Month: October 2007

Some more notes from day one of Wal-Mart’s (WMT) analyst meeting on Tuesday. Not exactly what I was looking for.

Wal-Mart stated it will keep capex at its current level of approximately $15 billion a year but that there would be a shift in that spending to its international division. By January 2010, over 40% of its spending on new stores will be internationally, up from less than 30% currently. Wal-Mart’s international sales currently account for almost 25% of its revenues, with about 40% of that coming from the UK’s Asda supermarkets.

The expenditures should add almost 30 million additional square feet to the international store base during its fiscal year ending in January 2010, some 50% more than the additional 20 million sq ft forecast for the current year.

Regarding the announced Japanese investment Wal-Mart addmitted, “it is going to be a while” before Wal-Mart can turn Seiyu around, but that they expected “significant progress” in the coming three to five years. Another area that was stressed was the potential of India, where Wal-Mart is expected to open its first wholesale market with Bharti next year.

They also acknowledged investors were concerned “about trading-off high returns at Wal-Mart US, for lower returns at Wal-Mart international”, but argued for the a balance between long and short term thinking. “We have to be making these investments for the long-term health of the business,”.

Sales and profits are surging internationally for Wal-Mart and the redirection of funds is long overdue. Wal-Mart is a cash cow and smart use of those funds could make shareholders very happy. Buying back shares by the truck load would have been a big step in the right direction. Pushing internationally is the right thing to do but if we are going to do it, then lets go. The “Best of Both Worlds” scenario would have been a cut to $12 billion in capex with 60% of that going overseas and the $3 billion savings going to additional share repurchases.

This is kind of a taking the band-aid off slowly approach… that does not make anyone happy..

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YUM! Brands (YUM) Taco Bell chain has a World Series promotion that was talked about all throughout the game last night.

If a player steals a base during the World Series, American’s can go to Taco Bell on Oct. 30th from 2-5 pm and receive a free Taco. It is a great idea and the best part of the promotion was the constant chatter about it during the game. There was actually a hysterical exchange caught between Coco Crisp and Royce Clayton as they attempted to explain the intricacies (there aren’t any) of the promotion to each other on the Boston bench. If anyone can find it on YouTube, please send it to me, it was priceless.

In a gamer that was a blowout after the 5th inning, there wasn’t interesting for the announcers to talk about and they filled much of the time dreaming and chatting about taco’s.

YUM is getting every pennies worth out of this one.

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USBE US Bioenergy Corp 6.31
USAK USA Truck Inc 13.96
UPFC United Panam Financial Cp 6.46
UIS Unisys Corporation 5.90
TUES Tuesday Morning Corp 7.12
TSCO Tractor Supply Co 43.74
TRID Trident Microsystems Inc 13.11
TM Toyota Motor Corp 104.97
TLB The Talbots, Inc 14.49
RUTH Ruths Chris Steak Hse Inc 13.15
ROX Castle Brands Inc 3.09
RL Polo Ralph Lauren Corp 65.99
RDN Radian Group Inc 12.96
RAD Rite Aid Corporation 3.94
MTB M & T Bk Corp 96.74
MNI McClatchy Newspapers, Inc 16.49
MMPI Meruelo Maddux Proper … 3.87
MGYR Magyar Bancorp Inc 10.20
MGPI Mgp Ingredients Inc 8.50
MER Merrill Lynch & Co., Inc 63.70
MCBI Metrocorp Bancshares Inc 13.68
MBWM Mercantile Bank Corp 19.36
MAXE Max & Ermas Restauran … 4.00
MAR Marriott Intl Inc New 39.61
LVLT Level 3 Communication … 3.03
LUV Southwest Airlines Co. 13.83
DSL Downey Financial Corp … 39.61
DFS Discover Finl Svcs 18.23
CTBK City Bk Lynnwood Wash 22.61
CRFT Craftmade Internation … 9.27
CHRS Charming Shoppes Inc 7.22
CAKE The Cheesecake Factor … 22.11
CACB Cascade Bancorp 18.14
C Citigroup, Inc 41.80

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Nothing to do with investing but great to watch. Thanks to Adam for finding it.

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Cell Phones, Bloggystyle, Swans, Religion vs Poverty

– This article is just great in describing the monopolistic hold cell phone carries have on our devices.

– Adam Warner is out with his “bloggystyle” post that I enjoy so much…. no mention of the Red Sox?

– Challenging modern thinking is always very interesting

– It looks like religion can help win this battle.

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Back in August I urged readers to lock in home heating oil prices or potentially face a huge heating bill this winter. For those who didn’t, the news today is not looking good.

Last week, heating-oil futures hit a record of $2.36 a gallon, up more than 40% since the start of the year.

With weather forecasters predicting a colder winter than last year, despite the unseasonably warm October in the Northeast, heating costs will rise no matter what fuel a homeowner uses. Now, we know we can trust weather forecaster about as much as a crack addict but oil fundamentals are strained currently and ANY disruption to the system will cause prices to rocket even higher.

Consumers who use heating oil will feel the most pain as their winter heating bill for the season according to the US Department of Energy is expected to average $1,785 vs. $891 for households that use natural gas. Unlike crude oil, natural-gas prices have been relatively restrained in the U.S. this year. In fact, it would seem there is a glut of natural gas out there with more coming online as Middle East and Asian operations come online.

The reason? No it is not market manipulation from Exxon (XOM), BP (BP) or Chevron (CVX) or other oil majors, it is Economics 101. Supplies of refined products have become historically tight, due to economic growth in developing countries like China and India. Any extra capacity that existed in the system when heating oil sold for $.90 cents a gallon has been absorbed and in fact several studies have shown it may be at equilibrium meaning supply and demand are equal. The problem here is that supply cannot be increased at the same rate demand is and that means that price have to go up.

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Merrill Lynch (MER) this morning actually may have done the impossible, they made Citigroup (C) shareholders sit back and say “at least we are not them”..

Merrill had warned in early October that it would post a net loss of up to $.50 a share because of writing down $4.5 billion in collateralized debt obligations and subprime mortgages. Merrill today reported a net loss of $2.24 billion, or $2.82 a share, compared with net income of $3.05 billion, or a $3.17 share last year. The actual amount if write downs? $7.9 billion.

Okay, here is the deal. When you come out a pre-announce, you are then required to come in very close to this number. A few hundred million would have been acceptable but to almost double to estimate and be off by a almost $4 billion, heads will roll.

CEO Stan O’Neal said the company reviewed its remaining CDO positions “with more conservative assumptions,” resulting in the write down amount almost doubling.

He continued, “We expect market conditions for subprime mortgage-related assets to continue to be uncertain and we are working to resolve the remaining impact from our positions. Away from the mortgage-related areas, we continue to believe that secular trends in the global economy are favorable and that our businesses can perform well, as they have all year.” In July, O’Neal claimed in a letter to employees that the company’s risk control procedures were “under control”.

I never thought that I would say this but as a Citigroup shareholder I am really glad we have Chuck Prince and not Stan O’Neal as our CEO. That is how bad things are are Merrill……….

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UPGRRADES

Occidental Petro OXY JP Morgan Neutral » Overweight
Murphy Oil MUR JP Morgan Underweight » Neutral
Apple AAPL Caris & Company Above Average » Buy
Zoran ZRAN Needham & Co Hold » Buy
Arcelor Mittal MT HSBC Securities Underweight » Overweight
THQ Inc THQI Kaufman Bros Hold » Buy
Texas Instruments TXN Caris & Company Above Average » Buy
Tribune TRB Barrington Research Underperform » Mkt Perform
Assurant AIZ KeyBanc Capital Mkts Hold » Buy $65
Sunpower SPWR Lehman Brothers Equal-weight » Overweight
Frontier Airlines FRNT JP Morgan Underweight » Overweight
AmSurg AMSG Jefferies & Co Hold » Buy
Jarden JAH Citigroup Hold » Buy
Teradyne TER Citigroup Hold » Buy
Zoran ZRAN CIBC Wrld Mkts Sector Perform » Sector Outperform
Apollo Group APOL Robert W. Baird Neutral » Outperform
Watsco WSO Robert W. Baird Neutral » Outperform
Pall Corp PLL Robert W. Baird Neutral » Outperform

DOWNGRADES

ConocoPhillips COP JP Morgan Neutral » Underweight
Marathon Oil MRO JP Morgan Overweight » Neutral
Veeco Instruments VECO FTN Midwest Buy » Neutral
Texas Instruments TXN Credit Suisse Outperform » Neutral
Zions Bancorp ZION UBS Buy » Neutral
Vineyard Natl VNBC Oppenheimer Buy » Neutral
Ultra Clean Holdings UCTT Piper Jaffray Outperform » Market Perform
Air Tran Holdings AAI JP Morgan Overweight » Neutral
Texas Instruments TXN Lehman Brothers Overweight » Equal-weight
Texas Instruments TXN JP Morgan Overweight » Neutral
TorreyPines Therapeutics TPTX JMP Securities Strong Buy » Mkt Outperform
Texas Instruments TXN Jefferies & Co Buy » Hold
Mobile Mini MINI Deutsche Securities Buy » Hold
Kellogg K Citigroup Buy » Hold
Texas Instruments TXN UBS Buy » Neutral
Check Point Sftwr CHKP Jefferies & Co Buy » Hold
Hub Group HUBG Robert W. Baird Outperform » Neutral

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Wednesday’s Picks

Jeff Macke recommended Microsoft (MSFT). Open $30.90

Guy Adami said Wal-Mart (WMT) was beginning to look interesting after it got hit Tuesday. Open $43.93

Karen Finerman recommended Washington Group (WNG). Open $95.35

Tuesday’s Results

Jeff Macke recommended buying Short Dow30 ProShares (DOG). Open $58.44 Close $57.94 LOSS

Guy Adami preferred Intel (INTC). Open $26.64 Close $26.80 GAIN

Karen Finerman liked Covidien, Ltd (COV). Open $40.71 Close $40.77 GAIN

Pete said Yahoo! (YHOO) is a buy. Open $29.85 Close $30.64 GAIN

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks). The percentage is the percentage of successful picks

Guy Adami= 35-22 = 63%
John Najarian= 13-4 = 76%
Jeff Macke= 39-31 = 53%
Pete Najarian= 28-24 = 53%
Tim Seymore= 4-3 = 57%
Karen Finerman= 19-12 = 60%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%

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VM Virgin Mobile Usa Inc 11.80
USBE US Bioenergy Corp 6.63
TMTA Transmeta Corp Del 4.27
SMTK Simtek Corp 3.67
SMRT Stein Mart Inc 6.71
PFB PFF Bancorp Inc 11.54
PEIX Pacific Ethanol Inc 7.92
PCS Metropcs Communicatio … 19.48
PACR Pacer Intl Inc Tenn 16.15
MU Micron Technology Inc 9.94
MTG MGIC Investment Corpo … 19.30
MRTN Marten Transport Ltd 13.55
MER Merrill Lynch & Co., Inc 65.11
LVLT Level 3 Communication … 3.54
KYO Kyocera Corporation 83.06
KOSS Koss Corporation 18.10
EDS Electronic Data Syste … 21.19
DWRI Design Within Reach Inc 4.38
DBRN Dress Barn Inc 15.32
CAG ConAgra Inc 23.50
CAC Camden Natl Corp 32.64
ALUS Alsius Corporation 4.02

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