, any chance of a rate cut is zero. What the Fed may choose to do instead rather than have their hands tied when that eventually happens is keep rates where they are now to force a mild slowdown and let that take the pressure off oil demand and thus its impact on consumers. This then leaves them the flexibility they want down the road should growth slow dramatically to cut rates to spur it.
Bank stocks like Citigroup (C), Bank of America (BAC), Wachovia (WB) and Wells Fargo (WFC) may get hit again on the news but they are all in fine shape and any additional selling will be a great chance to pick up more cheap.
The only way I see another rate cut in December is if there is another dramatic shock to the system. Barring that count on the status quo..
Thursday, November 22, 2007
"Fast Money" for Friday
Friday's Picks
No Picks
Wednesday's Results
Jeff Macke recommended buying Microsoft (MSFT). Open $34.58 Close $34.23 LOSS
Guy Adami preferred Freeport McMorRan (FCX).Open $91.85 Close $90.06 LOSS
Karen Finerman said to short iShares Dow Jones US Real Estate ETF (IYR).Open $67.05 Close $66.55 GAIN
Pete Najarian is buying Pulte Homes (PHM) Open $10.60 Close $9.25 LOSS
Records: Since 6/21/2007
Guy Adami= 46-40 = 60%
John Najarian= 13-4 = 76%
Jeff Macke= 53-35 = 62%
Pete Najarian= 35-36 = 48%
Tim Seymore= 5-5 = 50%
Karen Finerman= 29-21 = 59%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Friday's Upgrades and Downgrades
UPGRADES
EDS EDS Bernstein Mkt Perform » Outperform
BB&T Corp BBT Oppenheimer Sell » Neutral
Orient-Express OEH UBS Neutral » Buy
NOVA Chemicals NCX UBS Neutral » Buy
Office Depot ODP Credit Suisse Underperform » Neutral
Deutsche Telekom DT Lehman Brothers Underweight » Equal-weight
Dick's Sporting Goods DKS Citigroup Hold » Buy
DOWNGRADES
Smithfield Foods SFD Davenport Buy » Neutral
eHealth EHTH FTN Midwest Buy » Neutral
Highwoods Prop HIW Stifel Nicolaus Buy » Hold
Colonial Properties CLP UBS Neutral » Sell
Jamba JMBA Morgan Joseph Buy » Hold
Stein Mart SMRT Sun Trust Rbsn Humphrey Buy » Neutral
Hibbett Sporting HIBB CIBC Wrld Mkts Sector Outperform » Sector Perform
Gorman-Rupp Company GRC Friedman Billings Mkt Perform » Underperform
Office Depot ODP Bear Stearns Outperform » Peer Perform
Circuit City CC JP Morgan Overweight » Neutral
Telecom Italia TI Lehman Brothers Equal-weight » Underweight
Hot Topic HOTT Citigroup Buy » Hold
Wednesday, November 21, 2007
Wednesday's 52 Week Lows
WEN Wendy's International ... 27.46
WCI WCI Communities, Inc 3.74
WBSN Websense Inc 16.18
TWX Time Warner Inc 16.55
TWP Trex Inc 6.47
TWB Tween Brands Inc 25.13
RGS Regis Corp 26.35
RGCI Regent Communications ... 2.06
RCMT RCM Technologies Inc 4.95
R Ryder System, Inc 39.43
PER Perot Sys Corp 12.90
PEIX Pacific Ethanol Inc 4.30
MS Morgan Stanley 48.51
MRX Medicis Pharmaceutica ... 25.47
MRT Mortons Restaurant Gr ... 12.44
MOT Motorola, Inc 15.33
LOW Lowe's Companies, Inc 22.11
LLY Eli Lilly and Company 49.09
HSY Hershey Co 38.30
CEM Chemtura Corp 7.13
CCFH CCF Holding Company 12.00
CC Circuit City Stores, ... 5.45
C Citigroup, Inc 30.73
BZH Beazer Homes USA, Inc 8.00
BX Blackstone Group L P 21.02
Wednesday's Links
Adam Warner, Gruffalo, Prostitutes,
- Adam just put a dent in my holidays with the realization I may not get "24" in January. Like I needed another reason to disdain Hollywood?
- Nothing reads like Gruffalo for your kids.
- What would you rather be arrested for?
-
- Adam just put a dent in my holidays with the realization I may not get "24" in January. Like I needed another reason to disdain Hollywood?
- Nothing reads like Gruffalo for your kids.
- What would you rather be arrested for?
-
Sears Holdings: It's About Brands, Not Stores
Why does Wall St. want Sears Holdings (SHLD) Eddie Lampert to buy more stores, doesn't he have enough already? Aren't they always saying that mergers never work? If that is true, why are shareholders wanting a big one and why are they disappointed he is trying to buy a small specialty retailer.
Two news item shed light into what Lampert is doing and no it does not include the purchase of Circuit City (CC), Home Depot (HD) or even the oft speculated about Macy's (M) .
First: The New Retail Concept In Georgia (this location was a former Kmart).
"Sears will come to life by offering customers a "store-of-shops," and a fresh design layout with different flooring, fixtures, and displays. Marquee brand names now found in the new Sears include Sony, Hanes, Workwear - by Craftsman, Carhartt, Timberland and Diehard apparel, Levi's, and Nordic Track. The store will also feature expanded Home Electronics and Home Appliance showrooms, organized around favorite manufacturers, that will also help customers choose the right look, feel and function with other brands Sears carries.
A newly remodeled hardware department will feature innovative and interactive Garage Organization, Mechanics and Carpentry shops to help customers find the right item quickly and efficiently.
Five central internet workstations located throughout the sales floor will provide free high-speed Web access to enable both the customers and associates to quickly access the internet, verify prices, shop online and contact store personnel if help is needed.
The store will also carry a wide range of convenience items previously available at the former Kmart location including full pharmacy services, health and beauty, cosmetics and greeting cards.
This new format will help customers create the look they want and find the gifts they need all in one convenient location. Shoppers will find the quality brands they have come to know and love like Diehard, Craftsman, Ty Pennington, and Kenmore plus extended assortments of national brands from Nordic Track, Schwinn, Reebok and more. Customers can also shop for great fashions with the first 23,000 sq. foot mega Lands' End shop that brings the legendary brand to life with items for women, men, kids, baby and home. Now families can touch and feel the quality and see the details of Lands' End products. A special monogramming service is also available to easily personalize just about any Lands' End item that will take a stitch. There's even free shipping on any catalog or landsend.com order placed from the store."
Another Brand:
Sears Holdings take a 13% stake in Restoration Hardware and is looking at acquiring entire operation.
Now, if you are going to build a nationwide operation of these stores, what do you need? BRANDS. Lampert already has about 3,5000 locations is both the US and Canada. Why would he need to buy another retailer and adopt more locations?
Think about it. What is the most expensive thing a growing retailer experiences? Building new locations. Just ask Target, they are begging Lampert to sell them hundreds of his prime locations because it is cheaper than building them. More space is not what Lampert needs.
What is Lampert going to do? Smaller acquisition of brands that he can then plug into the new concept. Worse case scenario with the Restoration Hardware deal if it goes through, they close up its "back of the house" operations and sell the products through the Land's End catalog and stores and it is still a winner for him. One good thing about a successful mail order business, no matter who owns it, it makes money. Land's End, who has years or success here can only make it better.
So, if we go with the Brands thesis, what do we look for? Women. Sears has men with Craftsmen and Kenmore. How about going after Victoria's Secret or Bath & Body
Works from the struggling Limited Brands (LTD). Either would bring women into Sears for their products and traffic is what Lampert needs and has been shedding assets. Or, buy the whole company currently valued at $6.5 billion and then sell off the unwanted pieces to help pay for it. Maybe for just over a billion dollars he could go for Carter's (CTI) and create a top notch children's "store in a store". Any mother knows Carter's makes some of the best children's clothing out there.
Either way, next week's earnings announcement will be a fun one.
Two news item shed light into what Lampert is doing and no it does not include the purchase of Circuit City (CC), Home Depot (HD) or even the oft speculated about Macy's (M) .
First: The New Retail Concept In Georgia (this location was a former Kmart).
"Sears will come to life by offering customers a "store-of-shops," and a fresh design layout with different flooring, fixtures, and displays. Marquee brand names now found in the new Sears include Sony, Hanes, Workwear - by Craftsman, Carhartt, Timberland and Diehard apparel, Levi's, and Nordic Track. The store will also feature expanded Home Electronics and Home Appliance showrooms, organized around favorite manufacturers, that will also help customers choose the right look, feel and function with other brands Sears carries.
A newly remodeled hardware department will feature innovative and interactive Garage Organization, Mechanics and Carpentry shops to help customers find the right item quickly and efficiently.
Five central internet workstations located throughout the sales floor will provide free high-speed Web access to enable both the customers and associates to quickly access the internet, verify prices, shop online and contact store personnel if help is needed.
The store will also carry a wide range of convenience items previously available at the former Kmart location including full pharmacy services, health and beauty, cosmetics and greeting cards.
This new format will help customers create the look they want and find the gifts they need all in one convenient location. Shoppers will find the quality brands they have come to know and love like Diehard, Craftsman, Ty Pennington, and Kenmore plus extended assortments of national brands from Nordic Track, Schwinn, Reebok and more. Customers can also shop for great fashions with the first 23,000 sq. foot mega Lands' End shop that brings the legendary brand to life with items for women, men, kids, baby and home. Now families can touch and feel the quality and see the details of Lands' End products. A special monogramming service is also available to easily personalize just about any Lands' End item that will take a stitch. There's even free shipping on any catalog or landsend.com order placed from the store."
Another Brand:
Sears Holdings take a 13% stake in Restoration Hardware and is looking at acquiring entire operation.
Now, if you are going to build a nationwide operation of these stores, what do you need? BRANDS. Lampert already has about 3,5000 locations is both the US and Canada. Why would he need to buy another retailer and adopt more locations?
Think about it. What is the most expensive thing a growing retailer experiences? Building new locations. Just ask Target, they are begging Lampert to sell them hundreds of his prime locations because it is cheaper than building them. More space is not what Lampert needs.
What is Lampert going to do? Smaller acquisition of brands that he can then plug into the new concept. Worse case scenario with the Restoration Hardware deal if it goes through, they close up its "back of the house" operations and sell the products through the Land's End catalog and stores and it is still a winner for him. One good thing about a successful mail order business, no matter who owns it, it makes money. Land's End, who has years or success here can only make it better.
So, if we go with the Brands thesis, what do we look for? Women. Sears has men with Craftsmen and Kenmore. How about going after Victoria's Secret or Bath & Body
Works from the struggling Limited Brands (LTD). Either would bring women into Sears for their products and traffic is what Lampert needs and has been shedding assets. Or, buy the whole company currently valued at $6.5 billion and then sell off the unwanted pieces to help pay for it. Maybe for just over a billion dollars he could go for Carter's (CTI) and create a top notch children's "store in a store". Any mother knows Carter's makes some of the best children's clothing out there.
Either way, next week's earnings announcement will be a fun one.
Target's Miss: Credit Cards and Buyback Take Stage
Target (TGT) announced earnings this morning and while the EPS numbers were not good, (below estimates), revenues were good (up 9.3%). This is good news for folks like Wal-Mart (WMT) because it means people are still shopping at discount retailers. since nobody controls costs like Wal-Mart does, investor ought to be comforted that folks are still spending.
Here is more bad news. If we back out the credit card operations that Bill Ackman has them selling, EBIT in 2007 was $801 million vs $823 million in 2006. That equates to a 3% drop this year. Now, one must also understand earnings without the credit card results would be 17% lower and that this segment is growing at 17%. Retail results without the credit operation will be far worse than they are now.
Regarding the credit card sale? Maybe it is not a sure thing. “At this point in the review, it is clear that if a transaction occurs, it would involve sharing a meaningful portion of our future pre-tax credit card contribution with a new partner,” said Doug Scovanner, chief financial officer. “As a result, we are continuing to evaluate whether the benefits of a potential transaction outweigh its expected dilutive impact on earnings per share. Regardless of the outcome, we remain committed to maintaining our core financial services operation and growing and developing our best-in-class Target Financial Services team.”
Keep it....
Good News?
"Target also announced today that its board has authorized a new $10 billion share repurchase program that replaces the prior authorization. At recent share price levels, this authorization represents more than 20 percent of outstanding shares. The program is expected to be completed within three years, with the pace of repurchase activity being dependent on many factors, including: the strength of our business operations, the maintenance of an appropriate credit profile, capital reinvestment opportunities, access to adequate liquidity and debt and equity capital market conditions. Based on current conditions and outlook, a significant portion of the program is expected to be completed by the end of 2008. This new authorization is not contingent on any specific outcome from the review of the ownership of Target’s credit card receivables."
Now that is how you announce a buyback. Target produces about 10% of its market cap a year in cash flow from operations so it can easily finish the repurchase plan without mortgaging the future of the company like Home Depot (HD) is trying to do.
Target is being very conservative with both it cash and the credit card sale possibility and both are good form investors.
I have no position in Target.
Here is more bad news. If we back out the credit card operations that Bill Ackman has them selling, EBIT in 2007 was $801 million vs $823 million in 2006. That equates to a 3% drop this year. Now, one must also understand earnings without the credit card results would be 17% lower and that this segment is growing at 17%. Retail results without the credit operation will be far worse than they are now.
Regarding the credit card sale? Maybe it is not a sure thing. “At this point in the review, it is clear that if a transaction occurs, it would involve sharing a meaningful portion of our future pre-tax credit card contribution with a new partner,” said Doug Scovanner, chief financial officer. “As a result, we are continuing to evaluate whether the benefits of a potential transaction outweigh its expected dilutive impact on earnings per share. Regardless of the outcome, we remain committed to maintaining our core financial services operation and growing and developing our best-in-class Target Financial Services team.”
Keep it....
Good News?
"Target also announced today that its board has authorized a new $10 billion share repurchase program that replaces the prior authorization. At recent share price levels, this authorization represents more than 20 percent of outstanding shares. The program is expected to be completed within three years, with the pace of repurchase activity being dependent on many factors, including: the strength of our business operations, the maintenance of an appropriate credit profile, capital reinvestment opportunities, access to adequate liquidity and debt and equity capital market conditions. Based on current conditions and outlook, a significant portion of the program is expected to be completed by the end of 2008. This new authorization is not contingent on any specific outcome from the review of the ownership of Target’s credit card receivables."
Now that is how you announce a buyback. Target produces about 10% of its market cap a year in cash flow from operations so it can easily finish the repurchase plan without mortgaging the future of the company like Home Depot (HD) is trying to do.
Target is being very conservative with both it cash and the credit card sale possibility and both are good form investors.
I have no position in Target.
Wednesday's Upgrades and Downgrades
UPGRADES
Dillard's DDS Oppenheimer Sell » Neutral
Evergreen Solar ESLR Janco Partners Mkt Perform » Buy
Nucor NUE Soleil Sell » Hold
Celgene CELG BMO Capital Markets Market Perform » Outperform
Tyson Foods TSN BMO Capital Markets Market Perform » Outperform
Polaris Inds PII Banc of America Sec Sell » Neutral
WellCare Group WCG CIBC Wrld Mkts Sector Perform » Sector Outperform
Fresh Del Monte FDP Piper Jaffray Neutral » Buy
Under Armour UA UBS Neutral » Buy
Progressive Gaming PGIC Roth Capital Hold » Buy
iGATE IGTE Roth Capital Hold » Buy
China Petroleum (Sinopec) SNP UBS Sell » Neutral
Kendle KNDL UBS Neutral » Buy
Statoil ASA STO UBS Neutral » Buy
United Rentals URI JP Morgan Underweight » Neutral
Home Inns HMIN Susquehanna Financial Negative » Neutral
Starbucks SBUX Friedman Billings Mkt Perform » Outperform
Dollar Tree DLTR Lehman Brothers Equal-weight » Overweight
Embarq EQ Lehman Brothers Underweight » Equal-weight
Hess HES UBS Neutral » Buy
Exxon Mobil XOM UBS Neutral » Buy
Buckeye Tech BKI Citigroup Sell » Buy
Knight Trading NITE Keefe Bruyette Underperform » Mkt Perform
Franklin Bank Corp FBTX Keefe Bruyette Underperform » Mkt Perform
Wynn Resorts WYNN Jefferies & Co Hold » Buy
McAfee MFE Jefferies & Co Hold » Buy
Sykes Enterprises SYKE Susquehanna Financial Neutral » Positive
Suncor Energy SU CIBC Wrld Mkts Sector Perform » Sector Outperform
DOWNGRADES
Pharmion PHRM BMO Capital Markets Outperform » Market Perform
Transdigm Group TDG Calyon Securities Buy » Neutral
Quadra Realty QRR Wachovia Outperform » Mkt Perform
Kennametal KMT Wachovia Outperform » Mkt Perform
Ashford Hospitality Trust AHT RBC Capital Mkts Sector Perform » Underperform
Starbucks SBUX CIBC Wrld Mkts Sector Outperform » Sector Perform
Tuesday, November 20, 2007
"Fast Money" for Wednesday
Wednesday's Picks
Jeff Macke recommended buying Microsoft (MSFT). Open $34.58
Guy Adami preferred Freeport McMorRan (FCX).Open $91.85
Karen Finerman said to short iShares Dow Jones US Real Estate ETF (IYR).Open $67.05
Pete Najarian is buying Pulte Homes (PHM) Open $10.60
Tuesday's Results
Jeff Macke recommended Dick’s Sporting Goods (DKS) Open $29.01 Close $30.54 GAIN and Target (TGT) Open $53.90 Close $51.69 LOSS for a “quickie trade” of Nordstrom (JWN). Open $30.52 Close $34.21 GAIN
Pete Najarian would buy Echostar (DISH).Open $47.49 Close $43.24 LOSS
Karen Finerman reiterated her frequent final trade: Long Goldman Sachs (GS) Open $220.54 Close $218.28 LOSS, short Lehman Brothers (LEH).Open $60.55 Close $60.77 LOSS
Guy Adami was bullish on Vodafone (VOD). Open $38.97 Close $39.10 GAIN
Guy Adami= 46-39 = 62%
John Najarian= 13-4 = 76%
Jeff Macke= 53-34 = 64%
Pete Najarian= 35-35 = 50%
Tim Seymore= 5-5 = 50%
Karen Finerman= 28-21 = 58%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Tueday's 52 Week Low's
Add almost all the homebuilders to the list
XJT Expressjet Holdings Inc 2.37
WOLF Great Wolf Resorts Inc 11.22
WNC Wabash National Corpo ... 7.12
WMAR West Marine Inc 9.07
WGO Winnebago Industries, Inc 22.03
PZN Pzena Investment Mgmt Inc 12.79
NUTR Nutraceutical Intl Corp 11.86
NTRI Nutri Sys Inc New 21.97
NANX Nanophase Tchnologies ... 3.58
MZ Milacron Inc 3.44
MU Micron Technology Inc 8.51
JXSB Jacksonville Bancorp ... 10.60
JRC Journal Register Co 2.00
JOE St. Joe Company 28.95
FRE Freddie Mac 27.89
FNM Fannie Mae 30.75
D Dominion Resources Inc 46.11
CPB Campbell Soup Company 34.48
COHT Cohesant Technologies Inc 6.00
AVR Aventine Renewable Energy 8.33
ALG Alamo Group Inc 17.09
AIM Aerosonic Corporation 4.90
AIB Allied Irish Banks, P ... 40.15
XJT Expressjet Holdings Inc 2.37
WOLF Great Wolf Resorts Inc 11.22
WNC Wabash National Corpo ... 7.12
WMAR West Marine Inc 9.07
WGO Winnebago Industries, Inc 22.03
PZN Pzena Investment Mgmt Inc 12.79
NUTR Nutraceutical Intl Corp 11.86
NTRI Nutri Sys Inc New 21.97
NANX Nanophase Tchnologies ... 3.58
MZ Milacron Inc 3.44
MU Micron Technology Inc 8.51
JXSB Jacksonville Bancorp ... 10.60
JRC Journal Register Co 2.00
JOE St. Joe Company 28.95
FRE Freddie Mac 27.89
FNM Fannie Mae 30.75
D Dominion Resources Inc 46.11
CPB Campbell Soup Company 34.48
COHT Cohesant Technologies Inc 6.00
AVR Aventine Renewable Energy 8.33
ALG Alamo Group Inc 17.09
AIM Aerosonic Corporation 4.90
AIB Allied Irish Banks, P ... 40.15
Tuesday's Links
Romney, Lampert, Confirmation, Murdoch
- Now, if you truly believe the nation is "in trouble" and you honestly will vote for the "most qualified person", how can you vote for anyone other than this guy?
- Sears Holdings boards member Richard Perry's thoughts on Eddie Lampert
- Like me, this blogger enjoys the validation his thought process gets when the worlds greatest investors are buying the same stocks he is.
- Remember the dire predictions when Ruppert bought Dow Jones, right, all crap.
- Now, if you truly believe the nation is "in trouble" and you honestly will vote for the "most qualified person", how can you vote for anyone other than this guy?
- Sears Holdings boards member Richard Perry's thoughts on Eddie Lampert
- Like me, this blogger enjoys the validation his thought process gets when the worlds greatest investors are buying the same stocks he is.
- Remember the dire predictions when Ruppert bought Dow Jones, right, all crap.
Wachovia Insiders Still Buying
Wachovia (WB) director Lanty smith is at it again.
He followed up his 100,000 share purchase last week with another 37,000 share purchase on Wednesday (11/15). since the end of August smith has purchased almost $8 million dollars of Wachovia stock at prices between $38 and $48 a share. Smith now owns 220,000 shares of the bank.
The purchases make smith the third largest individual shareholder at Wachovia.
Superinvestor Peter Lynch famously once said, "There are a multitude of reasons insiders sell shares that have nothing to do with the health or the future of the company. I can only think of one reason they would use their own money to buy shares, they think the share price is going up."
Wachovia insiders are placing big bets on the company and that is worth noting
He followed up his 100,000 share purchase last week with another 37,000 share purchase on Wednesday (11/15). since the end of August smith has purchased almost $8 million dollars of Wachovia stock at prices between $38 and $48 a share. Smith now owns 220,000 shares of the bank.
The purchases make smith the third largest individual shareholder at Wachovia.
Superinvestor Peter Lynch famously once said, "There are a multitude of reasons insiders sell shares that have nothing to do with the health or the future of the company. I can only think of one reason they would use their own money to buy shares, they think the share price is going up."
Wachovia insiders are placing big bets on the company and that is worth noting
CSX Replies and Misses the Point
Full disclosure. I am no longer a CSX (CSX) shareholder as we swapped out of it and into Citigroup (C) recently. Now, to the letter.
First things first. Here is the letter.
The letter essentially lays out the accomplishments of management the past several years as the reason to dismiss every proposal made by TCI. Here is the problem with doing it that way. CSX still trails and ranks at the bottom of the major railroads in several key metrics.
Yes they have improved but, and this is the point that TCI was making, that improvement was due to a resurgence of the industry they operate in, not necessarily due to deft management. TCI argues that had management been better, the improvement at CSX would have been much greater and shareholders would have been rewarded much more.
What CSX is saying is akin to a sprinter after a race saying, "I beat my best time by 4 seconds, but still came in fourth, can I have a medal please?" No, you can't. I does not go that way. Your improvement still places you in last place.
CSX has placed itself into a precarious situation now. They are triumphing the stock price as a reason not to change. But, if we slide into a recession one can bet that the stock price will reverse and then CSX needs another excuse to ignore TCI. This will make the board look questionable at best, hen pecked at worst.
CSX is ignoring the railroad industry fundamentals and how much that has driven their success while at the same time taking too much credit for them. Their improvement, while very good, was not as good as their peers and when the economy slows down and their situation deteriorates faster than the other railroads, the reasons they gave for brushing off TCI will come back to haunt them.
First things first. Here is the letter.
The letter essentially lays out the accomplishments of management the past several years as the reason to dismiss every proposal made by TCI. Here is the problem with doing it that way. CSX still trails and ranks at the bottom of the major railroads in several key metrics.
Yes they have improved but, and this is the point that TCI was making, that improvement was due to a resurgence of the industry they operate in, not necessarily due to deft management. TCI argues that had management been better, the improvement at CSX would have been much greater and shareholders would have been rewarded much more.
What CSX is saying is akin to a sprinter after a race saying, "I beat my best time by 4 seconds, but still came in fourth, can I have a medal please?" No, you can't. I does not go that way. Your improvement still places you in last place.
CSX has placed itself into a precarious situation now. They are triumphing the stock price as a reason not to change. But, if we slide into a recession one can bet that the stock price will reverse and then CSX needs another excuse to ignore TCI. This will make the board look questionable at best, hen pecked at worst.
CSX is ignoring the railroad industry fundamentals and how much that has driven their success while at the same time taking too much credit for them. Their improvement, while very good, was not as good as their peers and when the economy slows down and their situation deteriorates faster than the other railroads, the reasons they gave for brushing off TCI will come back to haunt them.
Tuesday's Upgrades and Downgrades
UPGRADES
CLECO Corp CNL Davenport Neutral » Buy
Bristol-Myers BMY Cowen & Co Underperform » Neutral
Energizer ENR BMO Capital Markets Market Perform » Outperform
Tidewater TDW Lehman Brothers Equal-weight » Overweight
Eaton ETN KeyBanc Capital Mkts Hold » Buy
Bronco Drilling BRNC Calyon Securities Neutral » Add
U.S. Steel X Soleil Sell » Hold
Ixia XXIA Nollenberger Capital Neutral » Buy
Laboratory Corp LH UBS Neutral » Buy
Hormel Foods HRL JP Morgan Underweight » Neutral
Qualcomm QCOM JP Morgan Neutral » Overweight
Repsol SA REP Citigroup Sell » Hold
WellPoint WLP Wachovia Mkt Perform » Outperform
Best Buy BBY Wachovia Mkt Perform » Outperform
Caterpillar CAT UBS Sell » Neutral
Apria Healthcare AHG Banc of America Sec Sell » Neutral
AFLAC AFL Citigroup Sell » Hold
NYMEX NMX Citigroup Hold » Buy
EchoStar DISH Citigroup Hold » Buy
VASCO Data Security VDSI Friedman Billings Mkt Perform » Outperform
RBC Bearings ROLL Robert W. Baird Neutral » Outperform
Drew Industries DW Ferris Baker Watts Neutral » Buy
DOWNGRADES
Tollgrade TLGD Ferris Baker Watts Buy » Neutral
Smithfield Foods SFD JP Morgan Overweight » Neutral
Leap Wireless LEAP Lehman Brothers Overweight » Equal-weight
UBS AG UBS CIBC Wrld Mkts Sector Outperform » Sector Perform
Coley Pharma COLY Susquehanna Financial Positive » Neutral
Fannie Mae FNM Friedman Billings Outperform » Mkt Perform
Monday, November 19, 2007
Sears Holdings Seeks To Acquire Restoration Harware
It is a small deal but one that has the potential to change the image of Sears Holdings (SHLD) in home furnishings.
In a filing with the SEC (below), Sears said it acquired 5.31 million shares for about $30.2 million in cash of Restoration Hardware (RSTO).
Restoration Hardware, is a specialty retailer of hardware, bathware, furniture, lighting, textiles, accessories and gifts. The Company operated 103 stores and eight outlet stores in 30 states, the District of Columbia and Canada as of February 3, 2007. In addition to its retail stores, Restoration Hardware, Inc. operates a direct-to-customer (direct) sales channel, which includes both catalog and Internet, and a wholly owned furniture manufacturer. The Company is a multi-channel business and its catalog distribution drives sales across Restoration Hardware's retail, catalog and Internet businesses. The Company uses its catalog as the primary marketing vehicle, marketing to new customers and return customers, both in and outside the retail trade area.
From the SEC Filing:
"In June 2007, on behalf of Sears Holdings, the Chairman of Sears Holdings and another member of the Board of Directors of Sears Holdings approached a non-management director of the Issuer to inquire as to his views concerning a possible business combination or other strategic transaction involving the Issuer and Sears Holdings. This director advised Sears Holdings to contact the Chief Executive Officer of the Issuer. Following this conversation, the Chairman of Sears Holdings spoke with the Chief Executive Officer of the Issuer and discussed the potential benefits of a business or strategic combination between Sears Holdings and the Issuer. After that conversation, the Chairman of Sears Holdings spoke to the non-management director of the Issuer with whom he had previously spoken and this director suggested that the Chairman of Sears Holdings continue speaking with the Chief Executive Officer of the Issuer.
Shortly thereafter, the Chairman of Sears Holdings requested an opportunity to meet in person with the Chief Executive Officer of the Issuer to discuss the benefits of a transaction involving the Issuer and Sears Holdings. Due to scheduling conflicts, the Chairman of Sears Holdings and the Chief Executive Officer of the Issuer did not meet during the summer. In early October, the Chairman of Sears Holdings, the President of Sears Holdings’ Lands’ End business and a non-management member of Sears Holdings’ Board of Directors had a meeting with the Chief Executive Officer of the Issuer. Sears Holdings did not enter into a confidentiality agreement or receive non-public information about the Issuer or its business in connection with these discussions, and no price or terms of any transaction were solicited by the Issuer nor proposed by Sears Holdings.
In late October, in a conversation with the Chairman of Sears Holdings, the Chief Executive Officer of the Issuer informed Sears Holdings for the first time that the Issuer was considering a potential management buyout transaction and that a Special Committee of the Board had been established. After being informed of this development, Sears Holdings sent a letter to Raymond C. Hemmig, chairman of the Special Committee of the Board of Directors of the Issuer, proposing a transaction at $4.00 per Share (a 39% premium to the Shares’ closing price of $2.87 on the last trading day prior to Sears Holdings making its proposal) and informing him of Sears Holdings’ potential to increase the offer as a result of information gained from a due diligence process. Mr. Hemmig later responded by e-mail that the Special Committee was not prepared to have Sears Holdings engage with the Issuer’s management team and advisers in due diligence on the proposed terms and indicated that in order to have the opportunity to engage in due diligence Sears Holdings should revise its proposal to offer a substantially higher price.
On November 8, 2007, the Company announced it had entered into an Agreement and Plan of Merger (the “Home Merger Agreement”) with Home Holdings, LLC, a Delaware limited liability company, and Home Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Home Holdings, LLC.
Sears Holdings is seeking to obtain from the Issuer certain non-public information concerning the Issuer, as permitted by the Home Merger Agreement, and has indicated that it would enter into a confidentiality agreement in order to do so. Sears Holdings and the Issuer have discussed the terms of such a confidentiality agreement. There can be no assurance that Sears Holdings will enter into a confidentiality agreement or will receive any such information from the Issuer.
Sears Holdings intends to evaluate the Issuer and the desirability of proposing an acquisition of the Issuer and it also intends to review its holdings of Shares on a continuing basis and in that connection expects to consider various factors including, without limitation, the current and anticipated future trading price levels of the Shares, the status of the transactions contemplated by the Home Merger Agreement, the financial condition, results of operations and prospects of the Issuer, tax considerations, any non-public information which it may receive from the Issuer, conditions in the home furnishings industry and securities markets, general economic and industry conditions, other investment and business opportunities available to Sears Holdings, and other factors that Sears Holdings may deem relevant, and will in the future take such actions with respect to Sears Holdings investment in Issuer as it deems appropriate.
Such actions that Sears Holdings may take include, without limitation: (a) undertaking an extraordinary corporate transaction such as a tender offer or exchange offer for some or all of the Shares or a merger, consolidation, other business combination or reorganization involving Issuer; (b) increasing or decreasing its position in the Issuer through, among other things, the purchase or sale of Shares in open market or private transactions for cash or for other consideration; (c) seeking to acquire or influence control of the Issuer, including seeking representation on the board of the Issuer; (d) entering into derivative transactions, engaging in short selling of or any hedging or similar transactions with respect to the Shares; or (e) taking any other action similar to those listed above. Any open market or privately negotiated purchases, sales, distributions or other transactions may be made at any time without further prior notice."
Why will this acquisition matter? RSTO is a very successful high end catalog retailer like, ummmm.... Land's End!! We know Land's End is the future of Sears Holdings retail and Sears will be able to market RSTO's merchandise both in the Land's End catalog AND in the new Land's End stores (200+ to date). Restoration saw sales increase 40% in FY 2007 vs FY 2006 and the ability of Sears to seamlessly merge its merchandise into their existing operation will cause the segments sales to explode AND give more people a reason to look at Sears for products.
In a filing with the SEC (below), Sears said it acquired 5.31 million shares for about $30.2 million in cash of Restoration Hardware (RSTO).
Restoration Hardware, is a specialty retailer of hardware, bathware, furniture, lighting, textiles, accessories and gifts. The Company operated 103 stores and eight outlet stores in 30 states, the District of Columbia and Canada as of February 3, 2007. In addition to its retail stores, Restoration Hardware, Inc. operates a direct-to-customer (direct) sales channel, which includes both catalog and Internet, and a wholly owned furniture manufacturer. The Company is a multi-channel business and its catalog distribution drives sales across Restoration Hardware's retail, catalog and Internet businesses. The Company uses its catalog as the primary marketing vehicle, marketing to new customers and return customers, both in and outside the retail trade area.
From the SEC Filing:
"In June 2007, on behalf of Sears Holdings, the Chairman of Sears Holdings and another member of the Board of Directors of Sears Holdings approached a non-management director of the Issuer to inquire as to his views concerning a possible business combination or other strategic transaction involving the Issuer and Sears Holdings. This director advised Sears Holdings to contact the Chief Executive Officer of the Issuer. Following this conversation, the Chairman of Sears Holdings spoke with the Chief Executive Officer of the Issuer and discussed the potential benefits of a business or strategic combination between Sears Holdings and the Issuer. After that conversation, the Chairman of Sears Holdings spoke to the non-management director of the Issuer with whom he had previously spoken and this director suggested that the Chairman of Sears Holdings continue speaking with the Chief Executive Officer of the Issuer.
Shortly thereafter, the Chairman of Sears Holdings requested an opportunity to meet in person with the Chief Executive Officer of the Issuer to discuss the benefits of a transaction involving the Issuer and Sears Holdings. Due to scheduling conflicts, the Chairman of Sears Holdings and the Chief Executive Officer of the Issuer did not meet during the summer. In early October, the Chairman of Sears Holdings, the President of Sears Holdings’ Lands’ End business and a non-management member of Sears Holdings’ Board of Directors had a meeting with the Chief Executive Officer of the Issuer. Sears Holdings did not enter into a confidentiality agreement or receive non-public information about the Issuer or its business in connection with these discussions, and no price or terms of any transaction were solicited by the Issuer nor proposed by Sears Holdings.
In late October, in a conversation with the Chairman of Sears Holdings, the Chief Executive Officer of the Issuer informed Sears Holdings for the first time that the Issuer was considering a potential management buyout transaction and that a Special Committee of the Board had been established. After being informed of this development, Sears Holdings sent a letter to Raymond C. Hemmig, chairman of the Special Committee of the Board of Directors of the Issuer, proposing a transaction at $4.00 per Share (a 39% premium to the Shares’ closing price of $2.87 on the last trading day prior to Sears Holdings making its proposal) and informing him of Sears Holdings’ potential to increase the offer as a result of information gained from a due diligence process. Mr. Hemmig later responded by e-mail that the Special Committee was not prepared to have Sears Holdings engage with the Issuer’s management team and advisers in due diligence on the proposed terms and indicated that in order to have the opportunity to engage in due diligence Sears Holdings should revise its proposal to offer a substantially higher price.
On November 8, 2007, the Company announced it had entered into an Agreement and Plan of Merger (the “Home Merger Agreement”) with Home Holdings, LLC, a Delaware limited liability company, and Home Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Home Holdings, LLC.
Sears Holdings is seeking to obtain from the Issuer certain non-public information concerning the Issuer, as permitted by the Home Merger Agreement, and has indicated that it would enter into a confidentiality agreement in order to do so. Sears Holdings and the Issuer have discussed the terms of such a confidentiality agreement. There can be no assurance that Sears Holdings will enter into a confidentiality agreement or will receive any such information from the Issuer.
Sears Holdings intends to evaluate the Issuer and the desirability of proposing an acquisition of the Issuer and it also intends to review its holdings of Shares on a continuing basis and in that connection expects to consider various factors including, without limitation, the current and anticipated future trading price levels of the Shares, the status of the transactions contemplated by the Home Merger Agreement, the financial condition, results of operations and prospects of the Issuer, tax considerations, any non-public information which it may receive from the Issuer, conditions in the home furnishings industry and securities markets, general economic and industry conditions, other investment and business opportunities available to Sears Holdings, and other factors that Sears Holdings may deem relevant, and will in the future take such actions with respect to Sears Holdings investment in Issuer as it deems appropriate.
Such actions that Sears Holdings may take include, without limitation: (a) undertaking an extraordinary corporate transaction such as a tender offer or exchange offer for some or all of the Shares or a merger, consolidation, other business combination or reorganization involving Issuer; (b) increasing or decreasing its position in the Issuer through, among other things, the purchase or sale of Shares in open market or private transactions for cash or for other consideration; (c) seeking to acquire or influence control of the Issuer, including seeking representation on the board of the Issuer; (d) entering into derivative transactions, engaging in short selling of or any hedging or similar transactions with respect to the Shares; or (e) taking any other action similar to those listed above. Any open market or privately negotiated purchases, sales, distributions or other transactions may be made at any time without further prior notice."
Why will this acquisition matter? RSTO is a very successful high end catalog retailer like, ummmm.... Land's End!! We know Land's End is the future of Sears Holdings retail and Sears will be able to market RSTO's merchandise both in the Land's End catalog AND in the new Land's End stores (200+ to date). Restoration saw sales increase 40% in FY 2007 vs FY 2006 and the ability of Sears to seamlessly merge its merchandise into their existing operation will cause the segments sales to explode AND give more people a reason to look at Sears for products.
Sears Holdings Discloses 13% Stake In Restoration Hardware Inc
Sent from my BlackBerry® wireless device
Sears Holdings Corp filed after 5pm ET on Monday, 11/19/07, a 1-document, 2-page '3'
Initial Statement of Beneficial Ownership of Securities -- Form 3 for the period ended Monday, 11/12/07 filed as of Monday, 11/19/07, with respect to Restoration Hardware Inc
________________________________________________________________
This filing: '3' -- # 0000898822-07-001384 @ 071119-222000 --
http://www.secinfo.com/$/SEC/Filing.asp?D=rDX9.u1B7&CIK=1310067
Reporting owner: Sears Holdings Corp --
http://www.secinfo.com/$/SEC/Registrant.asp?CIK=1310067
Subject company: Restoration Hardware Inc --
http://www.secinfo.com/$/SEC/Registrant.asp?CIK=863821
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"Fast Money" for Tuesday
Tuesday's Picks
Jeff Macke recommended Dick’s Sporting Goods (DKS) Open $29.01 and Target (TGT) Open $53.90 for a “quickie trade” of Nordstrom (JWN). Open $30.52
Pete Najarian would buy Echostar (DISH).Open $47.49
Karen Finerman reiterated her frequent final trade: Long Goldman Sachs (GS) Open $220.54 , short Lehman Brothers (LEH).Open $60.55
Guy Adami was bullish on Vodafone (VOD). Open $38.97
Monday's Results
Jeff Macke will be looking for a dip in Dick’s Sporting Goods (DKS).Open $28.96 Close $29.01 GAIN
Guy Adami likes Lazard (LAZ).Open $43.97 Close $41.22 LOSS
Karen Finerman recommends shorting Hovnanian (HOV).Open $9.12 Close $8.50 LOSS
Pete Najarian thinks DaVita (DVA) is a buy .Open $59.54 Close $58.00 LOSS
Guy Adami= 45-39 = 60%
John Najarian= 13-4 = 76%
Jeff Macke= 51-33 = 63%
Pete Najarian= 35-34 = 51%
Tim Seymore= 5-5 = 50%
Karen Finerman= 28-19 = 61%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Monday's 52 week Low's
WMAR West Marine Inc 9.19
WLK Westlake Chem Corp 19.35
WGA Wells-Gardner Electro ... 2.03
WFC Wells Fargo & Company 30.16
WEN Wendy's International ... 28.74
TWX Time Warner Inc 16.80
TWB Tween Brands Inc 26.44
THO Thor Industries, Inc 36.90
TGT Target Corp 53.57
TGP Teekay Lng Partners L P 29.27
SPLS Staples Inc 20.60
SPF Standard Pacific Corp 2.98
SHLD Sears Hldgs Corp 115.09
SGTL Sigmatel Inc 2.10
SGK Schawk, Inc 14.51
RAD Rite Aid Corporation 3.51
PIR Pier 1 Imports, Inc 3.91
PHM Pulte Homes Inc 11.94
PEIX Pacific Ethanol Inc 4.66
PCX Patriot Coal Corp 28.64
MGPI Mgp Ingredients Inc 6.34
MGI Moneygram Intl Inc 14.36
M Macys Inc 27.55
MAR Marriott Intl Inc New 34.29
LOW Lowe's Companies, Inc 23.15
LIZ Liz Claiborne, Inc 24.94
LF Leapfrog Enterprises Inc 6.12
JOSB Jos A Bank Clothiers Inc 25.64
JMBA Jamba Inc 4.49
JLL Jones Lang LaSalle inc 78.82
JCP Penney (J.C.) Company ... 41.72
GGG Graco Inc 36.47
GGC Georgia Gulf Corporation 8.10
FDX Fedex Corp 94.22
FDO Family Dollar Stores, Inc 21.73
Monday's Links
Bloggystyle, Sears, Buffett and Estate Tax
- Adam is outdoing himself...
- Chad Brand notes the seemingly obvious (at least for me) direction of Sears Holdings. It is not obvious to analysts though. This is a great take on it.
- The REAL reason Warren Buffett is arguing for the estate tax? Hint: It is not an altruistic reason
- Adam is outdoing himself...
- Chad Brand notes the seemingly obvious (at least for me) direction of Sears Holdings. It is not obvious to analysts though. This is a great take on it.
- The REAL reason Warren Buffett is arguing for the estate tax? Hint: It is not an altruistic reason
Sears Holdings: Earnings Release & Ackman Speech..Hmm
Sometimes in life things seem just a bit too odd to be just a coincidence. Thus the predicament us watchers of Sears Holdings (SHLD) Chairman Eddie Lampert find ourselves in after the strange timing of the upcoming Q3 earnings release.
The site Concentrated Value posts:
"According to Pershing Square Capital Management 13-F, Bill Ackman has accumulated a 5 million share stake in Sears Holdings. He is currently SHLD’s fourth largest institutional holder. I imagine Ackman wouldn’t make such a significant bet on SHLD if he didn’t see a catalyst.
Bill Ackman is scheduled to present at the Value Investing Congress (agenda link) on November 28th, 2007. Will Bill announce his intention and vision in buying into SHLD? Will he agitate Sears to sell underperforming stores to Target (TGT)? (He owns a large stake in Target as well) Will he mention the Sears Canada takeover he was involved in?
The date of the Value Investing Congress is significant because the following morning Sears Holdings will release Q3 earnings. Consider SHLD released Q3 earnings last year on 11-16-2006, investors will be curious to see if there is any significance to the two week delay. Will SHLD announce an acquisition? A majority position by ESL? Will they announce additional income and buyback programs from the sales of the Sears Canada HQ? Considering the 100% institutional ownership in SHLD, all eye will be on Lampert. "
I had not consider this when I posted on it Friday. Now, usually I dismiss 90% of what is said about Lampert immediately but this one really got me thinking. If it were not for the unusually late earnings release, none of this would be an issue but the timing of both, is a bit odd.
I am not a huge believer in pure coincidence when it come to this stuff. It will be a very closely watch couple of days. Ackman speaks at 9:40 am.
The site Concentrated Value posts:
"According to Pershing Square Capital Management 13-F, Bill Ackman has accumulated a 5 million share stake in Sears Holdings. He is currently SHLD’s fourth largest institutional holder. I imagine Ackman wouldn’t make such a significant bet on SHLD if he didn’t see a catalyst.
Bill Ackman is scheduled to present at the Value Investing Congress (agenda link) on November 28th, 2007. Will Bill announce his intention and vision in buying into SHLD? Will he agitate Sears to sell underperforming stores to Target (TGT)? (He owns a large stake in Target as well) Will he mention the Sears Canada takeover he was involved in?
The date of the Value Investing Congress is significant because the following morning Sears Holdings will release Q3 earnings. Consider SHLD released Q3 earnings last year on 11-16-2006, investors will be curious to see if there is any significance to the two week delay. Will SHLD announce an acquisition? A majority position by ESL? Will they announce additional income and buyback programs from the sales of the Sears Canada HQ? Considering the 100% institutional ownership in SHLD, all eye will be on Lampert. "
I had not consider this when I posted on it Friday. Now, usually I dismiss 90% of what is said about Lampert immediately but this one really got me thinking. If it were not for the unusually late earnings release, none of this would be an issue but the timing of both, is a bit odd.
I am not a huge believer in pure coincidence when it come to this stuff. It will be a very closely watch couple of days. Ackman speaks at 9:40 am.
Citi CEO: Bring In "The Hammer"
Current Treasury Secretary Hank Paulson would be just what Citigroup (C) needs at this time.
After the gun slinger Sandy Weill and the cerebral and frumpy Chuck Prince, Citigroup could benefit from the disciplined no-nonsense Paulson.
Professional History:
1970 to 1972- Staff Assistant to the Assistant Secretary of Defense at The Pentagon
1972 to 1973- Assistant to John Ehrlichman
1974- Paulson joined Goldman Sachs (GS), working in the firm's Chicago office becoming partner in 1982.
1983 to 1988- Led the Investment Banking group for the Midwest Region, and became Managing partner of the Chicago Office in 1988.
1990 to 1994- Co-head of Investment Banking, then, Chief Operating Officer
1994 to 1998- Succeeded Jon Corzine (now Governor of New Jersey) as its chief executive of Goldman.
May 30, 2006- Succeed John Snow as the US Treasury Secretary.
Citi needs someone to walk in and take control. It is something they have been lacking even when Sandy Weill was there. Weill left a mess behind him for Prince to clean up and Prince did that. However, the head of the world's largest bank needs to have more personality that a wet dish mop and let's be honest, Prince being the handpicked successor to Weill without Weill's persona left him without much respect on Wall St.
Paulson as CEO would immediately fix both issues and give Citi a leader that would both bring discipline to the company and credibility to the CEO position.
Would Paulson take the job? Why not? It sure would pay well and the Treasury job he has is done in a year anyway. Would Rubin want him given their obvious political differences? Rubin's legacy is severely tainted now, fixing that would trump any other considerations he may have.
Is there any evidence this may happen? not that I am aware of but as long as the position is open, let's speculate.
After the gun slinger Sandy Weill and the cerebral and frumpy Chuck Prince, Citigroup could benefit from the disciplined no-nonsense Paulson.
Professional History:
1970 to 1972- Staff Assistant to the Assistant Secretary of Defense at The Pentagon
1972 to 1973- Assistant to John Ehrlichman
1974- Paulson joined Goldman Sachs (GS), working in the firm's Chicago office becoming partner in 1982.
1983 to 1988- Led the Investment Banking group for the Midwest Region, and became Managing partner of the Chicago Office in 1988.
1990 to 1994- Co-head of Investment Banking, then, Chief Operating Officer
1994 to 1998- Succeeded Jon Corzine (now Governor of New Jersey) as its chief executive of Goldman.
May 30, 2006- Succeed John Snow as the US Treasury Secretary.
Citi needs someone to walk in and take control. It is something they have been lacking even when Sandy Weill was there. Weill left a mess behind him for Prince to clean up and Prince did that. However, the head of the world's largest bank needs to have more personality that a wet dish mop and let's be honest, Prince being the handpicked successor to Weill without Weill's persona left him without much respect on Wall St.
Paulson as CEO would immediately fix both issues and give Citi a leader that would both bring discipline to the company and credibility to the CEO position.
Would Paulson take the job? Why not? It sure would pay well and the Treasury job he has is done in a year anyway. Would Rubin want him given their obvious political differences? Rubin's legacy is severely tainted now, fixing that would trump any other considerations he may have.
Is there any evidence this may happen? not that I am aware of but as long as the position is open, let's speculate.
Sunday, November 18, 2007
Monday's Upgrades and Downgrades
UPGRADES
BEA Systems BEAS Canaccord Adams Hold » Buy
Encore Energy ENP Stanford Research Hold » Buy
Ditech DITC Wedbush Morgan Sell » Hold
Virgin Mobile USA VM Stanford Research Sell » Hold
Hasbro HAS BMO Capital Markets Underperform » Market Perform
Aon AOC Stifel Nicolaus Hold » Buy
Sunoco SUN Bernstein Mkt Perform » Outperform
Broadcom BRCM Credit Suisse Underperform » Neutral
VeraSun Energy VSE Credit Suisse Underperform » Neutral
JC Penney JCP Credit Suisse Underperform » Neutral
Tyco TYC Citigroup Sell » Hold
Expedia EXPE Citigroup Hold » Buy
Marathon Oil MRO Deutsche Securities Hold » Buy
Chevron CVX Deutsche Securities Sell » Hold
ConocoPhillips COP Deutsche Securities Sell » Hold
CNA Financial CNA Bernstein Mkt Perform » Outperform
Chubb CB Bernstein Mkt Perform » Outperform
Travelers TRV Bernstein Mkt Perform » Outperform
Innospec IOSP JP Morgan Neutral » Overweight
NOVA Chemicals NCX Banc of America Sec Sell » Neutral
Starent Networks STAR Lehman Brothers Equal-weight » Overweight
China TechfaithEOG Resources EOG BMO Capital Markets Outperform » Market Perform
DOWNGRADES
Autodesk ADSK Kaufman Bros Buy » Hold
Wells Fargo WFC Keefe Bruyette Outperform » Mkt Perform
THQ Inc THQI Piper Jaffray Buy » Neutral
Activision ATVI Piper Jaffray Buy » Neutral
Gamestop GME Piper Jaffray Buy » Neutral
Autodesk ADSK Needham & Co Strong Buy » Buy
The9 Ltd NCTY Citigroup Buy » Hold
Hollywood Media HOLL Roth Capital Buy » Hold
Unica UNCA Wachovia Outperform » Mkt Perform
NuVasive NUVA Wachovia Outperform » Mkt Perform
Clearwire CLWR Wachovia Outperform » Mkt Perform
Windstream WIN Bear Stearns Outperform » Peer Perform
Quanta Services PWR Sun Trust Rbsn Humphrey Buy » Neutral
Target TGT UBS Buy » Neutral
Global Cash Access GCA Deutsche Securities Buy » Hold
Microsemi MSCC JP Morgan Overweight » Neutral
Starbucks SBUX Robert W. Baird Outperform » Neutral
FedEx FDX Robert W. Baird Outperform » Neutral Wireless CNTF Jefferies & Co Hold » Buy
Hawaiian Electric HE Robert W. Baird Neutral » Outperform
WNS WNS Deutsche Securities Hold » Buy
"Fast Money" for Monday
Monday's Picks
Jeff Macke will be looking for a dip in Dick’s Sporting Goods (DKS).Open $28.96
Guy Adami likes Lazard (LAZ).Open $43.97
Karen Finerman recommends shorting Hovnanian (HOV).Open $9.12
Pete Najarian thinks DaVita (DVA) is a buy .Open $59.54
Friday's Results
Jeff Macke recommended buying PowerShares QQQ Trust. Open $49.82 Close $50.28 GAIN
Guy Adami preferred U.S. Bancorp (USB).Open $31.60 Close $31.43 LOSS
Karen Finerman said to play defense with Altria (MO).Open $72.27 Close $73.18 GAIN
Pete Najarian liked Isis Pharmaceuticals (ISIS) Open $16.44 Close $16.75 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= 45-29 = 61%
John Najarian= 13-4 = 76%
Jeff Macke= 50-33 = 61%
Pete Najarian= 35-33 = 52%
Tim Seymore= 5-5 = 50%
Karen Finerman= 28-18 = 63%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Saturday, November 17, 2007
This Weeks Dividend Hikes
This Week's Insider Buys
Top Stories This Week at Value Investing News
Here are the top stories from Value Investing News.
2. Pompous Prognostication: Irish Banks
(via www.gannononinvesting.com)
Irish stocks have fallen a lot this year. This post mentions two Irish banks, Bank of Ireland (IRE) and Allied Irish Banks (AIB). However, Irish stocks in general now trade at substantial discounts to their peers in Europe. This post argues that Irish stocks are cheap and shares of these two Irish banks should outperform the giant U.S. financial services firms.
3. Digging for Value in the Real Estate Rubble by Zeke Ashton
(via blog.valueinvestingcongress.com)
This is a terrific piece by Centaur Capital’s Zeke Ashton on finding value in the sub-prime rubble.
4. 5 Interesting 13F Buys
(via www.futureblind.com)
Five interesting stocks that were added the portfolio's of super-investors last quarter.
5. Does Buffett's Carmax buy signal a recession? - BloggingStocks
(via www.bloggingstocks.com)
Why would Buffett be interested in Carmax? Could be that he expects a recession which would lead more people to the used car lots rather than buying them new.
7. Third Avenue Discloses 19 Percent Stake in Radian
(via www.bloomberg.com)
Third Avenue Management LLC, the money manager founded by activist investor Martin Whitman, became the largest investor in Radian Group Inc., the worst-performing stock in the Standard & Poor's Midcap 400 Index this year. Radian rose 15 percent in New York trading.
10. Private Equity "Time Out" May Give Lampert an Opening
(via valueplays.blogspot.com)
Todd Sullivan ponders the question: Will Lampert acquire soon?
Friday, November 16, 2007
Friday's 52 Week Lows
WON Westwood One Inc 2.06
WMAR West Marine Inc 9.32
WLK Westlake Chem Corp 19.82
WIRE Encore Wire Corp 17.89
WIBC Wilshire Bancorp Inc 9.42
THO Thor Industries, Inc 38.44
TGT Target Corp 54.11
SIMC Simclar Inc 5.01
SGK Schawk, Inc 15.12
SFUN Saifun Semiconductors Ltd 8.92
SEH Spartech Corporation 14.40
SBUX Starbucks Corp 22.27
NTRI Nutri Sys Inc New 23.04
NOA North Amern Energy Pa ... 14.50
NNI Nelnet Inc 14.23
NLS Nautilus Inc 5.05
NCTY The9 Ltd 22.96
MSO Martha Stewart Living ... 10.43
MSII Media Sciences Intl Inc 3.97
MRX Medicis Pharmaceutica ... 26.07
MNC Monaco Coach Corp 9.63
IAR Idearc Inc 20.95
HRZ Horizon Lines Inc 24.49
HOMB Home Bancshares Inc 19.24
FNM Fannie Mae 40.91
FNBN FNB Corp 13.25
CC Circuit City Stores, ... 6.20
BIG Big Lots Inc 20.10
BHO B+H Ocean Carriers Ltd. 12.73
BDL Flanigan's Enterprise ... 8.22
ACME Acme Communication Inc 3.25
ACF AmeriCredit Corp 11.05
ABL American Biltrite Inc 4.78
Friday's Links
"Hatred", Bloggystyle, Bonds,Rather
- How those who oppose Bush let their emotions cloud both their reason and their recollection of facts.
- Adam has them coming fast a furious now...
- I am not the only one who expected this am I?
- Even less surprised here.......
- How those who oppose Bush let their emotions cloud both their reason and their recollection of facts.
- Adam has them coming fast a furious now...
- I am not the only one who expected this am I?
- Even less surprised here.......
Starbucks Conference Call Note: More of the Same
I always go to the Q&A because it really tells you something about management, both in their candor what they are looking at.
Starbucks (SBUX)CEO James Donald said at one point:
"Let me just add to that. When we examine the competitive landscape, I think one of the things that we have not done a very good job of, because we haven’t had to, is just examine and leverage the assets that the company has that’s meaningful to our customers.
As an example, most people that are entering the space and creating lots of noise are not coffee roasters. They don’t have 35 years of history and heritage around sourcing, buying, blending, and providing the customer with a fully comprehended, vertically integrated experience. That’s an asset that is very, very important to our customers and speaks to the quality, the loyalty, and the trust they have in Starbucks.
We have not really had to tell that story for many, many years because we haven’t been concerned about people trying to in any way create attrition for us.
The issue of competition I just want to address, is that we take it extremely, extremely seriously. We understand all too well that we have built a very attractive business for others to look at and try and take away, whether it’s 1% on the margin or big companies that are trying to take more. We are up for the defense and we are going to get on the offense.
I want to make it clear also that the size of the prize is so large and although I’ve said it so many times, I need to say it again; we have less than 10% share of the total coffee consumption market in North America and less than 1% in the world. As what has happened in many consumer products when there is new awareness, it creates a new trial among consumers who have not yet been in the category. That is taking place as we speak.
Those consumers over time are going to trade up. They are going to trade up because they are not going to be satisfied with the commoditized experience or the flavor. We will do everything we can to ensure the fact that when they trade up, they are trading up to the company that built the category and is the leader and that, ladies and gentlemen, is Starbucks. And you can be assured that we are deeply, passionately committed to preserving our leadership position."
If all that is true, then why are people fleeing? Why are comps down at Starbucks but up at McDonalds (MCD)(I am just considering coffee) and Dunkin Donuts? What is happening out there is Donald sells a commodity that people are very price conscious to (despite his claims). That simply means that when given the option between comparable products, price and convenience win.
They are "trading up" as he says it but they are trading up to less expensive option. What Starbucks refused to admit it seems is that the competition has a quality product and it sells for far less. Also, does anyone really care about their "vertically" integrated operation? Some may, but not enough to keep the 20% EPS growth the company touts for next year.
CEO Donald responded this way to a question asking for an explanation of the negative traffic comps.
"I think that when we look at the softness in transactions, there’s a couple of things unfolding, and I mentioned them in my remarks. There are other operators in this specialty coffee business, but that doesn’t necessarily link in to this softness in comps. I think what you have to look at is just the pure and simple economic trends that we see."
He actually said other operator do not "necessarily link to this softness". Incredible. The only take away here is that he does not accept the simple FACT they are losing business to the competition. Are these folks just not drinking coffee anymore James? Staggering... Has he seen McDonald's numbers and transaction growth?
Even trading down 40% for the year to levels not seen since 2005, the stock still trades at 27 times current earnings and 22 times next years and if you believe they will hit the numbers they project next year, well, sorry..
Starbucks is still thinking like they are a little specialty niche operation and not the mega-chain they are. You cannot continue to growth a $16 billion dollar operation 20% a year by appealing to a smaller and smaller segment of the public. Especially when your competition and yes James, McDonald's and Dunkin Donuts are your competition and they have raised their game to match yours on several fronts.
This is just bad...
Read the whole transcript here:
Starbucks (SBUX)CEO James Donald said at one point:
"Let me just add to that. When we examine the competitive landscape, I think one of the things that we have not done a very good job of, because we haven’t had to, is just examine and leverage the assets that the company has that’s meaningful to our customers.
As an example, most people that are entering the space and creating lots of noise are not coffee roasters. They don’t have 35 years of history and heritage around sourcing, buying, blending, and providing the customer with a fully comprehended, vertically integrated experience. That’s an asset that is very, very important to our customers and speaks to the quality, the loyalty, and the trust they have in Starbucks.
We have not really had to tell that story for many, many years because we haven’t been concerned about people trying to in any way create attrition for us.
The issue of competition I just want to address, is that we take it extremely, extremely seriously. We understand all too well that we have built a very attractive business for others to look at and try and take away, whether it’s 1% on the margin or big companies that are trying to take more. We are up for the defense and we are going to get on the offense.
I want to make it clear also that the size of the prize is so large and although I’ve said it so many times, I need to say it again; we have less than 10% share of the total coffee consumption market in North America and less than 1% in the world. As what has happened in many consumer products when there is new awareness, it creates a new trial among consumers who have not yet been in the category. That is taking place as we speak.
Those consumers over time are going to trade up. They are going to trade up because they are not going to be satisfied with the commoditized experience or the flavor. We will do everything we can to ensure the fact that when they trade up, they are trading up to the company that built the category and is the leader and that, ladies and gentlemen, is Starbucks. And you can be assured that we are deeply, passionately committed to preserving our leadership position."
If all that is true, then why are people fleeing? Why are comps down at Starbucks but up at McDonalds (MCD)(I am just considering coffee) and Dunkin Donuts? What is happening out there is Donald sells a commodity that people are very price conscious to (despite his claims). That simply means that when given the option between comparable products, price and convenience win.
They are "trading up" as he says it but they are trading up to less expensive option. What Starbucks refused to admit it seems is that the competition has a quality product and it sells for far less. Also, does anyone really care about their "vertically" integrated operation? Some may, but not enough to keep the 20% EPS growth the company touts for next year.
CEO Donald responded this way to a question asking for an explanation of the negative traffic comps.
"I think that when we look at the softness in transactions, there’s a couple of things unfolding, and I mentioned them in my remarks. There are other operators in this specialty coffee business, but that doesn’t necessarily link in to this softness in comps. I think what you have to look at is just the pure and simple economic trends that we see."
He actually said other operator do not "necessarily link to this softness". Incredible. The only take away here is that he does not accept the simple FACT they are losing business to the competition. Are these folks just not drinking coffee anymore James? Staggering... Has he seen McDonald's numbers and transaction growth?
Even trading down 40% for the year to levels not seen since 2005, the stock still trades at 27 times current earnings and 22 times next years and if you believe they will hit the numbers they project next year, well, sorry..
Starbucks is still thinking like they are a little specialty niche operation and not the mega-chain they are. You cannot continue to growth a $16 billion dollar operation 20% a year by appealing to a smaller and smaller segment of the public. Especially when your competition and yes James, McDonald's and Dunkin Donuts are your competition and they have raised their game to match yours on several fronts.
This is just bad...
Read the whole transcript here:
Sears Holdings Earning Release: Why So Late?
Barron's had a very interesting article yesterday about the release of Sears Holding (SHLD) earnings.
From the Article:
"...it was only late yesterday (Monday) that investors learned that Sears Holdings, which owns Sears and K-Mart, will report third-quarter earnings on Nov. 29 before the financial markets open.
The computer programs that detail earnings dates had predicted Sears Holdings would report earnings Nov. 13, which is three months after the company reported second-quarter earnings.
All the uncertainty about a basic corporate fact that so many other companies divulge without any great mystery, coupled with concerns about weakening consumer spending, increased the implied volatility of Sears Holdings' options, perhaps even more so than if the company were transparent about its earnings report date.
Prior to Monday's press release, most investors expected earnings before November options expire. This caused the implied volatility of Sears Holdings' November options to hover around the range of 60%, or 12 volatility points higher than December options. In fact, many traders had implemented November "put spreads" -- selling one high-priced option to lower the cost of buying another put option -- to hedge against a decline in the stock. Today, investors have to readjust positions as the new earnings date occurs in the December expiration."
Why the delay on Sears part? Easy. Lampert is busy buying shares back by the truck load and wants to get as much buying done before he releases the information. The delay gives him another two weeks to buy shares near their 52 week low levels (down 27%).
A reader alerted me to the fact other value investors have been busy buying shares currently (a thank you to Russ):
Pershing Square - 5 million shares
Fairholme Capital (legendary value investor of FAIRX) - 2.9 million (192% increase from last filing)
Third Point - 650K shares
Last quarter Sears's board approved a $1.5 billion share repurchase program. Anyone want to bet that when results are released that buyback plan is completed? Does anyone think that ESL, Lampert's hedge fund may have bought a few more shares?
From the Article:
"...it was only late yesterday (Monday) that investors learned that Sears Holdings, which owns Sears and K-Mart, will report third-quarter earnings on Nov. 29 before the financial markets open.
The computer programs that detail earnings dates had predicted Sears Holdings would report earnings Nov. 13, which is three months after the company reported second-quarter earnings.
All the uncertainty about a basic corporate fact that so many other companies divulge without any great mystery, coupled with concerns about weakening consumer spending, increased the implied volatility of Sears Holdings' options, perhaps even more so than if the company were transparent about its earnings report date.
Prior to Monday's press release, most investors expected earnings before November options expire. This caused the implied volatility of Sears Holdings' November options to hover around the range of 60%, or 12 volatility points higher than December options. In fact, many traders had implemented November "put spreads" -- selling one high-priced option to lower the cost of buying another put option -- to hedge against a decline in the stock. Today, investors have to readjust positions as the new earnings date occurs in the December expiration."
Why the delay on Sears part? Easy. Lampert is busy buying shares back by the truck load and wants to get as much buying done before he releases the information. The delay gives him another two weeks to buy shares near their 52 week low levels (down 27%).
A reader alerted me to the fact other value investors have been busy buying shares currently (a thank you to Russ):
Pershing Square - 5 million shares
Fairholme Capital (legendary value investor of FAIRX) - 2.9 million (192% increase from last filing)
Third Point - 650K shares
Last quarter Sears's board approved a $1.5 billion share repurchase program. Anyone want to bet that when results are released that buyback plan is completed? Does anyone think that ESL, Lampert's hedge fund may have bought a few more shares?
Starbucks Management Refuses To See Reality?
It is hard to believe that CEO Jim Donald still has a job...
For the recent quarter ended Sept. 30, Starbucks (SBUX) posted net earnings of $158.5 million, or 21 cents a share, compared with $117.3 million, or 15 cents a share last year. Quarterly revenue was up to $2.44 billion from $2 billion last year. Analysts surveyed by Thomson Financial were projected 21 cents a share on $2.43 billion in revenue. Starbucks said it expects earnings per share in the next year of $1.02 to $1.05 a share, at the low end of the current $1.05 estimates.
For the full fiscal year, Starbucks earned $672.6 million, or 87 cents a share which was at the low end of the 87 cents to 89 cents the company predicted. It was not until July the company lowered expectations to the 87 cents a share.
The news that really mattered? A 1 percent drop in traffic, the first decrease since the company started releasing those numbers three years ago. On Thursday I said that Starbucks would post "flat to negative transactions".
CEO Jim Donald said the 1% dip in average transaction per store in the U.S., the first decline since Starbucks started disclosing this measure of customer traffic about three years ago, isn't a sign that the company has built stores too quickly or that the market is showing signs of saturation. "The saturation comment's overblown," he said.
For once I agree with Mr. Donald. Starbucks has not over-saturated the market with physical stores. What they have done is over-saturated the market for $6 lattes. Starbucks will not see this trend turn around until consumers perceive value in their products. Currently they do not. For whatever reason, management still believes that their products is not a discretionary item and when things get tight, those items are the first to go.
This could be an easy fix for Donald. Instead of raising prices and further shrinking your market, lower them and expand it. They raised prices twice last year and it just has resulted in less people coming in the door. I can't be the only one who sees this. Donald as much admitted this in an interview when he said that a July price increase of about $0.09 a cup hurt traffic. It is like sticking a fork in your eye and then wondering why it hurts.
Mr. Donald said Starbucks, like other retailers, is feeling the effects of pressures on consumer spending. Also, a sharp rise in dairy costs this summer caused the company to raise prices for the second time in less than a year. "We're seeing this economic impact not just in select states across the country but...coast to coast," he said. No kidding. If I were a shareholder I would really want to know why until late summer they were sticking to their 89 cents a share forecast and denying milk prices were an issue despite as my warnings as far back as May.
The main problem here is that Donald has lost all credibility. He is telling investors it is sunny out when they are standing in the rain. You just cannot believe what he or Schultz are saying anymore. It may not be an intentional lie, it may be far worse, they honestly may think that the laws of economics do not apply to their business. If that is true, there is no chance of this thing turning around anytime soon. With shares down almost 40% this year, more pain for investors is in store.
I will review the earnings call Friday and post on it.
For the recent quarter ended Sept. 30, Starbucks (SBUX) posted net earnings of $158.5 million, or 21 cents a share, compared with $117.3 million, or 15 cents a share last year. Quarterly revenue was up to $2.44 billion from $2 billion last year. Analysts surveyed by Thomson Financial were projected 21 cents a share on $2.43 billion in revenue. Starbucks said it expects earnings per share in the next year of $1.02 to $1.05 a share, at the low end of the current $1.05 estimates.
For the full fiscal year, Starbucks earned $672.6 million, or 87 cents a share which was at the low end of the 87 cents to 89 cents the company predicted. It was not until July the company lowered expectations to the 87 cents a share.
The news that really mattered? A 1 percent drop in traffic, the first decrease since the company started releasing those numbers three years ago. On Thursday I said that Starbucks would post "flat to negative transactions".
CEO Jim Donald said the 1% dip in average transaction per store in the U.S., the first decline since Starbucks started disclosing this measure of customer traffic about three years ago, isn't a sign that the company has built stores too quickly or that the market is showing signs of saturation. "The saturation comment's overblown," he said.
For once I agree with Mr. Donald. Starbucks has not over-saturated the market with physical stores. What they have done is over-saturated the market for $6 lattes. Starbucks will not see this trend turn around until consumers perceive value in their products. Currently they do not. For whatever reason, management still believes that their products is not a discretionary item and when things get tight, those items are the first to go.
This could be an easy fix for Donald. Instead of raising prices and further shrinking your market, lower them and expand it. They raised prices twice last year and it just has resulted in less people coming in the door. I can't be the only one who sees this. Donald as much admitted this in an interview when he said that a July price increase of about $0.09 a cup hurt traffic. It is like sticking a fork in your eye and then wondering why it hurts.
Mr. Donald said Starbucks, like other retailers, is feeling the effects of pressures on consumer spending. Also, a sharp rise in dairy costs this summer caused the company to raise prices for the second time in less than a year. "We're seeing this economic impact not just in select states across the country but...coast to coast," he said. No kidding. If I were a shareholder I would really want to know why until late summer they were sticking to their 89 cents a share forecast and denying milk prices were an issue despite as my warnings as far back as May.
The main problem here is that Donald has lost all credibility. He is telling investors it is sunny out when they are standing in the rain. You just cannot believe what he or Schultz are saying anymore. It may not be an intentional lie, it may be far worse, they honestly may think that the laws of economics do not apply to their business. If that is true, there is no chance of this thing turning around anytime soon. With shares down almost 40% this year, more pain for investors is in store.
I will review the earnings call Friday and post on it.
Friday's Upgrades and Downgrades
UPGRADES
Amazon.com AMZN Stifel Nicolaus Sell » Buy
Ares Capital ARCC Wachovia Mkt Perform » Outperform
Network Appliance NTAP Caris & Company Above Average » Buy
WW Grainger GWW Morgan Keegan Mkt Perform » Outperform
Telefonos de Mex TMX Citigroup Hold » Buy
Holly HOC Soleil Hold » Buy
Western Union WU First Analysis Sec Underweight » Equal-Weight
Sciele Pharma SCRX RBC Capital Mkts Underperform » Sector Perform
Network Appliance NTAP Bear Stearns Underperform » Peer Perform
Merrill Lynch MER Credit Suisse Neutral » Outperform
CNA Financial CNA Credit Suisse Neutral » Outperform
Ceragon CRNT Susquehanna Financial Neutral » Positive
Telefonos de Mex TMX UBS Sell » Neutral
Portugal Telecom PT Bear Stearns Peer Perform » Outperform
Applied Bio ABI JP Morgan Neutral » Overweight
Amgen AMGN Lehman Brothers Equal-weight » Overweight
Mylan Labs MYL Bernstein Mkt Perform » Outperform
ValueClick VCLK Citigroup Hold » Buy
Lehman Brothers LEH Punk, Ziegel & Co Sell » Mkt Perform
DOWNGRADES
Gold Fields GFI BMO Capital Markets Outperform » Market Perform
AmeriGas Partners APU Wachovia Outperform » Mkt Perform
Navteq NVT Piper Jaffray Outperform » Market Perform
Sierra Wireless SWIR Piper Jaffray Outperform » Market Perform
VeriSign VRSN WR Hambrecht Buy » Hold
Portugal Telecom PT Citigroup Buy » Hold
Goldleaf Financial Solutions GFSI Friedman Billings Outperform » Mkt Perform
Rayonier RYN JP Morgan Overweight » Neutral
Sina SINA Citigroup Buy » Hold
InVesco IVZ HSBC Securities Neutral » Underweight
Thursday, November 15, 2007
"Fast Money" for Friday
Friday's Picks
Jeff Macke recommended buying PowerShares QQQ Trust. Open $49.82
Guy Adami preferred U.S. Bancorp (USB).Open $31.60
Karen Finerman said to play defense with Altria (MO).Open $72.27
Pete Najarian liked Isis Pharmaceuticals (ISIS) Open $16.44
Thursday's Results
Short the Dow with the (DOG), Jeff Macke said. Open $59.98 Close $60.30 GAIN
Pete Najarian picked EMC (EMC)= Open $19.57 Close $19.32 LOSS
Karen Finneran liked American Eagle (AEO). Open $22.81 Close $22.46 LOSS
Guy Adami said buy EMC (EMC). Open $19.57 Close $10.32 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= 45-28 = 62%
John Najarian= 13-4 = 76%
Jeff Macke= 49-33 = 60%
Pete Najarian= 34-33 = 51%
Tim Seymore= 5-5 = 50%
Karen Finerman= 27-18 = 62%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Thursday's 52 Week Lows
WOS Wolseley Plc 14.42
WLK Westlake Chem Corp 20.52
WLDN Willdan Group Inc 6.68
USS U S Shipping Partners L P 11.72
TYC Tyco Intl Ltd Bermuda 38.97
TTPY Tomotherapy Inc 17.71
TTI TETRA Technologies Inc 15.11
TRY Triarc Companies, Inc ... 10.07
SHLD Sears Hldgs Corp 119.20
SEED Origin Agritech Limited 6.29
PGIC Progressive Gaming In ... 2.60
PFIN P & F Inds Inc 9.00
PFED Park Bancorp Inc 25.50
PEIX Pacific Ethanol Inc 5.95
MNT Mentor Corporation 37.31
MGPI Mgp Ingredients Inc 7.13
MAIL Incredimail Ltd 6.09
LTD Limited Brands Inc 18.40
JCP Penney (J.C.) Company ... 44.36
JBL Jabil Circuit Inc 18.29
JAZU Jazz Technologies Inc 2.95
HSY Hershey Co 39.87
FNM Fannie Mae 44.28
FFIV F5 Networks Inc 29.95
CEM Chemtura Corp 7.89
CDNS Cadence Design System ... 16.84
CARV Carver Bancorp, Inc 14.50
Thursday's Links
Kidneys, The Senate, Dogs, "Christmas"
- You know, if you have two and someone will die without one, why not let folks sell them?
- OK, This stuff infuriates me. Despite everything going on and considering they have not done anything in a year now, should the Senate be "debating" the "safety of light cigarettes"? Here, I'll help them out. THEY ARE CIGARETTES, THEY WILL KILL YOU, NOW GET TO WORK DAMMIT!! Jesus. What, no one want to talk about whether bacon fat for breakfast will help your cholesterol?
- Only slightly stranger than the above link is this one.
- Read this
- You know, if you have two and someone will die without one, why not let folks sell them?
- OK, This stuff infuriates me. Despite everything going on and considering they have not done anything in a year now, should the Senate be "debating" the "safety of light cigarettes"? Here, I'll help them out. THEY ARE CIGARETTES, THEY WILL KILL YOU, NOW GET TO WORK DAMMIT!! Jesus. What, no one want to talk about whether bacon fat for breakfast will help your cholesterol?
- Only slightly stranger than the above link is this one.
- Read this
Starbucks Still In Denial
"We only have 10% of the US coffee market" says Starbucks (SBUX) Chairman Howard Schultz. So, by that logic ought we expect 18% growth from Mercedes because they only have 3% of the US auto market? Me either and thus the problem with Starbucks
I would be willing to bet they have 95% of the US coffee market that would be willing to pay $5 for a latte. That being said, we now have Starbucks's central issue. The market they are selling to is only a fraction of what they think it is and they have virtually tapped out that smaller market. Schultz & Co. cannot continue to promise 18% to 20% growth when the number of people in the US they are serving has been stagnant for the current year. Consider the following chart from the WSJ.
Some folks have made the case that Starbucks grew too quick and saturated their market. Quite the contrary. They still have the same number of locations in the US as McDonalds (MCD) but the different is the coffee is more than twice as expensive. How could Mercedes increase their market share? Lower the price of the cars. How can Starbucks? Lower the price of its coffee.
Starbucks is caught here though between market share, maximizing ever penny per cup and growth. They have promised to expand to 40,000 stores and to back off that would scare investors. This is the problem will such bold predictions much like Home Depot(HD) is seeing with the shares repurchase plan, if you can't deliver, people are less than pleased with you. This causes management to fight reality. Always under promise and over deliver.
When you have two products that are similar, price and convenience always win. Now, does McDonalds have the "super premium" blends and the variety of drink offering Starbucks has? No. But what they do have is a very good product at very reasonable prices. What they have done is take a huge segment of Starbucks current and potential customers who are looking for value.
If you look at the chart above one thing has to stick out, Starbucks "no growth" periods in the US coincides 100% to McDonalds coffee improvement.
What to look for today? Transactions. Did they grow over last year and IF they hit their EPS number, was it due to the addition of debt to buy back abnormally large blocks of shares like they did at the beginning of the year.
My guess? Flat to negative transactions and an earnings estimate miss. The good news? They start coming up against much easier comps in the next quarter so the illusion of growth can at least be there for those investors still holding on.
I would be willing to bet they have 95% of the US coffee market that would be willing to pay $5 for a latte. That being said, we now have Starbucks's central issue. The market they are selling to is only a fraction of what they think it is and they have virtually tapped out that smaller market. Schultz & Co. cannot continue to promise 18% to 20% growth when the number of people in the US they are serving has been stagnant for the current year. Consider the following chart from the WSJ.
Some folks have made the case that Starbucks grew too quick and saturated their market. Quite the contrary. They still have the same number of locations in the US as McDonalds (MCD) but the different is the coffee is more than twice as expensive. How could Mercedes increase their market share? Lower the price of the cars. How can Starbucks? Lower the price of its coffee.
Starbucks is caught here though between market share, maximizing ever penny per cup and growth. They have promised to expand to 40,000 stores and to back off that would scare investors. This is the problem will such bold predictions much like Home Depot(HD) is seeing with the shares repurchase plan, if you can't deliver, people are less than pleased with you. This causes management to fight reality. Always under promise and over deliver.
When you have two products that are similar, price and convenience always win. Now, does McDonalds have the "super premium" blends and the variety of drink offering Starbucks has? No. But what they do have is a very good product at very reasonable prices. What they have done is take a huge segment of Starbucks current and potential customers who are looking for value.
If you look at the chart above one thing has to stick out, Starbucks "no growth" periods in the US coincides 100% to McDonalds coffee improvement.
What to look for today? Transactions. Did they grow over last year and IF they hit their EPS number, was it due to the addition of debt to buy back abnormally large blocks of shares like they did at the beginning of the year.
My guess? Flat to negative transactions and an earnings estimate miss. The good news? They start coming up against much easier comps in the next quarter so the illusion of growth can at least be there for those investors still holding on.
Lampert Adds to Citigroup Stake
We added to our Citigroup (C) holdings recently and we found out today that we had Sears Holdings (SHLD) Eddie Lampert as a fellow buyer.
According to his filing with the SEC, Lampert's ESL Investments held 27.8 million Citigroup shares at the end of September up from 24.8 at the end of Q2 and 15 million in Q1. This makes Citi ESL's third largest holdings behind Sears and AutoNation (AN).
Also during the quarter he sold his 625,000 shares of wireless handset maker Motorola (MOT) during the quarter and bought 16.7 million shares of Home Depot (HD).
Value investor like Berkshire Hathaway's (BRK.A) Warren Buffett, Bill Miller and Lampert have been buying shares lately and that means two things, there are mis-priced stocks out there and the financial sector seems to be a favorite. Buffet recently bought Bank of America (BAC) Miller is buying Countrywide (CFC) and admittedly is buying others now (although the exact companies he did not disclose) and now Lampert is busy buying Citi.
How is that for company if you are buying financials...
According to his filing with the SEC, Lampert's ESL Investments held 27.8 million Citigroup shares at the end of September up from 24.8 at the end of Q2 and 15 million in Q1. This makes Citi ESL's third largest holdings behind Sears and AutoNation (AN).
Also during the quarter he sold his 625,000 shares of wireless handset maker Motorola (MOT) during the quarter and bought 16.7 million shares of Home Depot (HD).
Value investor like Berkshire Hathaway's (BRK.A) Warren Buffett, Bill Miller and Lampert have been buying shares lately and that means two things, there are mis-priced stocks out there and the financial sector seems to be a favorite. Buffet recently bought Bank of America (BAC) Miller is buying Countrywide (CFC) and admittedly is buying others now (although the exact companies he did not disclose) and now Lampert is busy buying Citi.
How is that for company if you are buying financials...
Sherwin Williams: A Bargain For Potential Buyers
I think it is only a matter of time before someone makes a play for my favorite paint company and my guess will be that a chemical company, looking to expand it coatings business will be the suitor.
Let's look at Sherwin (SHW). In the Q3 that ended Sept. 30. Sales increased 4% and EPS increased a whopping 19%. The profit surge came from two events, both of which are excellent signs for shareholders. Higher margins on price increases and cost controls illustrate demand for their products is still strong and that the company is using the current slow period to maintain efficiency. A 6% lower share count during the period means Sherwin is directing cash flow into buying its own shares, which increase shareholders ownership of earnings. YTD the company has retired 10 million shares and just got approval to repurchase another 20 million, or more than 14% of Sherwin's remaining shares.
Investors currently will pay 12.7 times this year's earnings, a discount of 20%-30% to the S&P 500. This year's and next year's earnings forecasts suggest a long-term growth of around 10% minimum, about what the broad market typically delivers meaning shares could increase that amount (20% to 30%) and then be "fairly valued" to the market.
As a takeover target and not an investment, Sherwin looks just as, if not more attractive. It has an EV (enterprise value)/Ebitda ratio of 7. Great, but what does that mean? . It's the cost to buy all the outstanding shares and retire its debt, while using its available cash toward the purchase. Ebitda stands for earnings before interest, taxes, depreciation and amortization. It's used to gauge essentially earnings from operations. So think of EV/Ebitda as the ratio of a company's takeover price to its earnings potential. What does Sherwin's ratio of 7 mean? It is currently valued about 30% below the median for the S&P 500. A bargain.
Sherwin produces about $800 million in cash flow from operations and produces almost $600 million in net income each year.
Who then? Sherwin has a market cap of $7.5 billion making any of the chemical majors a potential buyer. Dow Chemical (DOW) as I have written several times is the most likely but DuPont (DD) and BASF (BASF) are just as capable
Dow CEO Andrew Liveris has said any potential acquisition must be accredive and a Dow purchase of Sherwin would be just that, and best of all it could be had at a bargain.
Let's look at Sherwin (SHW). In the Q3 that ended Sept. 30. Sales increased 4% and EPS increased a whopping 19%. The profit surge came from two events, both of which are excellent signs for shareholders. Higher margins on price increases and cost controls illustrate demand for their products is still strong and that the company is using the current slow period to maintain efficiency. A 6% lower share count during the period means Sherwin is directing cash flow into buying its own shares, which increase shareholders ownership of earnings. YTD the company has retired 10 million shares and just got approval to repurchase another 20 million, or more than 14% of Sherwin's remaining shares.
Investors currently will pay 12.7 times this year's earnings, a discount of 20%-30% to the S&P 500. This year's and next year's earnings forecasts suggest a long-term growth of around 10% minimum, about what the broad market typically delivers meaning shares could increase that amount (20% to 30%) and then be "fairly valued" to the market.
As a takeover target and not an investment, Sherwin looks just as, if not more attractive. It has an EV (enterprise value)/Ebitda ratio of 7. Great, but what does that mean? . It's the cost to buy all the outstanding shares and retire its debt, while using its available cash toward the purchase. Ebitda stands for earnings before interest, taxes, depreciation and amortization. It's used to gauge essentially earnings from operations. So think of EV/Ebitda as the ratio of a company's takeover price to its earnings potential. What does Sherwin's ratio of 7 mean? It is currently valued about 30% below the median for the S&P 500. A bargain.
Sherwin produces about $800 million in cash flow from operations and produces almost $600 million in net income each year.
Who then? Sherwin has a market cap of $7.5 billion making any of the chemical majors a potential buyer. Dow Chemical (DOW) as I have written several times is the most likely but DuPont (DD) and BASF (BASF) are just as capable
Dow CEO Andrew Liveris has said any potential acquisition must be accredive and a Dow purchase of Sherwin would be just that, and best of all it could be had at a bargain.
Thursday's Upgrades and Downgrades
UPGRADES
Affiliated Managers AMG Wachovia Mkt Perform » Outperform
Biofuel Energy BIOF Soleil Hold » Buy
Universal Technical Institute UTI Piper Jaffray Market Perform » Outperform
Bank of America BAC Punk, Ziegel & Co Mkt Perform » Buy
West Marine WMAR Morgan Joseph Hold » Buy
AXT Inc AXTI Roth Capital Hold » Buy
Newstar Financial NEWS William Blair Mkt Perform » Outperform
Autodesk ADSK Jefferies & Co Hold » Buy
Eagle Bulk Shipping EGLE UBS Neutral » Buy
EOG Resources EOG Citigroup Sell » Hold
Qwest Q Citigroup Sell » Hold
Franklin Resources BEN JP Morgan Underweight » Neutral
Encore Energy ENP UBS Neutral » Buy
Quicksilver Resrcs KWK Citigroup Hold » Buy
Andersons ANDE Banc of America Sec Neutral » Buy
Intl Paper IP Citigroup Hold » Buy
Oracle ORCL CIBC Wrld Mkts Sector Perform » Sector Outperform
OmniVision OVTI CIBC Wrld Mkts Sector Perform » Sector Outperform
InnerWorkings INWK Jefferies & Co Hold » Buy
Oracle ORCL Broadpoint Capital Neutral » Buy
j2 Global JCOM Jefferies & Co Hold » Buy
Lan Airlines S.A. LFL Deutsche Securities Hold » Buy
DOWNGRADES
CIBC CM RBC Capital Mkts Outperform » Sector Perform
La-Z-Boy LZB Morgan Keegan Mkt Perform » Underperform
Artes Medical ARTE Stifel Nicolaus Buy » Hold
Artes Medical ARTE Cowen & Co Outperform » Neutral
China Techfaith Wireless CNTF Brean Murray Buy » Hold
Hershey Foods HSY Bear Stearns Peer Perform » Underperform
TravelCenters of America TA UBS Buy » Neutral
Rio Tinto PLC RTP Bernstein Outperform » Mkt Perform
Wednesday, November 14, 2007
"Fast Money" for Thursday
Thursday's Picks
Short the Dow with the (DOG), Jeff Macke said. Open $59.98
Pete Najarian picked EMC (EMC)= Open $19.57
Karen Finneran liked American Eagle (AEO). Open $22.81
Guy Adami said buy EMC (EMC). Open $19.57
Wednesday's Results
Guy Adami likes Microsoft (MSFT).Open $34.46 Close $33.92 LOSS
Karen Finerman prefers Kaiser Aluminum (KALU).Open $69.65 Close $71.75 GAIN
Pete Najarian says Evergreen Solar (ESLR) is a buy. Open $12.92 Close $13.48 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= 45-27 = 64%
John Najarian= 13-4 = 76%
Jeff Macke= 48-33 = 59%
Pete Najarian= 34-32 = 51%
Tim Seymore= 5-5 = 50%
Karen Finerman= 27-17 = 63%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Wachovia Insiders Buying Shares
Insider at Wachovia (WB), the nations 4th largest bank have been busy lately buying shares in it.
Lanty L. Smith, a director at the bank, bought 100,000 shares of commons stock. In a filing with the SEC, Smith reported he bought the shares for $38.70 apiece Friday.
Donald K. Truslow, the chief risk officer and senior executive vice president bought 13,000 shares of common stock. In a filing with the SEC, Truslow reported he bought the shares Tuesday for $41.70 to $41.71 each.
John Baker, a director bought 15,000 total shares on Oct. 24th and Nov. 2nd. In a filing with the SEC the shares were bought for $44.80 and $42.70
This is a great sign for shareholders. When insiders begin snapping up shares with their own money it is only because they see a rosy picture ahead. With the banking industry in the flux it is in now, if you hold Wachovia shares there is an additional consideration. You have to assume that the write-down announcements for the bank are over.
If these insiders thought for a second that the bank would be writing down CDO assets again, one would have to wonder why they would be spending millions of their own money buying shares. Why not just wait a pick up some on the next drop? Assuming they are not fools, you must conclude that additional write-down are not forthcoming.
Financial stocks have bottomed and the quality institutions will see tremendous appreciation in the coming year. Just be patient..
Lanty L. Smith, a director at the bank, bought 100,000 shares of commons stock. In a filing with the SEC, Smith reported he bought the shares for $38.70 apiece Friday.
Donald K. Truslow, the chief risk officer and senior executive vice president bought 13,000 shares of common stock. In a filing with the SEC, Truslow reported he bought the shares Tuesday for $41.70 to $41.71 each.
John Baker, a director bought 15,000 total shares on Oct. 24th and Nov. 2nd. In a filing with the SEC the shares were bought for $44.80 and $42.70
This is a great sign for shareholders. When insiders begin snapping up shares with their own money it is only because they see a rosy picture ahead. With the banking industry in the flux it is in now, if you hold Wachovia shares there is an additional consideration. You have to assume that the write-down announcements for the bank are over.
If these insiders thought for a second that the bank would be writing down CDO assets again, one would have to wonder why they would be spending millions of their own money buying shares. Why not just wait a pick up some on the next drop? Assuming they are not fools, you must conclude that additional write-down are not forthcoming.
Financial stocks have bottomed and the quality institutions will see tremendous appreciation in the coming year. Just be patient..
Wednesday's 52 Week Lows
VMED Virgin Media Inc 17.72
USS U S Shipping Partners L P 11.90
UBOH United Bancshares Inc ... 12.40
SIX Six Flags Inc 2.08
PFED Park Bancorp Inc 25.50
PFDC Peoples Bancorp 14.40
PEIX Pacific Ethanol Inc 6.22
OSP Osg Amer L P 18.26
OSHC Ocean Shore Hldg Co 9.50
MIPS Mips Technologies Inc 6.65
MGPI Mgp Ingredients Inc 7.48
MDTH MedCath Corp 22.19
MAXE Max & Ermas Restauran ... 2.25
LNY Landry's Seafood Rest ... 22.97
HBNC Horizon Bancorp Ind 25.00
GVHR Gevity Hr Inc 5.54
GRO Agria Corp 10.99
GOLF Golfsmith Intl Holdin ... 4.49
BBI Blockbuster Inc 3.79
BAYN Bay Natl Corp 11.81
AVY Avery Dennison Corpor ... 52.67
ASFN Atlantic Southern Fin ... 23.07
Wednesday's Links
Kelly to buy Bills?, Bloggystyle, EU & Google, AG's
- Jim Kelly buying the Buffalo Bills would be just too perfect.
- Here it is....
- The EU says "not so fast" to Google
- I great take on today's State Attorney Generals and their vapid morality
- Jim Kelly buying the Buffalo Bills would be just too perfect.
- Here it is....
- The EU says "not so fast" to Google
- I great take on today's State Attorney Generals and their vapid morality
NYSE to Hold Press Conference at 1pm.: Thain Leaving?
Has either Merrill Lynch (MER) or Citigroup (C) found their new CEO?
A 1pm press conference has been scheduled today by the NYSE (NYX). The hot rumor is that current CEO John Thain is leaving to take a similar position at either of the previously mentioned institutions.
Based on Thain's history. I hope he is heading to Citigroup..
A 1pm press conference has been scheduled today by the NYSE (NYX). The hot rumor is that current CEO John Thain is leaving to take a similar position at either of the previously mentioned institutions.
Based on Thain's history. I hope he is heading to Citigroup..
Warren Buffett Buying Financials
Berkshire Hathaway's (BRK.A) Warren Buffett is buying banks.
Buffett bought Bank of America (BAC) during the 3-months ended 6/30. His purchase prices were between $ 48.34 and $ 50.14, with an estimated average price of $49.6 for his 8.7 million shares. Now, the BAC position is small for Berkshire as it represents 0.7 % of Berkshire's holdings as of 6/30. His holdings was 8700000 shares as of 2007-06-30.
Buffett has long been a fan of financials holding shares in Wells Fargo (WFC), M&T Bank (MTB) and HSBC Holdings (HBC). According to the site Gurufocus, Buffett has almost 40% of Berkshire's holding in financials.
Buffett's buying is indeed a sign not of a short term bottom in the sector, but of the long term health of it. While Buffett's typical holding period for a common stock has nearly evaporated for his "forever" mantra of earlier years, he still has a multi year time frame which on Wall St. is an eternity.
It also indicates "value" now exists in financials, a sentiment I post on yesterday. Do not confuse "cheap" with "value". A cheap stock is one that will not cost you much money to purchase. A value stocks costs what it costs to buy but it is worth much more, a significant difference.
Buffett bought Bank of America (BAC) during the 3-months ended 6/30. His purchase prices were between $ 48.34 and $ 50.14, with an estimated average price of $49.6 for his 8.7 million shares. Now, the BAC position is small for Berkshire as it represents 0.7 % of Berkshire's holdings as of 6/30. His holdings was 8700000 shares as of 2007-06-30.
Buffett has long been a fan of financials holding shares in Wells Fargo (WFC), M&T Bank (MTB) and HSBC Holdings (HBC). According to the site Gurufocus, Buffett has almost 40% of Berkshire's holding in financials.
Buffett's buying is indeed a sign not of a short term bottom in the sector, but of the long term health of it. While Buffett's typical holding period for a common stock has nearly evaporated for his "forever" mantra of earlier years, he still has a multi year time frame which on Wall St. is an eternity.
It also indicates "value" now exists in financials, a sentiment I post on yesterday. Do not confuse "cheap" with "value". A cheap stock is one that will not cost you much money to purchase. A value stocks costs what it costs to buy but it is worth much more, a significant difference.
Home Depot Conference Call: Bye Bye Buyback
That did not take long. Anyone care to wager the doomed from the beginning share repurchase plan at Home Depot (HD) is not completed next year either?
Aside from suspending the buyback plans, they also said the recapitalization plan under which they planned to buy back $22.5 billion in stock would not be completed this year. Under that plan, the company bought back about 290 million common shares for $10.7 billion earlier this year in a tender offer. Most of those repurchases were done with the proceeds from the Supply sale. In August I joked that HD would end up with a $12 billion plan. It looks like even I was too optimistic.
Do not be fooled into thinking HD will complete this anytime soon. The ingredients necessary for it to happen, improved credit markets, improved business environment and improved business fundamentals are at least a year away. Don't believe me? Blake said it himself on the call "We expect continued difficult conditions for the remainder of 2007 and into 2008." That puts us a 2008 at the earliest before we can even consider more repurchases of anything other than a token amount. I would bet we do not see any additional ones this decade..
How did the sale of Supply end up? Carol Thome said "Earnings for our discontinued operation, HD Supply, were $20 million. Included in this quarter’s results are the net after tax financial results for the month of August, as well as the impact of the sale of HD Supply. After expenses and taxes, we recognized a $4 million loss on the sale of the business."
Regarding the repurchase plan and buyback Thome said "We will move forward when we see improvement in both the home improvement and credit market, which we believe will not occur until some time in 2008."
During the conference call, CEO Frank Blake said they continued to lose overall home improvement market share but at a lower rate compared with the year earlier. Of all the news this is the worse because it means that Home Depot as a company, is doing worse than its competitors.
Home Depot's problems are so deep, it will be bad for a while. If you must invest in this sector, go with Lowe's (LOW).
Read the transcript here:
Aside from suspending the buyback plans, they also said the recapitalization plan under which they planned to buy back $22.5 billion in stock would not be completed this year. Under that plan, the company bought back about 290 million common shares for $10.7 billion earlier this year in a tender offer. Most of those repurchases were done with the proceeds from the Supply sale. In August I joked that HD would end up with a $12 billion plan. It looks like even I was too optimistic.
Do not be fooled into thinking HD will complete this anytime soon. The ingredients necessary for it to happen, improved credit markets, improved business environment and improved business fundamentals are at least a year away. Don't believe me? Blake said it himself on the call "We expect continued difficult conditions for the remainder of 2007 and into 2008." That puts us a 2008 at the earliest before we can even consider more repurchases of anything other than a token amount. I would bet we do not see any additional ones this decade..
How did the sale of Supply end up? Carol Thome said "Earnings for our discontinued operation, HD Supply, were $20 million. Included in this quarter’s results are the net after tax financial results for the month of August, as well as the impact of the sale of HD Supply. After expenses and taxes, we recognized a $4 million loss on the sale of the business."
Regarding the repurchase plan and buyback Thome said "We will move forward when we see improvement in both the home improvement and credit market, which we believe will not occur until some time in 2008."
During the conference call, CEO Frank Blake said they continued to lose overall home improvement market share but at a lower rate compared with the year earlier. Of all the news this is the worse because it means that Home Depot as a company, is doing worse than its competitors.
Home Depot's problems are so deep, it will be bad for a while. If you must invest in this sector, go with Lowe's (LOW).
Read the transcript here:
Wednesday's Upgrades and Downgrades
UPGRADES
Biogen Idec BIIB BWS Financial Sell » Hold
SPSS Inc SPSS First Analysis Sec Equal-Weight » Overweight
Posco PKX HSBC Securities Neutral » Overweight
Schlumberger SLB Calyon Securities Neutral » Add
Pioneer Natural PXD Credit Suisse Neutral » Outperform
Weatherford WFT Calyon Securities Add » Buy
Investment Tech ITG Keefe Bruyette Mkt Perform » Outperform
51job JOBS Citigroup Hold » Buy
Repsol SA REP Credit Suisse Underperform » Neutral
McDermott MDR Calyon Securities Add » Buy
Yahoo! YHOO CIBC Wrld Mkts Sector Perform » Sector Outperform
TAM S.A. TAM Bear Stearns Peer Perform » Outperform
Brooks Automation BRKS Bear Stearns Peer Perform » Outperform
Yamana Gold AUY UBS Neutral » Buy
Smith & Nephew SNN Bear Stearns Peer Perform » Outperform
Tyson Foods TSN Deutsche Securities Hold » Buy
DOWNGRADES
Cognos COGN BMO Capital Markets Outperform » Market Perform
Trans World TWMC Wedbush Morgan Buy » Hold
Amerigroup AGP Stifel Nicolaus Buy » Hold
Koppers Holdings KOP KeyBanc Capital Mkts Aggressive Buy » Buy
Royal KPN KPN Credit Suisse Outperform » Neutral
Cognos COGN Broadpoint Capital Buy » Neutral
MSC Industrial MSM Robert W. Baird Outperform » Neutral
Fastenal FAST Robert W. Baird Outperform » Neutral
Tuesday, November 13, 2007
"Fast Money" for Wednesday
Wednesday's Picks
Guy Adami likes Microsoft (MSFT).Open $34.46
Karen Finerman prefers Kaiser Aluminum (KALU).Open $69.65
Pete Najarian says Evergreen Solar (ESLR) is a buy. Open $12.92
Tuesday's Results
Jeff Macke liked Procter & Gamble (PG).Open $70.77 Close $71.75 GAIN
Guy Adami thought Cisco (CSCO) is a buy.Open $29.11
Close $30.14 GAIN
Pete Najarian and Karen Finerman recommend buying Ameritrade (AMTD).Open $18.89 Close $19.17 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= 45-26 = 64%
John Najarian= 13-4 = 76%
Jeff Macke= 48-33 = 59%
Pete Najarian= 33-32 = 51%
Tim Seymore= 5-5 = 50%
Karen Finerman= 27-17 = 61%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Tuesday's 52 Week Lows
RVSN Radvision Ltd 10.69
ROX Castle Brands Inc 2.11
PEIX Pacific Ethanol Inc 6.49
OXGN OXiGENE Inc 2.87
OSP Osg Amer L P 18.50
OCCF Optical Cable Corp 4.20
NSTK Nastech Pharmaceutical Co 4.98
IMOS Chipmos Tech Bermuda Ltd 5.08
III Information Services ... 7.00
IIG Imergent Inc 15.08
HOME Home Federal Bancorp Inc 12.43
HIA Highlands Acquisition ... 9.05
HFWA Heritage Finl Corp Wash 20.52
HBNC Horizon Bancorp Ind 25.00
EYE Advanced Medical Opti ... 24.58
EPIX Epix Pharmaceuticals Inc 3.33
EOF Merrill Lynch & Co Inc 9.31
ASFN Atlantic Southern Fin ... 23.17
ASBI Ameriana Bancorp 7.25
ARM Arvinmeritor Inc 12.49
ANS Airnet Sys Inc 2.01
A Citibank Rumor That Has Merit
Here is a rumor sent to me about Citigroup (C) that has some merit
Robert Rubin remains chairman
John Thain brought in from the NYSE (NYX) to run the commercial bank
Vikrim Pandit would run the investment bank after it is spun off
Brokerage are would be sold to JP Morgan (JPM)
This scenario, has real merit as Citi gets to keep Pandit, who is now likely to leave if the CEO jobs goes to anyone under 60 and investors get the breakup many have been clamoring for.
Hmmmmm..
Robert Rubin remains chairman
John Thain brought in from the NYSE (NYX) to run the commercial bank
Vikrim Pandit would run the investment bank after it is spun off
Brokerage are would be sold to JP Morgan (JPM)
This scenario, has real merit as Citi gets to keep Pandit, who is now likely to leave if the CEO jobs goes to anyone under 60 and investors get the breakup many have been clamoring for.
Hmmmmm..
Goldman Sachs Answers my Question.
Last month I speculated "Goldman is still short the CDO markets and if they are, that means they are still profiting handsomely from it." Goldman Sachs (GS) affirmed that speculation today.
CEO Lloyd Blankfein said Tuesday that the firm maintains a short position in the subprime mortgage market and will not be taking any significant charges to write off losses on its position. He also said that the firm remains bearish on the mortgage backed securities market and that new accounting rules regarding certain assets the firm holds would not hurt the company's business.
Since Goldman reported results, the mortgage markets has declined significantly with the majority of bank write-downs coming recently. This has to lead one to believe that Goldman should see even better results from these short position that they saw last quarter. shares have retreated from a high of $249 down to almost $200 recently but are surging in this news today up $10 to $225.
Goldman is the creme of the crop here....
CEO Lloyd Blankfein said Tuesday that the firm maintains a short position in the subprime mortgage market and will not be taking any significant charges to write off losses on its position. He also said that the firm remains bearish on the mortgage backed securities market and that new accounting rules regarding certain assets the firm holds would not hurt the company's business.
Since Goldman reported results, the mortgage markets has declined significantly with the majority of bank write-downs coming recently. This has to lead one to believe that Goldman should see even better results from these short position that they saw last quarter. shares have retreated from a high of $249 down to almost $200 recently but are surging in this news today up $10 to $225.
Goldman is the creme of the crop here....
Home Depot: What Do They Cut, the Dividend, CapEx or Buybacks
Home Depot (HD) is just in a world of hurt. Shares are now down 30% this year and shareholders are looking at the 3rd consecutive year of losses.
Home Depot reported Q3 net income fell 27% and same store sales were down 6.2%. Net income was $1.09 billion or $0.60 a share, versus net income of $1.49 billion and EPS of $0.73 last year. Earnings from continuing operations came in at $0.59 less than expectations of $0.60 per share. Sales fell 3.5% to $18,96 billion, versus $19.65 billion last year again short of expectations of $19.43 billion.
The company now expects earnings from continuing operations to fall by as much as 11% in FY2007. To make matters worse HD continues to lose market share to arch rival Lowes (LOW).
Now, Home Depot shares currently trade at $28 and change, yields 3% and trades at 11 times earnings. Value? No, not really. Why?
Home Depot is deteriorating. Were it not losing market shares to Lowes, one could argue that "once housing turns around, HD will rally". Since they are, Lowes will reverse its current course far faster. One does have to wonder though hoe long HD can or will continue to pay a $440 million quarterly dividend. Consider that Capex runs them roughly $800 million to $1 billion a quarter, the interest on their now exploding debvt will run about $125 million a quarter and they only pulled in $1 billion last quarter and things do not look to be getting any better anytime soon.
How long can the negative math continue to not add up? Either they have to cut capex and risk falling further behind Lowes, cut the dividend or drastically reduce or just put the buyback plans on hold. Either one of the options will only hurt shareholders more...
What happened? Simple. Short term thinking and the sale of HD Supply. I first spoke out against it in June when it was announced. Three months later they finally managed to sell it at a reduced price, were forced to keep some of it and guarantee some of its debt. Shrewed.
Once Nardelli was ousted, incoming CEO Frank Blake sought to appease Relational Investors who lead the Nardelli lynching and caved to their demands. This included the Supply sale and HD taking on massive debt to repurchase shares. Now both those move are coming back to haunt Blake.
Supply, while not a fast grower contributed to HD's cash and profits substantially. What cash HD received from the sale was used to repurchase huge blocks of stock and then additional debt was added to buy more. While I am a fan of buybacks, they must be done intelligently. This one wasn't. With it's business environment deteriorating rapidly and its position in that business falling just as fast, loading up on debt and making promises you might be able to keep was less than wise.
One cannot even say with confidence that when housing turns around Home Depot will be a winner. If you are making a bet here, Lowes is the pick because they are at least managing their way through the housing downturn.
Miss Nardeli yet?
Home Depot reported Q3 net income fell 27% and same store sales were down 6.2%. Net income was $1.09 billion or $0.60 a share, versus net income of $1.49 billion and EPS of $0.73 last year. Earnings from continuing operations came in at $0.59 less than expectations of $0.60 per share. Sales fell 3.5% to $18,96 billion, versus $19.65 billion last year again short of expectations of $19.43 billion.
The company now expects earnings from continuing operations to fall by as much as 11% in FY2007. To make matters worse HD continues to lose market share to arch rival Lowes (LOW).
Now, Home Depot shares currently trade at $28 and change, yields 3% and trades at 11 times earnings. Value? No, not really. Why?
Home Depot is deteriorating. Were it not losing market shares to Lowes, one could argue that "once housing turns around, HD will rally". Since they are, Lowes will reverse its current course far faster. One does have to wonder though hoe long HD can or will continue to pay a $440 million quarterly dividend. Consider that Capex runs them roughly $800 million to $1 billion a quarter, the interest on their now exploding debvt will run about $125 million a quarter and they only pulled in $1 billion last quarter and things do not look to be getting any better anytime soon.
How long can the negative math continue to not add up? Either they have to cut capex and risk falling further behind Lowes, cut the dividend or drastically reduce or just put the buyback plans on hold. Either one of the options will only hurt shareholders more...
What happened? Simple. Short term thinking and the sale of HD Supply. I first spoke out against it in June when it was announced. Three months later they finally managed to sell it at a reduced price, were forced to keep some of it and guarantee some of its debt. Shrewed.
Once Nardelli was ousted, incoming CEO Frank Blake sought to appease Relational Investors who lead the Nardelli lynching and caved to their demands. This included the Supply sale and HD taking on massive debt to repurchase shares. Now both those move are coming back to haunt Blake.
Supply, while not a fast grower contributed to HD's cash and profits substantially. What cash HD received from the sale was used to repurchase huge blocks of stock and then additional debt was added to buy more. While I am a fan of buybacks, they must be done intelligently. This one wasn't. With it's business environment deteriorating rapidly and its position in that business falling just as fast, loading up on debt and making promises you might be able to keep was less than wise.
One cannot even say with confidence that when housing turns around Home Depot will be a winner. If you are making a bet here, Lowes is the pick because they are at least managing their way through the housing downturn.
Miss Nardeli yet?
Wal-Mart Beats: International Operations & Buybacks Strong
I just cannot understand why Wal-Mart(WMT) CEO Lee Scott is not plowing money into the international operations. The best news is at the end of the post though.
Here are the sales growth numbers:
Sam's Clubs= 6.1%
Wal-Mart= 6.4%
International= 16.9%
International sales, last year at 23% of sale currently stand at 27% this year. That is a significant jump when you are talking about $92 billions in sales, 4% of that is a huge number. Earnings per share from continuing operations was $0.70, up from $0.62 per share last year. Earnings per share from continuing operations for the third quarter were impacted positively $0.01 per share due to the recognition of $46.5 million in after tax gains from the sale of certain real estate properties.
Earnings for Q4 to be between 99 cents per share and $1.03 per share and the full year should be between $3.13 and $3.17. Analysts project quarterly earnings per share of $1.02 and full-year profit of $3.09 per share.
Earnings growth increases:
Sam's Club= 6.2%
Wal-Mart= 11.1%
International= 8.6%
Wal-Mart gave the usual lowball 0% to 2% same store sales growth going forward and it is getting to the point that this projection is becoming meaningless.
Now, one might say hey, the Wal-Mart stores profit growth was in excess of the international operations, what gives? Why are the international operations more important?
Wal-Mart has induced heavy price cutting in US locations and the upcoming holiday shopping season has boosted results there. The question that needs to be asked is how much is left there? How much further can they cut? We know that there is saturation of locations in the US but internationally, there is hug
e room.
Admittedly Wal-Mart has not been successful in all markets but where they are a hit, they are huge and the results quarter after quarter are proving that.
What makes me the most happy? The company repurchased than 63 million shares in the third quarter, worth $2.8 billion. For the nine months, the company has repurchased almost 115 million shares, worth $5.3 billion.
In October I said, "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." Nothing like getting what you ask for at Christmas. Since the new $15 billion repurchase plan was announced in June, Wal-Mart has now bought about $3.8 billion of it.
That being said, Q4 will have cash flooding Wal-Mart coffers. With prices still at decade low levels, there is no reason we should not expect $3 billion plus to be repurchased.
Here are the sales growth numbers:
Sam's Clubs= 6.1%
Wal-Mart= 6.4%
International= 16.9%
International sales, last year at 23% of sale currently stand at 27% this year. That is a significant jump when you are talking about $92 billions in sales, 4% of that is a huge number. Earnings per share from continuing operations was $0.70, up from $0.62 per share last year. Earnings per share from continuing operations for the third quarter were impacted positively $0.01 per share due to the recognition of $46.5 million in after tax gains from the sale of certain real estate properties.
Earnings for Q4 to be between 99 cents per share and $1.03 per share and the full year should be between $3.13 and $3.17. Analysts project quarterly earnings per share of $1.02 and full-year profit of $3.09 per share.
Earnings growth increases:
Sam's Club= 6.2%
Wal-Mart= 11.1%
International= 8.6%
Wal-Mart gave the usual lowball 0% to 2% same store sales growth going forward and it is getting to the point that this projection is becoming meaningless.
Now, one might say hey, the Wal-Mart stores profit growth was in excess of the international operations, what gives? Why are the international operations more important?
Wal-Mart has induced heavy price cutting in US locations and the upcoming holiday shopping season has boosted results there. The question that needs to be asked is how much is left there? How much further can they cut? We know that there is saturation of locations in the US but internationally, there is hug
e room.
Admittedly Wal-Mart has not been successful in all markets but where they are a hit, they are huge and the results quarter after quarter are proving that.
What makes me the most happy? The company repurchased than 63 million shares in the third quarter, worth $2.8 billion. For the nine months, the company has repurchased almost 115 million shares, worth $5.3 billion.
In October I said, "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." Nothing like getting what you ask for at Christmas. Since the new $15 billion repurchase plan was announced in June, Wal-Mart has now bought about $3.8 billion of it.
That being said, Q4 will have cash flooding Wal-Mart coffers. With prices still at decade low levels, there is no reason we should not expect $3 billion plus to be repurchased.
Wachovia and The Rest of Banking Just Fine
Despite a recent $1.1 billion write on on mortgage backed securities, business at Wachovia (WB) is just fine.
Wacho
Wacho