How bad, Ross, Porn, Cullen
– Could this pessimism be a sign of the bottom?
– If he is buying, downside from here is minimal
– OK, how does one stop this? Every been to DC? It is best to keep them inside watching their screens.
– James Cullen is a very smart man
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.
How bad, Ross, Porn, Cullen
– Could this pessimism be a sign of the bottom?
– If he is buying, downside from here is minimal
– OK, how does one stop this? Every been to DC? It is best to keep them inside watching their screens.
– James Cullen is a very smart man
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.
Wachovia (WB) CEO G. Kennnedy Thompson said in January, “Will Wachovia cut its dividend? And the answer to that question is we have no plans to cut the dividend, because we don’t need to cut the dividend. We are confident in our ability to meet our 2008 business plan and that plan, as we have said before, will generate cash earnings that will cover our dividend payments, continue to build necessary credit reserves, improve our capital ratios and support growth in our business lines.”
They also said “Wachovia is expecting to earn “in excess” of a dollar per share each quarter for about $4.12 a share total in 2008.”
Today Thompson is learning the danger of making promises in turbulent markets much like GE’s (GE) Jeff Immelt did last week with his “in the bag” comments from a month ago…
Wachovia posted a net loss was $350 million or 20 cents per share. It compared with a year-earlier profit of $2.3 billion, or $1.20 per share. Excluding items, the loss was $270 million, or 14 cents per share vs an expected profit of 48 cents per share.
Revenue fell 5 percent to $7.9 billion, short of the average $8.37 billion estimate. Wachovia set aside $2.83 billion for credit losses, and its investment bank took $1.56 billion of write-downs. They finally cut the quarterly dividend 41 percent to 37.5 cents per share (6% yield) from 64 cents, preserving $2 billion of capital a year.
Investors buying today still get a nice fat yield and the chance that anything Thompson says will hold true. His reputation and job are hanging now. It is one thing to make an assumption that turns out not to be true, it is quite another to chastise those doubting you and make a guarantee based on that which is stunningly wrong.
Is Wachovia a good investment long term? Sure. The question that now remains is whether or not Thompson will be around to see that time. His purchase of Golden West looks worse each day despite his proclamations to the contrary and now the dividend cut despite his assurance he would not.
It is one thing to follow fellow banks Citigroup (C), Merrill Lynch (MER) and UBS (UBS) raising tens of billions of dollars from foreign and private equity investors, and last week Washington Mutual (WMU) getting cash from private equity form TPG. It is another to do do after laughing at those who said you would.
Not good at all G…
Disclosure (“none” means no position):Long WB,C, None
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This work is licensed under a Creative Commons Attribution 2.5 License.
Wachovia (WB) CEO G. Kennnedy Thompson said in January, “Will Wachovia cut its dividend? And the answer to that question is we have no plans to cut the dividend, because we don’t need to cut the dividend. We are confident in our ability to meet our 2008 business plan and that plan, as we have said before, will generate cash earnings that will cover our dividend payments, continue to build necessary credit reserves, improve our capital ratios and support growth in our business lines.”
They also said “Wachovia is expecting to earn “in excess” of a dollar per share each quarter for about $4.12 a share total in 2008.”
Today Thompson is learning the danger of making promises in turbulent markets much like GE’s (GE) Jeff Immelt did last week with his “in the bag” comments from a month ago…
Wachovia posted a net loss was $350 million or 20 cents per share. It compared with a year-earlier profit of $2.3 billion, or $1.20 per share. Excluding items, the loss was $270 million, or 14 cents per share vs an expected profit of 48 cents per share.
Revenue fell 5 percent to $7.9 billion, short of the average $8.37 billion estimate. Wachovia set aside $2.83 billion for credit losses, and its investment bank took $1.56 billion of write-downs. They finally cut the quarterly dividend 41 percent to 37.5 cents per share (6% yield) from 64 cents, preserving $2 billion of capital a year.
Investors buying today still get a nice fat yield and the chance that anything Thompson says will hold true. His reputation and job are hanging now. It is one thing to make an assumption that turns out not to be true, it is quite another to chastise those doubting you and make a guarantee based on that which is stunningly wrong.
Is Wachovia a good investment long term? Sure. The question that now remains is whether or not Thompson will be around to see that time. His purchase of Golden West looks worse each day despite his proclamations to the contrary and now the dividend cut despite his assurance he would not.
It is one thing to follow fellow banks Citigroup (C), Merrill Lynch (MER) and UBS (UBS) raising tens of billions of dollars from foreign and private equity investors, and last week Washington Mutual (WMU) getting cash from private equity form TPG. It is another to do do after laughing at those who said you would.
Not good at all G…
Disclosure (“none” means no position):Long WB,C, None
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.
When this was first emailed to me I thought the emailer was being a smart a#@. Turns out it is true. How? Why? Haven’t shareholders suffered enough? Why does management hate them so much?
Blockbuster (BBI) said it made a $1 to $1.3 billion cash offer in a Feb. 17 letter to Circuit City (CC) Chief Executive Philip Schoonover. They decided to go public with the offer Monday after Circuit City did not provide access to its books. (Read the letter.)
Circuit City said today of Blockbuster they had “reservations as to their ability to finance the offer.” Considering that as of January Blockbuster only had $184 million in cash on the books, they are only $1 to $1.12 billion short of the stated goal.
In the letter Blockbuster CEO Jim Keyes said, “Given current debt market conditions, we believe most of the cash necessary would be generated through the issuance of additional Blockbuster equity, most probably in a rights offering to our existing shareholders. We believe they, and the market, will recognize the merits of this transaction and we are confident that we can raise the required equity. The borrowing capacity of the combined business would provide the remaining cash proceeds.”
They’ll have to essentially dilute shareholders to the max and then raid the credit line CC set up in February to fund the deal since banks are not loaning money for deals that make sense much less one that means a struggling retailer barely making a profit buying one that isn’t.
The larger issue is, what is Blockbuster trying to become? They have a valuable franchise in video if they would just realize the video store concept is officially dead. Adding more brick and mortar locations, diluting shareholders and maxing out the credit line to acquire another problem is a huge mistake.
Keyes said “The combination of Blockbuster and Circuit City will result in an $18 billion retail enterprise uniquely positioned for the convergence of media content and electronic devices. We would seek to differentiate products in both Blockbuster and Circuit City stores by offering exclusive content and content-enabled devices. Both companies would benefit from complementary products, marketing, management strengths, technology and distribution and the resulting synergies would significantly improve consolidated financial performance.”
He has mentioned this vision before but it has yet to be rolled out in Blockbuster locations, why bet the farm on a wholly unproven concept? He talks about “differentiating products” in both locations. That is confusing because I was not aware of any similarities currently. Let’s also be real honest here. Using the term “management’s strengths” and either Blockbuster or Circuit City in the same sentence is laughable unless it is preceded by “lack of”.
Now, were RadioShack (RSK) to make a run a CC, that would make sense. Borders (BGP) and Barnes and Noble (BKS) does. This doesn’t on any level.
Maybe Keyes is officially throwing on the towel in the war with Netflix (NFLX) and has decided to try a new direction?
Circuit City shareholders should jump at the price because they won’t see $6 to $8 a share anytime soon, this will destroy Blockbuster holders…
Disclosure (“none” means no position):Long BGP, None
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Upgrades
AmericanWest Banc (AWBC)- DA Davidson Neutral » Buy $18
Northwest Airlines (NWA)- Credit Suisse Neutral » Outperform
Delta Air Lines (DAL)- Credit Suisse Neutral » Outperform
Seagate Tech (STX)- Caris & Company Average » Above Average
EuroBancshares (EUBK)- Keefe Bruyette Mkt Perform » Outperform
SBA Comm (SBAC)- Soleil Hold » Buy
Crown Castle (CCI)- Soleil Hold » Buy
Medco Health Solutions (MHS)- Credit Suisse Neutral » Outperform
Diamond Offshore (DO)- JP Morgan Neutral » Overweight
Ross Stores (ROST)- JP Morgan Neutral » Overweight
Atlas America (ATLS)- Friedman Billings Mkt Perform » Outperform
Aventine Renewable Energy (AVR)- Broadpoint Capital Underperform » Neutral
BP (BP)- JP Morgan Neutral » Overweight
Wright Medical (WMGI)- JP Morgan Neutral » Overweight
Downgrades
Foundry Ntwks (FDRY)- Collins Stewart Buy » Hold
Seaspan (SSW)- Cantor Fitzgerald Buy » Hold
Ixia (XXIA)- Ferris Baker Watts Buy » Neutral
Tollgrade (TLGD)- Ferris Baker Watts Buy » Neutral
Foundry Ntwks (FDRY)- BWS Financial Buy » Sell
General Electric (GE)- Credit Suisse Outperform » Neutral
Pinnacle (PNK)- KeyBanc Capital Mkts Hold » Underweight
Garmin (GRMN)- Oppenheimer Outperform » Perform
IdaCorp (IDA)- JP Morgan Neutral » Underweight
Abercrombie (ANF)- JP Morgan Overweight » Neutral
Ixia (XXIA)- JMP Securities Strong Buy » Mkt Outperform
Smith Intl (SII)- Citigroup Buy » Hold
Cintas (CTAS)- Lehman Brothers Overweight » Equal-weight
Zoran (ZRAN)- Jefferies & Co Buy » Underperform
Total S.A. (TOT)- JP Morgan Overweight » Neutral
Valspar (VAL)- JP Morgan Overweight » Neutral
Johnson Controls (JCI)- JP Morgan Overweight » Neutral
Ensco (ESV)- Citigroup Buy » Hold
BlackRock (BLK)- Wachovia Outperform » Mkt Perform
Millennium Pharm (MLNM)- Robert W. Baird Outperform » Neutral
Red Robin Gourmet (RRGB)- Wachovia Outperform » Mkt Perform
Hershey Foods (HSY)- Bernstein Mkt Perform » Underperform
Disclosure (“none” means no position):
Visit the ValuePlays Bookstore for Great Investing Books
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Upgrades
AmericanWest Banc (AWBC)- DA Davidson Neutral » Buy $18
Northwest Airlines (NWA)- Credit Suisse Neutral » Outperform
Delta Air Lines (DAL)- Credit Suisse Neutral » Outperform
Seagate Tech (STX)- Caris & Company Average » Above Average
EuroBancshares (EUBK)- Keefe Bruyette Mkt Perform » Outperform
SBA Comm (SBAC)- Soleil Hold » Buy
Crown Castle (CCI)- Soleil Hold » Buy
Medco Health Solutions (MHS)- Credit Suisse Neutral » Outperform
Diamond Offshore (DO)- JP Morgan Neutral » Overweight
Ross Stores (ROST)- JP Morgan Neutral » Overweight
Atlas America (ATLS)- Friedman Billings Mkt Perform » Outperform
Aventine Renewable Energy (AVR)- Broadpoint Capital Underperform » Neutral
BP (BP)- JP Morgan Neutral » Overweight
Wright Medical (WMGI)- JP Morgan Neutral » Overweight
Downgrades
Foundry Ntwks (FDRY)- Collins Stewart Buy » Hold
Seaspan (SSW)- Cantor Fitzgerald Buy » Hold
Ixia (XXIA)- Ferris Baker Watts Buy » Neutral
Tollgrade (TLGD)- Ferris Baker Watts Buy » Neutral
Foundry Ntwks (FDRY)- BWS Financial Buy » Sell
General Electric (GE)- Credit Suisse Outperform » Neutral
Pinnacle (PNK)- KeyBanc Capital Mkts Hold » Underweight
Garmin (GRMN)- Oppenheimer Outperform » Perform
IdaCorp (IDA)- JP Morgan Neutral » Underweight
Abercrombie (ANF)- JP Morgan Overweight » Neutral
Ixia (XXIA)- JMP Securities Strong Buy » Mkt Outperform
Smith Intl (SII)- Citigroup Buy » Hold
Cintas (CTAS)- Lehman Brothers Overweight » Equal-weight
Zoran (ZRAN)- Jefferies & Co Buy » Underperform
Total S.A. (TOT)- JP Morgan Overweight » Neutral
Valspar (VAL)- JP Morgan Overweight » Neutral
Johnson Controls (JCI)- JP Morgan Overweight » Neutral
Ensco (ESV)- Citigroup Buy » Hold
BlackRock (BLK)- Wachovia Outperform » Mkt Perform
Millennium Pharm (MLNM)- Robert W. Baird Outperform » Neutral
Red Robin Gourmet (RRGB)- Wachovia Outperform » Mkt Perform
Hershey Foods (HSY)- Bernstein Mkt Perform » Underperform
Disclosure (“none” means no position):
Visit the ValuePlays Bookstore for Great Investing Books
This work is licensed under a Creative Commons Attribution 2.5 License.
Monday’s Picks
Jeff Macke recommends making a list of names you like and buying the dips. He’s looking at Intel (INTC)$21.24 and Wal-Mart (WMT) $54.8
Guy Adami prefers Apple (AAPL) $147.14 around $145.
Tim Seymour thinks the UltraShort MSCI Emerging Markets ProShares
UltraShort MSCI Emerging Markets ETF (EEV) $75.55 is a buy as a bet against the emerging markets.
Jon Najarian recommends shorting eBay (EBAY) $30.98
Friday’s Results
Jeff Macke recommends Wal-Mart (WMT) $54.66 on a dip. Close $54.80 GAIN
Guy Adami prefers Cephalon (CEPH) $64.89. Close $63.15 LOSS
Tim Seymour likes ConocoPhillips (COP) $79.32 Close $78.54 LOSS
Jon Najarian thinks Cameco (CCJ) $37.42 is a buy. Close $36.74
2008 Records:
Brian Schaeffer= 0-1
Carter Worth= 0-1
Jon Najarian= 4-2
Jeff Macke= 26-20-1
Tim Seymore= 14-10
Guy Adami= 25-24
Pete Najarian= 27-22
Karen Finerman= 20-24-1
Joe Terrenova= 1-1
2007 Results (Since 6/21):
Guy Adami= 58-46 = 56%
Jeff Macke= 60-40 = 60%
Pete Najarian= 49-41 = 54%
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Wilbur says watch out for regional banks.
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Amount of insider purchases:
Crocs Inc (CROX)= $4,988,274
Integramed America Inc (INMD)= $4,821,795
Granahan Mccourt Acquisition Corp (GHN)= $4,466,250
Xcorporeal Inc New (XCR)= $ 2,774,000
Allied Nevada Gold Corp (ANV)= $2,772,424
Titanium Metals Corp (TIE)= $1,938,842
Hillenbrand Inc (HI)= $ 1,742,936
Liberty Global Inc (LBTYA)= $842,383
Philip Morris International Inc ( PM)= $ 805,493
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Amount of insider purchases:
Crocs Inc (CROX)= $4,988,274
Integramed America Inc (INMD)= $4,821,795
Granahan Mccourt Acquisition Corp (GHN)= $4,466,250
Xcorporeal Inc New (XCR)= $ 2,774,000
Allied Nevada Gold Corp (ANV)= $2,772,424
Titanium Metals Corp (TIE)= $1,938,842
Hillenbrand Inc (HI)= $ 1,742,936
Liberty Global Inc (LBTYA)= $842,383
Philip Morris International Inc ( PM)= $ 805,493
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Some interesting notes from Borders (BGP) 8-K filed last night.
* Management as a group own 1.103 million shares making them a the 5th largest holder behind Citadels LP’s 3 million shares. Pershing is by far #1, Dremen Management is #2, and Deutsche Bank (DB)is #3.
* Most executive officers of the Company had received minimal or no bonus for the last three years.
Regarding Pershing and International Operations:
“The Purchase Offer Option is a backstop purchase offer that will give the Company the right, but not the obligation, until January 15, 2009, to require Pershing Square to purchase the Company’s Paperchase, Australia, New Zealand and Singapore subsidiaries, as well as its approximately 17% interest in Bookshop Acquisitions, Inc. (Borders U.K.) (collectively, the “Subject Companies”). Pershing Square’s purchase offer is at a price of $135,000,000 (subject to adjustment for indebtedness for borrowed money of the subject businesses and the after-tax benefit of cash remaining with the Subject Companies). Although the company believes that these businesses are worth substantially more than the backstop purchase offer price, the relative certainty of this arrangement provides the company with valuable flexibility to pursue strategic alternatives. Proceeds to the Company of any such purchase by Pershing Square would be first applied to repay amounts outstanding under the Term Loan Facility.
The Company may sell all of the foregoing businesses or may elect to sell only Paperchase and the Company’s interest in Bookshop Acquisitions (collectively, the “UK Business”) alone or together with the Company’s Singapore business. In the event of such election, the purchase price for the UK Business will be $65,000,000, or $67,500,000 for the UK Business and the Company’s business in Singapore (in each case, subject to adjustment).”
“Pershing Square has agreed not to interfere with the sale of the Subject Businesses to third parties until the acceptance of the Purchase Offer by the Company, and has agreed not to contact any potential alternative buyers, with whom the Company or any of its representatives are then in discussions with prior to December 15, 2008 (or until January 15, 2009 if the Company is then party to a definitive agreement for the sale of all Subject Businesses not yet sold).”
” The Company has retained the right, in its sole discretion, to forego selling some or all of the Subject Companies to any party, to sell some or all of the Subject Companies to one or more third parties, or to require Pershing Square to consummate the purchase transaction. Pershing Square has no right of first refusal or breakup fee or other preemptive right with respect to the sale of the Subject Companies by the Company to other parties.”
Regarding the Warrent to Pershing:
“The Warrants are freely transferable, subject to securities law restrictions, except the Side Letter provides that Pershing Square may not transfer (other than internally among its affiliates) any Warrants until January 1, 2009 or the earlier public announcement of the entry into a definitive agreement with respect to (or the completion of) a change of control or other extraordinary transaction involving the Company to which Pershing Square is not a party. In addition, Pershing Square has agreed not to sell or transfer any of its shares of the Company’s common stock until such time.”
No real bombshells here which is nice because it means Borders is doing a nice job disclosing relevant information to shareholders as it become available.
Disclosure (“none” means no position):Long BGP,
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Here are the week’s top stories at Value Investing News
1. Vitaliy Katsenelson Interview with Active Trader Magazine
(via contrarianedge.com)
I was interviewed by Active Trader Magazine. The question comes to mind – what do I know about trading? Absolutely nothing! This is exactly what I told David Bukey, the editor of the magazine, when he asked me for an interview. He assured me that he read my book and thought my (investing) message was very important to his readers. How can you say no to that?
2. Buffett tips off MU crowd
(via www.columbiatribune.com)
Billionaire investor Warren Buffett takes part in a question-and-answer session with business college students during the “Emerging Issues and Trends in Real Estate” forum and educational conference yesterday at the Trulaske College of Business at the University of Missouri.
3. Right Price Checklist: Business
(via mikesnewsletterinvesting.blogspot.com)
I detail my checklist for evaluating the business then apply it to Best Buy.
4. Warren Buffett Named ‘Manager’ of 2008 Boardroom All-Star Team
(via msnbcmedia.msn.com)
Warren Buffett ranks number one on Directorship magazine’s new list of the most admired board directors. Its Annual Survey of Exceptional Directors is compiled using “data from proxy firms, reader polls and governance experts.”
5. Special Situations Real Money Portfolio March 2008 Update
(via www.fatpitchfinancials.com)
Another update of the Special Situations Real Money Portfolio, my experiment in arbitrage investing. This month I talk about a profitless tender offer and the decline in price of three positions that have been held for several months.
6. Prof. Bruce Greenwald’s Talk on Value Investing
(via fundooprofessor.blogspot.com)
The talk, titled, “Value Investing Frameworks and Business Analytics” was delivered by Prof. Greenwald to an audience of 220 guests from the Indian investment community at Hotel Taj President in Mumbai On January 8.
7. Interview with Robert Rodriguez of FPA
(via www.investors.com)
Nice little interview with Bob Rodriguez, who along with Seth Klarman, always seems to have a good handle on the pulse of the financial markets.
8. Third Avenue Q1 Shareholder Letters
(via www.thirdavenuefunds.com)
Martin Whitman devotes a section of his quarterly letter to refuting William Ackman’s views on MBIA. My favorite sentence: “The argument that if an entity is in trouble, every liability on the balance sheet of that entity is also in trouble is strictly ‘amateur hour’.”
9. Altria’s Spin Cost Basis
(via valueplays.blogspot.com)
Here is the cost basis for your shares
10. Buffett Beats Bernanke
(via www.fool.com)
Fed Chairman Ben Bernanke is in a rough spot these days. When he lowers interest rates, the specter of stagflation is raised. When he rescues Bear Stearns from potential bankruptcy by brokering a sale to JPMorgan Chase, he’s chided for guaranteeing billions in private subprime loans with public money.
11. Bill Miller’s wishful thinking
(via money.cnn.com)
The value manager wants a better deal for Yahoo, but like so many takeover targets it has no better offers.
12. Value investing is supposed to get ugly
(via www.advisor.ca)
One of the tenets of value investing is there will be times when it’s going to get ugly. Problem is, for a lot of established value firms, things have never looked uglier — leading some advisors to question the wisdom of the strategy. But fund analysts say there is merit to what value firms are doing right now and investors should wait before they write off their value holdings.
Posted April 9th, 2008 by SilverSlime | Tags:
13. Q & A: Which Gurus Are Not Hurt By Credit Crisis?
(via www.gurufocus.com)
This is an interview GuruFocus had with Swiss magazine BILANZ. The questions and answers.
14. FDA Tobacco Bill: A Partnership
(via valueplays.blogspot.com)
This bill will end up being an FDA endorsement of tobacco
15. Swimming Happily Against the Tide — Third Avenue’s Marty Whitman Finds Lots to Buy
(via online.barrons.com)
In the midst of the market mayhem last August, Third Avenue Management sent a two-page letter to shareholders in its four mutual funds, including its flagship $10 billion Third Avenue Value Fund. The message: It’s time to buy.
16. Credit crisis over says top fund manager
(via www.citywire.co.uk)
Bill Miller of Legg Mason Investment Management believes the Bear Stearns bailout two weeks ago marks the end of the credit crisis.
17. MBA Advice from the Oracle of Omaha
(via www4.gsb.columbia.edu)
On March 21 I flew to Omaha — along with 150 of my classmates — to meet Warren Buffett, MS ’51, a man I have admired (some friends would say fanatically idolized) for close to 15 years.
18. Free Cash Yield: The Best Valuation Statistic?
(via magicdiligence.com)
There is only one valuation statistic that takes into account a company’s free cash production and balance sheet risk, and allows you to compare it’s valuation against other stocks, bonds, and treasuries. That statistic is the little used free cash yield measure.
19. Beware of Blind Contrarianism!
(via streetcapitalist.com)
Price is what you pay, value is what you get. Those words aren’t mine, they belong to Warren Buffett. For now though, they remain incredibly relevant to the type of investment environment we’re in.
20. Fat Pitch Financials Portfolio First Quarter 2008
(via www.fatpitchfinancials.com)
A review of the performance of the Fat Pitch Financials Portfolio for the first quarter of 2008.
Disclosure (“none” means no position):
Visit the ValuePlays Bookstore for Great Investing Books
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The billionaire investor had some interesting thought sin a recent interview..
In the interview he said:
Q:How is the credit market looking now?
A: The market isn’t going to stay broken forever. Citibank (C) is selling loans back to borrowers. $12 billion is not the end of the earth, but it’s a good start. Citi must feel that they’ve marked loans properly to market. If you haven’t marked these to market, you can’t really sell them because that would crystallize a loss.
Similarly, Goldman Sachs (GS) announced recently that they had sold some of their Chrysler debt at 63 cents on the dollar. That’s a terrible number, but at least they found a taker for them and offloaded some debt.
Every time some of this logjam is reduced, it’s constructive. But remember that there’s hundreds of billions of paper that’s stuck, versus tens of millions that’s only recently become unstuck.
Q:So what’s the duration? Six months? A year?
A: I doubt this will take longer than 24 months.
With his purchases of Assured Guarentee (AGO), American Home Mortgage and Option One, Ross is buy far making the largest individual bet that the end of the mess is near. Based on his almost flawless history, I would have a hard time betting against him.
Disclosure (“none” means no position): Long C, GS, none
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Gonna be a real expensive summer says Shell Oil’s(RDS) CEO Hoffmeister..
Disclosure (“none” means no position):None
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