I really liked Bolling when he was on “Fast Money” because of his insight. There is a bit at the end about Jim Cramer welshing on a $50,000 bet.
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Month: February 2008
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Friday’s Links
Google, Clemens, Lizdon on Cramer, Gadgets..
– Cullen has some thoughts on Google
– What did he say?
– This is true, tis stuff just gets too small sometimes
Wal-Mart released sales today and at first blush, it was not all that good, until you dig just a bit more.
First the results:
Wal-Mart said “Unfavorable weather negatively affected overall general merchandise sales, especially in the Midwest. Gift card redemptions were below expectations, and customers appear to be holding gift cards longer and using them more often for food and consumables rather than discretionary purchases.”
They continued ” We expect to be within our previously stated guidance of $0.99 to $1.03 for earnings per share from continuing operations for the fourth quarter of fiscal year 2008.”
On CNBC this morning Jim Cramer dismissed the “weather” reasoning because of the results at both Costco (COST) and BJ’s (BJ). Here is the problem with that. If it indeed was the weather in the Midwest as Wal-Mart stated, it would not effect BJ’s at all as they have no locations there and Costco has less than 10% of theirs there. BJ’s said “By region, the largest sales increases were in Upstate New York and Metro New York” where the weather was mild in January.
Now even Costco’s results were not that stellar as the headlines would lead you to believe. In their release they said “The U.S. comparable sales figure includes, among other things, the effect of gasoline price inflation, with the average sales price per gallon of gasoline up 31% for the four-week month of January, as compared to the year-earlier January. Excluding gasoline price inflation, U.S. comparable sales would have been up 3%.” Wal-Mart numbers are reported “excluding fuel”.
At BJ’s, “For January 2007, the Company reported a comparable club sales increase of 3.5%, including a contribution from sales of gasoline of 0.3%.
If we are doing an honest comp., we need look at Sam’s Club, which reported 2.1% comparable growth without gas as has far more exposure to the Midwest that the others.
Looking at Target (TGT), they said today “On this same equal-week basis, January comparable store sales decreased 1.1 percent”.
Now, does this mean Wal-Mart is in trouble or we should just ignore these results? No, it does mean that we should not draw too many conclusions from this month. The weather in the Midwest was lousy and the two retailers Wal-Mart is being compared to have no real exposure there, making the comparison flawed.
Disclosure (“none” means no position):Long Wal-Mart, None
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Circuit City: More Humor
Leave it to Circuit City’s (CC) Philip Schoonover to inject humor into the recent turbulent market. Problem is, I do not think it was his intention to.
Apparently giving up on trying to compete with Best Buy (BBY), Schoonover and crew have decided to open 50-60 smaller well staffed (theres an idea!) locations called “The City”. Early plans have the 20,000 square-foot stores being about 40% smaller than the typical Circuit City, but a redesign eliminating obsolete warehouse space results in having nearly the same amount of selling space. That means CC is sitting on 8,000 sq. feet per location of unnecessary warehouse space? That is a stunning number, if true.
This means either one of two things. Sales are just real dismal and it is not necessary to stock extra items in current locations, hence the “extra space”. Or, CC plans to cut way back on inventory in which case potential customers will constantly hearing these words “we do not have that in stock here, can I call another location for you?” Neither scenario is a good one.
While execs at the failing chain may think “The City” is a novel idea, it has been done before. It was and still is called Radioshack (RSH)!! The problem is that Radioshacks CEO Julian Day could out-manage Schoonover from the grave.
In response to a question about selling the company, “We have a solid plan, we have the capital to continue this multi-quarter turnaround, and management feels that at today’s stock prices it would not be in the best interest of the shareholder to sell the company,” Schoonover told Reuters.
Perhaps it would have been a little over a year ago when they dismissed out of hand an over $20 a share private equity offer? For those of you not keeping track, shares trade at $4.70 currently.
“We have the financial capability (debt) and the access to sustain a multiquarter turnaround,” Schoonover said. “While we’re learning from some of the errors we made, we’re making significant progress on that turnaround, as we think on behalf of the shareholders that at today’s stock price, we’re better off staying the course.”
By staying the course does he mean “making the stock worthless”? I mean it is down 80%.
Here is the kicker, execs said that by the middle of next year, they hope to have a plan for applying some of the best things about The City format to older stores. “Middle of next year”?
Translation? Another dismal year for shareholders. I will say it now for Schoonover before the next earnings call, “clearly we are disappointed by our performance”.
Disclosure (“none” means no position):None, Pity for shareholders
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Friday’s Upgrades and Downgrades
Upgrades
Kimco Realty (KIM)- Deutsche Securities Hold » Buy
Dawson Geophys. (DWSN)- CapitalOne southcoast Hold » Buy
Mechel Steel (MTL)- Credit Suisse Neutral » Outperform
Power Integrations (POWI)- Needham & Co Buy » Strong Buy
Genomic Health (GHDX)- RBC Capital Mkts Sector Perform » Outperform
Thornburg Mortg (TMA)- Credit Suisse Underperform » Neutral
Commvault Systems (CVLT)- Robert W. Baird Neutral » Outperform
Celanese (CE)- UBS Neutral » Buy
Sirona Dental Systems (SIRO)- Banc of America Sec Neutral » Buy
Principal Fincl (PFG)- UBS Sell » Neutral
Universal Technical Institute (UTI)- JP Morgan Underweight » Neutral
Pioneer Natural (PXD)- Citigroup Hold » Buy
Danaher (DHR)- Deutsche Securities Hold » Buy
Downgrades
O’Charley’s (CHUX)- Morgan Keegan Outperform » Mkt Perform
Saba Software (SABA)- Wedbush Morgan Buy » Hold
Taleo (TLEO)- Wedbush Morgan Buy » Hold
Sepracor (SEPR)- AmTech Research Neutral » Sell
Casual Male (CMRG)- RBC Capital Mkts Outperform » Sector Perform
Select Comfort (SCSS)- Morgan Keegan Mkt Perform » Underperform
Aruba Networks (ARUN)- Caris & Company Above Average » Average
Nalco (NLC)- JP Morgan Overweight » Neutral
CPI International (CPII)- Bear Stearns Outperform » Peer Perform
Cisco Systems (CSCO)- JP Morgan Overweight » Neutral
BT Group (PLC)- BT Bear Stearns Outperform » Peer Perform
Elbit Systems (ESLT)- UBS Buy » Neutral
Virgin Mobile USA (VM )- Lehman Brothers Overweight » Equal-weight
XL Capital (XL)- JP Morgan Overweight » Neutral
Cisco Systems (CSCO)- Robert W. Baird Outperform » Neutral
Polo Ralph Lauren (RL)- Citigroup Buy » Hold
Regal-Beloit (RBC)- Deutsche Securities Buy » Hold
In an SEC filing tonight, Leucadia (LUK) disclosed it purchased an additional 2 million shares of AmeriCredit (ACF) at $12.38 a share.
This bring the total ownership by Leucadia and affiliates to 25,587,776 shares or 22.4% of total.
Disclosure (“none” means no position): None
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"Fast Money" for Friday
Friday’s Picks
Guy Adami likes Cisco (CSCO) $23.38
Pete Najarian is taking profit in Cognizant Technology (CTSH) $27.28
Karen Finerman prefers Crocs (CROX) $31.99
Thursday’s Results
Guy Adami likes Dow Chemical (DOW) $38.05 Close $37.92 LOSS
Karen Finerman prefers Microsoft (MSFT) $28.52 Close $28.12 LOSS
Pete Najarian recommends looking at JetBlue (JBLU) $6.57 Close $7.23 GAIN
2008 Records:
Brian Schaeffer= 0-1
Carter Worth= 0-1
Jon Najarian= 4-1
Jeff Macke= 8-6
Tim Seymore= 2-3
Guy Adami= 7-10
Pete Najarian= 9-6
Karen Finerman= 7-9
2007 Results (Since 6/21):
Guy Adami= 58-46 = 56%
Jeff Macke= 60-40 = 60%
Pete Najarian= 49-41 = 54%
Karen Finerman= 40-30 = 57%
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52 Week Lows 2/7
(ZGEN)- Zymogenetics Inc
(XRIT )- X-Rite Incorporated
(WSH )- Willis Group Holdings Ltd
(WMK )- Weis Markets, Inc
(VSAT )- ViaSat Inc
(USMO )- Usa Mobility Inc
(SMTC )- Semtech Corporation
(SLXP )- Salix Pharmaceuticals Inc
(SCSS )- Select Comfort Corp
(RVSN )- Radvision Ltd
(RSYS )- RadiSys Corporation
(RNVS )- Renovis Inc
(OESX)- Orion Energy Systems Inc
(NT )- Nortel Networks Corp New
(NSANY)- Nissan Motors
(LUX )- Luxottica Group S.p.A.
(KEP )- Korea Electric Power …
(KEM)- KEMET Corp
(EVVV )- Ev3 Inc
(ERIC )- Ericsson L M Tel Co
(EPEX)- Edge Petroleum Corpor …
(DXR)- Daxor Corporation
(DTSI)- Dts Inc
Disclosure (“none” means no position):
Sears Holdings (SHLD), after recently announcing it was dividing its businesses up essentially by their major brands, has begun to spread the channels through which they are sold.
The AP reports to that Sears’ Diehard Division is teaming up with Orange County Choppers (OCC) for a special event.
Sears will unveil DieHard and Craftsman branded bikes, designed by Orange County Choppers. Sears also announced a marketing agreement with Orange County Choppers (OCC) that makes DieHard the “Official Battery of Orange County Choppers”. With this agreement, all custom motorcycles created as part of the “American Chopper” TV series (as seen on TLC) will be powered by DieHard.
In addition, the partnership will include the following:
— OCC will sell DieHard batteries in their new retail store in Newburgh, NY
— DieHard battery signage in the OCC shop along with a unique battery maintainer station
— A link to diehardbatteries.com from orangecountychoppers.com
— DieHard branding on shirts worn by OCC mechanics
Do you remember the Monty Python Piece from way back where they walked around chanting “spam, spam, spam, spam,” incessantly? When you think of Sears Holdings, the thought process needs to be “brands, brands, brands, brands”.
This is the first of many deal that will dramatically expand the sales channels of the Diehard, Craftsmen and Kenmore brands. Now that the separation has been announced and according to all accounts, management has been given the “green light” to find deals, we ought to see them coming fast and furious. Look for Craftsmen tools to be sold in Home Depot (HD) and Lowe’s (LOW) before the summer ends.
As far back as November I have been focused on the brands rather than the stores. What we now need to see when Sears reports next Q1 are the results broken out by division.
Disclosure (“none” means no position): Long SHLD, None
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Warren Buffett Speaking in Toronto
Berkshire Hathaway’s (BRK.A) Warren Buffet speaking at the “Business Wire Canada” opening reception.
Follow this link
Disclosure (“none” means no position):None
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Leucadia Ups AmeriCredit Stake to 20.7%
In a SEC filing moments ago, Leucadia (LUK) announced it had purchased an additional 1.4 million shares of AmeriCredit (ACF) on Feb. 6th at $11.08 a share.
From the Filing:
” As of the close of business on February 6, 2008, the Reporting Persons may be deemed to beneficially own collectively an aggregate of 23,587,776 shares of Common Stock, representing approximately 20.7% of the shares of Common Stock presently outstanding. All percentages in this Item 5 are based on 114,162,314 shares of Common Stock outstanding as of October 31, 2007, as set forth in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2007.”
Disclosure (“none” means no position): None
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Thursday’s Links
SIDS, Blood Drive Canceled, Foreclosures, Icahn
– Mothers who smoke have children with a higher SIDS rates
– This is stupid. How many people may not get the blood they need so some asinine college administrator can make a juvenile argument.
– Here are the 100 worst foreclosure areas by zip code.
– This could be very insightful..
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Icahn Places Board Member
Carl Icahn disclosed a position in and has placed an associate on the Board of BKF Capital (BGFG) (
From the filing:
“Following the resignation of Keith Meister from Issuer’s Board of
Directors, Reporting Persons suggested that Issuer should consider David
Schechter to replace Keith Meister and thereafter Issuer added Mr. Schechter to
its Board of Directors.”
Icahn ans his affiliates, “..may be deemed to beneficially own, in the aggregate, 1,194,100 Shares, representing approximately 14.98% of the Issuer’s outstanding Shares (based upon the 7,973,216 Shares stated to be outstanding by the Issuer in the Issuer’s 10-Q, filed with the Securities and Exchange Commission on November 13, 2007).”
Disclosure (“none” means no position): None
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Thornburg Mortgage: Soon
I have been saying to readers that one of the stocks I am watching for a buy is Thornburg Mortgage (TMA). Kind of wish I had hit the button rather than watch.
On Tuesday, Thornburg reported net income before preferred stock dividends for the quarter ended December 31, 2007, of $64.8 million, or $0.33 per diluted common share and $0.34 per basic common share, as compared to $80.3 million, or $0.68 per basic and diluted common share, for the same period in the prior year.
Net loss before preferred stock dividends for the year ended December 31, 2007, was $874.9 million as compared to net income of $297.7 million for the year ended December 31, 2006. The company’s fourth quarter cash dividend for common shareholders of record on December 31, 2007 was $0.25 per share, which was paid on January 30, 2008.
Read the press release here:
Here is the only thing that matters. “Continued exceptional credit performance with 0.44% 60-plus day delinquencies and REO at December 31, 2007, well below the 4.23% industry average at September 30, 2007”. Larry Goldstone, president and chief executive officer said “..we have begun to see financing conditions improve and, despite these challenges, we successfully continue to maintain existing short-term financing facilities with our existing finance counterparties and have successfully added new financing capacity since year end.”
He continued, “With the potential for expanded agency guidelines raising the conforming loan limit, the company would expect to benefit from this market change as a notable percentage of its pipeline and existing unsecuritized loan portfolio would qualify under the increased loan limit. The company would then be able to create agency securities as well as the private label securities in order to further diversify its portfolio financing strategies.”
They have not been able to sell a CDO since October 2007 but are under the opinion they will in Q1, 2008. This is good for the entire market.
Despite what you may think, people are still buying houses. Just not at levels they were before. Thornburg is focused on the upper end of the market and while results prove it has slowed, it is not non-existent. For lenders like Thornburg, finding financing for their loans is key and with the industries lowest default rate, that potential issue ought to be put to bed.
As long as TMA is able to keep their default rate low, they will be fine. Based on past and current results, that should happen. When housing returns, they will emerge a very strong and more preferred player in the business.
The stock has rallied form $8 on 1/18 to almost $13 now. It is important to note these numbers are down from a high of $28 in 2007. The stock yields 7.8% and based on Q4 results, seems safe after being ditched in Q3.
Rush out and jump in? No. TMA has been volatile and the next market leg down ought to take TMA with it. Then it will give you a better entry point. You could sell the March $12.50 call and receive about $100 per contract. That would lower your entry price, should you get “put” them (forced to buy at $12.50) at $11.50. If TMA keeps climbing, you keep the cash and do it again.
I may do just that…
Disclosure (“none” means no position):None
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Leap Frog Releases Preliminary Results
LeapFrog (LF) released results and it appears that despite the dismal retail environment out there, the made very good progress over 2006.
“LeapFrog’s sales for the 2007 fourth quarter were approximately equal to last year, and brought the full year sales to $445 million, a decline of 11%, which was in line with our expectations,” said LeapFrog president and chief executive officer Jeffrey G. Katz.
He continued, “Our overall results were affected by the widely publicized economic concerns facing U.S. consumers which caused retailers to order cautiously for many items. This impacted some of our products, of course, including our newly introduced FLY Fusion Pentop Computer. Fly Fusion hardware was nearly sold out in stores by year-end, but retailers ordered fewer units than originally forecasted. In spite of these issues, there were some bright spots over the holiday season, including ClickStart My First Computer, which performed well at retail, our Learn & Groove toy line, and the Leapster gaming system and software, which continued to lead the educational gaming market and sold strongly.”
Chief Financial Officer Bill Chiasson said,”We ended 2007 with a strong balance sheet and improved inventory positions at both Leap Frog and at retailers. Cash and investments totaled approximately $105 million at year-end. Inventories were approximately $53 million, down almost 30% from year ago levels. Inventories of LeapFrog products held at retailers were also down sharply from last year.”
LeapFrog is a minute .5% of the portfolio and is a pick i made cause the kids like the products and I believe in both Katz and the products they have coming out. the fact that they are still on track and in better shape now then they were at this time last year means they are doing a great job.
In no way did I expect the company to turn a profit in 2007 and they did accomplish what I was looking for. The new products are VERY exciting and will be good sellers, cash levels are good, inventories are way down and debt levels are good. In short 2007 was about getting things inline and now that it has been done, time to execute.
That being said, I will hold my shares. I may look to add more but seeing as 3/4 of all sales for the company come in Q4, I will not consider doing anything until late summer at the earliest.
Disclosure (“none” means no position):Long LF