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Category: Articles
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The New Oil: Energy Demand and Water
BIO
Ken Caldeira – Ken Caldeira is the head of the Caldeira Lab at Stanford University, which conducts research to try to improve the science base needed to allow human civilization to develop while protecting our environmental endowment.
David Harrison – David Harrison is a practicing water resources lawyer in Boulder, Colorado, of counsel with the firm of Moses, Wittemyer, Harrison and Woodruff, P.C. He works as a consultant to The Nature Conservancy acting as senior advisor to the Global Freshwater Team, formerly the Freshwater Initiative, of which he was one of the co-founders. In that connection, he leads the strategic group on Ecologically Sustainable Hydropower. He is currently focusing on the application of that approach at several demonstration projects including the YangtzeRiver Basin in China and the ZambeziRiver Basin in southern Africa. In addition, he is working with the International Hydropower Association in examining ways to transform global standards and practices for sustainable hydropower.
Peter Murdoch – Pete Murdoch is a Research Hydrologist with the Watershed Research Group of the US Geological Survey in Troy, New York. Since 1982 he has lead research projects on watershed biogeochemical processes, and the effects of acid rain and climate change on aquatic systems. In the mid-1990s he served as the DOI representative to the White House Committee on Environmental and Natural Resources (CENR), and lead a pilot of a multi-agency collaborative assessment of the Delaware River based on the CENR ‘Framework for Environmental Monitoring and Research”. In 2004-06, Murdoch served as the DOI representative to an interagency committee that oversees the North American Carbon Program. He now is leading a multi-agency study on the effects of permafrost thawing on the hydrology, energy, and carbon budgets of the Yukon River Basin.
Michael P. Totten – Michael Totten has nearly three decades of professional work in promoting ecologically sustainable economic development at the local, national and international levels. At Conservation International’s Center for Environmental Leadership in Business (CELB), he focuses on engaging the business sector in opportunities to shrink the ecological footprints of their operations and products and advising them on ways to take action to offset these footprints with positive steps, such as preserving threatened biodiversity habitat.
Vijay V. Vaitheeswaran – Vijay V. Vaitheeswaran is a global correspondent for The Economist. He joined the magazine’s staff as the London-based Latin America Correspondent in 1992. Two years later, he opened its first bureau in that region in Mexico City. He wrote about political, financial and cultural developments in that part of the world until 1997, when he returned to the editorial headquarters in London. As the newspaper’s Global Environment & Energy Correspondent, he covered the politics, economics, business and technology involved in those topics from 1998 to 2006.
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Unconventional Oil & Gas Resources
BIO
Peter Balash – Peter C. Balash, Ph.D., is senior economist at the United States Department of Energy’s National Energy Technology Laboratory (NETL), in Pittsburgh, Pennsylvania. He has followed energy markets, energy security, and technology issues for NETL since 2002, focusing on the interaction of upstream fuel market developments with downstream, or end-use, sectors. Current duties include studying the near and medium term economic impacts of climate change mitigation policy and assessing energy security options in a carbon-constrained world, inclusive of coal to liquids. He has also recently directed a study of scenarios to simultaneously reduce petroleum consumption and carbon emissions. These scenarios focus on linkages between the transport, electricity, and petroleum markets. Previously Mr. Balash worked for the Internal Revenue Service in Houston, Texas, engaged in multinational corporate audits and transfer pricing issues. Mr. Balash earned his doctorate in economics in 1992 from the University of Texas at Austin. He received a bachelor’s in economics from Xavier University, Cincinnati, in 1987. He resides with his family in McMurray, Pennsylvania.
Frits Eulderink – Frits Eulderink began his career with Shell in 1990. He spent a portion of his initial assignment working in the United States on Coal Gasification at the Westhollow Research Center and the Deer Park facility in Houston, Texas. In his current role as Vice President of the Unconventional Oil organization, Eulderink is focused on developing and leveraging in-situ conversion / upgrading technologies on a commercial scale to produce light oil and gas from deep oil shale and heavy oil deposits in an effort to meet growing future energy demands in an environmentally responsible and socially acceptable manner. Eulderink and his team bridge the full spectrum from research and appraisal through development and production of Unconventional Oil assets in North America and worldwide. Eulderink’s previous role was as the General Manager of Bapetco, Egypt, Exploration & Production. In his career with Shell, he has held various technical and management roles in the United States, Europe, Africa and the Middle East. Eulderink was born in Leiden, Netherlands. He has Masters degrees in Astrophysics and Mathematics from Leiden University. While obtaining his Leiden Ph.D. in Astrophysics, he worked with the faculty of the University of Cambridge in the United Kingdom.
Gordon Pickering – Gordon Pickering, Navigant Consulting, Inc., is a Director in NCI’s Fuels Analysis practice, in Sacramento, CA. He has over 28 years of energy industry experience, mostly in the natural gas industry in the United States and Canada. Throughout his career, Mr. Pickering has worked closely with the electric generation sector as a natural gas marketer and commodity services supplier and most recently as a consultant. He has also provided valuation expertise to infrastructure projects such as storage operators and pipelines and has worked extensively in both the public and private sectors. A focus for Mr. Pickering has been in providing detailed market assessments as part of due diligence efforts supporting infrastructure investments and mergers and acquisition activity in the upstream and mid-stream sectors of the natural gas industry. He has also consulted to the LNG industry performing market studies supporting new regasification projects in North America. Mr. Pickering has expertise in physical and financial natural gas pricing and contracts including hedging and risk management. Mr. Pickering is co-author of the North American Natural Gas Supply Assessment study, a gas supply research project for the American Clean Skies Foundation. This widely distributed study updated the natural gas resource base in North America and was first issued in July of 2008, in Washington, DC. Mr. Pickering heads up NCI’s fuels forecasting and analytics team in Sacramento, CA.
Andre Plourde – Andre Plourde is Professor and Chair, Department of Economics, University of Alberta. He received his B.A. and M.A. in Economics from the University of New Brunswick, and a Ph.D. in Economics from the University of British Columbia. After serving as assistant professor and research associate at the University of Toronto from 1983 to 1987, he joined the Department of Economics at the University of Ottawa. In 1997, Plourde undertook a one-year assignment as Director of Economic Studies and Policy Analysis with the federal Department of Finance. He joined the University of Alberta in 1998, where he helped launch the Natural Resources and Energy specialization within the School of Business’s MBA program. During academic year 2003-2004, Plourde took a one-year leave from academic life and was appointed Associate Assistant Deputy Minister for the Energy sector at Natural Resources Canada. Plourde has served on numerous advisory committees. In 2007, he was appointed to the Province of Alberta’s Royalty Review Panel; he also served as President of the International Association for Energy Economics. His research interests have centered mainly on energy economics and on Canadian energy and environmental policy issues.
John Wimer – Mr. Wimer has worked at the U.S. Department of Energy’s National Energy Technology Laboratory for eighteen years, providing engineering support to DOE’s Fossil Energy research and development programs, primarily in the areas of advanced coal conversion technologies. Presently, Mr. Wimer is the director of NETL’s Systems Division, which performs technology evaluation, systems engineering and economic analyses to inform policy makers and to guide NETL’s R&D programs. Mr. Wimer earned M.S. and B.S. degrees in Mechanical Engineering from Carnegie Mellon University and West Virginia University, and holds the Certified Energy Manager credential from the Association of Energy Engineers.
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Friday’s Links
Jon & Kate, Madoff, Wal-Mart
– Get over it. Now they are suing TLC, the show that made them rich for “emotional distress” via their divorce. These two are being exposed as simply self-indulgent tripe. “It is all about the kids”…my ass….
– Dasan nails it perfectly
– I own Wal-Mart shares but this is simply about adding costs to competition, not altruistic reasons
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Disclosure (“none” means no position):
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Friday's Links
Jon & Kate, Madoff, Wal-Mart
– Get over it. Now they are suing TLC, the show that made them rich for “emotional distress” via their divorce. These two are being exposed as simply self-indulgent tripe. “It is all about the kids”…my ass….
– Dasan nails it perfectly
– I own Wal-Mart shares but this is simply about adding costs to competition, not altruistic reasons
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Disclosure (“none” means no position):
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Sears’ Online Strategy Unfolding
Sears’ is doing doing some very interesting things online that while in their infancy, have the potential to turn them into a “social shopping hub”.
Sears Holding announcements about the advance of its web-based marketing strategy have followed fast and furious of late and now the company has announced that it will become the first major retailer to launch the Open ID platform – one that permits users to establish a single screen name for identification across web sites — for the MySears and MyKmart communities it has been building online.
According to Sears Holding spokesman Tom Aiello, launching the OpenID platform is the first part of a two-phase initiative to establish MySears and MyKmart as adjuncts to popular social networks. He said:
It’s part of a bigger, long-term vision. Phase one basically enables our individual participants to use their IDs to get into the Sears communities. Phase two will enable sharing in either direction based on user permissions. That’s going to include things like photos, content and product reviews they might have done on MySears and want to share with friends.
The move will connect users of Sears communities directly to social media portals Facebook, Twitter, Yahoo! and MySpace. Sears communities already get a million monthly visitors, the company stated, and the social media connections can only pump that number up.
While a launch date has not yet been set, the second phase will roll out this year, Aiello said, which should put it in effect for the critical holiday season and provide the virtual ground for any number of cyber promotions.
“The beauty of OpenID is that all of those prominent portals people have known and grown to trust make it easier for users to get into one of the Sears communities,” Aiello said.
In announcing the OpenID adoption, Rob Harles, Sears vice president of community, said the technology “helps simplify our customers’ online experience and ultimately helps us meet our goal of ensuring our customers have the most efficient shopping experience possible.”
Sears seems to be the fist significant retailer who has developed a strategy around social networking site that is designed to drive sales. To date neither Wal-Mart (WMT), Target (TGT), JC Penny (JCP) or any of the other large retailers seem to be making much of an effort.
Again from the article:
Yet, online is only one element of an evolving Sears multi-channel selling strategy. The company also has been linking its web and store operations through programs such as Shop Your Way, which puts web kiosks in stores, and Sears2go, which facilitates purchasing over mobile phones. Aiello previously told Bnet that a range of Sears cyber experiments had been coalescing into a more clearly defined marketing strategy over the past year and those would support the multi-channel selling proposition.
The OpenID announcement makes it more apparent that Sears plans to develop a social network hub that will link store, Internet and mobile initiatives with the goal of connecting customers more intimately with the retailer, in a virtual kind of way.
In the past I have complained here that Sears disparate retail sites were not a cohesive unit online and I felt that was hurting their efficiency.
The recent changes at Sears.com fixed many of those issue and now these new initiatives are aimed at driving people to the site and better promoting the products.
This is really worth watching because it is unlike what any other retailer is doing now. at the annual meeting Lampert stressed his desire to expand the online business and this proves he is indeed investing in that arena.
Since Sears does not give monthly updates, other than quarterly results, the results of these initiatives will have to be gleamed from what information is released or third party sources.
With that being said, with the abnormally quiet Lampert vocally supporting it and the rate at which progress is being made, one would probably be safe assuming Lampert is pleased with the return he is getting on the investment to date.
On another note. Sears still have not names a new CEO and the search is taking some time. What will be very interesting to see is if the new CEO is more of a typical brick and mortar retailer OR if their backround is more web-based.
Disclosure (“none” means no position):Long SHLD
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McDonalds New Burger
So McDonalds (MCD) is introducing its first new burger in a long time, called “Angus Third Pounders” .
Will it work? Based on early tests in NY and other test markets, yes it will. The cost of the product will be $4 which is not unreasonable at all for a burger. McDonalds is also going the right direction. Going up the price ladder is easier than coming down.
Look at Starbucks (SBUX), they cannot shake the “expensive” label, no matter how hard they try because for so long, they were and were proud of it because to them it signaled “quality”. Now the consumer has turned as is looking for value and McDonalds is printing profits as they come in the door.
The burger. I think people are really underestimating the potential here. Think about it. Most people like a good burger and $4 is still dramatically cheaper than the $7 -$9 you pay in most chain restaurants for one. Because of that, I am of the opinion that a large swath of current customers are going to give it a spin. Mom and dad can enjoy one while the little kids enjoy the Happy Meal they always want.
From a consumer perspective, this is the perfect thing for them to be doing now. They have expanded the coffee customer base, expanded the healthy offerings, and now they are expanding the base of people who want a burger but also want more than the current cheeseburger fare. Unlike other past unsuccessful roll-outs like when they ventured into pizza, this is perfectly in keeping with what people go to McDonalds for in the first place.
This is going to be big folks…..
Disclosure (“none” means no position):Long MCD, none
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Thursday’s Links
Deficits, Savings, Approval, Auto’s, Kneale
– Mish has a good piece on their unsustainability
– Why the Chinese save
– It would seem that those who “strongly disagree” now outnumber those who “strongly agree”
– Sales track over 10m units. This is a good proxy for the consumers outlook
– Dennis Kneale took a swipe at bloggers and they respond…..by using these annoying things called facts to refute what he says…
Disclosure (“none” means no position):
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Thursday's Links
Deficits, Savings, Approval, Auto’s, Kneale
– Mish has a good piece on their unsustainability
– Why the Chinese save
– It would seem that those who “strongly disagree” now outnumber those who “strongly agree”
– Sales track over 10m units. This is a good proxy for the consumers outlook
– Dennis Kneale took a swipe at bloggers and they respond…..by using these annoying things called facts to refute what he says…
Disclosure (“none” means no position):
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Dow Chemical Continues Cost Reductions
The release:
The Dow Chemical Company (NYSE: DOW) announced today that on June 30, its Board of Directors approved a restructuring plan which calls for the shutdown of a number of manufacturing assets, including ethylene and ethylene-derivative assets in the Company’s basics portfolio.
Consistent with the Company’s $1.3 billion synergy commitment related to the acquisition of Rohm and Haas Company, the restructuring plan includes a charge for the elimination of approximately 2,500 positions, which has been previously announced.
Dow will also recognize an impairment charge due to an expected loss on the divestiture of certain acrylic monomer and specialty latex assets, which is required for United States Federal Trade Commission approval of the Rohm and Haas acquisition.
“Consistent with Dow’s practice of active portfolio management, we continue to take quick and aggressive action to right-size our manufacturing footprint, particularly in our basics portfolio,” said Andrew N. Liveris, Dow chairman and chief executive officer. “These actions are also aligned with our strategic transformation, which focuses on preferentially investing for growth in our performance and advanced materials portfolios. In addition, we are making excellent progress on
achieving $1.3 billion in cost synergies from the acquisition, and today’s steps demonstrate our speed and determination to deliver these savings.”
Specific sites in the Company’s Basics portfolio that will be impacted include:
Ethylene Production
• An ethylene cracker in Hahnville, Louisiana
Ethylene Derivatives
• An ethylene oxide/ethylene glycol production unit in Hahnville, Louisiana
• An ethylene dichloride and vinyl chloride monomer facility in Plaquemine, LouisianaThese shutdowns are in addition to numerous other ethylene-derivative closures that have occurred as part of a restructuring program announced in the fourth quarter of 2008, specifically:
• A production unit in Seadrift, Texas, for the manufacture of NORDEL™ hydrocarbon rubber ceased production in the first quarter of 2009
• A low density polyethylene unit in Freeport, Texas, ceased production in the first quarter of 2009
• A production unit in Plaquemine, Louisiana, for the manufacture of TYRIN™ chlorinated polyethylene ceased production in the first quarter of 2009
• A styrene monomer production unit in Freeport, Texas, ceased production in the fourth quarter of 2008These shutdowns, when taken in total, will reduce the Company’s ethylene demand by approximately 30 percent on the U.S. Gulf Coast. As a result, Dow expects to eliminate its purchases of ethylene from the merchant market (approximately three billion pounds annually), improving the Company’s cost position while fully integrating ethylene production with internal demand in order to better meet customer need
What does it all mean? Dow is essentially exiting the ethylene market save for what it need for internal uses. It is a good move in that domestic ethylene production cannot compete with what is currently being produced in Asia in term of cost. With the upcoming glut of the product expected on the market, Dow would be selling product at or near a loss as prices plummet while still importing it for marginally profitable businesses. Dow will eliminate its purchases of ethylene from the merchant market, roughly 3 billion lbs/year, due to the shutdowns, matching its ethylene production with internal demand.
The really good news here is the reduction in necessary capital expenditures for marginal businesses.
Some analyst comments:
P.J. Juvekar of Citi said, “Today’s announcement underlines DOW’s leadership in cutting production to better align supply and demand; the company showed similar leadership in the last trough in 2002. We view the news as incrementally positive for the oversupplied commodity chemicals space.”
David Begleiter of Deutsche Bank said the news “… reflects Dow’s focus on executing its transformation strategy of growing its performance products and specialty materials portfolio (while downsizing its basic chemicals business) in order to deliver more consistent earnings growth.
The move is not big news, just affirmation that the company is still moving forward on its goal, successfully.
Disclosure (“none” means no position):Long Dow
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Why Wal-Mart Backs Health Insurance
Full disclosure. Readers here know I own Wal-Mart (WMT) shares.
Now the news (from the WSJ):
In a major break with most other large companies, Wal-Mart Stores Inc. Tuesday told the White House that it supports requiring employers to provide health insurance to workers, a centerpiece of President Barack Obama’s effort to provide near-universal coverage to Americans.
The support of Wal-Mart, the nation’s largest private employer, could give momentum to one of the most-contentious aspects of legislation taking shape in Congress to fix the health system. To help pay for covering the 46 million uninsured, lawmakers have proposed mandating that all but small employers provide insurance for workers or help pay for it.
Lobbies for large corporations have opposed the idea. The U.S. Chamber of Commerce has fought such a mandate, saying it would prompt companies to cut jobs, lower wages and possibly drive them out of business. Wal-Mart — which provides insurance to employees and wants to level the playing field with companies that don’t — on Tuesday delivered a letter to President Obama taking a different stance.
“We are for an employer mandate which is fair and broad in its coverage,” said the letter, signed by Wal-Mart Chief Executive Mike Duke. Andrew Stern, president of the Service Employees International Union, also signed the letter, along with John Podesta, who led President Obama’s transition team and is chief executive of the Center for American Progress, a liberal-leaning think tank.
Why? It seems to run counter to Wal-Mart “we’ll do what we think is right” approach.
Wal-Mart provides health care to it employees. Much of the competition does not. Should they then be required to, their cost basis for their business suddenly rises…considerably. Should that happen, in order to offset their new cost increases two things must happen. Either they offset it with pay freezes or reductions for new hires OR increase their prices to consumers.
Either scenario aids Wal-Mart immensely as it slows growth in their payroll and/or increases their competitive price advantage over the competition.
I like Wal-Mart and I shop there quite a bit. Just lets not read anything into this like a sudden altruistic bent or support for the current administration’s policies. It is as simple as “whatever hurts your competition helps you”.
As Micheal Corleone was fond of saying…. “It’s just business”.
Disclosure (“none” means no position):Long WMT
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Wednesday’s Links
Jobs, Jobs, Repo, Renters
– Love him or hate him, I’ll give huge credit to the guy for being back after a liver transplant..If you are wondering why people are successful….this is a clue
– “Saved or created”. Using this in any form is totally dishonest as there is no way to accurately quantify it. Yet we keep hearing it and they keep being allowed to use it…..
– we keep hearing about the “repo market”. Here is a great video explanation of what it is
– How many homeowners sold at the peak to rent??
Disclosure (“none” means no position):
Categories
Wednesday's Links
Jobs, Jobs, Repo, Renters
– Love him or hate him, I’ll give huge credit to the guy for being back after a liver transplant..If you are wondering why people are successful….this is a clue
– “Saved or created”. Using this in any form is totally dishonest as there is no way to accurately quantify it. Yet we keep hearing it and they keep being allowed to use it…..
– we keep hearing about the “repo market”. Here is a great video explanation of what it is
– How many homeowners sold at the peak to rent??
Disclosure (“none” means no position):
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Playing Jobs With Volt
Employment sucks. We know that. BUT, we also know it will get better. Let’s look at a potential play on that improvement.
When the turn does come, where will we look? I am guessing employers will crawl, not rush into re-employment of staff. With that being said, I think companies that provide professional services will be the first to benefit from this trend. The cost/benefit to employer is huge and given any recovery will most likely be a shaky one, employers will want to add people at a minimal cost in term of both training and continued employment cost. Volt enables both of these scenarios.
Enter Volt Information Services (VOL):
Company Description:
Volt Information Sciences, Inc., incorporated in 1957, provides staffing services, and telecommunications and information solutions. The Company is organized in two businesses: Staffing Services and Telecommunications and Information Solutions. Staffing services segment provides a range of employee staffing services to a range of customers throughout North America, Europe and Asia/Pac, and has expanded operations in Latin America. Telecommunications services provide telecommunications and other services, including design, engineering, construction, installation, maintenance and removal of telecommunications equipment for the outside plant and central offices of telecommunications and cable companies. In September 2008, the Company sold the net assets of its DataNational and Directory Systems divisions.
Staffing Services
Services offered by the Staffing Services segment fall within three major functional areas: staffing solutions, information technology (IT) solutions and e-procurement solutions. Staffing solutions provides managed staffing, temporary/contract personnel employment and workforce solutions. This functional area comprises the Technical Resources (Technical) division and the Administrative and Industrial (A&I) division. This functional area also provides direct placement services and, upon request from customers, subject to contractual conditions, is focused to allow the customer to convert the temporary employees to full-time customer employees under negotiated terms. In addition, the Company’s Recruitment Process Outsourcing (RPO) services deliver end-to-end recruitment and hiring outsourced solutions to customers. The Technical division provides skilled employees, such as computer and other IT specialties, engineering, design, life sciences and technical support. The A&I division provides administrative, clerical, accounting and financial, call center and light industrial personnel.
E-procurement solutions provide global bid human capital acquisition and management solutions by combining Web-based tools and business process outsourcing services. IT solutions provides a range of services, including consulting, outsourcing and turnkey project management in the software and hardware development, IT infrastructure services and customer contact markets.
Telecommunications and Information Solutions
This segment is divided into three sub segments: telecommunications services, computer systems, and printing and other. Telecommunications Services segment designs, engineers, constructs, installs and maintains voice, data, video and utility infrastructure for public and private businesses, military, and government agencies.
Computer Systems segment provides directory and operator systems and services primarily for the telecommunications industry and provides IT maintenance services. The segment also sells information systems to its customers and, in addition, provides an application service provider (ASP) model, which also provides information services, including infrastructure and database data services to others. This segment consists of Volt Delta Resources LLC, Volt Delta International, LSSiData and the Maintech computer maintenance division.
Super…so why Volt?
1- Volt is global and stands to benefit as the global recovery takes hold
2- Professional/technical skills will be in high demand and Volt enables employers to better manage costs
3- Insiders/Founders/Directors own 42% of the outstanding shares
4- VALUATION…..
Let’s look closer at #4 because we value guys like that stuff.
Volt has typically traded at 16-20 times earnings and about twice book value (remember that). Earnings, as one would expect have suffered along with employment and Volt has reported operating loss from continuing operations in the 2009 six-month period of $21.7 million, or ($1.04) per share, compared to a loss from continuing operations of $12.3 million, or ($0.56) per share, in the fiscal 2008 six-month period. The Company incurred a restructuring charge of $7.1 million ($4.2 million, or $0.20 per share, net of taxes) and goodwill and long-lived intangible impairment charges of $7.3 million ($6.8 million, or $0.32 per share, net of taxes) in the first six months of fiscal 2009 as compared to a restructuring charge of $1.5 million in the comparable fiscal 2008 period.
About what you would expect given what has happen to employment…
So then, what to like?
1- Cash and cash equivalents, excluding restricted cash, totaled $141.5 million at the end of the second fiscal quarter of 2009.
At May 3, 2009, the Company had sold a participating interest in accounts receivable of $50.0 million under its securitization program and had the ability to finance an additional $125.0 million under the program. In addition, the Company may borrow under a $42.0 million five-year unsecured revolving credit facility (“Credit Facility”) and the Company’s wholly owned subsidiary, Volt Delta Resources (“Volt Delta”), may borrow under a separate $75.0 million revolving secured credit facility (“Delta Credit Facility”). At May 3, 2009, the Company had borrowed $10.7 million under its Credit Facility and Volt Delta had borrowed $41.7 million under the Delta Credit Facility.
Why does that matter? The company’s current market cap? $131 million meaning it is trading for LESS THAN THE CASH ON ITS BOOKS..
2- Book Value.
Currently about $18 a share. Remember earlier we said Volt tends to trade on average about 2x book? It current valuation of .3x book. Look close, this isn’t 3x it is point 3x book or 33%.
Lets look at it this way. Say tomorrow the company decide to close up, sell it all and distribute the proceeds to shareholders.
Right now you would pay $6.61 a share for the stock. The cash on hand comes to $6.77 a share so already your are up in the investment and not a single asset has been sold. Let then say the current book value of $18 a share gets slashed 80% (I am not saying it would, just picking an extreme scenario for illustration). That leaves $3.60 a share for shareholders for a nice total of $10.37 or 56% profit. The margin of safety here is huge..
Risks:
Simple, the global slowdown takes longer than anyone thinks to resolve itself. If US unemployment hits 10% and then stubbornly stays there for all of 2010, large share price recovery is put off. Now, depending on the global economy we could see improvement as it recovers absent the US but large shares gains will need US participation. The company has ample cash and debt availability to withstand a prolonged poor employment scenario. Because of this, the risk is not a “will it survive or not” but a “how long before shares recover” situation.
Like any of these deep value plays (especially ones tied to employment), because the valuation is so rock bottom, if you wait until you see clarity in employment you very well may be buying a $10-$12 stock vs $6.
Latest 10-Q:
Vol
Disclosure (“none” means no position):none
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Tuesday’s Links
Climate change, Lead Paint, GM, Stimulus
– Now that the earth is no longer “warming” skeptics are growing..
– Perfect….eat wood, sue someone
– Will retain liability for future product claim cases…….the least they could do after soaking taxpayers for $50B
– This is an excellent piece on the stimulus and the “effect” it is having
Disclosure (“none” means no position):