Interesting video I cam across.
Mary Buffett talks about the types of businesses Berkshire’s (BRK.A) Warren Buffett likes..
Disclosure (“none” means no position):none
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Author: ToddSullivan
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Icahn Wins with Motorola
It looks like Carl Icahn will get what he want with Motorola (MOT)
Motorola announced this morning it has “commenced a process to create two independent, publicly-traded companies. Today’s decision follows the Company’s January 31, 2008 announced evaluation of the structural and strategic realignment of its businesses and represents affirmative steps to position its Mobile Devices and Broadband & Mobility Solutions businesses for success, while creating value for all Motorola shareholders.
“Our decision to separate our Mobile Devices and Broadband & Mobility Solutions businesses follows a review process undertaken by our management team and Board of Directors, together with independent advisors,” said Greg Brown, Motorola’s president and chief executive officer. “Creating two industry-leading companies will provide improved flexibility, more tailored capital structures, and increased management focus – as well as more targeted investment opportunities for our shareholders.”
Based on current plans, the creation of the two stand-alone businesses is expected to take the form of a tax-free distribution to Motorola’s shareholders, subject to further financial, tax and legal analysis, resulting in shareholders holding shares of two independent and publicly-traded companies.”
It took him a while but the man (Icahn) rarely loses…
Disclosure (“none” means no position):none
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Circuit City Being Sold Soon?
On March 11th Goldman Sachs (GS) made an announcement that may give light into the future of Circuit City (CC).
An analyst note removed price targets for CC’s stock saying Goldman is “acting as a financial adviser in connection with a strategic transaction that is fundamental to the reasonable analysis” of Circuit City’s stock price.
Hmm
But, Circuit City spokesman Bill Cimino said yesterday the “strategic transaction” referenced is an ongoing effort to sell the company’s InterTan unit, a Canadian electronics retailer purchased from RadioShack (RSK) in 2004.
He continued..”Last year, [the process] was put on hold for the holidays, then it started back up.” Goldman’s withdrawal of its stock rating “is really in connection with that.”
Well, if that is true, why didn’t Goldman withdraw its price targets from CC’s stock then? Shouldn’t they have done so? Why wait 6 months? It does not make sense.
The timing of investor Mark Wattles’ recent agitation and the Goldman change must leave one to think this has nothing to do with the Canadian unit. We can assume this if for no other reason than CC says it is so.
We can assume that something is in the works……
Disclosure (“none” means no position):None
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Borders Call Notes
Finally got around to reading the Borders (BGP) earnings call and the take away for me at least was very positive…
A couple of things struck me.
1- Guidance:
Despite a 2% comps sales increase number last year, guidance for the current year was in the words of CEO George Jones “very conservative”, “given the current environment”.
2- Cost cutting:
DVD “shrinkage” (read:theft) was at $20 million last year. The company has both made changes to security measures and will be reducing the number of titles sold and the expectations are for this number to fall dramatically.
Inventory ended the year at $1.3 billion and change, essentially flat over the previous year. Now, the company is moving towards a “face out” strategy on books that will reduce the number of titles sold at the store level. The results will be a dramatic fall in carried inventory at the store level. This savings drops immediately to the bottom line. The locations that have the “face out” shelving, carry 20% fewer titles yet are seeing double digits sales growth. hmmm.
The dividend was stopped (for now) and that will save $25 million and change.
3-Selective Promotions:
The Borders Rewards program now sports a membership of 25 million people. The importance of this is huge. It allows Borders to track purchases from its members and then tailor promotions to maximize the value of them. Retailers have been using these programs for years but Borders is only now getting involved. The tie in with the upcoming website launch will allow email-to-purchase marketing previously not available on this scale to the company.
4-Borders.com
The heavy costs involved with rolling out the site are done. Estimates of them were not given but looking sat the site one ought to assume they were substantial. It is important to note that in the previous year, Borders reaped no benefits from that investment. This year they will both reap the benefits and see a decrease in costs. CEO Jones said that he expects CapEX to fall from $200 million to “around” $140 million
5- Sale of assets
The minimum that will be raised in the $125 million offered by Ackman. Now, the company only has a market cap of just under $400 million at the current share price. They could conceivably by back 25% of the shares and have cash left over for operations or debt repurchases.
So where does this leave us? A cursory look shows $80 to $100 million in cost cuts available without any real effort or impediment to operations. The inventory reductions should be over an additional $100 million as the stores (not the company) begin stocking fewer titles.
Border lost $157 million last year and it looks as though it could easily cut its way to break-even or better this year now that much of heavy lifting in investment has be done. This assumes the above conservative guidance. Should that guidance prove to be conservative, results could improve even more.
Disclosure (“none” means no position):Long BGP
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Wednesday’s Upgrades and Downgrades
Upgrades
Radyne (RADN)- Feltl & Co. Hold » Buy
XM Satellite (XMSR)- Utendahl Equal-weight » Over-weight
Force Protection (FRPT)- Collins Stewart Sell » Hold
L-1 Identity Solutions (ID)- Needham & Co Hold » Buy
N Amer Palladium (PAL)- HSBC Securities Underweight » Neutral
Avant Immun (AVAN)- Needham & Co Hold » Buy
XM Satellite (XMSR)- Stifel Nicolaus Hold » Buy
Canadian Solar (CSIQ)- Lazard Capital Hold » Buy
Boardwalk Pipeline (BWP)- Morgan Keegan Mkt Perform » Outperform
Orleans Homebuilders (OHB)- JMP Securities Mkt Perform » Mkt Outperform
Pulte Homes (PHM)- JMP Securities Mkt Perform » Mkt Outperform
Meritage (MTH)- JMP Securities Mkt Perform » Mkt Outperform
DR Horton (DHI)- JMP Securities Mkt Outperform » Strong Buy
Packeteer (PKTR)- Brean Murray Sell » Hold
CIGNA (CI)- Credit Suisse Neutral » Outperform
Wimm-Bill-Dann Foods (WBD)- Citigroup Hold » Buy
THQ Inc (THQI)- Citigroup Hold » Buy
Yahoo! (YHOO)- Citigroup Hold » Buy
Downgrades
SiRF Technology (SIRF)- Piper Jaffray Neutral » Sell
Agree Realty (ADC)- Janney Mntgmy Scott Buy » Sell
Omega Health (OHI)- Ferris Baker Watts Buy » Neutral
XM Satellite (XMSR)- Janco Partners Buy » Accumulate
Williams-Sonoma (WSM)- FTN Midwest Buy » Neutral
Volcom (VLCM)- Wedbush Morgan Buy » Hold
Stillwater Mining (SWC)- HSBC Securities Neutral » Underweight
Heartland Payment Systems (HPY)- Sun Trust Rbsn Humphrey Buy » Neutral
Starwood Hotels (HOT)- Stifel Nicolaus Buy » Hold
FPIC Insurance (FPIC)- Stifel Nicolaus Buy » Hold
Extra Space Storage (EXR)- Banc of America Sec Buy » Neutral
Prosperity Bancshares (PRSP)- BMO Capital Markets Outperform » Market Perform
Public Storage (PSA)- Banc of America Sec Buy » Neutral
Accentia Biopharmaceuticals (ABPI)- Jefferies & Co Buy » Underperform
Capital One (COF)- Friedman Billings Mkt Perform » Underperform
UnitedHealth (UNH)- Credit Suisse Outperform » Neutral
C.H. Robinson (CHRW)- UBS Buy » Neutral
Amtrust Financial (AFSI)- Keefe Bruyette Outperform » Mkt Perform
Pzena (PZN)- Keefe Bruyette Mkt Perform » Underperform
Royal Philips Electronics (PHG)- JP Morgan Overweight » Neutral
Credit Suisse (CS)- UBS Buy » Neutral
Liberty Media Capital (LCAPA)- Lehman Brothers Overweight » Equal-weight
Gap Inc (GPS)- Citigroup Buy » Hold
Bear Stearns (BSC)- Sandler O’Neill Hold » Sell
Accentia Biopharmaceuticals (ABPI)- Rodman & Renshaw Mkt Outperform » Mkt Perform
Zumiez (ZUMZ)- Oppenheimer Outperform » Perform
Tiffany & Co (TIF)- Oppenheimer Outperform » Perform
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"Fast Money" for Wednesday
Wednesday’s Picks
Jeff Macke likes Intel (INTC) $22.27
Tim Seymour prefers Tesoro (TSO) $29.88
Karen Finerman recommends the Altria (MO) $73.33 stub.
Pete Najarian thinks Oracle (ORCL) $21.08 is a buy ahead of earnings.
Tuesday’s Results
Jeff Macke is buying Valero (VLO) $50.08 Close $48.10 LOSS
Tim Seymour likes the U.S. Natural Gas ETF (UNG) $45.56 Close $45.99 GAIN
Karen Finerman recommends Philip Morris International (PM-WI). Agreed
Jon Najarian is sticking with JPMorgan Chase (JPM) $46.55 and CEO Jamie Dimon. Close $46.06 LOSS
2008 Records:
Brian Schaeffer= 0-1
Carter Worth= 0-1
Jon Najarian= 4-1
Jeff Macke= 21-14
Tim Seymore= 13-6
Guy Adami= 20-21
Pete Najarian= 21-17
Karen Finerman= 16-20-1
Joe Terrenova= 1-1
2007 Results (Since 6/21):
Guy Adami= 58-46 = 56%
Jeff Macke= 60-40 = 60%
Pete Najarian= 49-41 = 54%
Ever see the cop shows where the crazy guy sits there with a gun to his head and shouts “take one step closer and I’ll shoot”? We now know what Circuit City (CC) CEO Phil “The Shill” Schoonover watched as a kid.
Back in February when Mark Wattles disclosed a 5% stake in the company, rumors abounded he may make a play for it. Schoonver responded by expanding the company’s credit line by $800 million to $1.3 billion with an option to add another $300 million at their convenience. It does not seem like much until you consider prior to this they had $49.7 million outstanding against the current credit facility and have total sales of a paltry $2.9 billion. Quite an increase for no apparent reason.
Clearly Schoonover was trying to protect his job by making the company unattractive as a potential investment. It should be noted here that the now almost 80% drop in the stock price had done that for scores of current investors.
Wattles then called for the a new Board of Directors and nominated his own slate.
Schoonover responded by chopping off his own feet and fired Steven Pappas the Company’s “Small Store President,” and Peter Weedfald the Chief Marketing Officer. An important note here is the $6 million bonuses approved in December to retain 10 Vice Presidents and $3 million more to retain Executive Vice presidents, including the now unemployed Pappas and Weedfald. At the time Schoonover defended the bonuses saying it was important to retain “instrumental executives”. OK
Now word is that Schoonover is seeking to pacify irate investors with a $0.04 dividend. Is he thinking that makes up for the $16 collapse in the stock price?
Now the company is being removed from the S&P 500 and index funds are dumping the stock by the truck load. Schoonover’s moves have backfired as activist funds D.E. Shaw, Royal Capital Management & HBK Investments LP, have scooped up over 15% of the shares.
I cannot wait to see Schoonover’s next move… maybe random rolling store closings until Wattles “goes away”?
Disclosure (“none” means no position):None (Thank God)
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More Evidence for Auto Loan Investing
CNBC ran a piece today that may give more clarity into Leucadia’s (LUK) recent AmeriCredit (ACF) investment.
The key take-away is that the financing companies are seeing more revenues due to the increased length of financing terms BUT, so far there have been no real increase in defaults. I still stand by my thesis that people will walk away from a home before an auto…..must get to work.
Translation: Higher profits.
Disclosure (“none” means no position): None
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Tuesday’s Links
Tipping, LTCM again, Starbucks’ “social networking site”, Hillary.
– This was fascinating
– Remember John Meriweather? Left Solomon in the 80’s amid bond trading scandal, then founded LTCM which imploded, almost taking 6 banks with it and now…. back at his old tricks.
– Finally got it….it is just an idea factory.
– Oops….Bet she never though this stuff would see the light of day
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A Classic…..
Did anyone else see this ad? It seems Cramer is now fodder for Fox Biz
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Who Will Buy Borders?
It seems there are four options for a purchaser of Borders (BGP).
1- Barnes and Noble (BKS)
This has been talked about fr a few years now. The theory being that a combined entity would be better able to compete with Amazon (AMZN) without the cannibalization of the foot traffic market the two currently compete for.
2- Indigo-
Canada’s largest bookseller has been mentioned as a possible suitor. This has some interesting story-lines to it. Indigo leads in market share in Canada. Here is the interesting part. Indigo’s CEO Heather Reisman knows Borders well. She lead the attempt to expand Borders into Canada in 1996 that was blocked by the Canadian government. She eventually left Borders,started Indigo, and then took over Canadian rival Chapters in 2001, claiming market dominance in the country. A combination of the two would lead to a North American powerhouse and with the controlling interesting being Canadian, would see no objection from that country’s government.
3- Pershing.
Ackman will already own the international operations soon enough, why not just convert his soon to be 40% stake into total ownership, do what he wants to it, and then spin it out in a few years when the climate is better?
4- Nothing.
It is possible for the company to continue on its own should no legitimate offered come about as the Ackman loan allows for uninterrupted operations through 2009. This option is not likely though. It was probably done to give the company some bargaining power in negotiations.
No matter what happens, Pershing will own the international operations on Australia, New Zealand, Singapore and Britain. Having those operation off the books may clear the way for Indigo to scoop up the US assets at a reduced price.
Borders is a profitable business that is turning around albeit very slowly in the current environment. With that being said, there is a market for the business for a buyer.
Again, the good news for current shareholders is Ackman’s interest. Being the largest shareholder and essentially in control of the sale process, shareholders can be assured of a good deal should one come about.
Disclosure (“none” means no position):Long BGP, none
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Tuesday’s Upgrades and Downgrades
Upgrades
Alcoa (AA)- Davenport Buy » Strong Buy
Delia’s (DLIA)- CL King Underperform » Neutral
Green Mtn Coffee (GMCR)- Canaccord Adams Hold » Buy
Big Lots (BIG)- Wedbush Morgan Buy » Strong Buy
Molson Coors Brewing (TAP)- Stifel Nicolaus Hold » Buy
CIT Group (CIT)- Stifel Nicolaus Hold » Buy
Anheuser-Busch (BUD)- Stifel Nicolaus Hold » Buy
Tsakos Energy (TNP)- Citigroup Sell » Hold
Rockwell Collins (COL)- JP Morgan Neutral » Overweight
National City (NCC)- Friedman Billings Underperform » Mkt Perform
Potash (POT)- RBC Capital Mkts Outperform » Top Pick
Grey Wolf (GW)- Credit Suisse Neutral » Outperform
PMC-Sierra (PMCS)- Lehman Brothers Equal-weight » Overweight
Microsemi (MSCC)- Lehman Brothers Equal-weight » Overweight
Intersil (ISIL)- Lehman Brothers Equal-weight » Overweight
Fairchild Semi (FCS)- Lehman Brothers Equal-weight » Overweight
Analog Devices (ADI)- Lehman Brothers Equal-weight » Overweight
FPL Group (FPL)- Lehman Brothers Equal-weight » Overweight
Xyratex (XRTX)- Wachovia Mkt Perform » Outperform
Hawaiian Airlines, Inc. (HA)- Bear Stearns Peer Perform » Outperform
CIGNA (CI)- UBS Neutral » Buy
Monsanto (MON)- UBS Neutral » Buy
Cameron (CAM)- Wachovia Mkt Perform » Outperform
Cresud SA (CRESY)- HSBC Securities Neutral » Overweight
Collective Brands (PSS)- Soleil Hold » Buy
Auxilium Pharma (AUXL)- Soleil Hold » Buy
Domtar (UFS)- Soleil Hold » Buy
Downgrades
Synplicity (SYNP)- DA Davidson Buy » Neutral
Cambrex (CBM)- KeyBanc Capital Mkts Buy » Hold
Piper Jaffray (PJC)- Sterne Agee Buy » Sell
Steelcase (SCS)- BB&T Capital Mkts Buy » Hold
Herman Miller (MLHR)- BB&T Capital Mkts Buy » Hold
Astoria Fincl (AF)- Sterne Agee Buy » Hold
InfoSpace (INSP)- Needham & Co Buy » Hold
Dime Community (DCOM)- FTN Midwest Buy » Neutral
Integra Bank (IBNK)- FTN Midwest Buy » Neutral
Cambrex (CBM)- First Analysis Sec Overweight » Equal-Weight
Textron (TXT)- Cowen & Co Outperform » Neutral
Hercules Offshore (HERO)- CapitalOne southcoast Add » Neutral
Cellcom Israel (CEL)- Jefferies & Co Buy » Hold
Winnebago Inds (WGO)- BB&T Capital Mkts Buy » Hold
CIT Group (CIT)- Oppenheimer Outperform » Perform
Symmetry Medical (SMA)- Wachovia Outperform » Mkt Perform
Gap Inc (GPS)- UBS Buy » Neutral
Selective Insurance (SIGI)- Banc of America Sec Buy » Neutral
Auxilium Pharma (AUXL)- Merriman Curhan Ford Neutral » Sell
Wells Fargo (WFC)- Robert W. Baird Neutral » Underperform
Lehman Brothers (LEH)- Oppenheimer Outperform » Perform
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"Fast Money" for Tuesday
Tuesday’s Picks
Jeff Macke is buying Valero (VLO) $50.08
Tim Seymour likes the U.S. Natural Gas ETF (UNG) $45.56
Karen Finerman recommends Philip Morris International (PM-WI).
Jon Najarian is sticking with JPMorgan Chase (JPM) $46.55 and CEO Jamie Dimon.
Monday’s Results
Jeff Macke believes in the financials breakout and is buying the XLF (XLF) $26.32 Close $26.65 GAIN
Guy Adami’s going with Microsoft (MSFT) $29.18 which he predicts gets a 30-handle. Close $29.17 LOSS
Tim Seymour said the time is right to buy PetroChina (PTR) $122.55 Close $123.20 GAIN
Pete Najarian is bullish on Oracle (ORCL) $20.08 into its earnings next Wednesday.Close $20.77 GAIN
2008 Records:
Brian Schaeffer= 0-1
Carter Worth= 0-1
Jon Najarian= 4-1
Jeff Macke= 21-13
Tim Seymore= 12-6
Guy Adami= 20-21
Pete Najarian= 21-16
Karen Finerman= 16-20-1
Joe Terrenova= 1-1
2007 Results (Since 6/21):
Guy Adami= 58-46 = 56%
Jeff Macke= 60-40 = 60%
Pete Najarian= 49-41 = 54%
Disclosure (“none” means no position):
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Monday’s Upgrades and Downgrades
Upgrades
Morgan Stanley (MS)- Punk, Ziegel & Co Sell » Mkt Perform
Oritani Financial (ORIT)- Sterne Agee Hold » Buy
Lindsay Manu (LNN)- Boenning & Scattergood Market Perform » Market Outperform
Rent-A-Center (RCII)- Stifel Nicolaus Hold » Buy
Abbott Labs (ABT)- Wachovia Mkt Perform » Outperform
Global Industries (GLBL)- CapitalOne southcoast Neutral » Add
TeleTech (TTEC)- Wachovia Mkt Perform » Outperform
Micromet (MITI)- RBC Capital Mkts Sector Perform » Outperform
Netflix (NFLX)- Cantor Fitzgerald Hold » Buy
Zimmer Hldgs (ZMH)- Lehman Brothers Equal-weight » Overweight
Fannie Mae (FNM)- Keefe Bruyette Mkt Perform » Outperform
Freddie Mac (FRE)- Keefe Bruyette Mkt Perform » Outperform
Downgrades
Towerstream (TWER)- Canaccord Adams Buy » Hold
Texas Instruments (TXN)- AmTech Research Buy » Neutral
Banco Sant. P.R. (SBP)- Sandler O’Neill Buy » Hold
Great Plains Engy (GXP)- Wachovia Outperform » Mkt Perform
InterNAP (INAP)- Jefferies & Co Buy » Underperform
Diamond Mngmt (DTPI)- JMP Securities Mkt Perform » Mkt Underperform
BladeLogic (BLOG)- Cowen & Co Outperform » Neutral
Assured Guaranty (AGO)- Citigroup Buy » Hold
China Sunergy (CSUN)- Jefferies & Co Hold » Underperform
Towerstream (TWER)- Morgan Joseph Buy » Hold
US Airways (LCC)- Lehman Brothers Overweight » Equal-weight
Air Tran Holdings (AAI)- Lehman Brothers Overweight » Equal-weight
Panera Bread (PNRA)- JP Morgan Overweight » Neutral
First Horizon (FHN)- JP Morgan Overweight » Neutral
SanDisk (SNDK)- JP Morgan Overweight » Neutral
AMR Corp (AMR)- UBS Neutral » Sell
Delta Air Lines (DAL)- UBS Buy » Neutral
Continental Air (CAL)- UBS Buy » Neutral
US Airways (LCC)- UBS Buy » Neutral
Northwest Airlines (NWA)- UBS Buy » Neutral
UAL Corp. (UAUA)- UBS Buy » Neutral
Amgen (AMGN)- Wachovia Outperform » Mkt Perform
ICICI Bank (IBN)- Jefferies & Co Buy » Underperform
Disclosure (“none” means no position):
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"Fast Money" for Monday
Monday’s Picks
Jeff Macke believes in the financials breakout and is buying the XLF (XLF) $26.32
Guy Adami’s going with Microsoft (MSFT) $29.18 which he predicts gets a 30-handle.
Tim Seymour said the time is right to buy PetroChina (PTR) $122.55
Pete Najarian is bullish on Oracle (ORCL) $20.08 into its earnings next Wednesday.
Thursday’s Results
Jeff Macke recommends selling the United States Oil Fund (USO) $82.29 Close $81.30 GAIN
Guy Adami thinks Starbucks (SBUX) $17.50 is a buy with a tight stop. Close $17.53 GAIN
Tim Seymoyr prefers iShares MSCI Emerging Markets Index (EEM) $126.467 Close $128.60 GAIN
Pete Najarian anticpates upside in Merck (MRK) $42.99. Close $43.36 GAIN
2008 Records:
Brian Schaeffer= 0-1
Carter Worth= 0-1
Jon Najarian= 4-1
Jeff Macke= 20-13
Tim Seymore= 11-6
Guy Adami= 20-20
Pete Najarian= 20-16
Karen Finerman= 16-20-1
Joe Terrenova= 1-1
2007 Results (Since 6/21):
Guy Adami= 58-46 = 56%
Jeff Macke= 60-40 = 60%
Pete Najarian= 49-41 = 54%