TGIF Randomosity!
7 hours ago
Greenblatt's calculation of ROIC in TLBTBTM is a useful quick and dirty tool but when it comes to really analysing companies it may need some adjustments to give a clearer picture.
Monday, December 31, 2007
52 Week Lows 12/31/2007
WRI Weingarten Realty Inv ... 31.50
WEN Wendy's International ... 25.76
SBGI Sinclair Broadcasting ... 8.21
RURL Rural/Metro Corp 2.14
RUBO Rubio's Restaurants, Inc. 8.25
RTLX Retalix Ltd 15.36
RRGB Red Robin Gourmet Bur ... 32.08
JNY Jones Apparel Group, Inc 16.00
JCOM J2 Global Communicati ... 21.21
JBLU Jetblue Awys Corp 5.91
BWS Brown Shoe Inc New 15.12
BONT The Bon-Ton Stores Inc 9.44
BJRI BJ's Restaurants, Inc. 16.23
CKR CKE Restaurants, Inc. ... 13.25
CHS Chico's FAS Inc 9.04
CHRK Cherokee Intl Corp 2.04
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ValuePlays: Best and Worst Calls of 2007
It is the end of the year and it is time to take credit for the prophetic like calls I have made and then take my lumps for the, well, "was he drinking?" ones.
BEST:
1- Starbucks (SBUX). On Feb 8th, with shares at $33, I wrote, "The switch to premium coffee is clearly working for McDonald's. In the last couple conference calls they have given huge credit to their coffee for both their increase in sales and customer counts. Contrast this to Starbucks' call in which they intimated their profit increases were mainly due to price increases on coffee and by selling customers more products once inside, not by increased customer counts. Translation, they are losing people to McDonalds (MCD)."
Since then Starbucks shares have cratered, down 40% and McDonalds shares are up 40% to all-time highs.
2- Oil (USO). On Jan. 30th, I wrote with oil at its lowest point since the index was created, "If you are long term (years) you are really only looking at supply and demand, as long as it does not change from its current long term trend, the price must go up." Since then the price has risen roughly 70%.
3- Harley Davidson (HOG): On Feb.7th with shares at $70 I wrote, "It will get cheaper". The initial price point was set at $60 and was then was reduce over the summer to under $45, where shares sit today, a 35% decline.
I have a feeling I will end up buying Harley shares around $40 in the not too distant future.
4- Dow Chemical: On 12/7 I wrote: "How about using the very same strategy they have been using for the past year? Selling chunk of this business to outsiders and placing them into the Joint Venture (JV) category. This would provide Dow billions of dollars instantly to be deployed in buying some specialty chemical makers without impairing the balance sheet."
The next week Dow did just that.
5- Ethanol: In January I said that 2007 & 08 will be a battle for the hearts of the FOS's (fly over states) for politicians and that battle would be fought with ethanol. Each party would battle to bring the largest biofuel mandate to that area and the #1 benefactor would be Archer Daniels Midland (ADM). Sure enough the 2007 Energy Bill featured massive biofuel increases. ADM? Up 50% since January.
WORST
1- Google (GOOG). On Feb. 2nd, I wrote with shares of Google at $500 "I repeat my prior statement. Google is a great company with great product, it's stock is just overpriced."
Since then shares have risen 35% to $685. I still think it is overpriced, maybe next year we will be able to move this one to the "best call column". Who knows...
2- Apple (AAPL). On May 16th, with shares at $110, I wrote "the introduction of the iPhone will be the first miscue for the company and send it's shares, priced for perfection tumbling."
Shares since then have risen 63% to $185. Here was the flaw, iPod and especially Mac sales have exploded and with it, the profitability of the company. iPhone sales have been "lukewarm" or "spectacularly average"? It surely has not been a flop but it has not been a smash hit either. The real winner in the iPhone rollout was AT&T (T), the sole carrier of the product. In all fairness to myself I did also say the phone at $599 was way over priced and apparently Apple agreed (or sluggish sales indicated) as the price was dropped 33% to $399 almost immediately after roll-out and $100 refunds given to early buyers. In my initial May post I did say "drop the price to $299 and you'll have something". Apple met me more than half way.
With Verizon (VZ) and Research in Motion (RIMM) the Blackberry maker coming out with touch screen phones in '08, it will be interesting to see how iPhone sales are effected.
The Jury is Still Out
1- Citigroup (C): Down 30% since first purchase.
2- Sears Holdings (SHLD): Ditto Citigroup
3- Owens Corning (OC): Down 30% since purchase
These do not go into the "worst" category for the simple reason I still hold them and as a value investor, you buy stocks when they are down, you are either right or wrong a year or two down the road, not in a few months. If these are still where they are now at thing time next year, we will have to move them into the "worst" category if for no other reason, the thought process behind the purchases and when they were made was flawed.
Please feel free to email or comment on any other ones you can think of and I will be happy to expand on any of them. I sure there are others but these are the ones off the top of my head...
Donate to the ValuePlays Project for KIVA
BEST:
1- Starbucks (SBUX). On Feb 8th, with shares at $33, I wrote, "The switch to premium coffee is clearly working for McDonald's. In the last couple conference calls they have given huge credit to their coffee for both their increase in sales and customer counts. Contrast this to Starbucks' call in which they intimated their profit increases were mainly due to price increases on coffee and by selling customers more products once inside, not by increased customer counts. Translation, they are losing people to McDonalds (MCD)."
Since then Starbucks shares have cratered, down 40% and McDonalds shares are up 40% to all-time highs.
2- Oil (USO). On Jan. 30th, I wrote with oil at its lowest point since the index was created, "If you are long term (years) you are really only looking at supply and demand, as long as it does not change from its current long term trend, the price must go up." Since then the price has risen roughly 70%.
3- Harley Davidson (HOG): On Feb.7th with shares at $70 I wrote, "It will get cheaper". The initial price point was set at $60 and was then was reduce over the summer to under $45, where shares sit today, a 35% decline.
I have a feeling I will end up buying Harley shares around $40 in the not too distant future.
4- Dow Chemical: On 12/7 I wrote: "How about using the very same strategy they have been using for the past year? Selling chunk of this business to outsiders and placing them into the Joint Venture (JV) category. This would provide Dow billions of dollars instantly to be deployed in buying some specialty chemical makers without impairing the balance sheet."
The next week Dow did just that.
5- Ethanol: In January I said that 2007 & 08 will be a battle for the hearts of the FOS's (fly over states) for politicians and that battle would be fought with ethanol. Each party would battle to bring the largest biofuel mandate to that area and the #1 benefactor would be Archer Daniels Midland (ADM). Sure enough the 2007 Energy Bill featured massive biofuel increases. ADM? Up 50% since January.
WORST
1- Google (GOOG). On Feb. 2nd, I wrote with shares of Google at $500 "I repeat my prior statement. Google is a great company with great product, it's stock is just overpriced."
Since then shares have risen 35% to $685. I still think it is overpriced, maybe next year we will be able to move this one to the "best call column". Who knows...
2- Apple (AAPL). On May 16th, with shares at $110, I wrote "the introduction of the iPhone will be the first miscue for the company and send it's shares, priced for perfection tumbling."
Shares since then have risen 63% to $185. Here was the flaw, iPod and especially Mac sales have exploded and with it, the profitability of the company. iPhone sales have been "lukewarm" or "spectacularly average"? It surely has not been a flop but it has not been a smash hit either. The real winner in the iPhone rollout was AT&T (T), the sole carrier of the product. In all fairness to myself I did also say the phone at $599 was way over priced and apparently Apple agreed (or sluggish sales indicated) as the price was dropped 33% to $399 almost immediately after roll-out and $100 refunds given to early buyers. In my initial May post I did say "drop the price to $299 and you'll have something". Apple met me more than half way.
With Verizon (VZ) and Research in Motion (RIMM) the Blackberry maker coming out with touch screen phones in '08, it will be interesting to see how iPhone sales are effected.
The Jury is Still Out
1- Citigroup (C): Down 30% since first purchase.
2- Sears Holdings (SHLD): Ditto Citigroup
3- Owens Corning (OC): Down 30% since purchase
These do not go into the "worst" category for the simple reason I still hold them and as a value investor, you buy stocks when they are down, you are either right or wrong a year or two down the road, not in a few months. If these are still where they are now at thing time next year, we will have to move them into the "worst" category if for no other reason, the thought process behind the purchases and when they were made was flawed.
Please feel free to email or comment on any other ones you can think of and I will be happy to expand on any of them. I sure there are others but these are the ones off the top of my head...
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Sunday, December 30, 2007
ValuePlays Most Popular Posts for December
1- Has Lampert "Lost It"?, Did Buffett?
2- Eddie Lampert, World's Worst Third World Dictator? Come on, Herb!!
3- MFP Investor's Micheal Price on Sears Holdings
4- Autozone Easily Beats Estimates. Is Lampert a Genius Again?
5- Did Lampert Dump Burnett?
6- Walmart.com Blows away Competition.
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ValuePlays Top Referring Sites, December
1- Google Finance
2- Value Investing News
3- Stockpickr
4- Seeking Alpha
5- MSN.com
6- Google.com
7- Wall St. Journal Online
8- NY Times Dealbook
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"Fast Money" for Monday
Monday's Picks
Pete Najarian likes Caterpillar(CAT) Open $73.16
Karen Finerman says short Big Lots (BIG) Open $15.77
Guy Adami recommends Deere & Co (DE) Open $92.28
Friday's Results
Karen Finerman recommends being short the iShares Dow Jones US Real Estate ETF(IYR). Open $66.48 Close $65.18 GAIN
Guy Adami likes Intel (INTC). Open $26.83 Close $26.76 LOSS
Pete Najarian says investors should buy Archer Daniels Midland (ADM). Open $46.04 Close $47.09 GAIN
Results since 6/21/2007:
Guy Adami= 57-46 = 55%
John Najarian= 13-4 = 76%
Jeff Macke= 60-40 = 60%
Pete Najarian= 49-40 = 55%
Tim Seymore= 7-7 = 50%
Karen Finerman= 39-30 = 57%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
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Saturday, December 29, 2007
The Week's Top Stories at Value Investing News
Here are the top 10 from VIN
VALUEPLAYS NOTE: Read a similar post from February at ValuePlays
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2. Warren Buffett's "Bet on America": The Complete CNBC Interview
(via www.cnbc.com)
In a live interview this morning on CNBC's Squawk Box, Warren Buffett called his purchase of a big Marmon stake as a "bet on America over a long time." He also revealed that while he has been approached by financials companies about buying a stake, "we have not seen a deal that causes me to start salivating."
3. Another Look At Greenblatt's ROIC
(via valetudoinvesting.blogspot.com)
4. Emil Lee : Are You a Value Pretender?
(via www.fool.com)
In 2005, Seth Klarman of Baupost Capital warned a group of Wharton business school students that a new class of "value pretenders" had emerged. Klarman, whose fund has earned more than 20% annual returns on more than $5 billion in holdings, provided the following description: "These investors apply a dip strategy.
5. SEC Probing Washington Mutual
(via biz.yahoo.com)
More bad news for WAMU. SEC is investigating the possible use of inflated appraisals.
6. Lessons From Ted Williams
(via shahinkhezri.blogspot.com)
"If they are in the strike zone at all, the business 'pitches' we now see are just catching the lower outside corner. If we swing, we will be locked into low returns. But if we let all of today's balls go by, there can be no assurance that the next ones we see will be more to our liking. Perhaps the attractive pries of the past were the aberrations, not the full pries of today.
VALUEPLAYS NOTE: Read a similar post from February at ValuePlays
7. If you read between the lines for what it is worth
(via www.atfreeforum.com)
Rockefeller and Buffett parallel
8. Mauboussin on Strategy : Fat Tails and Nonlinearity
(via www.lmcm.com)
Diversity Breakdowns and Invisible Vulnerability. For he who is acquainted with the paths of nature, will more readily observe her deviations; and, vice versa, he who has learned her deviations will be able more …
9. Want A Risk Free 14% Return
(via www.intelligentspeculator.net)
DVW is currently trading at a 14% discount from its acquisition price. This provides a relativley risk free 14% return in just a few months.
10. Martin Whitman's Bet on Asia
(via www.cnbc.com)
Insight on why he is investing in Asia, with Marty Whitman, Third Avenue Management and CNBC's Erin Burnett
This Week's Dividend Hikes
This Week's Insider Purchases
Equity One Inc (EQY)= $7,755,627
World Acceptance Corp (WRLD)= $2,374,380
Cousins Properties Inc (CUZ)= $ 1,479,383
Hercules Offshore Inc (HERO)= $1,404,247
Nuveen Municipal Value Fund Inc (NUV)= $1,393,820
Nuveen Global Value Opportunities Fund (JGV) = $1,368,600
Neuro Hitech Inc (NHPI) = $1,326,750
Osiris Therapeutics Inc (OSIR)= $1,237,000
Aca Capital Holdings Inc (ACAH )= $1,214,080
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Friday, December 28, 2007
Martin Whitman Releases Annual shareholder Letter
Mr. Whitman's thoughts on the mortgage situation are just spectacular and more than worth the time to read. I get the letter by being a holder in the Third Avenue Value Fund (TAVFX)
Read the Whole Letter Here:
THE RESIDENTIAL MORTGAGE MELTDOWN AND HOUSING COLLAPSE
TAVF is investing heavily in the common stocks of companies suffering through the current housing crisis. These companies include financial institutions, a home builder, a building supplier, land banks and investment builders. The Fund’s reasons for this investment program provide a good case study as to how Third Avenue’s “safe and cheap*” approach works in practice:
First, the bad side of these investments:
1) The stock market pricing for these equity issues ischaotic. There is no way Fund management is able to pick a bottom for securities prices, or a near bottom.
2) Fund management has no good idea of how deep the crisis will become, or how long it will last. Our best guess is two to four years.
Second, the good side of these investments:
1) In each instance, TAVF is acquiring common stocks at meaningful discounts from readily ascertainable NAVs. In the case of certain financial institution common stocks – MGIC Common, MBIA Common and Radian Common, the prices the Fund is paying are no more that 40% of book value, or adjusted book value. For each of these companies, a normalized Return on Equity (equity equals book value) (“ROE”) ranges from 8% to 14%.
Assuming a 10% ROE sometime in the future, and no further dramatic deterioration in book value during the interim, probably a realistic assumption; and current pricing at 40% of book value, Third Avenue would be paying only four times future normalized earning power. There seems to be a reasonable probability, too, that TAVF is really paying less than four times normalized earnings, even assuming that future normalized earnings are fully taxed and even assuming some modest dilution of the common stocks.
2) Each common stock acquired, is acquired in a company which enjoys a strong financial position. While there can be no guarantees, the probabilities are that each of these companies will survive as solvent going concerns either without requiring major access to capital markets for new funding, or by obtaining new funding from others on terms that are only modestly dilutive for TAVF. On December 10th, MBIA announced that it is obtaining $500 million of equity financing from Warburg Pincus; and another $500 million from a rights offering which Warburg Pincus will backstop, i.e., underwrite. Assuming that Third Avenue participates in the rights offering and also takes advantage of any oversubscription privileges, the capital infusion should be, at worst, only modestly dilutive for TAVF.
3) Each company seems very well managed.
4) It is possible that the crisis will become increasingly deep, and prolonged; or rating agencies will start to place great weight on soft, qualitative considerations. In those events, the companies might need capital infusions to remain going concerns. TAVF has proposed to MBIA, Radian and USG managements that such infusions be in the form of equity, and that existing stockholders provide the equity via pre-emptive rights offerings. MBIA proposes to raise $500 million via a rights offering. If this were to occur, and if other portfolio companies were to follow the MBIA path, the capital infusions would be, for Third Avenue, mostly nondilutive, or anti–dilutive (if there are oversubscription privileges).
In the case of MBIA and Radian, it is crucial if they are to remain going concerns, that the national rating agencies continue to assign AAA and AA ratings, respectively, to each company’s bond insurance subsidiaries. As an aside, given current prices, TAVF would probably not lose money if Radian or MBIA were to go into run-off rather than remain going concerns. Run-off, i.e., liquidation, simply is not a likely outcome, however. It would appear as if capital infusions would not become necessary if the rating agencies were to rely on only hard, quantitative data.
However, this month, Moody’s announced that in reviewing ratings it would also consider soft qualitative data, much as Moody’s views as to what “investor perceptions” are. Consideration of such qualitative factors as investor perceptions seems to increase the probabilities that Radian might seek a capital infusion as was the case for MBIA. At December 21st, TAVF owns 12.9% of the Radian Common outstanding, and 8.0% of the MBIA common outstanding.
At current depressed prices, the Fund would rather buy common stocks from the companies than from company stockholders. If rights offerings were to become available not only for MBIA, but also others, TAVF might have attractive buying opportunities. In analyzing each of the financial institutions, Generally Accepted Accounting Principles (“GAAP”) tend to be quite misleading. This is because GAAP require that derivatives such as the Credit Default Swaps be marked to market – and market prices now are highly capricious, to say the least.
Marks to market are the most appropriate, and helpful, tool in the appraisal of publicly-traded common stocks held in trading portfolios. Marks to market are an inappropriate, and unhelpful, tool in the appraisal of credit instruments held in portfolios where the intent is to hold the credit instruments to maturity. MBIA and Radian intend to hold their credit instruments to maturity. Third Quarter 2007 mark to market losses recorded by MBIA and Radian were as follows:
Mark to Market Losses,
MBIA $222,000,000 / $1.80 PER SHARE
Radian $404,000,000 / $5.02 PER SHARE
Further, MBIA announced on December 10th that its mark to market losses for the fourth calendar quarter of 2007 will be significantly greater than they were in the third quarter.
The real losses to MBIA and Radian will be determined not by marks to market, but by
(a) the percentage of the portfolios that suffer moneydefaults, plus
(b) how those money defaults work out after recoveries from foreclosures, restructurings, refinancings and reinvestments.
MBIA’s fourth quarter 2007 reported losses will be staggering. In addition to mark to market losses, the preliminary indications are that case reserves will be increased by $500 million to $800 million pre-tax. The Company, however, will remain with a quite strong capital position. When I first trained as an analyst – some 50 plus years ago – the primary role of GAAP was to meet the needs of creditors who held credit instruments to maturity. That’s all changed now.
The primary role of GAAP seems to have become to fulfill the perceived needs of equity holders who are vitally affected by day to day changes in common stock prices. As I’ve pointed out in previous letters – What a waste! GAAP can’t really be very useful to stock market speculators, but it can hurt issuers like MBIA and Radian. In any event, TAVF, as a “safe and cheap” investor, will continue to place primary weight on “what the numbers mean” rather than on “what the numbers are”.
Though I feel very good about our investing program into U.S. housing related companies, TAVF is hardly “betting the ranch” on such investments. At October 31, the Fund had $1 billion, or 8.3% of its net assets, in such investments. In contrast, for example, the Fund had $3.2 billion, or 26.2% of its net assets, invested in the common stocks of Hong Kong-based companies involved with real estate and private equity.
Over the years, TAVF has been rather successful in distress investing, the recent Collins & Aikman debacle notwithstanding. The key to most of the distress successes was the Fund successfully indentified, and acquired at bargain prices, the fulcrum security of the troubled issuer, i.e., the most senior security which would participate in a reorganization. Our current housing crisis investments are very much like our other distress investing (e.g., Nabors Industries, Covanta, Kmart, USG) except here the fulcrum security investment is common stock rather than credit instruments. To push the analogy a little further, as a return to normal times occurs, it appears as if the common stocks either will be reinstated (i.e., the capital invested will remain intact) or that there will be a reorganization (i.e., companies will need capital infusions.) A principal risk to the Fund could occur if the businesses seek capital infusions, and if such infusions are on a basis that would be highly dilutive to existing stockholders.
Historically, financial guaranty insurance has been a highly profitable business for the monoline insurers, even though the insureds received a very attractive deal by being able to obtain AAA ratings at low cost. Insurance company profitability is measured by a combination of underwriting profits and net investment income. Underwriting profit is measured by the “combined ratio”, i.e., the ratio of the sum of losses and expenses to net premium income and net premiums written. Net investment income, usually all interest income, tends to be larger as long as loss liabilities are “long tail”, i.e., the losses do not have to be paid out until long after the insurance premiums have been collected and then invested in bonds.
Typically, MBIA’s insurance subsidiaries have enjoyed a combined ratio each year under 40%. Net investment income for the MBIA insurance subsidiaries has grown over the years to almost $600,000,000 per annum. The prospects appear quite good to Fund management that, once past the current housing difficulties, MBIA will return to its historic patterns of very attractive combined ratios and relatively steady growth in net investment income.
The mortgage meltdown-housing collapse seems nothing new for the U.S. economy. During the last 60 years, virtually every sector of the American economy has gone through depressions as bad as anything that occurred in the 1930s. Remember the melt-downs during the past 40 years for, inter alia energy, banks, real estate, savings & loans, Wall Street brokerages, row crops, steel, automobiles, machine tools, etc. Unlike the 1930s, all these depressions occurred without domino effect. The probability seems to be that the next ten years in the U.S. will be more like the last 40 than they will be like the 1930s. Put otherwise, the odds favor overcoming the current crisis in residential housing and residential housing finance without underlying damage to the U.S. economy.
Martin J. Whitman
Donate to the ValuePlays Project for KIVA
Read the Whole Letter Here:
THE RESIDENTIAL MORTGAGE MELTDOWN AND HOUSING COLLAPSE
TAVF is investing heavily in the common stocks of companies suffering through the current housing crisis. These companies include financial institutions, a home builder, a building supplier, land banks and investment builders. The Fund’s reasons for this investment program provide a good case study as to how Third Avenue’s “safe and cheap*” approach works in practice:
First, the bad side of these investments:
1) The stock market pricing for these equity issues ischaotic. There is no way Fund management is able to pick a bottom for securities prices, or a near bottom.
2) Fund management has no good idea of how deep the crisis will become, or how long it will last. Our best guess is two to four years.
Second, the good side of these investments:
1) In each instance, TAVF is acquiring common stocks at meaningful discounts from readily ascertainable NAVs. In the case of certain financial institution common stocks – MGIC Common, MBIA Common and Radian Common, the prices the Fund is paying are no more that 40% of book value, or adjusted book value. For each of these companies, a normalized Return on Equity (equity equals book value) (“ROE”) ranges from 8% to 14%.
Assuming a 10% ROE sometime in the future, and no further dramatic deterioration in book value during the interim, probably a realistic assumption; and current pricing at 40% of book value, Third Avenue would be paying only four times future normalized earning power. There seems to be a reasonable probability, too, that TAVF is really paying less than four times normalized earnings, even assuming that future normalized earnings are fully taxed and even assuming some modest dilution of the common stocks.
2) Each common stock acquired, is acquired in a company which enjoys a strong financial position. While there can be no guarantees, the probabilities are that each of these companies will survive as solvent going concerns either without requiring major access to capital markets for new funding, or by obtaining new funding from others on terms that are only modestly dilutive for TAVF. On December 10th, MBIA announced that it is obtaining $500 million of equity financing from Warburg Pincus; and another $500 million from a rights offering which Warburg Pincus will backstop, i.e., underwrite. Assuming that Third Avenue participates in the rights offering and also takes advantage of any oversubscription privileges, the capital infusion should be, at worst, only modestly dilutive for TAVF.
3) Each company seems very well managed.
4) It is possible that the crisis will become increasingly deep, and prolonged; or rating agencies will start to place great weight on soft, qualitative considerations. In those events, the companies might need capital infusions to remain going concerns. TAVF has proposed to MBIA, Radian and USG managements that such infusions be in the form of equity, and that existing stockholders provide the equity via pre-emptive rights offerings. MBIA proposes to raise $500 million via a rights offering. If this were to occur, and if other portfolio companies were to follow the MBIA path, the capital infusions would be, for Third Avenue, mostly nondilutive, or anti–dilutive (if there are oversubscription privileges).
In the case of MBIA and Radian, it is crucial if they are to remain going concerns, that the national rating agencies continue to assign AAA and AA ratings, respectively, to each company’s bond insurance subsidiaries. As an aside, given current prices, TAVF would probably not lose money if Radian or MBIA were to go into run-off rather than remain going concerns. Run-off, i.e., liquidation, simply is not a likely outcome, however. It would appear as if capital infusions would not become necessary if the rating agencies were to rely on only hard, quantitative data.
However, this month, Moody’s announced that in reviewing ratings it would also consider soft qualitative data, much as Moody’s views as to what “investor perceptions” are. Consideration of such qualitative factors as investor perceptions seems to increase the probabilities that Radian might seek a capital infusion as was the case for MBIA. At December 21st, TAVF owns 12.9% of the Radian Common outstanding, and 8.0% of the MBIA common outstanding.
At current depressed prices, the Fund would rather buy common stocks from the companies than from company stockholders. If rights offerings were to become available not only for MBIA, but also others, TAVF might have attractive buying opportunities. In analyzing each of the financial institutions, Generally Accepted Accounting Principles (“GAAP”) tend to be quite misleading. This is because GAAP require that derivatives such as the Credit Default Swaps be marked to market – and market prices now are highly capricious, to say the least.
Marks to market are the most appropriate, and helpful, tool in the appraisal of publicly-traded common stocks held in trading portfolios. Marks to market are an inappropriate, and unhelpful, tool in the appraisal of credit instruments held in portfolios where the intent is to hold the credit instruments to maturity. MBIA and Radian intend to hold their credit instruments to maturity. Third Quarter 2007 mark to market losses recorded by MBIA and Radian were as follows:
Mark to Market Losses,
MBIA $222,000,000 / $1.80 PER SHARE
Radian $404,000,000 / $5.02 PER SHARE
Further, MBIA announced on December 10th that its mark to market losses for the fourth calendar quarter of 2007 will be significantly greater than they were in the third quarter.
The real losses to MBIA and Radian will be determined not by marks to market, but by
(a) the percentage of the portfolios that suffer moneydefaults, plus
(b) how those money defaults work out after recoveries from foreclosures, restructurings, refinancings and reinvestments.
MBIA’s fourth quarter 2007 reported losses will be staggering. In addition to mark to market losses, the preliminary indications are that case reserves will be increased by $500 million to $800 million pre-tax. The Company, however, will remain with a quite strong capital position. When I first trained as an analyst – some 50 plus years ago – the primary role of GAAP was to meet the needs of creditors who held credit instruments to maturity. That’s all changed now.
The primary role of GAAP seems to have become to fulfill the perceived needs of equity holders who are vitally affected by day to day changes in common stock prices. As I’ve pointed out in previous letters – What a waste! GAAP can’t really be very useful to stock market speculators, but it can hurt issuers like MBIA and Radian. In any event, TAVF, as a “safe and cheap” investor, will continue to place primary weight on “what the numbers mean” rather than on “what the numbers are”.
Though I feel very good about our investing program into U.S. housing related companies, TAVF is hardly “betting the ranch” on such investments. At October 31, the Fund had $1 billion, or 8.3% of its net assets, in such investments. In contrast, for example, the Fund had $3.2 billion, or 26.2% of its net assets, invested in the common stocks of Hong Kong-based companies involved with real estate and private equity.
Over the years, TAVF has been rather successful in distress investing, the recent Collins & Aikman debacle notwithstanding. The key to most of the distress successes was the Fund successfully indentified, and acquired at bargain prices, the fulcrum security of the troubled issuer, i.e., the most senior security which would participate in a reorganization. Our current housing crisis investments are very much like our other distress investing (e.g., Nabors Industries, Covanta, Kmart, USG) except here the fulcrum security investment is common stock rather than credit instruments. To push the analogy a little further, as a return to normal times occurs, it appears as if the common stocks either will be reinstated (i.e., the capital invested will remain intact) or that there will be a reorganization (i.e., companies will need capital infusions.) A principal risk to the Fund could occur if the businesses seek capital infusions, and if such infusions are on a basis that would be highly dilutive to existing stockholders.
Historically, financial guaranty insurance has been a highly profitable business for the monoline insurers, even though the insureds received a very attractive deal by being able to obtain AAA ratings at low cost. Insurance company profitability is measured by a combination of underwriting profits and net investment income. Underwriting profit is measured by the “combined ratio”, i.e., the ratio of the sum of losses and expenses to net premium income and net premiums written. Net investment income, usually all interest income, tends to be larger as long as loss liabilities are “long tail”, i.e., the losses do not have to be paid out until long after the insurance premiums have been collected and then invested in bonds.
Typically, MBIA’s insurance subsidiaries have enjoyed a combined ratio each year under 40%. Net investment income for the MBIA insurance subsidiaries has grown over the years to almost $600,000,000 per annum. The prospects appear quite good to Fund management that, once past the current housing difficulties, MBIA will return to its historic patterns of very attractive combined ratios and relatively steady growth in net investment income.
The mortgage meltdown-housing collapse seems nothing new for the U.S. economy. During the last 60 years, virtually every sector of the American economy has gone through depressions as bad as anything that occurred in the 1930s. Remember the melt-downs during the past 40 years for, inter alia energy, banks, real estate, savings & loans, Wall Street brokerages, row crops, steel, automobiles, machine tools, etc. Unlike the 1930s, all these depressions occurred without domino effect. The probability seems to be that the next ten years in the U.S. will be more like the last 40 than they will be like the 1930s. Put otherwise, the odds favor overcoming the current crisis in residential housing and residential housing finance without underlying damage to the U.S. economy.
Martin J. Whitman
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Online Retail Traffic Through 12/22
I have an interesting question about the group.
1. www.walmart.com (WMT)= 7.94%
2. www.target.com (TGT)= 5.06%
3. www.bestbuy.com (BBY)= 3.96%
4. www.sears.com / www.kmart.com (SHLD)= 3.72%
5. www.circuitcity.com (CC)= 3.07%
6. www.jcpenney.com (JCP)= 2.03%
7. www.toysrus.com (private)= 1.97%
8. www.macys.com (M) = 1.43%
9. www.kohls.com (KSS)= 1.3%
Data from Hitwise
The question? How in all that is holy can Circuit City be losing money? They have been in the top 5 all season and are currently the only one of the group losing cash. Pathetic comes to mind...
Wal-Mart has commanded essentially a 3% lead over #2 Target all fall. Now, with Target announcing a recent December sales disappointment, this 3% may be the difference for Wal-Mart being successful this holiday season. When you add Wal-Mart advertising of its very popular "site-to-st0re" program and Target's lack thereof, a hard lesson may have been l;earned by Target execs this season.
What will be interesting is to see results from Sears Holdings which has a similar program but did not advertise it as hard..
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1. www.walmart.com (WMT)= 7.94%
2. www.target.com (TGT)= 5.06%
3. www.bestbuy.com (BBY)= 3.96%
4. www.sears.com / www.kmart.com (SHLD)= 3.72%
5. www.circuitcity.com (CC)= 3.07%
6. www.jcpenney.com (JCP)= 2.03%
7. www.toysrus.com (private)= 1.97%
8. www.macys.com (M) = 1.43%
9. www.kohls.com (KSS)= 1.3%
Data from Hitwise
The question? How in all that is holy can Circuit City be losing money? They have been in the top 5 all season and are currently the only one of the group losing cash. Pathetic comes to mind...
Wal-Mart has commanded essentially a 3% lead over #2 Target all fall. Now, with Target announcing a recent December sales disappointment, this 3% may be the difference for Wal-Mart being successful this holiday season. When you add Wal-Mart advertising of its very popular "site-to-st0re" program and Target's lack thereof, a hard lesson may have been l;earned by Target execs this season.
What will be interesting is to see results from Sears Holdings which has a similar program but did not advertise it as hard..
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Happy New Year, Macy's Style
Today, Macy's (M) announced they are closing nine underperforming stores, citing declining sales with no identifiable growth opportunities.
The store are located at: Washington Square, Indianapolis, IN; Prien Lake Mall, Lake Charles, LA; Rolling Acres Mall, Akron, OH; Canton Centre, Canton, OH; Randall Park Mall, North Randall, OH; Crossroads Mall, Oklahoma City, OK; Valley View Center, Dallas, TX; Sharpstown Center, Houston, TX; Family Center at Riverdale, Riverdale, UT.
This is just lousy. They could not wait a week? It is especially repugnant when just a few weeks ago Chief Executive Terry Lundgren said, "We always go through the normal process of pruning our real estate portfolio, but there are no plans for a wide-scale closure of stores."
Nice.......
On another note, retail is must suffering currently. This will make the results Wal-Mart (WMT) turns in Jan. 10th even more impressive.
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The store are located at: Washington Square, Indianapolis, IN; Prien Lake Mall, Lake Charles, LA; Rolling Acres Mall, Akron, OH; Canton Centre, Canton, OH; Randall Park Mall, North Randall, OH; Crossroads Mall, Oklahoma City, OK; Valley View Center, Dallas, TX; Sharpstown Center, Houston, TX; Family Center at Riverdale, Riverdale, UT.
This is just lousy. They could not wait a week? It is especially repugnant when just a few weeks ago Chief Executive Terry Lundgren said, "We always go through the normal process of pruning our real estate portfolio, but there are no plans for a wide-scale closure of stores."
Nice.......
On another note, retail is must suffering currently. This will make the results Wal-Mart (WMT) turns in Jan. 10th even more impressive.
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Friday's 52 Week Low's
WM Washington Mutual Inc 13.09
WEN Wendy's International ... 26.26
TLB The Talbots, Inc 11.93
TIN Temple-Inland Inc 29.51
PFCB P F Chang's China Bis ... 22.76
PETM PETsMART Inc 23.77
MSO Martha Stewart Living ... 8.84
MDS Midas Group Inc 14.97
MAT Mattel, Inc 19.12
JBLU Jetblue Awys Corp 5.98
FIG Fortress Investment G ... 15.47
FIC Fair Isaac Corporation 32.42
FDX Fedex Corp 90.39
CC Circuit City Stores, ... 4.17
C Citigroup, Inc 29.22
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Citigroup Dividend Cut Talk: Just That
Citi (C) CEO Vikrim Pandit has already commented on the dividend issue and as far back as early November I commented that I felt it would not be cut. Despite recent reports like the Goldman Sachs (GS) estimate of a 40% cut, recent events have only buffered my feelings on the subject.
Currently Citi pays just under $11 billion a year in dividends. Sounds like a lot until you consider in the last 12 months Citi earned almost $24 billion. My guess is that Pandit had no desire to be the guy who cuts the dividend. It would be construed as taking the easy way out, rather than trying to actually fix Citi's issues. I have said repeatedly in the past he has $2.3 trillion in assets under his control and can easily sell chunks of them to raise capital if he needs it.
Thursday the Wall. St. Journal reported that Citi is looking at doing just that. Units rumored on the block include Student Loan Corp., which is 80 percent owned by the bank, its North American auto lending business, the Brazilian credit card company Redecard SA, in which Citigroup held a 24 percent stake as of Sept. 30 and its Japanese consumer finance business.
Pandit's also is laying off about 20,000 employees as he streamlines operations. Now, the current list of items for sale is just the beginning and the "low hanging fruit". In his first interview as CEO Pandit did say regarding possible asset sales "all options are on the table". He was far less open to a dividend cut saying "the board has spoken on that and the dividend is where it is".
Do I think the dividend will be raised in 2008? not by a long shot. But sitting here getting over 7% taxed a 15% is a real nice deal while we wait for this thing to shake out.
Financials are a huge opportunity here, for investors with the right time frame and temperament.
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Currently Citi pays just under $11 billion a year in dividends. Sounds like a lot until you consider in the last 12 months Citi earned almost $24 billion. My guess is that Pandit had no desire to be the guy who cuts the dividend. It would be construed as taking the easy way out, rather than trying to actually fix Citi's issues. I have said repeatedly in the past he has $2.3 trillion in assets under his control and can easily sell chunks of them to raise capital if he needs it.
Thursday the Wall. St. Journal reported that Citi is looking at doing just that. Units rumored on the block include Student Loan Corp., which is 80 percent owned by the bank, its North American auto lending business, the Brazilian credit card company Redecard SA, in which Citigroup held a 24 percent stake as of Sept. 30 and its Japanese consumer finance business.
Pandit's also is laying off about 20,000 employees as he streamlines operations. Now, the current list of items for sale is just the beginning and the "low hanging fruit". In his first interview as CEO Pandit did say regarding possible asset sales "all options are on the table". He was far less open to a dividend cut saying "the board has spoken on that and the dividend is where it is".
Do I think the dividend will be raised in 2008? not by a long shot. But sitting here getting over 7% taxed a 15% is a real nice deal while we wait for this thing to shake out.
Financials are a huge opportunity here, for investors with the right time frame and temperament.
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"Fast Money" for Friday
Friday's Picks
Karen Finerman recommends being short the iShares Dow Jones US Real Estate ETF(IYR). Open $66.48
Guy Adami likes Intel (INTC). Open $26.83
Pete Najarian says investors should buy Archer Daniels Midland (ADM). Open $46.04
Results since 6/21/2007:
Guy Adami= 57-45 = 60%
John Najarian= 13-4 = 76%
Jeff Macke= 60-40 = 66%
Pete Najarian= 48-40 = 57%
Tim Seymore= 7-7 = 50%
Karen Finerman= 38-30 = 56%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
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Thursday, December 27, 2007
Year in Review
For those who do not know who Todd Harrison is, you should. He is the founder of Minyanville.com. He has an article on 2007's top 10 themes. It is a great read.
Read it here:
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Read it here:
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Dow Chemical To Invest Heavily In China
There has been a ton of speculation as to what Dow Chemical (DOW) was going to do with the $9.5 billion it is getting from Kuwait in the recent JV agreement.
Some backround:
On 12/7 I wrote "How about using the very same strategy they have been using for the past year? Selling chunk of this business to outsiders and placing them into the Joint Venture (JV) category. This would provide Dow billions of dollars instantly to be deployed in buying some specialty chemical makers without impairing the balance sheet."
A week later Dow announced it has sold 5 of those very commodity businesses into a new JV with Kuwait and would receive $9.5 billion for them AND still receive a 50/50 split of the businesses results.
Where is the money going?
Dow Chemical plans to invest $5 billion in China in the coming 10 years, said CEO Andrew N. Liveris in Shanghai yesterday. The $5 billion fund budget will not cover a potential coal-to-chemical project in central China's Shaanxi Province, where the chemical giant is conducting a feasibility with Shenhua Group Corp, the world’s second largest coal producer, added Liveris.
Now that is has signed the agreement with KPC (Kuwait Petroleum Corp.) Dow is in talks with Sinopec (SHI) to take over stake in the refiner's $5 billion joint venture oil refinery and petrochemical project with Kuwait Petroleum Corp in East China's Guangdong province.
China welcomes chemical producers from Kuwait and Saudi Arabia because they are able to provide crude oil to the country's large petrochemical projects, said Wang Jin, an analyst at Orient Securities recently.
Dow is on a path to be the world's dominant petrochemical producer. Early this year CEO Andrew Liveris called 2007 "a transformational year". He has delivered.
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Some backround:
On 12/7 I wrote "How about using the very same strategy they have been using for the past year? Selling chunk of this business to outsiders and placing them into the Joint Venture (JV) category. This would provide Dow billions of dollars instantly to be deployed in buying some specialty chemical makers without impairing the balance sheet."
A week later Dow announced it has sold 5 of those very commodity businesses into a new JV with Kuwait and would receive $9.5 billion for them AND still receive a 50/50 split of the businesses results.
Where is the money going?
Dow Chemical plans to invest $5 billion in China in the coming 10 years, said CEO Andrew N. Liveris in Shanghai yesterday. The $5 billion fund budget will not cover a potential coal-to-chemical project in central China's Shaanxi Province, where the chemical giant is conducting a feasibility with Shenhua Group Corp, the world’s second largest coal producer, added Liveris.
Now that is has signed the agreement with KPC (Kuwait Petroleum Corp.) Dow is in talks with Sinopec (SHI) to take over stake in the refiner's $5 billion joint venture oil refinery and petrochemical project with Kuwait Petroleum Corp in East China's Guangdong province.
China welcomes chemical producers from Kuwait and Saudi Arabia because they are able to provide crude oil to the country's large petrochemical projects, said Wang Jin, an analyst at Orient Securities recently.
Dow is on a path to be the world's dominant petrochemical producer. Early this year CEO Andrew Liveris called 2007 "a transformational year". He has delivered.
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Wednesday, December 26, 2007
Wednesday's Links
Dumbest moments, Bill Miller, Standardized Tests, Bloggystyle.
- Here they are, the 100 dumbest business moves of the year.
- A very interesting interview with Bill Miller.
- We need them. It is the only way to compare. Life is about being tested, might as well learn how to deal with it.
- Adam's missive...
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- Here they are, the 100 dumbest business moves of the year.
- A very interesting interview with Bill Miller.
- We need them. It is the only way to compare. Life is about being tested, might as well learn how to deal with it.
- Adam's missive...
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Blockbuster: Only Slightly Better Than Circuit City
In early November, Blockbuster (BBI) CEO Jim Keyes said "Are we raising prices? No, as of today, what I don't want to do is raise them three or four times." Well guess what?
Blockbuster is boosting prices of its DVD-by-mail service for new customers and some existing ones by up to 40 percent. This mean hikes of $2 to $10 depending on "the profitability of the individual subscriber." Back in June when Blockbuster lowered the prices in a desperate attempt to steal business away from Netflix (NFLX), I simply said they could not maintain the prices because their cost structure was so much higher than that of Netflix.
I said if they wanted to compete on price with their rival, they need to close more stores to lower the basis.
Of the new plan, Blockbuster spokeswoman Karen Raskopf said they are "a really good value for consumers" that are "providing a fair return to Blockbuster." She said the company hopes the increases won't cause existing subscribers to quit. "This is not a plan to drive people away," she said. "We want to keep them all."
Raising prices is not usually a recipe for keeping customers. Although, Blockbuster has been losing ground on Netflix for the past year so I guess if they just tread water, they will be happy.
At the end of the day this all boils down to the stores. Until they get serious about doing something with them (either closing or selling), they are doomed to play second fiddle to Netflix. They just cannot compete with Netflix on cost and people do not want to have to get in a car in January to go get a video.
Since Blockbuster was last to the online download game and still has not established themselves there, one cannot even say that there is a light at the end of the tunnel...
Blockbuster has gone from the leader in its business to a great business school case study about what happens when management does not see how its business is changing.
The sad thing for shareholders is I think Blockbuster still cannot see it.
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Blockbuster is boosting prices of its DVD-by-mail service for new customers and some existing ones by up to 40 percent. This mean hikes of $2 to $10 depending on "the profitability of the individual subscriber." Back in June when Blockbuster lowered the prices in a desperate attempt to steal business away from Netflix (NFLX), I simply said they could not maintain the prices because their cost structure was so much higher than that of Netflix.
I said if they wanted to compete on price with their rival, they need to close more stores to lower the basis.
Of the new plan, Blockbuster spokeswoman Karen Raskopf said they are "a really good value for consumers" that are "providing a fair return to Blockbuster." She said the company hopes the increases won't cause existing subscribers to quit. "This is not a plan to drive people away," she said. "We want to keep them all."
Raising prices is not usually a recipe for keeping customers. Although, Blockbuster has been losing ground on Netflix for the past year so I guess if they just tread water, they will be happy.
At the end of the day this all boils down to the stores. Until they get serious about doing something with them (either closing or selling), they are doomed to play second fiddle to Netflix. They just cannot compete with Netflix on cost and people do not want to have to get in a car in January to go get a video.
Since Blockbuster was last to the online download game and still has not established themselves there, one cannot even say that there is a light at the end of the tunnel...
Blockbuster has gone from the leader in its business to a great business school case study about what happens when management does not see how its business is changing.
The sad thing for shareholders is I think Blockbuster still cannot see it.
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Tuesday, December 25, 2007
Monday, December 24, 2007
Monday's Links
Bill Miller, Recession?, Bank Stocks, Rite Aid, Master's Picks
- Can't argue with this. Great investors do not "lose it".
- Here is the case against a recession.
- The case for buying banks
- Rite Aid has not been on my radar screen but at these levels, deserves a look. Thanks to the Masters
- Speaking of the Master's, here is a list of stocks they think will bounce before 2007 is done.
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- Can't argue with this. Great investors do not "lose it".
- Here is the case against a recession.
- The case for buying banks
- Rite Aid has not been on my radar screen but at these levels, deserves a look. Thanks to the Masters
- Speaking of the Master's, here is a list of stocks they think will bounce before 2007 is done.
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Circuit City: I Am At a Loss
How could you announce million dollar "retention" bonuses for executives and then days later announce results like this? Watching these guys operate is like watching a monkey try to impregnate a football.
For the three months ended Nov. 30, Circuit City's (CC) losses ballooned to $207.3 million, or $1.26 per share, from $20.4 million, or 12 cents per share, a year ago. Excluding tax-related accounting items, losses totaled 64 cents per share in the latest period.
Sales slipped 3 percent to $2.96 billion from $3.06 billion a year earlier, with sales at stores open at least a year falling 5.6 percent.
CEO Phillip Schoonover still insists Circuit City is on the right track. "We're implementing the right initiatives to lead to profitability and sustained growth," he said. "We're staying the course on our longer-term strategic initiatives." By long term do you mean by the end of the decade Phil? I mean it has taken you three years to ruin the company, do you really think you can bring it back faster?
Regarding the bonus announcements, Schoonover said the bonuses are essential to keep together a team he spent three years assembling. Three years assembling a team to get these results? Far from getting bonuses for staying with CC, these incompetent buffoons ought to be thanking god everyday they are even employed.
Bruce H. Besanko, Executive Vice President and Chief Financial Officer made the following inexplicable statement regarding the bonuses:
"The base program that we have in place was a combination of stock options and restricted shares. Because of the current stock performance, that program for many of our executives was underwater and so far underwater that it didn’t have any meaningful value over time. In addition to that, our senior most executives did not receive a bonus for the last two years and will not receive a bonus based on this year’s performance. So we have two plans now to retain those leaders. One is our cash-based retention program and two is a stock-based incentive program which is in line with our annual stock-based incentive program and I feel I have the tools in place now to keep the management and leadership as well as the managers at all levels in the company engaged in this work."
Essentially, he is saying that because the executives performance has been so bad, under the old plan, they were not eligible for a bonus. That being said, CC decided just to lower the bar, just show up for the next three years, performance be damned to get your money. This is disgusting.
This makes me want to buy shares just to bash them every single day......how can shareholders stand for this?
If that isn't enough to have shareholders going into vapor-lock, Schoonover then said, "We are very dissatisfied with our third quarter results. We underestimated the financial impact from the disruption of our transformation work." Here it comes "We believe that these issues are primarily self-induced".
He "believes" they are? What else could it be? What were they doing, remodeling stores in the middle of the Christmas shopping season? Shares are down 25% today and now down 70% for the year.
Back in June when people speculated Eddie Lampert and Sears might make a run at CC, I opined, "Eddie Lampert, based on past history would just be as likely to wait for these buffoons to run it into bankruptcy and buy it there even cheaper than now."
It just may get there next year.....
Let's not forget that current management turned down a $20 offer per share from private equity not too long ago.... shareholders will never see that price again, not with these guys in charge.
Finally, A note to Herb Greenberg: How can you in all intellectual honesty say Eddie Lampert at Sears Holdings (SHLD) is worse than this guy? Herb, Sears IS MAKING MONEY!!!!
This is a call for Herb to do a "do over" with his pick for 2007. We'll give him a Mulligan or should we now call it a Greenberg?
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For the three months ended Nov. 30, Circuit City's (CC) losses ballooned to $207.3 million, or $1.26 per share, from $20.4 million, or 12 cents per share, a year ago. Excluding tax-related accounting items, losses totaled 64 cents per share in the latest period.
Sales slipped 3 percent to $2.96 billion from $3.06 billion a year earlier, with sales at stores open at least a year falling 5.6 percent.
CEO Phillip Schoonover still insists Circuit City is on the right track. "We're implementing the right initiatives to lead to profitability and sustained growth," he said. "We're staying the course on our longer-term strategic initiatives." By long term do you mean by the end of the decade Phil? I mean it has taken you three years to ruin the company, do you really think you can bring it back faster?
Regarding the bonus announcements, Schoonover said the bonuses are essential to keep together a team he spent three years assembling. Three years assembling a team to get these results? Far from getting bonuses for staying with CC, these incompetent buffoons ought to be thanking god everyday they are even employed.
Bruce H. Besanko, Executive Vice President and Chief Financial Officer made the following inexplicable statement regarding the bonuses:
"The base program that we have in place was a combination of stock options and restricted shares. Because of the current stock performance, that program for many of our executives was underwater and so far underwater that it didn’t have any meaningful value over time. In addition to that, our senior most executives did not receive a bonus for the last two years and will not receive a bonus based on this year’s performance. So we have two plans now to retain those leaders. One is our cash-based retention program and two is a stock-based incentive program which is in line with our annual stock-based incentive program and I feel I have the tools in place now to keep the management and leadership as well as the managers at all levels in the company engaged in this work."
Essentially, he is saying that because the executives performance has been so bad, under the old plan, they were not eligible for a bonus. That being said, CC decided just to lower the bar, just show up for the next three years, performance be damned to get your money. This is disgusting.
This makes me want to buy shares just to bash them every single day......how can shareholders stand for this?
If that isn't enough to have shareholders going into vapor-lock, Schoonover then said, "We are very dissatisfied with our third quarter results. We underestimated the financial impact from the disruption of our transformation work." Here it comes "We believe that these issues are primarily self-induced".
He "believes" they are? What else could it be? What were they doing, remodeling stores in the middle of the Christmas shopping season? Shares are down 25% today and now down 70% for the year.
Back in June when people speculated Eddie Lampert and Sears might make a run at CC, I opined, "Eddie Lampert, based on past history would just be as likely to wait for these buffoons to run it into bankruptcy and buy it there even cheaper than now."
It just may get there next year.....
Let's not forget that current management turned down a $20 offer per share from private equity not too long ago.... shareholders will never see that price again, not with these guys in charge.
Finally, A note to Herb Greenberg: How can you in all intellectual honesty say Eddie Lampert at Sears Holdings (SHLD) is worse than this guy? Herb, Sears IS MAKING MONEY!!!!
This is a call for Herb to do a "do over" with his pick for 2007. We'll give him a Mulligan or should we now call it a Greenberg?
Donate to the ValuePlays Project for KIVA
Sunday, December 23, 2007
Monday's Upgrades and Downgrades
UPGRADES
Globecomm Systems GCOM Collins Stewart Market Perform » Buy
Pier 1 Imports PIR Wedbush Morgan Hold » Buy
Knology KNOL Morgan Keegan Mkt Perform » Outperform
Itron ITRI RBC Capital Mkts Sector Perform » Outperform
Genomic Health GHDX RBC Capital Mkts Underperform » Sector Perform
Research In Motion RIMM Bear Stearns Peer Perform » Outperform
Rite Aid RAD UBS Neutral » Buy
Schering-Plough SGP Lehman Brothers Equal-weight » Overweight
IMS Health RX Robert W. Baird Underperform » Neutral
First Horizon FHN Keefe Bruyette Underperform » Mkt Perform
DOWNGRADES
Anadigics ANAD Charter Equity Mkt Perform » Mkt Underperform
Respironics RESP Caris & Company Above Average » Average
Genitope GTOP Punk, Ziegel & Co Buy » Mkt Perform
Cognos COGN Wedbush Morgan Buy » Hold
Ruby Tuesday RT KeyBanc Capital Mkts Hold » Underweight
Genitope GTOP RBC Capital Mkts Sector Perform » Underperform
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Three ValuePlays KIVA Loans Dispersed To Recipients
Our first three loans have bee dispersed to the recipients...Let's Wish Them Good Luck
**This is an update on “Second-hand electronic sales”, run by Basilia
Paucar Quispe,:
Thank you for your loan. It has been disbursed to Basilia Paucar Quispe
by Microfinanzas PRISMA in Peru. We are excited to watch this business
grow. Over the next 6 months, Microfinanzas PRISMA will be collecting
repayments from this entrepreneur and posting progress updates on the
Kiva website.
Kiva very much appreciates your responses online. You can read and
respond to this journal online here:
**This is an update on Yusif Musayev:
Thank you for your loan. It has been disbursed to Yusif Musayev by
Norwegian Microcredit LLC (Normicro) in Azerbaijan. We are excited to
watch this business grow. Over the next 14 months, Norwegian
Microcredit LLC (Normicro) will be collecting repayments from this
entrepreneur and posting progress updates on the Kiva website.
Kiva very much appreciates your responses online. You can read and
respond to this journal online here:
**This is an update on Ada Laura Zumaeta De Toguchi:
Thank you for your loan. It has been disbursed to Ada Laura Zumaeta De
Toguchi by Manuela Ramos / CrediMUJER in Peru. We are excited to watch
this business grow. Over the next 6 months, Manuela Ramos / CrediMUJER
will be collecting repayments from this entrepreneur and posting
progress updates on the Kiva website.
Kiva very much appreciates your responses online. You can read and
respond to this journal online here:
I will update their progress in the blog...
Donate to the ValuePlays Project for KIVA
**This is an update on “Second-hand electronic sales”, run by Basilia
Paucar Quispe,:
Thank you for your loan. It has been disbursed to Basilia Paucar Quispe
by Microfinanzas PRISMA in Peru. We are excited to watch this business
grow. Over the next 6 months, Microfinanzas PRISMA will be collecting
repayments from this entrepreneur and posting progress updates on the
Kiva website.
Kiva very much appreciates your responses online. You can read and
respond to this journal online here:
**This is an update on Yusif Musayev:
Thank you for your loan. It has been disbursed to Yusif Musayev by
Norwegian Microcredit LLC (Normicro) in Azerbaijan. We are excited to
watch this business grow. Over the next 14 months, Norwegian
Microcredit LLC (Normicro) will be collecting repayments from this
entrepreneur and posting progress updates on the Kiva website.
Kiva very much appreciates your responses online. You can read and
respond to this journal online here:
**This is an update on Ada Laura Zumaeta De Toguchi:
Thank you for your loan. It has been disbursed to Ada Laura Zumaeta De
Toguchi by Manuela Ramos / CrediMUJER in Peru. We are excited to watch
this business grow. Over the next 6 months, Manuela Ramos / CrediMUJER
will be collecting repayments from this entrepreneur and posting
progress updates on the Kiva website.
Kiva very much appreciates your responses online. You can read and
respond to this journal online here:
I will update their progress in the blog...
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"Fast Money'" for Monday
Monday's Picks
No picks for Monday
Friday's Results
Jeff Macke recommends getting long Disney (DIS). Open $32.33 Close $32.94 GAIN
Karen Finerman likes ValueClick (VCLK).Open $22.63 Close $23.61 GAIN
Pete Najarian prefers Microsoft (MSFT).Open $35.52 Close $36.06 GAIN
Results since 6/21/2007:
Guy Adami= 57-45 = 60%
John Najarian= 13-4 = 76%
Jeff Macke= 60-40 = 66%
Pete Najarian= 48-40 = 57%
Tim Seymore= 7-7 = 50%
Karen Finerman= 38-30 = 56%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Donate to the ValuePlays Project for KIVA
Saturday, December 22, 2007
This Week's Insider Purchases
INSIDER PURCHASES
Anesiva Inc ANSV = 7,999,997
Imax Corp IMAX = 5,598,082
Internet America Inc GEEK = 2,480,000
Chesapeake Energy Corp CHK = 1,929,579
Unitrin Inc UTR= 1,790,607
First Acceptance Corp FAC = 1,579,479
Isle Of Capri Casinos Inc ISLE = 1,576,086
O Charley S Inc CHUX = 1,470,364
Kronos Worldwide Inc KRO = 1,297,182
General Electric Co GE = 1,280,521
Ardea Biosciences Inc RDEA = 1,238,851
Macerich Co MAC= 1,221,455
Churchill Downs Inc CHDN= 1,200,670
Donate to the ValuePlays Project for KIVA
Anesiva Inc ANSV = 7,999,997
Imax Corp IMAX = 5,598,082
Internet America Inc GEEK = 2,480,000
Chesapeake Energy Corp CHK = 1,929,579
Unitrin Inc UTR= 1,790,607
First Acceptance Corp FAC = 1,579,479
Isle Of Capri Casinos Inc ISLE = 1,576,086
O Charley S Inc CHUX = 1,470,364
Kronos Worldwide Inc KRO = 1,297,182
General Electric Co GE = 1,280,521
Ardea Biosciences Inc RDEA = 1,238,851
Macerich Co MAC= 1,221,455
Churchill Downs Inc CHDN= 1,200,670
Donate to the ValuePlays Project for KIVA
The Weeks Top Stories at Value Investing News
The week's top picks from VIN. Ever heard of Warren Buffett?
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1. Gannon to Barron’s: Berkshire Fairly Valued…As a Buffettless Empire!
(via www.gannononinvesting.com)
Geoff Gannon writes this blog post in response to Barron's "Sell Buffett" cover story. The post looks at a fair value for Berkshire (BRK.A) shares and finds that there is currently no real "Buffett premium" baked into the stock price. In fact, if Buffett gives Berkshire another 9 years, Berkshire may end up being a bit undervalued at the latest price of $143,000 per "A" share.
2. Mark Sellers: Rational investors should rejoice
(via www.ft.com)
Two months ago in my Financial Times column, I listed some of the things I have learnt about the stock market over the years. I likened the market to a game of online poker, with anonymous opponents and continuously evolving probabilities. I received some good reader feedback, so this month I’ve decided to revisit the topic. Here are a few more things I’ve learnt about the stock market.
3. Two 50 cent dollars–Whitney Tilson and Glenn Tongue’s Value Investing Congress Presentation 11/2
(via www.valueinvestingcongress.com)
Whitney Tilson and Glenn Tongue, co-portfolio managers of T2 Partners, presented on November 29, 2007 at the 3rd Annual New York Value Investing Congress to a standing- room-only crowd at Rose Hall in the Time Warner Center. This link will take you to their presentation, which also argues that Berkshire Hathaway is somewhat undervalued but offers an immense margin of safety.
4. Kiplinger : Buy Bill Miller Now
(via www.kiplinger.com)
Legg Mason Value has been a stinker the past two years. But Bill Miller is a gifted manager. Bet on him to rebound. By Steven Goldberg
5. Eveillard Reopens Funds
(via www.controlledgreed.com)
First Eagle is reopening two of their funds and several other value funds have recently been reopened. Could this be a sign that managers are find more value opportunities?
6. Election Night at Nautilus
(via www.gannononinvesting.com)
"Forget about the upcoming presidential primaries; it’s already election night at Nautilus (NLS) – and the early exit polls favor the challenger." Geoff Gannon reports on the proxy fight between activist hedge fund Sherborne investors and the incumbent board of Bowflex maker Nautilus.
7. Barron's Pans Buffett's Berkshire
(via www.peridotcapitalist.com)
The Peridot Capitalist chimes in on the Berkshire Hathaway valuation debate and actually thinks the shares are even more overvalued than Barron's. The debate rages on...
8. Sorry, Warren, Your Stock's Too Pricey
(via online.barrons.com)
Here is the Barron's story that everyone is talking about today regarding Berkshire Hathaway's value. Access to this story should now be free.
9. Sell Buffett?
(via jeffmatthewsisnotmakingthisup.blogspot.com)
Jeff Matthews responds to Barron's recent "Sell Buffett" cover story. He focuses on issues other than valuation, and points out that Berkshire is not harder to understand than many other businesses, despite its complexity. Most importantly, Buffett actually does communicate extensively with shareholders - he just doesn't do quarterly conference calls for Wall Street analysts.
10. Berkshire Hathaway Shares Battered As Barron's Says Sell, But Bulls See Buying Opportunity
(via www.cnbc.com)
Berkshire Hathaway shares are under a lot of pressure today after a cover story in Barron's over the weekend recommended, "Sell Buffett: Sorry, Warren, Your Stock's Too Pricey." (The piece itself is still behind a paid subscription firewall, but will become free content this afternoon.)
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Friday, December 21, 2007
Super-SIV Fund Abandoned: Very Good News
Why is it good news? It simply means it is no longer needed.
At the request of Hank Paulson, Head of The Treasury Department, Bank of America (BAC), Citigroup (C) and J.P. Morgan (JPM) had been working to set up the SIV fund since September. It was proposed to buy assets from so-called structured investment vehicles (SIV's), removing the direct risk from the banks.
The fact that the banks feel it is no longer needed is very good news indeed. It means the write downs for the SIV's at the institutions can't go much lower. These things ARE worth something. Citigroup's decision to put them on the balance sheet also is a very good event. They will provide clarity.
I have been stumping for financials since about October. They will be the big winners next year and our next purchases will be in the sector again. Currently we own Citi (C), Wachovia (WB) and Goldman Sachs (GS). Goldman is an automatic buy under $200, Citi under $30 and Wachovia under $39.
Our next purchases will be a troubled mortgage lender and a Buffett favorite.
span style="font-weight: bold;">Donate to the ValuePlays Project for KIVA
At the request of Hank Paulson, Head of The Treasury Department, Bank of America (BAC), Citigroup (C) and J.P. Morgan (JPM) had been working to set up the SIV fund since September. It was proposed to buy assets from so-called structured investment vehicles (SIV's), removing the direct risk from the banks.
The fact that the banks feel it is no longer needed is very good news indeed. It means the write downs for the SIV's at the institutions can't go much lower. These things ARE worth something. Citigroup's decision to put them on the balance sheet also is a very good event. They will provide clarity.
I have been stumping for financials since about October. They will be the big winners next year and our next purchases will be in the sector again. Currently we own Citi (C), Wachovia (WB) and Goldman Sachs (GS). Goldman is an automatic buy under $200, Citi under $30 and Wachovia under $39.
Our next purchases will be a troubled mortgage lender and a Buffett favorite.
span style="font-weight: bold;">Donate to the ValuePlays Project for KIVA
Earn 2% and Change The World with Andrew Corn
Most of you know I am involved with KIVA. Andrew Corn over at Clear Asset Management has a wonderful group he is involved with. Please read and invest.
Dear Friends,
It is the season. The season of holidays and the season of requests. Mine is a request to invest. Invest in people and receive a return beyond dollars and cents. Below is my blog post from this morning. I hope you consider joining me and my family and the thousands of others trying to change and repair a small piece of the world.
Happy Holidays,
Andy
Earn Two Percent and Change the World
It is that time of year, the holidays. The old movies are on TV and one of my favorites is It’s a Wonderful Life. A key take-away of the movie is that everyone is connected. Our actions can have an impact on a global basis.
That same powerful, enabling concept can hold true in investing.
Now let’s move to US foreign policy. There is a hypothesis in some circles that our vast aid sometimes breeds resentment. The richest country in the world is providing a handout. Many people are proud and resent handouts. The old Chinese proverb goes: “give a person a fish, feed them for a day, teach a person to fish and feed them for a lifetime.” This philosophy of investing in individuals’ ability to make their own living can translate as follows:
The Investment Thesis
* Touch over 100 lives with a minimal investment of $1,000 (a three year lockup)
* Loan people the tiny amount they need to buy “a fishing pole;” we are not “teaching anyone to fish”
* Earn 2% in the process
The essence of my investment thesis combines interest income with touching over 100 lives over three years, empowering them to help themselves through an entrepreneurial endeavor. The concept of MicroBanking is not new. Unfortunately it has been perverted by some large banks. My family has had the privilege to meet and work with a not for profit organization. They charge the lowest amount of interest possible as a microleander and pay interest back to their investors.
The Bank was founded in 1975 by the World Council of Churches and is the largest, most far reaching organization of its kind. The loans have no religious overtone. This is only about non-profit microbanking, not about converting the masses. I believe in this so strongly that I have started a personal web site to assist them at www.InvestingBack.com which is chock full of information.
How to Get Started
I recommend you invest your hard earned money to help people earn their way out of a life of poverty. They accomplish this by borrowing small amounts of money and paying it back. The default rate is lower than credit card defaults in the US. Every investor has received their principal investment back along with interest.
Invest a minimum of $1,000 for three years and earn a two percent interest rate. This is not a donation! It is an investment.
The money will be loaned, mostly to women, who will use this money ($100 borrowed on average) to devise a way to make an honest living, feed and clothe their family and provide basic healthcare.
I believe giving someone money because he or she is poor is not helping them as much as lending them money to create a business, get on their feet and keep earning money. I am investing in people helping themselves.
It truly is a wonderful life!
Your money is invested in the loan pool of the Micro Bank which invests it over and over again, helping many people. You are NOT placing one cent into administration or fund raising. Your investment touches many people (remember the movie scenario) helping individuals, families and touching whole communities. Yes, each investment into the loan portfolio makes a material difference!
My Quest
The promise I made to my family, who are all in on this, is not to stop talking, writing and cajoling people about micro banking until at least 99 additional families have invested alongside us. For those that know me well, the whisper number is 999. Together we can help a lot of families and repair a small piece of the world.
Invest Now!
http://www.investingback.com/ap/Invest/tabid/56/Default.aspx
The bottom Line
Too many funds are down for the year. A daily liquid savings account pays near zero. How many money markets are invested in level three junk bonds and are in trouble? Through this investment, you know who the lender is, where the money is going and all of the stats are a few links away.
I suggest investing more than the minimum and doing it with your family this weekend.
Make money and make a difference.
www.InvestingBack.com
Donate to the ValuePlays Project for KIVA
Dear Friends,
It is the season. The season of holidays and the season of requests. Mine is a request to invest. Invest in people and receive a return beyond dollars and cents. Below is my blog post from this morning. I hope you consider joining me and my family and the thousands of others trying to change and repair a small piece of the world.
Happy Holidays,
Andy
Earn Two Percent and Change the World
It is that time of year, the holidays. The old movies are on TV and one of my favorites is It’s a Wonderful Life. A key take-away of the movie is that everyone is connected. Our actions can have an impact on a global basis.
That same powerful, enabling concept can hold true in investing.
Now let’s move to US foreign policy. There is a hypothesis in some circles that our vast aid sometimes breeds resentment. The richest country in the world is providing a handout. Many people are proud and resent handouts. The old Chinese proverb goes: “give a person a fish, feed them for a day, teach a person to fish and feed them for a lifetime.” This philosophy of investing in individuals’ ability to make their own living can translate as follows:
The Investment Thesis
* Touch over 100 lives with a minimal investment of $1,000 (a three year lockup)
* Loan people the tiny amount they need to buy “a fishing pole;” we are not “teaching anyone to fish”
* Earn 2% in the process
The essence of my investment thesis combines interest income with touching over 100 lives over three years, empowering them to help themselves through an entrepreneurial endeavor. The concept of MicroBanking is not new. Unfortunately it has been perverted by some large banks. My family has had the privilege to meet and work with a not for profit organization. They charge the lowest amount of interest possible as a microleander and pay interest back to their investors.
The Bank was founded in 1975 by the World Council of Churches and is the largest, most far reaching organization of its kind. The loans have no religious overtone. This is only about non-profit microbanking, not about converting the masses. I believe in this so strongly that I have started a personal web site to assist them at www.InvestingBack.com which is chock full of information.
How to Get Started
I recommend you invest your hard earned money to help people earn their way out of a life of poverty. They accomplish this by borrowing small amounts of money and paying it back. The default rate is lower than credit card defaults in the US. Every investor has received their principal investment back along with interest.
Invest a minimum of $1,000 for three years and earn a two percent interest rate. This is not a donation! It is an investment.
The money will be loaned, mostly to women, who will use this money ($100 borrowed on average) to devise a way to make an honest living, feed and clothe their family and provide basic healthcare.
I believe giving someone money because he or she is poor is not helping them as much as lending them money to create a business, get on their feet and keep earning money. I am investing in people helping themselves.
It truly is a wonderful life!
Your money is invested in the loan pool of the Micro Bank which invests it over and over again, helping many people. You are NOT placing one cent into administration or fund raising. Your investment touches many people (remember the movie scenario) helping individuals, families and touching whole communities. Yes, each investment into the loan portfolio makes a material difference!
My Quest
The promise I made to my family, who are all in on this, is not to stop talking, writing and cajoling people about micro banking until at least 99 additional families have invested alongside us. For those that know me well, the whisper number is 999. Together we can help a lot of families and repair a small piece of the world.
Invest Now!
http://www.investingback.com/ap/Invest/tabid/56/Default.aspx
The bottom Line
Too many funds are down for the year. A daily liquid savings account pays near zero. How many money markets are invested in level three junk bonds and are in trouble? Through this investment, you know who the lender is, where the money is going and all of the stats are a few links away.
I suggest investing more than the minimum and doing it with your family this weekend.
Make money and make a difference.
www.InvestingBack.com
Donate to the ValuePlays Project for KIVA
Whitman on Ackman... Video
Here is the video from this mornings comments from Martin Whitman on Bill Ackman
Here is the video
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Here is the video
Donate to the ValuePlays Project for KIVA
Whitney Tilson Interviewed On a 360 Point Down Day
Whitney is interviewed on a 360 point down day for the Dow in October. If you are a value investor, this is what your thought process must be to be successful. Please view this. It is 9 minutes long and worth every second.
Here he talks about about McDonalds (MCD), Google (GOOG), Oil (USO), Microsoft (MSFT), EMC (EMC), Citigroup (C), Target (TGT) and financials.
Donate to the ValuePlays Project for KIVA
Here he talks about about McDonalds (MCD), Google (GOOG), Oil (USO), Microsoft (MSFT), EMC (EMC), Citigroup (C), Target (TGT) and financials.
Donate to the ValuePlays Project for KIVA
Friday's Links
Beer, Hat's off, Steroids, CEO melt down,
- So it is beer, not guns, that cause more murders...
- Got to give it this parent, this is how you make a point.
- Who performed best after the "juiced"?
- Sallie Mae's CEO melts down
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- So it is beer, not guns, that cause more murders...
- Got to give it this parent, this is how you make a point.
- Who performed best after the "juiced"?
- Sallie Mae's CEO melts down
Donate to the ValuePlays Project for KIVA
Marty Whitman Slams Bill Ackman
Whitman on CNBC just called Bill Ackman a "slick salesman who does not know much about insurance and certainly doesn't know much about restructuring secure debt"...WOW
I'll look for the video later...
Donate to the ValuePlays Project for KIVA
I'll look for the video later...
Donate to the ValuePlays Project for KIVA
Circuit City Approves Executive Awards for Lousy Performance
I guess we finally found out where the money Circuit City (CC) saved by "letting go" its highest paid and most experienced sales people earlier in the year is going, to the folks who made the ill-fated decision.
In an SEC filing, CC said the company's board approved "retention awards" of $1 million for executive vice presidents and $600,000 for senior vice presidents. The awards will be effective as of January 1, 2008, and vest over a three-year period. Circuit City said the awards were intended "to ensure the stability of the company's leadership team by providing an incentive" for the officers to stay.
Included in the payouts are Bruce H. Besanko, chief financial officer; George D. Clark Jr., executive vice president for multi-channel sales; and general counsel Reginald D. Hedgebeth.
CEO Philip Schoonover will not be participating in the retention plan, but would be able to receive long-term incentive awards under a 2003 stock incentive plan. Based on both the company's and the stocks performance, Schoonover gets nothing and in all reality will be fired before next year is out anyway.
One would think shareholders would be outraged by this. They have watched this team lose almost 75% of the company's market cap this year as shares have fallen from $22 to $6. If we go back a another year, the losses jump to 80% from $30 a share.
I guess the questions is, why would shareholders want to retain these guys? By almost every metric, Circuit City is worse off. Since FY 2005 ended its cash position has steadily deteriorated (from $1 billion to $400 million), debt has almost tripled and market share has plummeted. They did manage to raise the dividend this year from 16 cents a share from 7 cents in 2005 but given the company's precarious financial situation, even that decision is questionable.
Both Best Buy (BBY), Wal-Mart (WMT) and Sears Holdings (SHLD) all have reported strong electronics sales this Christmas. If Circuit City does not do the same, there ought to be a shareholder revolt.
It just seems that every time we hear from Circuit City, they leave us scratching our heads. At least we are not shareholders, they are probably pounding their heads on a table.
Donate to the ValuePlays Project for KIVA
In an SEC filing, CC said the company's board approved "retention awards" of $1 million for executive vice presidents and $600,000 for senior vice presidents. The awards will be effective as of January 1, 2008, and vest over a three-year period. Circuit City said the awards were intended "to ensure the stability of the company's leadership team by providing an incentive" for the officers to stay.
Included in the payouts are Bruce H. Besanko, chief financial officer; George D. Clark Jr., executive vice president for multi-channel sales; and general counsel Reginald D. Hedgebeth.
CEO Philip Schoonover will not be participating in the retention plan, but would be able to receive long-term incentive awards under a 2003 stock incentive plan. Based on both the company's and the stocks performance, Schoonover gets nothing and in all reality will be fired before next year is out anyway.
One would think shareholders would be outraged by this. They have watched this team lose almost 75% of the company's market cap this year as shares have fallen from $22 to $6. If we go back a another year, the losses jump to 80% from $30 a share.
I guess the questions is, why would shareholders want to retain these guys? By almost every metric, Circuit City is worse off. Since FY 2005 ended its cash position has steadily deteriorated (from $1 billion to $400 million), debt has almost tripled and market share has plummeted. They did manage to raise the dividend this year from 16 cents a share from 7 cents in 2005 but given the company's precarious financial situation, even that decision is questionable.
Both Best Buy (BBY), Wal-Mart (WMT) and Sears Holdings (SHLD) all have reported strong electronics sales this Christmas. If Circuit City does not do the same, there ought to be a shareholder revolt.
It just seems that every time we hear from Circuit City, they leave us scratching our heads. At least we are not shareholders, they are probably pounding their heads on a table.
Donate to the ValuePlays Project for KIVA
Starbucks Dairy Problem
Let's just say it before they do. Starbucks (SBUX) will not meet its earnings goal this year. Why?
Back in May, months before Starbucks actually acknowledged this, I spoke about milk prices and their effect on the company. What has happened since then?
The price of milk has increase of 23.2 percent through November. The nationwide average for a gallon of whole milk is $3.80, according to the U.S. Department of Agriculture. That, by the way smashes the price of everyone largest gripe, the nationwide average for a gallon of unleaded gasoline which stands at $2.99.
Now, Starbucks actually came out in late summer and admitted diary prices were hurting them. What was the average price per gallon in May? $3.38, a full 13% lower than current levels.
Starbucks responded to these increases by raising prices, a move I panned then and a move that received the expected response, a dramatic decline in store traffic.
How do they expect to reach their lofty expectations in 2008? When facing lower store traffic and steadily increasing costs, another price increase for the company is just not possible.
With shares trading at levels not seen since early 2004, it would seem investors feel the same way...
Donate to the ValuePlays Project for KIVA
Back in May, months before Starbucks actually acknowledged this, I spoke about milk prices and their effect on the company. What has happened since then?
The price of milk has increase of 23.2 percent through November. The nationwide average for a gallon of whole milk is $3.80, according to the U.S. Department of Agriculture. That, by the way smashes the price of everyone largest gripe, the nationwide average for a gallon of unleaded gasoline which stands at $2.99.
Now, Starbucks actually came out in late summer and admitted diary prices were hurting them. What was the average price per gallon in May? $3.38, a full 13% lower than current levels.
Starbucks responded to these increases by raising prices, a move I panned then and a move that received the expected response, a dramatic decline in store traffic.
How do they expect to reach their lofty expectations in 2008? When facing lower store traffic and steadily increasing costs, another price increase for the company is just not possible.
With shares trading at levels not seen since early 2004, it would seem investors feel the same way...
Donate to the ValuePlays Project for KIVA
Friday's Upgrades and Downgrades
UPGRADES
OmniVision OVTI AmTech Research Sell » Neutral
Pier 1 Imports PIR Morgan Keegan Underperform » Mkt Perform
SMSC SMSC Needham & Co Buy » Strong Buy
Smart Modular Tech SMOD Needham & Co Hold » Buy
Park Electrochem PKE Needham & Co Hold » Buy
Petrobras Brasileiro PBR Citigroup Hold » Buy
Darden Restaurants DRI Morgan Keegan Mkt Perform » Outperform
RadioShack RSH Banc of America Sec Sell » Neutral
Nationwide NFS Banc of America Sec Sell » Neutral
CBRL Group CBRL Morgan Keegan Mkt Perform » Outperform
Dot Hill Systems HILL Friedman Billings Mkt Perform » Outperform
MasterCard MA Bear Stearns Peer Perform » Outperform
Heartland Payment Systems HPY Robert W. Baird Neutral » Outperform
Wynn Resorts WYNN UBS Sell » Neutral
Buckeye Tech BKI UBS Sell » Buy
Holly HOC UBS Neutral » Buy
Hancock Holding HBHC Keefe Bruyette Mkt Perform » Outperform
DOWNGRADES
Kinder Morgan Prtnrs KMP SMH Capital Buy » Neutral
BB&T Corp BBT Fox Pitt In Line » Underperform
Sterling Banc SBIB Fox Pitt Outperform » In Line
FBR Capital Markets FBCM Jefferies & Co Buy » Hold
Altus Pharma ALTU Collins Stewart Buy » Market Perform
priceline.com PCLN Stifel Nicolaus Buy » Hold
Orbitz OWW Stifel Nicolaus Buy » Hold
Expedia EXPE Stifel Nicolaus Buy » Hold
Hess HES Citigroup Buy » Hold
VeraSun Energy VSE Friedman Billings Outperform » Mkt Perform
Atlas America ATLS Friedman Billings Outperform » Mkt Perform
Altus Pharma ALTU Wachovia Outperform » Mkt Perform
LDK Solar LDK Piper Jaffray Neutral » Sell
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Thursday, December 20, 2007
"Fast Money" for Friday
Friday's Picks
Jeff Macke recommends getting long Disney (DIS). Open $32.33
Karen Finerman likes ValueClick (VCLK).Open $22.63
Pete Najarian prefers Microsoft (MSFT).Open $35.52
Thursday's Results
Jeff Macke likes Disney (DIS). Open $32.26 Close $32.33 GAIN
Guy Adami prefers Sallie Mae (SLM). Open $22.89 Close $20.53 LOSS
Tim Seymour recommends Cameco (CCJ). Open $36.70 Close $38.59 GAIN
Pete Najarian says Morgan Stanley (MS) is a buy. Open $50.08 Close $51.37 GAIN
Results since 6/21/2007:
Guy Adami= 57-45 = 60%
John Najarian= 13-4 = 76%
Jeff Macke= 59-40 = 64%
Pete Najarian= 47-40 = 55%
Tim Seymore= 7-7 = 50%
Karen Finerman= 37-30 = 55%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Donate to the ValuePlays Project for KIVA
Dr. Seuss on the CDO Debacle
Whitney Tilson sent this to me earlier today. It is great...
Read it here:
The author is unknown, if anyone does know who it is, let me know, they deserve credit.
Donate to the ValuePlays Project for KIVA
Read it here:
The author is unknown, if anyone does know who it is, let me know, they deserve credit.
Donate to the ValuePlays Project for KIVA
Thursday's 52 Week Low's
TRID Trident Microsystems Inc 5.79
TKG Telkom Sa Ltd 78.04
TIN Temple-Inland Inc 30.42
TGT Target Corp 50.10
OMX Officemax Inc Del 21.10
OLP One Liberty Propertie ... 17.75
OFSI Omni Finl Svcs Inc 4.29
ODP Office Depot, Inc 13.39
OC Owens Corning New 20.25
MBI MBIA Inc 20.97
MAIR Mair Holdings Inc 4.38
M Macy's, Inc. 26.20
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Thursday's Links
Switch cell phone carriers, Gasparino, Bonuses, Magna Carta
- It will not be as expensive to switch carriers soon
- This is just funny.
- This is the very least they could do, considering what they have done to shareholders.
- Of all the things to do with your money, this is just one of the best.
Donate to the ValuePlays Project for KIVA
- It will not be as expensive to switch carriers soon
- This is just funny.
- This is the very least they could do, considering what they have done to shareholders.
- Of all the things to do with your money, this is just one of the best.
Donate to the ValuePlays Project for KIVA
Google Calendar and Blackberries Now Sync
Google (GOOG) and Research in Motion (RIMM) have solved the problem stopping most Blackberry users from using Google calendar.
Blackberry users may now download a "sync" function for their devices that syncs the calendar on their Blackberries with their online Google calendar.
View it here:
Donate to the ValuePlays Project for KIVA
Blackberry users may now download a "sync" function for their devices that syncs the calendar on their Blackberries with their online Google calendar.
View it here:
Donate to the ValuePlays Project for KIVA
Inflation Up: Bernanke Will Sit Tight
Much has been said about Bernanke & Co. the past four months. Despite it all, this is the truest test of his Chairmanship to date.
On Friday consumer inflation numbers were released. The CPI jumped 0.8% in November, crushing October's 0.3% rise. It was largest increase since September 2005. The core CPI, excluding volatile food and energy prices, advanced 0.3%, it biggest rise since January. The results passed Wall Street forecasts of a 0.6% headline CPI increase and 0.2% core gain.
Now, IF the Fed is truly in a neutral stance and is not being told what to do by the markets, then they CANNOT cut rates again in January, barring a dramatic deterioration of the economic landscape.
Recent numbers portray an economy that is growing faster than expectation with jobs and output ahead of expectations. That being said inflation now becomes the primary concern for all and it is getting to the point it is a problem.
Energy prices it seem have finally crept into the picture outside of our gas tanks and heating systems. Now that they have, they cannot be ignored.
Should Bernanke opt to cut rates in the face of the current situation is January, all creditability will be lost. It will then be clear he is taking his direction from the markets which ALWAYS want lower rates, whether is is the right thing or not. That being said we will have to update this again as we get closer to decision day but it is unlikely recent numbers are aberrations.
Investors ought to get in the right frame of mind going into the new year...
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On Friday consumer inflation numbers were released. The CPI jumped 0.8% in November, crushing October's 0.3% rise. It was largest increase since September 2005. The core CPI, excluding volatile food and energy prices, advanced 0.3%, it biggest rise since January. The results passed Wall Street forecasts of a 0.6% headline CPI increase and 0.2% core gain.
Now, IF the Fed is truly in a neutral stance and is not being told what to do by the markets, then they CANNOT cut rates again in January, barring a dramatic deterioration of the economic landscape.
Recent numbers portray an economy that is growing faster than expectation with jobs and output ahead of expectations. That being said inflation now becomes the primary concern for all and it is getting to the point it is a problem.
Energy prices it seem have finally crept into the picture outside of our gas tanks and heating systems. Now that they have, they cannot be ignored.
Should Bernanke opt to cut rates in the face of the current situation is January, all creditability will be lost. It will then be clear he is taking his direction from the markets which ALWAYS want lower rates, whether is is the right thing or not. That being said we will have to update this again as we get closer to decision day but it is unlikely recent numbers are aberrations.
Investors ought to get in the right frame of mind going into the new year...
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Sprint's New CEO: So Far So Good
Yeah, I know it has only been one day, but at least Sprint's (S) new CEO knows what the company's #1 problem is.
New CEO Dan Hesse said his first priority will be to tackle the customer-service problems and customer defections that have plagued the company in the past year saying, "I read the magazines and Consumer Reports like everyone else." Good
An internal Sprint document recently disclosed described the company's "inferior results" in customer service. It pointed out that Sprint resolved just 53% of problems on the first call, compared with 71% for Deutsche Telekom AG's T-Mobile USA despite Sprint having nearly 3X's as many customer service reps.
Hesse was the pioneer of AT&T's (T) "Digital One Rate" plan, which introduced flat-rate pricing to U.S. wireless consumers in the late 1990s. Prior the "One Rate" plan, most Americans were accustomed to paying for wireless service by the minute, incurring extra charges for roaming or long-distance calling. In short, they revolutionized the cell phone industry. Hess has the experience and a proven track record, if he complete step two below, he has a chance at success.
The second thing he can do is chop heads. Sprint and Nextel have never merged on a corporate level and until they do, real success will be elusive. I have no idea whose fault it is and two full years after the merger was completed it really no longer matters. Anyone from either side who stands in the way, see ya'.
Fortunately for potential shareholders, both of these steps will take time to accomplish. The evidence that they are being implemented will become apparent before their results show up in earnings and that gives those who wish to buy shares plenty of time to wait.
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New CEO Dan Hesse said his first priority will be to tackle the customer-service problems and customer defections that have plagued the company in the past year saying, "I read the magazines and Consumer Reports like everyone else." Good
An internal Sprint document recently disclosed described the company's "inferior results" in customer service. It pointed out that Sprint resolved just 53% of problems on the first call, compared with 71% for Deutsche Telekom AG's T-Mobile USA despite Sprint having nearly 3X's as many customer service reps.
Hesse was the pioneer of AT&T's (T) "Digital One Rate" plan, which introduced flat-rate pricing to U.S. wireless consumers in the late 1990s. Prior the "One Rate" plan, most Americans were accustomed to paying for wireless service by the minute, incurring extra charges for roaming or long-distance calling. In short, they revolutionized the cell phone industry. Hess has the experience and a proven track record, if he complete step two below, he has a chance at success.
The second thing he can do is chop heads. Sprint and Nextel have never merged on a corporate level and until they do, real success will be elusive. I have no idea whose fault it is and two full years after the merger was completed it really no longer matters. Anyone from either side who stands in the way, see ya'.
Fortunately for potential shareholders, both of these steps will take time to accomplish. The evidence that they are being implemented will become apparent before their results show up in earnings and that gives those who wish to buy shares plenty of time to wait.
Donate to the ValuePlays Project for KIVA
Thursday's Upgrades and Downgrades
Here is the list:
UPGRADES
PS Business Parks PSB KeyBanc Capital Mkts Underweight » Hold
Home Prop of NY HME KeyBanc Capital Mkts Hold » Buy
Watsco WSO BB&T Capital Mkts Hold » Buy
Buckeye Partners BPL SMH Capital Sell » Neutral
Applied Signal APSG BB&T Capital Mkts Underweight » Hold
Verint Systems VRNT Lehman Brothers Equal-weight » Overweight
American Medical AMMD Piper Jaffray Neutral » Buy
Corel CREL Piper Jaffray Neutral » Buy
GSI Commerce GSIC Piper Jaffray Neutral » Buy
Take-Two TTWO Citigroup Hold » Buy
NYMEX NMX Deutsche Securities Hold » Buy
Amdocs DOX Cantor Fitzgerald Hold » Buy
Celera Genomics CRA JMP Securities Mkt Perform » Mkt Outperform
Blue Nile NILE Citigroup Hold » Buy
Agrium AGU CIBC Wrld Mkts Sector Perform » Sector Outperform
Maxim Integrated MXIM Citigroup Hold » Buy
Plantronics PLT Robert W. Baird Neutral » Outperform
DOWNGRADES
Kingsway Fin KFS Ferris Baker Watts Neutral » Sell
Force Protection FRPT Dougherty & Company Buy » Neutral
United Dominion UDR KeyBanc Capital Mkts Buy » Hold
SL Green Rlty SLG KeyBanc Capital Mkts Buy » Hold
Post Properties PPS KeyBanc Capital Mkts Hold » Underweight
First Potomac Realty FPO KeyBanc Capital Mkts Buy » Hold
Mack-Cali Realty CLI KeyBanc Capital Mkts Buy » Hold
AvalonBay AVB KeyBanc Capital Mkts Hold » Underweight
Diebold DBD Wedbush Morgan Buy » Hold
Darden Restaurants DRI Banc of America Sec Buy » Neutral
Tribune TRB Deutsche Securities Buy » Hold
Tecumseh Prods TECUA Robert W. Baird Outperform » Neutral
Golden Telecom GLDN JP Morgan Overweight » Neutral
BP BP JP Morgan Overweight » Neutral
Grant Prideco GRP Banc of America Sec Buy » Neutral
Exelon EXC Jefferies & Co Buy » Hold
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UPGRADES
PS Business Parks PSB KeyBanc Capital Mkts Underweight » Hold
Home Prop of NY HME KeyBanc Capital Mkts Hold » Buy
Watsco WSO BB&T Capital Mkts Hold » Buy
Buckeye Partners BPL SMH Capital Sell » Neutral
Applied Signal APSG BB&T Capital Mkts Underweight » Hold
Verint Systems VRNT Lehman Brothers Equal-weight » Overweight
American Medical AMMD Piper Jaffray Neutral » Buy
Corel CREL Piper Jaffray Neutral » Buy
GSI Commerce GSIC Piper Jaffray Neutral » Buy
Take-Two TTWO Citigroup Hold » Buy
NYMEX NMX Deutsche Securities Hold » Buy
Amdocs DOX Cantor Fitzgerald Hold » Buy
Celera Genomics CRA JMP Securities Mkt Perform » Mkt Outperform
Blue Nile NILE Citigroup Hold » Buy
Agrium AGU CIBC Wrld Mkts Sector Perform » Sector Outperform
Maxim Integrated MXIM Citigroup Hold » Buy
Plantronics PLT Robert W. Baird Neutral » Outperform
DOWNGRADES
Kingsway Fin KFS Ferris Baker Watts Neutral » Sell
Force Protection FRPT Dougherty & Company Buy » Neutral
United Dominion UDR KeyBanc Capital Mkts Buy » Hold
SL Green Rlty SLG KeyBanc Capital Mkts Buy » Hold
Post Properties PPS KeyBanc Capital Mkts Hold » Underweight
First Potomac Realty FPO KeyBanc Capital Mkts Buy » Hold
Mack-Cali Realty CLI KeyBanc Capital Mkts Buy » Hold
AvalonBay AVB KeyBanc Capital Mkts Hold » Underweight
Diebold DBD Wedbush Morgan Buy » Hold
Darden Restaurants DRI Banc of America Sec Buy » Neutral
Tribune TRB Deutsche Securities Buy » Hold
Tecumseh Prods TECUA Robert W. Baird Outperform » Neutral
Golden Telecom GLDN JP Morgan Overweight » Neutral
BP BP JP Morgan Overweight » Neutral
Grant Prideco GRP Banc of America Sec Buy » Neutral
Exelon EXC Jefferies & Co Buy » Hold
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Wednesday, December 19, 2007
"Fast Money" for Thursday
Thursday's Picks
Jeff Macke likes Disney (DIS). Open $32.26
Guy Adami prefers Sallie Mae (SLM). Open $22.89
Tim Seymour recommends Cameco (CCJ). Open $36.70
Pete Najarian says Morgan Stanley (MS) is a buy. Open $50.08
Wednesday's Picks:
Jeff Macke recommends Best Buy (BBY).Open $51.62 Close $51.20 LOSS
Guy Adami likes Oracle (ORCL).Open $21.25 Close $20.76 LOSS
Pete Najarian prefers Cypress (CY). Open $34.83 Close $35.61 GAIN
Results since 6/21/2007:
Guy Adami= 56-45 = 59%
John Najarian= 13-4 = 76%
Jeff Macke= 58-40 = 62%
Pete Najarian= 46-40 = 54%
Tim Seymore= 6-7 = 57%
Karen Finerman= 37-30 = 55%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
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Wednesday's 52 Week low's
SBUX Starbucks Corp 20.04
SAVB The Savannah Bancorp Inc 19.25
S Sprint Nextel Corporation 13.50
RL Polo Ralph Lauren Corp 63.12
M Macy's, Inc. 26.67
LCI Lannett Company Inc 3.27
KSS Kohl's Corporation 45.70
IHP IHOP Corp 38.22
IHG Intercontinental Htls ... 17.54
DD E.I. du Pont de Nemou ... 42.69
DBD Diebold, Incorporated 30.82
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Whitney Tilson on Housing
I become a bigger and bigger fan of Whitney every time I hear or read his thoughts. Here he discusses housing inventory.
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Donate to the ValuePlays Project for KIVA
Lead Paint Litigation Update
Here are the notable events forthcoming for Sherwin Williams (SHW) and NL Industries (NL)
- Rhode Island Supreme Court schedule finally released
- Responses the RI "lead free" abatement plan filed.
Short list? Sure is....
Essentially that is what lead paint litigation has been reduced to. When you throw into the mix the recent RI Supreme Court lead paint related ruling, one has to think that these dates are now reduced to the day "this stuff is finally behind us" not "hopefully we prevail".
It what has become a colossal waste of time, the lead paint litigation saga is virtually over. The true irony here? The only company that will actually contribute to any abatement will be DuPont (DD), who settled with RI to avoid what at the time was thought to be a more costly legal outcome. Now, before we feel sorry for DuPont, we need to remember that both they and RI AG Patrick Lynch did their best to assure this money never "went to the children" as it was donated to Boston Hospitals and a Washington DC DuPont controlled charity.
One can only assume recent public filing in court by the defendants lead to the recent "release" of funds to the state.
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- Rhode Island Supreme Court schedule finally released
- Responses the RI "lead free" abatement plan filed.
Short list? Sure is....
Essentially that is what lead paint litigation has been reduced to. When you throw into the mix the recent RI Supreme Court lead paint related ruling, one has to think that these dates are now reduced to the day "this stuff is finally behind us" not "hopefully we prevail".
It what has become a colossal waste of time, the lead paint litigation saga is virtually over. The true irony here? The only company that will actually contribute to any abatement will be DuPont (DD), who settled with RI to avoid what at the time was thought to be a more costly legal outcome. Now, before we feel sorry for DuPont, we need to remember that both they and RI AG Patrick Lynch did their best to assure this money never "went to the children" as it was donated to Boston Hospitals and a Washington DC DuPont controlled charity.
One can only assume recent public filing in court by the defendants lead to the recent "release" of funds to the state.
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Wednesday's Links
Blogystyle, Best Deals, Raising emotionally healthy kids, Bosses
- What do Jessica Simpson and investing have in common?
- What was the best deal of 2007?
- Parents, check this out
- Dumb bosses
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- What do Jessica Simpson and investing have in common?
- What was the best deal of 2007?
- Parents, check this out
- Dumb bosses
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Airlines' Questionable Move
Airlines are making a move to fill pilot ranks that to be honest, really do not make me want to run out and jump into a plane. As a matter of fact, they make me want to avoid them.
Faced with competition for pilots from overseas carriers and private companies, airlines including American Airlines (AMR), United (UAUA) and US Airways (LCC) have announced several measures to address the shortage.
*They are lowering the flight hour requirements for pilots from 1500 to 500, with only 50 of those hours in multi-engine planes.
*Raising the mandatory retirement age for pilots from 60 to 65.
*Partnering with flight schools to offer “accelerated” educational programs.
Now, correct me if I am wrong, but aren’t the most likely people to get into an accident in an automobile the young & inexperienced and the elderly? Is it really the best move to place those very demographics behind the wheel of a DC-10? Perhaps a better move to become more competitive when hiring would be to raise the starting salary from the $24,000 a year it sits at now? Essentially there is not really a shortage of pilots, just pilots that will work for that money when better money is available elsewhere.
When CVS (CVS) needed additional pharmacists in order to accomplish its expansion plan, they began a program that paid for schooling for applicants in return for a 5 year commitment after graduation.
Is there anything stopping airlines from enacting a similar program?
Would you feel safe if CVS lowered the standards for those dispensing your medicine?
Admittedly the younger hires will be co-pilots, not pilots out of the gate but as the airlines continue to lower the experience requirement, these folks will eventually find themselves behind the controls with potentially thousands of hours less flying time than their predecessors had.
If we had a shortage of heart surgeons, would any of us be rushing to get in line for an operation from a doctor who was allowed to graduate with a GPA below 2.0 or only required to have 1 year rather than 3 of residency? Me either.
The move to raise the retirement age alone is estimated to net 1,500 additional pilots in the first year alone. That means 1500 people who last year and this year were considered to have a skill set that the unstoppable aging process would have deteriorated to the point that it was no longer safe to have them pilot airlines.
Now, because we need more folks, we can just move the needle? I am sure the vast majority of these pilots, and let’s not forget, these folks will be pilots, not co-pilots, who will be just fine flying. But, if say 15 of them aren’t, isn’t that a huge problem?
Lowering the standard to accomplish a goal is never the best choice, more often than not the results can be tragic…
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Faced with competition for pilots from overseas carriers and private companies, airlines including American Airlines (AMR), United (UAUA) and US Airways (LCC) have announced several measures to address the shortage.
*They are lowering the flight hour requirements for pilots from 1500 to 500, with only 50 of those hours in multi-engine planes.
*Raising the mandatory retirement age for pilots from 60 to 65.
*Partnering with flight schools to offer “accelerated” educational programs.
Now, correct me if I am wrong, but aren’t the most likely people to get into an accident in an automobile the young & inexperienced and the elderly? Is it really the best move to place those very demographics behind the wheel of a DC-10? Perhaps a better move to become more competitive when hiring would be to raise the starting salary from the $24,000 a year it sits at now? Essentially there is not really a shortage of pilots, just pilots that will work for that money when better money is available elsewhere.
When CVS (CVS) needed additional pharmacists in order to accomplish its expansion plan, they began a program that paid for schooling for applicants in return for a 5 year commitment after graduation.
Is there anything stopping airlines from enacting a similar program?
Would you feel safe if CVS lowered the standards for those dispensing your medicine?
Admittedly the younger hires will be co-pilots, not pilots out of the gate but as the airlines continue to lower the experience requirement, these folks will eventually find themselves behind the controls with potentially thousands of hours less flying time than their predecessors had.
If we had a shortage of heart surgeons, would any of us be rushing to get in line for an operation from a doctor who was allowed to graduate with a GPA below 2.0 or only required to have 1 year rather than 3 of residency? Me either.
The move to raise the retirement age alone is estimated to net 1,500 additional pilots in the first year alone. That means 1500 people who last year and this year were considered to have a skill set that the unstoppable aging process would have deteriorated to the point that it was no longer safe to have them pilot airlines.
Now, because we need more folks, we can just move the needle? I am sure the vast majority of these pilots, and let’s not forget, these folks will be pilots, not co-pilots, who will be just fine flying. But, if say 15 of them aren’t, isn’t that a huge problem?
Lowering the standard to accomplish a goal is never the best choice, more often than not the results can be tragic…
Donate to the ValuePlays Project for KIVA
International Tariffs Cut: ADM to Profit.
What do Turkey, The European Union, China, Russia, Mexico, Morocco, Azerbaijan, Bosnia, Egypt, Philippines, Taiwan, Bangladesh, India, Nigeria, Ghana and Peru all have in common?
The have all dramatically slashed tariffs on food in recent months. Turkey, for instance announced a reduction on wheat tarrifs from 130% to 8%, corn from 130% to 35% and scrapped the previous 100% duty for barley.
This follows moves by Morocco cutting its wheat import tariff from 130% to 2.5%, China cutting its soyabean import tariff from 35 to 1%, Russia cutting its import tariff for soya oil and rapeseed oil from 15% to 5% and Nigeria cutting its rice import tax from 100% to just 2.7%.
The cuts come as cereals and soyabean prices have risen to new highs and a warning by the US Department of Agriculture recently that insatiable demand from emerging countries is denting inventories dramatically.
As an investor, who benefits? Food processors. The top choices will be Archer Daniels Midland (ADM) with processing, distribution and trading operations in over 35 countries and privately held Cargill. As demand rises exponentially throughout the world, ADM's distribution and trading segments are poised to reap the benefits.
The virtual elimination of tariffs will only serve to increase the demand as prices for imports of the affected products drop by half in most cases. Aside from the demand increase, the moves will also increase traffic in the goods. As these goods are moved from producers to end-user, ADM profits.
Between the recently passed energy bill and this news, ADM's major segments are both poised for prolonged growth.
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The have all dramatically slashed tariffs on food in recent months. Turkey, for instance announced a reduction on wheat tarrifs from 130% to 8%, corn from 130% to 35% and scrapped the previous 100% duty for barley.
This follows moves by Morocco cutting its wheat import tariff from 130% to 2.5%, China cutting its soyabean import tariff from 35 to 1%, Russia cutting its import tariff for soya oil and rapeseed oil from 15% to 5% and Nigeria cutting its rice import tax from 100% to just 2.7%.
The cuts come as cereals and soyabean prices have risen to new highs and a warning by the US Department of Agriculture recently that insatiable demand from emerging countries is denting inventories dramatically.
As an investor, who benefits? Food processors. The top choices will be Archer Daniels Midland (ADM) with processing, distribution and trading operations in over 35 countries and privately held Cargill. As demand rises exponentially throughout the world, ADM's distribution and trading segments are poised to reap the benefits.
The virtual elimination of tariffs will only serve to increase the demand as prices for imports of the affected products drop by half in most cases. Aside from the demand increase, the moves will also increase traffic in the goods. As these goods are moved from producers to end-user, ADM profits.
Between the recently passed energy bill and this news, ADM's major segments are both poised for prolonged growth.
Donate to the ValuePlays Project for KIVA
Wednesday's Upgrades and Downgrades
UPGRADES
Prospect Energy PSEC
Quicksilver Resrcs KWK Canaccord Adams Hold » Buy
Ceragon CRNT Ferris Baker Watts Neutral » Buy
Ingersoll-Rand IR Deutsche Securities Hold » Buy
Adobe Systems ADBE Deutsche Securities Hold » Buy
Symantec SYMC Bear Stearns Underperform » Peer Perform
DaVita DVA Oppenheimer Neutral » Buy
Intl Paper IP Credit Suisse Neutral » Outperform
Embarq EQ JP Morgan Neutral » Overweight
Fairport Comms FRP JP Morgan Underweight » Neutral
Occidental Petro OXY Friedman Billings Underperform » Mkt Perform
Royal Gold RGLD HSBC Securities Neutral » Overweight
Equity Res EQR Lehman Brothers Equal-weight » Overweight
Cirrus Logic CRUS Jefferies & Co Hold » Buy
Atwood Oceanics ATW Banc of
Gulfmark Offshore GLF Banc of
DOWNGRADES
Adobe Systems ADBE
ACI Worldwide ACIW Janney Mntgmy Scott Buy » Neutral
Starent Networks STAR JP Morgan Overweight » Neutral
Tempur-Pedic TPX William Blair Outperform » Mkt Perform
Embraer SA ERJ Credit Suisse Outperform » Neutral
Carrier Access CACS Needham & Co Buy » Hold
Asta Funding ASFI Kaufman Bros Buy » Hold
TransTech TT KeyBanc Capital Mkts Aggressive Buy » Hold
AvalonBay AVB Robert W. Baird Outperform » Neutral
Associated Estates AEC Robert W. Baird Outperform » Neutral
Trident Microsystems TRID Roth Capital Buy » Hold
Zymogenetics ZGEN Banc of
Nestle NSRGY UBS Buy » Neutral
Lincare LNCR Oppenheimer Buy » Neutral
Windstream WIN JP Morgan Neutral » Underweight
Cousins Prop CUZ Lehman Brothers Overweight » Equal-weight
Allianz AG AZ Lehman Brothers Overweight » Equal-weight
Mack-Cali Realty CLI Lehman Brothers Equal-weight » Underweight
TransTech TT Lehman Brothers Overweight » Equal-weight
Grant Prideco GRP Citigroup Buy » Hold
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Tuesday, December 18, 2007
"Fast Money" for Wednesday
Wednesday's Picks:
Jeff Macke recommends Best Buy (BBY).Open $51.62
Guy Adami likes Oracle (ORCL).Open $21.25
Pete Najarian prefers Cypress (CY). Open $34.83
Tuesday's Results
Guy Adami prefers Holly Corp (HOC) as a refiner play.Open $50.20 Close $51.13 GAIN
Karen Finerman likes kidney dialysis provider DaVita (DVA). Open $55.72 Close $56.99 GAIN
Pete Najarian thinks ASML Holdings (ASML) is a short. Open $33.05 Close $32.87 GAIN
Results since 6/21/2007:
Guy Adami= 56-44 = 59%
John Najarian= 13-4 = 76%
Jeff Macke= 58-39 = 62%
Pete Najarian= 45-40 = 53%
Tim Seymore= 6-7 = 57%
Karen Finerman= 37-30 = 55%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
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A Masochistic Market Sells Goldman's Great Quarter
Goldman Sachs (GS) had it usual fantastic quarter and appears to be the only financial institution that will walk unscathed through the credit crisis, and shares fall.
Goldman announced:
* They will repurchase over 15% of outstanding shares
* Announced CDO exposure of only $400 million
* Investment banking revenues jumped 47% from last year to $1.97 billion,
* Q4 net earnings of $3.166 billion or $7.01 per share vs $6.59 last year.
* Earned $24.73 a share on revenue of $11.407 billion, a 26% increase in 2007.
What did the market seize on today? David Viniar, its chief financial officer said "The markets are pretty dislocated. In the near term we are more cautious, not pessimistic, just cautious."
And for that, $4.4 billion was shaved off Goldman's market cap at one point today. Let's not forget that Goldman trades at a scorching PE of 7 times trailing earnings. I would say the market not only has "pessimistic" baked into the price, they have "disastrous" factored in it.
It is ok, Goldman at or under $200 is a screaming buy and those of us who can see through the fear are getting this institution at dollar store prices. This is how negative the markets are on anything financial, even good news is sold.
As earnings news come out from the other financials over the next few weeks like Merrill (MER) and Lehman (LEH), people will actually realize just how good this quarter was.
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Goldman announced:
* They will repurchase over 15% of outstanding shares
* Announced CDO exposure of only $400 million
* Investment banking revenues jumped 47% from last year to $1.97 billion,
* Q4 net earnings of $3.166 billion or $7.01 per share vs $6.59 last year.
* Earned $24.73 a share on revenue of $11.407 billion, a 26% increase in 2007.
What did the market seize on today? David Viniar, its chief financial officer said "The markets are pretty dislocated. In the near term we are more cautious, not pessimistic, just cautious."
And for that, $4.4 billion was shaved off Goldman's market cap at one point today. Let's not forget that Goldman trades at a scorching PE of 7 times trailing earnings. I would say the market not only has "pessimistic" baked into the price, they have "disastrous" factored in it.
It is ok, Goldman at or under $200 is a screaming buy and those of us who can see through the fear are getting this institution at dollar store prices. This is how negative the markets are on anything financial, even good news is sold.
As earnings news come out from the other financials over the next few weeks like Merrill (MER) and Lehman (LEH), people will actually realize just how good this quarter was.
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Tuesday's 52 Week Low's
WM Washington Mutual Inc 14.77
S Sprint Nextel Corporation 13.82
ODP Office Depot, Inc 13.95
MU Micron Technology Inc 7.79
MSO Martha Stewart Living ... 9.47
DD E.I. du Pont de Nemou ... 43.27
DAVE Famous Dave's of Amer ... 12.49
DAL Delta Air Lines Inc Del 14.24
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Tuesday's Links
Blogging Tips, Selling Organs, More Senate Incompetence, Kids and Money
- Here are ten blogging tips from the original blogger.
- If we need organs so bad, why not let people sell them upon their death. Why do they have to be donated? It would be a sure way to get more in circulation.
- OK, If we are in the current housing crisis due to loose lending standards, how in the hell will "loosening" them more help?
- One of the most important things a parent can do is teach their kids about money. This is a must read.
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- Here are ten blogging tips from the original blogger.
- If we need organs so bad, why not let people sell them upon their death. Why do they have to be donated? It would be a sure way to get more in circulation.
- OK, If we are in the current housing crisis due to loose lending standards, how in the hell will "loosening" them more help?
- One of the most important things a parent can do is teach their kids about money. This is a must read.
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Sprint Service Down
Limited blogging today due to Sprint's netwok being down ün the area
Wonderful
Todd
--
Sent via Empower HTML Mail Viewer For BlackBerry
Wonderful
Todd
--
Sent via Empower HTML Mail Viewer For BlackBerry
Todd Sullivan
Sent from my BlackBerry® wireless device
Citigroup Follows the Old Testament
"If any mischief follow, then thou shalt give life for life, eye for eye, tooth for tooth, hand for hand, foot for foot, burning for burning, wound for wound, stripe for stripe." Exodus 21:23,24,25
Citigroup (C) on Monday enacted its own revenge on the industry that has downgraded, maligned and otherwise dismissed it the past three months.
Cutting a swath through the sector Citi:
*Downgraded three stocks to "Sell" from "Hold" -- Comerica (CMA), M&T Bank (MTB) and US Bancorp (USB).
*Cut price targets on Dallas-based Comerica to $35 from $53, M&T's to $78 from $113 and US Bancorp to $29 from $35.
*Reduced ratings to "Hold" from "Buy" on Bank of America (BAC), JPMorgan (JPM), Wachovia (WB), Wells Fargo (WFC), PNC Financial (PNC) and First Horizon National (FHN).
* Lowered price targets on Bank of America, to $42 from $58, JPMorgan's to $46 from $57, Wachovia to $39 from $50, PNC to $65 from $80, Wells Fargo's to $31 from $33, First Horizon's to $20 from $29, Fifth Third Bancorp (FITB) to $25 from $33. Keycorp (KEY) to $23 from $34, Suntrust Banks (STI)to $63 from $78 and finally National City (NCC) to $15 from $25.
As a matter of fact, Citi hit virtually every major bank except, well, Citi.
The banks play this game with each other and for that reason, anytime the upgrade or downgrade each other it needs to be looked at very skeptically.
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Citigroup (C) on Monday enacted its own revenge on the industry that has downgraded, maligned and otherwise dismissed it the past three months.
Cutting a swath through the sector Citi:
*Downgraded three stocks to "Sell" from "Hold" -- Comerica (CMA), M&T Bank (MTB) and US Bancorp (USB).
*Cut price targets on Dallas-based Comerica to $35 from $53, M&T's to $78 from $113 and US Bancorp to $29 from $35.
*Reduced ratings to "Hold" from "Buy" on Bank of America (BAC), JPMorgan (JPM), Wachovia (WB), Wells Fargo (WFC), PNC Financial (PNC) and First Horizon National (FHN).
* Lowered price targets on Bank of America, to $42 from $58, JPMorgan's to $46 from $57, Wachovia to $39 from $50, PNC to $65 from $80, Wells Fargo's to $31 from $33, First Horizon's to $20 from $29, Fifth Third Bancorp (FITB) to $25 from $33. Keycorp (KEY) to $23 from $34, Suntrust Banks (STI)to $63 from $78 and finally National City (NCC) to $15 from $25.
As a matter of fact, Citi hit virtually every major bank except, well, Citi.
The banks play this game with each other and for that reason, anytime the upgrade or downgrade each other it needs to be looked at very skeptically.
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MFP Investors Micheal Price on Sears Holdings
Mr. Price talks to Bloomberg about his largest investment, Sears Holdings (SHLD)
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Tuesday's Upgrades and Downgrades
UPGRADES
GSI Commerce GSIC Needham & Co Hold » Buy
Euronet EEFT Citigroup Sell » Hold
ADTRAN ADTN Brean Murray Hold » Buy
Teekay LNG Partners TGP Friedman Billings Mkt Perform » Outperform
AMBAC Fincl ABK Friedman Billings Mkt Perform » Outperform
Delek US Holdings DK Citigroup Hold » Buy
Kroger KR Credit Suisse Neutral » Outperform
Tesoro TSO Citigroup Hold » Buy
American Eagle AEO Bear Stearns Peer Perform » Outperform
MDU Resources MDU Citigroup Hold » Buy
Apria Healthcare AHG UBS Sell » Neutral
Orbitz OWW Lehman Brothers Equal-weight » Overweight
DOWNGRADES
UnionBanCal UB BMO Capital Markets Market Perform » Underperform
Symantec SYMC Cowen & Co Outperform » Neutral
US Bancorp USB Citigroup Hold » Sell
M&T Bank MTB Citigroup Hold » Sell
Comerica CMA Citigroup Hold » Sell
Wells Fargo WFC Citigroup Buy » Hold
Wachovia WB Citigroup Buy » Hold
PNC Bank PNC Citigroup Buy » Hold
JP Morgan Chase JPM Citigroup Buy » Hold
First Horizon FHN Citigroup Buy » Hold
Bank of America BAC Citigroup Buy » Hold
Westpac Banking Corp. WBK JP Morgan Overweight » Neutral
ArthroCare ARTC Susquehanna Financial Positive » Neutral
UBS AG UBS CIBC Wrld Mkts Sector Perform » Sector Underperform
Radian Group RDN Citigroup Hold » Sell
Capital One COF Citigroup Hold » Sell
Countrywide CFC Citigroup Buy » Hold
MGIC Investment MTG Citigroup Buy » Hold
Rexam PLC REXMY Citigroup Buy » Hold
priceline.com PCLN Citigroup Buy » Hold
Retail Ventures RVI Johnson Rice Overweight » Equal Weight
Starbucks SBUX RBC Capital Mkts Outperform » Sector Perform
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Monday, December 17, 2007
"Fast Money" for Tuesday
Tuesday's Picks
Guy Adami prefers Holly Corp (HOC) as a refiner play.Open $50.20
Karen Finerman likes kidney dialysis provider DaVita (DVA). Open $55.72
Pete Najarian thinks ASML Holdings (ASML) is a short. Open $33.05
Monday's Results
Guy Adami and Pete Najarian recommended Biogen (BIIB).Open $58.79 Close $55.72 LOSS
Karen Finerman preferred Altria (MO).Open $76.82 Close $76.02 LOSS
Guy Adami= 54-44 = 56%
John Najarian= 13-4 = 76%
Jeff Macke= 58-39 = 62%
Pete Najarian= 44-40 = 53%
Tim Seymore= 6-7 = 57%
Karen Finerman= 36-30 = 54%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
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Monday's 52 Week Low's
WTW Weight Watchers Intl ... 44.99
WISPR Wisconsin Pwr & Lt Co 81.00
WIND Wind River Systems Inc 8.58
WIBC Wilshire Bancorp Inc 8.59
WEN Wendy's International ... 26.71
SBUX Starbucks Corp 20.53
S Sprint Nextel Corporation 14.10
OMX Officemax 22.43
MTB M & T Bk Corp 81.89
HD Home Depot, Inc 26.25
F Ford Motor Company 6.81
DWA Dreamworks Animation ... 22.99
DSW Dsw Inc 17.85
CBOU Caribou Coffee Inc 3.76
AMGN Amgen Inc 47.02
AMD Advanced Micro Device ... 8.08
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