Ross gives us reason to stay away from investing in ford (F) or GM (GM), like we needed yet another reason too.
Disclosure (“none” means no position): None
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Author: ToddSullivan
Blockbuster (BBI) reported net income for the first quarter of 2008 was $45.4 million, or $0.20 per diluted share, an improvement of $94.4 million as compared with a net loss of $49.0 million, or $0.27 per share, for the first quarter of 2007.
Total revenues decreased 5.4% to $1.39 billion for the first quarter of 2008 from $1.47 billion for the first quarter of 2007, as a result of fewer company-operated stores. Domestic same-store revenues increased 2.9% as compared to the first quarter of 2007, reflecting a 920 basis point improvement over the first quarter of 2007. This increase was driven by a 0.4% growth in same-store rental revenues and a 19.7% increase in same-store merchandise sales. International same-store revenues decreased 1.5% from the same period last year, reflecting a 0.9% increase in same-store rental revenues and a 4.9% decline in same-store merchandise sales. Worldwide same-store revenues grew 1.4% from the same period last year.
More importantly, they had a $124.5 million increase in cash flow provided by operating activities for the first quarter of 2008 to a deficit of $19.5 million from a $144.0 million deficit for the first quarter of 2007. Free cash flow (net cash flow used for operating activities less capital expenditures) for the first quarter of 2008 improved by $115.6 million as compared to the same period last year to a negative $39.4 million.
What happened? Essentially domestic same-store sales grew for the first time in five years and total revenue fell because of the decrease in company-owned stores.
Rather than having 5 blockbusters in a town, they decreased it to one and folks still went to the store. It has been just over a year since I first pleased for blockbuster to “increase the rate of store closures” and have posted the request countless times.
Now CEO Jim Keyes said “The significant improvement in our first quarter results demonstrates the underlying strength of our core rental and emerging retail business.” I would not go that far Jim, having less shareholder money go out the door to support poor stores and then having those folks rent from another location will improve your results but it does not necessarily mean the core business is strong. It does mean there is a base of customer and that you may finally be on the right track.
The only problem is the store rental base will continue to shrink as more folks go online for rentals or turn to the mail for them. Unless Keyes can convert these folks to his mail or kiosk concept. Blockbuster will continue to shrink. Last quarter the mail division subs were at 3.1 million, stable from the previous one. This need to grow as store rentals will continue to shrink. If it doesn’t, it means people are going elswhere.
Blockbuster may finally be on the right track, why on earth would they want to pay for the privilege of taking over Circuit City’s (CC) problems now?
Disclosure (“none” means no position):None
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Leucadia Annual Meeting Notes
These guys are really at the top of the game. Steinberg discusses recent investments in AmeriCredit (ACF) and Jefferies (JEF)
Check it out here
Disclosure (“none” means no position):None
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Time to Buy Ambac?
Recent events may say that Ambac (ABK) has bottomed..
1- Ackman:
According to his SEC filing today, Pershing’s Bill Ackman no longer hold a short position in the company. The most vocal critic of the bond insurers, Ackman’s actions show he feels the downside from here is limited. It is also of note that he dramatically also scaled back his short exposure to MBIA (MBI) since December.
2- Whitman:
Value investor Martin Whitman has picked up over 10 million shares of the bond insurer. Whitman, whose Third Avenue Value has trounced the markets since its inception, is famous for his bets in troubled companies.
3- Exposure:
Ambac recently responded to a Moody’s rating inquiry “we have already taken substantial reserves against our CES and HELOC portfolios (48% and 33%, respectively, against below investment grade exposure). Moreover, we have not assumed any recoveries related to our active remediation efforts. Despite very stressful loss estimates of our portfolio, we believe we have already exceeded Moody’s stressed Aaa target as of April 30th, 2008 and we continue to build excess capital.”
It also said “Ambac has no material exposure to subprime borrowers in either asset class. The estimated range of average FICO scores for borrowers within pools we’ve insured in these asset classes is 695 – 745.”
The big news is the Ackman exit. Without his negative commentary (and the specter of his presence) on the insurers, sentiment will begin to turn and the value investors that have bought shares and their outlook will begin to take a dominant role.
It has become clear that the NY Insurance Commissioners Office has decided that these two, MBIA and Ambac will not fail. They have held off ratings downgrades and the public statements from the office are always an attempt to reassure investors. Let’s also not forget that a failure of either of these will not exactly put the Office in the best of light. Without pal Eliot Spitzer to look out for him, Commissioner Dinallo may be in danger of being able to “pursue other opportunities”.
That being said, the downward heat on both companies just subsided big time. With smart money pouring into Ambac, I think it may be time to take a small stake..
Disclosure (“none” means no position):None
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T. Boone Talks Alternatives (video)
T. Boone talks about auto’s and alternative fuels. This is a great conversation (19 minutes).
Lampert has a $4 billion credit line and that is unused and about $1 billion in cash at Sears Holdings (SHLD). While an outright purchase may not be in the cards, Lampert could easily take a large piece of the unit and turn Sears, already the nations largest seller of appliances into it’s largest producer also.
The GE (GE) unit is expected to garner between $5 and $8 billion. GE is currently the second-largest producer of appliances sold, after Whirlpool (WHR), which bought Maytag in 2006 for $1.7 billion.
According to the Journal, “GE has hired Goldman Sachs Group Inc. to run an auction for the appliances unit. It’s unclear who might be interested in bidding this early in the process. But possible buyers for the division include appliance makers BSH Boschv (BCFHF) & Siemens (SI) Hausgeräte GmbH of Germany and Haier Group (HRELF) of China, bankers said. Private-equity firms and GE’s Mexican partner, Controladora Mabe SA, could also be interested, they said.”
Why not buy it all? Technically he could but, Lampert is not one to leverage up a balance sheet and buying the whole company would do just that. The timing of it, with the current retail environment would make things a bit tight. It has to be tempting though. With the current logical push into brands, adding the GE line to the stable would be very exciting. Let’s also not forget that the price it will sell at today is far less than what it would have sold for even a year ago.
It would also give the company tremendous bargaining power when dealing with retailers like Home Depot (HD) and Lowe’s (LOW). Antitrust concerns ought not be an issue considering the Whirlpool and Maytag merger was approved. There is still plenty of international competition, including the above named potential suitors.
We must assume Whirlpool as a bidder is out simply because the deal would never get by regulators. Private equity may not be there simply because of the debt markets. That does give the advantage to strategic buyers of which Sears is one. That also means fewer bids at the auction and because of it a lower price.
This may be then perfect time for Lampert. Perhaps his hedge funds ESL or RBS Partners could take a stake with Sears? That way Lampert has total control of the unit and Sears does not take on too much debt. Then as the retail environment improves, Sears could buy the rest from him down the road.
Just a thought….
Disclosure (“none” means no position):Long SHLD, none
Bill Ackman released the 13-F for his hedge fund today. Here are the current holdings. Missing is Ambac…
Holdings (in $ millions)
Target (TGT)= $1,215.9
Target (TGT)= $133 (calls)
Sears Holdings (SHLD)= $794.3
Barnes and Nobel (BKS)= $200.4
Borders (BGP)= $62.1
MBIA (MBI)= -$74 (puts)
Greenlight Capital (GLRE)= $4.5
Wendy’s (WEN)= $164.6
Cadbury Schwepps (CBY)= $1.6
Some big news as there is a a $150 million increase in Sears Holdings and Ackman is no longer short Ambac (ABK). He also reduced his MBIA short from over $500 million as of 12/31 to its current level.
Disclosure (“none” means no position):Long SHLD, BGP, None
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Thursday’s Links
Autism, Lawns, iPhone, StockGumshoe
– This is garbage. There is no proof there is a link between the two.
– I am surprised this market is not much larger
– Creating a shortage to stir sluggish demand.
– More barely legal mailings….before you act, please read this site
Categories
Thursday's Links
Autism, Lawns, iPhone, StockGumshoe
– This is garbage. There is no proof there is a link between the two.
– I am surprised this market is not much larger
– Creating a shortage to stir sluggish demand.
– More barely legal mailings….before you act, please read this site
Categories
Sullivan Out at AIG?
Not yet, but it seems like just a matter of time for the AIG (AIG) CEO..
Here is the thing. Sullivan can talk all day about “system upgrades” and M&A troubles integrating Greenberg’s mergers. He can also complain all day that many of the write-down’s currently being suffered are the results of what Greenberg did. None of it matters…
Why? Sullivan said earlier in the year that he did not expect any write-downs. He said it and he cannot put that aside. You also cannot say you have a “fortress balance sheet”, take over $11 billion in write-downs in a quarter then go out and raise $12 billion in an environment that will cause that equity raising to be very expensive. Let’s not forget the current results come just after of the announcement earlier this month that an auditor found “material weakness” in AIG’s accounting. Then AIG said it had to write down the value of the portfolio of derivatives by $4.88 billion for October and November. That indicates that in December, the value of that portfolio declined by an additional $6.24 billion.
That just does not jive with a “fortress balance sheet”.
Sullivan now has a job because no one wants it. As soon as folks view the worst is over for AIG candidates will begin to emerge. The Board will then take action to find a successor to Sullivan.
Disclosure (“none” means no position):None
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Thursday’s Upgrades and Downgrades
Upgrades
Nippon Telegr (NTT)- UBS Neutral » Buy
DISH Network (DISH)- Kaufman Bros Hold » Buy
Glu Mobile (GLUU)- Morgan Keegan Mkt Perform » Outperform
Staples (SPLS)- Jefferies & Co Hold » Buy
ADC Telecom (ADCT)- Jefferies & Co Hold » Buy
Genzyme (GENZ)- Bernstein Mkt Perform » Outperform
Evergreen Solar (ESLR)- Jefferies & Co Hold » Buy
Sun Microsystems (JAVA)- Wachovia Mkt Perform » Outperform
Nexen (NXY)- Lehman Brothers Equal-Weight » Overweight
Downgrades
MoneyGram (MGI)- JMP Securities Mkt Outperform » Mkt Perform
USANA (USNA)- Wedbush Morgan Buy » Hold $24 » $26
Corp Office Props (OFC)- Wachovia Mkt Perform » Underperform
Canadian Solar (CSIQ)- Collins Stewart Buy » Hold
Fluor (FLR)- Stanford Research Hold » Sell
Ariba (ARBA)- Roth Capital Buy » Hold
Cameco (CCJ)- UBS Buy » Neutral
Crystal River Capital (CRZ)- Wachovia Outperform » Mkt Perform
Canadian Solar (CSIQ)- Broadpoint Capital Strong Buy » Buy
Wabtec (WAB)- KeyBanc Capital Mkts Buy » Hold
Genco Shipping & Trading (GNK)- Credit Suisse Outperform » Neutral
EDS (EDS)- Bernstein Outperform » Mkt Perform
Spectrum Brands (SPC)- Sun Trust Rbsn Humphrey Buy » Neutral
Sunstone Hotel (SHO)- UBS Buy » Neutral
Anadigics (ANAD)- Oppenheimer Outperform » Perform
Categories
Thursday's Upgrades and Downgrades
Upgrades
Nippon Telegr (NTT)- UBS Neutral » Buy
DISH Network (DISH)- Kaufman Bros Hold » Buy
Glu Mobile (GLUU)- Morgan Keegan Mkt Perform » Outperform
Staples (SPLS)- Jefferies & Co Hold » Buy
ADC Telecom (ADCT)- Jefferies & Co Hold » Buy
Genzyme (GENZ)- Bernstein Mkt Perform » Outperform
Evergreen Solar (ESLR)- Jefferies & Co Hold » Buy
Sun Microsystems (JAVA)- Wachovia Mkt Perform » Outperform
Nexen (NXY)- Lehman Brothers Equal-Weight » Overweight
Downgrades
MoneyGram (MGI)- JMP Securities Mkt Outperform » Mkt Perform
USANA (USNA)- Wedbush Morgan Buy » Hold $24 » $26
Corp Office Props (OFC)- Wachovia Mkt Perform » Underperform
Canadian Solar (CSIQ)- Collins Stewart Buy » Hold
Fluor (FLR)- Stanford Research Hold » Sell
Ariba (ARBA)- Roth Capital Buy » Hold
Cameco (CCJ)- UBS Buy » Neutral
Crystal River Capital (CRZ)- Wachovia Outperform » Mkt Perform
Canadian Solar (CSIQ)- Broadpoint Capital Strong Buy » Buy
Wabtec (WAB)- KeyBanc Capital Mkts Buy » Hold
Genco Shipping & Trading (GNK)- Credit Suisse Outperform » Neutral
EDS (EDS)- Bernstein Outperform » Mkt Perform
Spectrum Brands (SPC)- Sun Trust Rbsn Humphrey Buy » Neutral
Sunstone Hotel (SHO)- UBS Buy » Neutral
Anadigics (ANAD)- Oppenheimer Outperform » Perform
Categories
Tax Dollars Hard At Work
Thank you,
Todd Sullivan
Sent from my BlackBerry® wireless device
—–Original Message—–
From: "WSJ.com Editors" <access@interactive.wsj.com>
Date: Wed, 14 May 2008 14:41:19
To:TODD.SULLIVAN1@GMAIL.COM
Subject: WSJ NEWS ALERT: Polar Bear to Be Designated as Threatened Species
__________________________________
NEWS ALERT
from The Wall Street Journal
May 14, 2008
The Interior Department has decided to protect the polar bear as a threatened species, amid a decline in Arctic sea ice due to global warming, handing environmentalists a major victory. Opponents said it could trigger new obstacles for oil companies seeking to drill in the Arctic. The official announcement was to come from Interior Secretary Dirk Kempthorne later this afternoon.
For more information, see:
http://online.wsj.com/article/SB121078668964492405.html?mod=djemalertNEWS
The article link above is also mobile friendly. Mobile users, click the link to see this story now.
Copyright 2008 Dow Jones & Company, Inc. All Rights Reserved.
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Break Up Citi (C)? Why Rush?
Would it be best, or just easiest for Citigroup (C) to break up?
Cohen makes the point that the concept cannot succeed. Perhaps a plan like the one UBS (UBS) is going to attempt. The problem with breaking up in a down market is that you will get a small fraction of the true worth of the assets you are selling.
Pandit’s current plan to gradually sell of smaller, insignificant assets is the preferred way as it maximizes the value shareholders get for the assets that are sold. While it may take a while for the “worm to turn” so to speak, the end product will be better and stronger.
Cohen does in a way contradict himself when he says that JP Morgan (JPM) is making the supermarket concept work, but Citi has not been able to. Well, if that is true than it is a management issue, not a model one. If that is true, then why rush to break it up before Pandit is given a chance to fix it?
If he can, the shareholders win big, if not, then he can sell assets later at better prices, shareholders win.
The rush to break it up seems a bit short sighted at this point…
Disclosure (“none” means no position):Long C, None
Now, here is a concentrated equity portfolio.
Leucadia’s (LUK) 13-F reveals equity holdings in just 7 companies:
Amount of holdings in millions:
Americredit (ACF)= $295
Capital Southwest (CSWC)= $2.4
Cresund (CRESY)= $51.3
Georesources (GEOI)= $4.6
International Assets Holding (IAAC)= $34.5
Jefferies (JEF)= $68.8
United Western Bank (UWBK) = $2.2
Total= $458.8
The interesting part is that 88% of the portfolio is in financials. United, Amercredit, Capital, International Assets and Jefferies are all in the financial sector in some form.
Now, that is concentration…
Disclosure (“none” means no position):None