Author: ToddSullivan

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Monday’s Upgrades and Downgrades

UPGRADES

Arbitron ARB CL King Neutral » Accumulate
Brinker EAT Bear Stearns Peer Perform » Outperform
Bank of NY BK Punk, Ziegel & Co Mkt Perform » Buy
Packeteer PKTR Ferris Baker Watts Sell » Neutral
King Pharms KG Citigroup Sell » Hold
First Horizon FHN Citigroup Hold » Buy
American Financial Realty Trust AFR Stifel Nicolaus Sell » Buy
CyberSource CYBS Needham & Co Hold » Buy
InfoSpace INSP Needham & Co Hold » Buy
Centene CNC Jefferies & Co Hold » Buy
WNS WNS Credit Suisse Neutral » Outperform
Computer Sciences CSC Credit Suisse Underperform » Neutral
Harmonic HLIT Friedman Billings Mkt Perform » Outperform
LaSalle Hotel LHO RBC Capital Mkts Outperform » Top Pick
Teradyne TER JP Morgan Neutral » Overweight
Old Dominion ODFL Bear Stearns Underperform » Peer Perform
SunTrust Banks STI Bernstein Underperform » Mkt Perform
Overseas Shipholding OSG Banc of America Sec Neutral » Buy
Parker-Hannifin PH CIBC Wrld Mkts Sector Underperform » Sector Perform
J. Crew JCG CIBC Wrld Mkts Sector Perform » Sector Outperform

DOWNGRADES

Wachovia WB Punk, Ziegel & Co Buy » Mkt Perform
SunTrust Banks STI Punk, Ziegel & Co Buy » Mkt Perform
Zions Bancorp ZION Stifel Nicolaus Buy » Hold
Wesco WCC CIBC Wrld Mkts Sector Outperform » Sector Perform
Hershey Foods HSY Piper Jaffray Market Perform » Underperform
IntercontinentalExchange ICE BMO Capital Markets Outperform » Market Perform
Pilgrim’s Pride PPC BMO Capital Markets Outperform » Market Perform
Syntel SYNT Credit Suisse Outperform » Neutral
ExlService EXLS Credit Suisse Outperform » Neutral
EDS EDS Credit Suisse Outperform » Underperform
St. Jude Medical STJ HSBC Securities Overweight » Neutral
Vertex Pharm VRTX Cowen & Co Outperform » Neutral
Mohawk MHK Morgan Keegan Outperform » Mkt Perform
Bankunited Fin BKUNA Friedman Billings Outperform » Mkt Perform
FirstFed Financial FED Friedman Billings Mkt Perform » Underperform
Preferred Bank PFBC Friedman Billings Outperform » Underperform
Talbots TLB CIBC Wrld Mkts Sector Outperform » Sector Perform
AMR Corp AMR Calyon Securities Buy » Add
Capital One COF Friedman Billings Outperform » Mkt Perform
AstraZeneca AZN UBS Neutral » Sell
Hess HES UBS Buy » Neutral
HSBC Holdings HBC UBS Buy » Neutral
Southern Copper PCU UBS Buy » Neutral
Host Hotels HST RBC Capital Mkts Top Pick » Outperform
Cabela’s CAB Robert W. Baird Outperform » Neutral
DaVita DVA Oppenheimer Buy » Neutral
Hansen Natural HANS JP Morgan Overweight » Neutral

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RED SOX: AL CHAMPS

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"Fast Money" for Monday

Here are results to date and Monday’s picks..

Monday’s Picks

Jeff Macke recommended getting long Intel (INTC). Open $26.30

Guy Adami told the panel to short Exxon Mobil (XOM). Open $92.14

Karen Finerman preferred to play defense with Altria (MO).Open $70.50

Pete Najarian said Apple (AAPL) was a buy. Open $170.42

Friday’s Results

Jeff Macke recommended Intel (INTC). Open $26.97 Close $26.30 LOSS

“Short Exxon Mobil (XOM)” said Guy Adami. Open $95.05 Close $92.14 GAIN

Karen Finerman thought investors should get long Limited Brands (LTD). Open $21.95 Close $21.39 LOSS

Pete Najarian said Cypress Semi (CY) is a buy. Open $32.94 Close $32.73 LOSS

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= 33-22 = 60%
John Najarian= 13-4 = 76%
Jeff Macke= 38-30 = 54%
Pete Najarian= 26-24 = 51%
Tim Seymore= 4-3 = 57%
Karen Finerman= 17-12 = 58%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%

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The Hidden Value In Sears Holdings

Barron’s did a piece this weekend on Sears Holdings (SHLD). In it the author detailed several value metrics which shed light on why Chairman Eddie Lampert apparently cannot buy shares fast enough this summer at these prices.

Here is the gist of the article:

Time Frame:
– It took retail veteran Allen Questrom five years to revive then dead JC Penny (JCP) from 2000 to 2004. Lampert purchased Sears in 2005.

Retail Operations
– Margins are only at 4.7%, half those of competitors JC Penny, Target and Kohl’s
– The Lands End “store-in-a-store” concept will increase margins
– Kenmore appliances (high margin) are now being moved into Kmart locations
– Lampert could increase cash flow $3 billion a year lust by delaying payments to suppliers like other retailers do.

Real Estate:
– Sears owns 518 of the 861 legacy general merchandise stores located in the best malls in America. Those not owned currently pay well below market rents.
– Kmart leases 1,194 out of 1,333 locations at rock bottom rates and the 100 year agreements essentially give Sears ownership control of the location.
– The company recently added to its “land bank” when it absorbed excess Macy’s (M) and Mervyn’s locations.
– Bill Ackman, who recently took a stake in the company says that at the current share price of $132, the market essentially values this rich real estate at $33 per sq. ft.. By comparison, Target (TGT) sells for $341 /sq. ft, Home Depot (HD) for $277/ sq. ft, JC Penny for $144/ sq. ft, Kohl’s (KSS) for $319 /sq. ft and Simon Properties (SPG)(Ackman uses this because he argues Seas Holdings is a conglomerate much like Simon) for $698/ sq.ft.
– The management of Target has made it publicly know that it has the desire to take over “hundreds” of Sears current locations either on or off mall.
– Mall owners would pay dearly to take over Sears locations and put in stores like Cheesecake Factory (CAKE), Barnes and Noble (BKS) or PF Chang’s (PFCB). There is nothing to stop Lampert and Sears from becoming their own leasing and development operation with these locations.

Back in February I said that “Sears Holdings is in the infancy of what it will eventually become” and the Barron’s article, if nothing else should illustrate the tremendous options Lampert has at his disposal to enhance shareholder value.

How could you bet long term against this guys track record?

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This Week’s Dividend Increases

Lake Shore Bank (LSBK)= +33%
Provident NY Bank (PBNY)= +20%
MFB Corp (MFBC)= +15%
Healthcare Services (HCSG)= +12%
Green County Bank (GCBC)= +12%

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Largest Changes in Short Interest

An increase means people are betting against the stock, a decrease means those who were betting against are getting out of those positions. Notice the short covering in Wells Fargo and Wachovia..

INCREASES- number of shares
Washington Mutual (WM)= +12,483,000
EMC (EMC)= +11,205,000
Target (TGT)= +5,720,000
Pulte Homes (PHM)= +5,392,000
Beazer Homes (BZH)= +5,209,000
Mylan (MYL)= +5,001,000

DECREASES- number of shares
Wells Fargo (WFC)= -9.180,000
Wachovia (WB)= -8,394,000
Commerce Bank (CBH) = -8,002,000
Express Jet (XJT)= -7,409,000
McDonalds (MCD)= -6,569,000

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This Week’s Insider Buys

This was the lowest weekly total in recent memory.

World Acceptance Corp (WRLD)= $1,708,00
Private Media Group (PRVT)= $1,392,000
Emerging Visions (ISEE)= $1,133,000
Valley Financial (VYFC)= $1,050,000
Ruby Tuesday (RT)= $858,000

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Sears Holdings Opens 200th Lands End Store

Well that did not take long at all.

Just two week ago I commented that the Lands end store in a store concept was on track and Sears Holdings (SHLD) announced this past week that they have reached to 200 store goal ahead of schedule.

To celebrate the opening of the 200th Lands’ End Shop at Sears , the company is asking customers to share where they’d like to see the next Shop located. click here
“We’ve had an overwhelming response from customers to the Lands’ End Shops at Sears,” said David McCreight, president, Lands’ End. “People write to tell us how thrilled they are to have us in their communities. We also receive a number of letters saying ‘we hear you are in Sears — when are you coming to my town?'”

Lands’ End will accept customer suggestions for the location of the next Lands’ End Shop at Sears between September 25 and December 31, 2007. Customers can send their suggestions to nextshop@landsend.com, by calling 1-800-800-5800

“We’ve had an overwhelming response from customers to the Lands’ End Shops at Sears,” said David McCreight, president, Lands’ End. “People write to tell us how thrilled they are to have us in their communities. We also receive a number of letters saying ‘we hear you are in Sears — when are you coming to my town?'”

I have been saying since February that the future of Sears retailing is the Land’s End concept. Now, that being said we need some more information when earnings are released. For instance, we know that Lands end will report another record year for sales and earnings. But, when you double your locations sales and earning are bound to produce record results. Now that Lands End is becoming a more dominant earnings driver for Sears Holdings, we need to know how it is doing.

While I agree with Lampert that same store sales are not the end all be all metric for retailers, if Lands End is going to be the future, we need to know how the stores with the store-in-a-store (SIS) concept are performing vs those that do not have it. Are the retail operation at these locations experiencing positive results? If they are not, at least is the decline less that those without them?

My opinion is that those stores with the SIS concept are experiencing much better results than those without. Even if sales are level, profitability should be far greater. Lampert could easily boost shares and quell the naysayers out there by releasing this information. But, he may keep the results under wraps while he finishes buying the $2 billion worth or stock he wants at the current low prices.

I do not expect them to break it out at the next earnings announcement but I would like to see it when the annual results are released. If the results are what I anticipate them to be, it would illustrate positive momentum on the retailing level and really go along way to help shareholders (of which Lampert is the largest).

On another note. It is real satisfying to see Lampert not let anything stop him from accomplishing stated goals to shareholders. It would have been real easy to slow down the expansion given the current retail environment and just focus on share repurchases. As a shareholder it is nice to know that when the Chairman says “we are going to do “X””, it gets done.

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Top Stories This Week at Value Investing News

There was some great stuff this week at VIN. Check out George’s post on the 52 Week Low List.

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Friday’s 52 Week Lows

When the Dow drops 350 points, the list gets big

WM Washington Mutual Inc 28.82
WLK Westlake Chem Corp 23.40
WL Wilmington Trust Corp … 36.07
TRY Triarc Companies, Inc … 11.86
TRX Tronox Inc 8.12
TRK Speedway Motorsports, Inc 35.80
RF Regions Financial Cor … 26.57
RDN Radian Group Inc 14.03
RCII Rent A Ctr Inc New 16.12
PSS Collective Brands Inc 18.07
PMTI Palomar Med Technolog … 25.91
PMI The PMI Group, Inc 20.89
PLAB Photronics Inc 11.16
PFBC Preferred Bank 33.15
PEIX Pacific Ethanol Inc 8.33
PBKS Provident Bankshares Corp 26.05
PACR Pacer Intl Inc Tenn 16.84
ORI Old Republic Internat … 16.71
OLCB Ohio Legacy Corp 7.78
NTRI Nutri Sys Inc New 27.97
MAT Mattel, Inc 20.78
LZB La-Z-Boy Incorporated 7.06
LIZ Liz Claiborne, Inc 28.95
HTLD Heartland Express Inc 13.65
HSY Hershey Co 42.22
HMNF HMN Financial Inc 27.50
HIBB Hibbett Sports Inc 21.87
HHS Harte-Hanks Communica … 17.98
HD Home Depot, Inc 30.62
GYMB The Gymboree Corp 32.95
GW Grey Wolf Inc 6.10
GPI Group 1 Automotive Inc 30.95
GLYT Genlyte Group Incorported 59.28
GHS Gatehouse Media Inc 11.38
GCI Gannett Co., Inc 41.28
DITC Ditech Networks Inc 4.50
DFS Discover Finl Svcs 19.80
DEIX Directed Electronics Inc 2.93
CZFC Citizens First Corp 11.81
CTRN Citi Trends Inc 18.03
CTCT Constant Contact Inc 21.80
CSK Chesapeake Corporation 8.11
CRFT Craftmade Internation … 9.95
C Citigroup, Inc 42.75

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Sherwin Willliams (SHW) To Repurchase 23% of Shares

Sherwin Williams (SHW) today declared a dividend and announced a huge share repurchase plan.

SHW declared a regular quarterly dividend of $0.315 per common share, payable on December 7, 2007 to shareholders of record on November 16, 2007. In addition, Sherwin-Williams’s board of directors authorized the Company to purchase, in the aggregate, 30,000,000 shares of stock.

With only 130 million shares outstanding, the authorization amounts to 23% of the outstanding shares. Now the question begs, when will it be finished? Let’s look. In the past three years Sherwin has repurchased about $230 million a year worth of stock and for the first 6 months of 2007, that number sits far ahead of that pace at $250 million. If we use a $67 share price the 30 million shares comes to $2 billion dollars needed to finish the authorization. Of course there will be variations as the stock price fluctuates but we need to pick a number.

That means at the current rate of the past three years, it will take about 8 years to complete the repurchase. Now based on the fact Sherwin will probably repurchase in excess of $350 million this year alone, the eight year number is a worse case scenario. That being said, we are looking at about 4% a year being added to earnings from the repurchase plan. Not bad..

The nice part about the history of current management is that unlike the recent Home Depot (HD) buyback, the company will not be sunk deep into debt to accomplish it. In fact, long term debt at Sherwin has fallen from $506 million in 2002 to $291 million last year. Fiscally speaking, despite the housing recession we are in the company is in it best shape in years.

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Friday’s Links

Apple-holics, CAT, Oil, Red Sox

– James Cullen, who had the audacity to suggest Apple is not the single best investment in the history of man (please note sarcasm) brilliantly answers the critics of his stance that actually had the ability to do it without hurling insults, a rare event for Apple lovers.

– The Stockmasters absolutely nail it on the importance of Caterpillar’s upcoming earnings.

– Some interesting thoughts on crude oil as it sits at $88 a barrel.

– Just a reminder for those who bought furniture at Jordan’s this spring. If the Sox continue, you may be getting your money back.

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The Viewing Day

So, here is how things are beginning to shape up between CNBC and FOX

It looks like the morning is pure CNBC. “Squawk” with Kernan and Co. decimates anything the newbie network has to offer (not that the FOX show is bad, it is getting better) and I am such a Mark Haines fan that FOX would have to come up with something awfully special to make me switch channels.

But, it is increasingly looking like the afternoon may belong to the folks at FOX. CNBC seems to have sensed this and the afternoon offerings and placement of people there have been jumping around the past few weeks. FOX has a solid crew in place (most of them are from the weekend shows that have been on for years) and the addition of Liz Claymen (and her Buffett connection) will only serve to strengthen the line up. The shows flow well and the personalities work well together either when they agree or disagree.

Also, they do spend more time on segments which means they do tend to get more in depth than CNBC does into the subject at hand. This is both good and bad, if you are into the conversation, it is a plus but if it is about a topic that bores you, you may be more likely to change the channel. Personally, I like it.

Week one is in the books for FOX and despite a real shaky Day 1, it appears as though they are finding their footing and at least in the afternoon, will provide CNBC some real competition.

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Berkshire’s Warren Buffett On Fox Business News

This was one of the best and most detailed interviews I have seen if Berkshire’s Chairman (BRK.A) in recent years. Liz Clayman landed on Fox Business News with a big splash yesterday. If anyone knows were the whole interview can be found, please let me know.

Buffett, in the live interview commented a quit a few thing. Watch videos:

On his best investment

On the economy.

On the HY Times “erroneous” Bears Sterns story.

On his Petro China sale.

Finally, on succession.

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Barnes and Noble…… Hmmm

Anytime the largest shareholder of a company goes on a buying spree like Barnes and Noble’s (BKS) Leonard Riggio did recently, I have to look closer.

Riggio, who bought 100,000 shares both in August and September, bought an additional $11.3 (approximately 420,000 shares) million dollars worth in October. This bring his total stake in the company to 24%. Much like Sear Holding’s (SHLD) Eddie Lampert’s buying spree this summer, when people intimately involved in the company cannot seem to buy enough shares, you have to be interested.

If you recall Barnes and Noble in August predicted a more optimistic outlook than was previously thought and about this time Riggio began his buying spree. On has to infer from this that the future for BKS may be even rosier that predicted in August. For those hoping for a Barnes and Noble and Borders (BGP) merger, this news ought to put a damper on those expectations. Were a merger or other collaboration to be announced anytime in the near future, Riggio’s purchases was be reduced to simple insider trading ahead of the announcement. That does not mean it will not happen, just that it will not happen anytime soon.

I am going to look closer here over the weekend and get back next week….. I am very intrigued though..

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