For those not familaiar with Mr. Forstmann, he was made famous to the public in the movie and book “Barbarian’s at the Gate”. If you have not read it, it is a great story.
Key Line? Forstmann says we should work to create equality of opportunity, not equality of result. Achieving equality of result is not possible, because of differences between people.
Here is the book:
Disclosure (“none” means no position):
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On Tuesday Warren Buffett’s Berkshire Hathaway (BRK.A) purchased an additional 825K shares of Burlington Northern (BNI)
Berkshire now holds 64.6 million shares or just under 20% of the total.
This is additions to put options he has sold on the company’s shares.
Disclosure (“none” means no position):None
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Here is the audio from the 2 hr presentation and Q&A..This took way too much effort as one thing after another went wrong…sorry for the delay. Best line? He calls Wal-Mart (WMT) a “flea market”.
The audio is a little fuzzy in the beginning but about 1:18 min. in I was able to fix it.
Audio:
Part 2
Here were the initial plans that were discussed with management of Target (TGT) and the issues with each one.
Ultimately this is how they view the retailer::
Ackman broke down the value of the new entities this way:
Disclosure (“none” means no position):None
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So the boys at West Coast Asset Management in October at the Value Investing Congress posed the following idea..
What is ATP Natural Gas (ATPG):
ATP Oil & Gas Corporation (ATPG) is engaged in the acquisition, development and production of oil and natural gas properties in the Gulf of Mexico and the United Kingdom and Dutch Sectors of the North Sea (the North Sea). At December 31, 2007, the Company owned leasehold and other interests in 76 offshore blocks, 40 platforms and 127 wells, including 19 subsea wells, in the Gulf of Mexico. It operates 109 (86%) of these wells, including all of the subsea wells, and 78% of offshore platforms. It also had interests in 10 blocks and two Company-operated subsea wells in the North Sea. The Company’s average working interest in these properties was approximately 82%. ATP had leasehold interests located in the Gulf of Mexico and North Sea covering approximately 447,910 gross and 372,386 net acres, of which 276,374 gross acres were developed and 206,322 net acres were developed
Here is the guts of their presentation from the congress.
The stock also has >20% insider ownership.
Why bring it up now? I ran across this little tidbit the other day:
ATP Oil & Gas Corporation (NASDAQ:ATPG) announced last week that its Board of Directors has approved a share repurchase program of up to 3,500,000 shares or roughly 10% of the currently outstanding shares. The program, authorized through the end of 2011, will be funded by free cash flow and the proceeds of asset sales and monetizations.
T. Paul Bulmahn, Chairman and CEO of ATP, stated that “In August 2008, ATP estimated its recoverable oil and gas to be approximately 252 million BOE. With approximately 35 million outstanding shares, each share accounts for roughly seven BOE. This represents a large disconnect between our asset value per share and our trading value per share. With funds generated from our ongoing monetization program and with our internally generated cash flow, we intend to reduce debt, continue our 2008 and 2009 capital development program at levels we deem prudent and actively pursue a share repurchase program. The divestiture of a portion of two selected North Sea properties announced earlier today launches our repurchase of ATP shares. At these prices investing in our own shares is accretive to our equity owners.
Then:
ATP announced it will sell its U.K. assets in the North Sea to a subsidiary of EDF for about $430 million. The agreement transfers 80% of ATP’s U.K. interest in its Tors (a 68% working interest) and Wenlock (an 80% working interest) properties to EDF. EDF has a later option to acquire the remaining ATP interests.
The sale is expected before the end of 2008. ATP’s U.K. subsidiary will remain as operator of both Tors and Wenlock. ATP said Monday it will use proceeds from the sale to reduce its debt, and further its development programs.
Essentially both of these transactions we talked about as value enhancers at the Conference. The good news? In the current market sell-off, no one cares. The stock is stuck essentially where it was in the beginning of October.
One other huge point. The sale of the N. Sea assets, for $430 million? That sale is in excess of the companies current $398 million market cap.
For those looking for a buy in the gas sector, this just may be a huge winner…
Disclosure (“none” means no position):None
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Yesterday at 3:40 aheadline passed that was contributed to a statement by GE’s (GE) CEO Jeff Immelt. It sent the Dow (.DJI) down from +300 to -74 in 15 minutes…
At a dinner in France Immelt was asked what he would do it sales dropped 10% to 15% next year (2009). He simply replied that he would “ask his managers to at least keep their profits equal to last year”.
That is it. It was reported that he said revenue would drop 10% to 15%. If revenues at GE did drop by that much, the effect on the overall economy would be bad as GE is involved in so much of it. But, Immelt never insinuated they would, he simply answered a hypothetical question.
Immelt said later that his statement was “taken way out of context”.
What was lost in it all was that current estimates are for a fall in GE profits in 2009. So, for Immelt to say with a 10% to 15% revenue fall he would ask for the same profit numbers from his managers, it was actually a very bullish statement.
One could deduce from that that should revenues come in near 2008 in 2009, recent and proposed cost cutting move may internally at Ge be expected to lead to an earnings increase in 2009.
This is a hair trigger market with its finger on the sell button. Since we know that, if one has a long time frame, this is far from the time to panic. It is, the time to be buying quality names and sitting on them. Ben Graham, Berkshire’s (BRK.A) Warren Buffett’s mentor said that “in the short term the market is a voting machine, in the long term is is a weighing one”.
Simply put the market on a daily basis votes on how it feels that day. The farther you go out, eventually to the fundamentals of a business eventually take precedence over the daily outlook.
Now we are in a period of extreme pessimism. That will lead to irrational action like yesterday’s sell-offs. Just be ready for them because they are not over. When they happen, buy your favorites at dirt cheap prices. Long term, you’ll be glad you did.
Disclosure (“none” means no position):Long GE, none
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Pershing and Bill Ackman are going tech…
Pershing and Bill Ackman control 38.9 million shares of EMC (EMC) in a just released SEC filing. That comes to roughly 2% of the outstanding total.
FULL FILING
Disclosure (“none” means no position):None
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Drexel’s former “Bond King” Micheal Milken on Charlie Rose. I could get a whole hour of Milken…
MSNBC, Donations, Derivatives, Tilson, Lay-offs
– Dems and Repubs call the network “out of control”
– Does who you give to say anything about your belief’s?
– A 101 Course
– Tilson has a nice comment about fear…
– Lindzon is great here
Disclosure (“none” means no position):
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Shiller predicted the 2000 market plunge and the subprime mess. What he says bears some listening to..
Here is his book, “Irrational Exuberance”
Disclosure (“none” means no position):
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I said yesterday there was more buying to come…
After yesterday’s insider buying announcement, today VP Greg Freiwald disclosed he purchased 16,000 at $23 a share on Tuesday spending $368k of his own money. He now holds over 103K shares directly.
That brings the two day total to almost $700k of insider money buying shares so far this week. I said yesterday “I would expect more purchases in the coming days”.
I still do… When Berkshire’s (BRK.A) Buffett sees the value and management is ponying up cash to buy shares…one might want to take a look..no?
Oh yea….and a 7% dividend..
Disclosure (“none” means no position):Long Dow
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Bill Ackman has settled his Longs Drug (LDG) total return swaps with the CVS (CVS) biuyout complete.
From the filing:
“In connection with the successful tender offer by Blue MergerSub Corp., an indirect wholly-owned subsidiary of CVS Caremark Corporation, to purchase all outstanding shares of common stock of the Issuer, certain counterparties to Pershing Square’s Swaps have terminated certain of the Swaps. As a result, these Swaps were settled in cash between such parties relating to 2,054,100 notional shares (the “Settled Swaps”). In accordance with the terms of the Settled Swaps, the applicable counterparty was obligated to pay to the applicable Pershing Square Fund any positive price difference between the initial reference price (ranging from $53.41 and $70.36) and the final valuation price ($71.50). As a result of the termination of the Settled Swaps, the Reporting Persons no longer have long economic exposure to an aggregate of 2,054,100 shares. As cash-settled total return swaps, the Reporting Persons had no discretion over the issue of any extraordinary event like a tender offer. Consistent with the International Swaps and Derivatives Association’s (“ISDA”) protocols, as the calculation agents for extraordinary events, the counterparties exercise the discretion afforded to them as calculation agents, in accordance with the ISDA definitions for equity derivatives and in good faith and in a commercially reasonable manner.”
Swap Trading Data
FULL SEC FILING
Disclosure (“none” means no position):NONE
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Funny what a few hurricanes will do.
Owens Corning (NYSE: OC) reported today that consolidated net sales increased 28 percent to $1.6 billion during the third quarter, compared with $1.3 billion in the third quarter of 2007. Third-quarter sales were up due to strong performance in
the Roofing and Asphalt and Composites businesses.
Excluding comparability items, Owens Corning’s adjusted earnings from continuing operations were $94 million, or $0.72 per adjusted diluted share, compared with $56 million, or $0.42 per adjusted diluted share during the third quarter last year
“I’m pleased with the quarter as the results are in line with our objectives for the year,” said Mike Thaman, chairman and chief executive officer. “The integration of our composites acquisition is on track. We are exceeding our year-one synergy goals. Our Roofing and Asphalt business has improved performance with a streamlined asset base, significant productivity and an improved product mix. Our Insulation business will be profitable for the year in a very difficult U.S. housing market. We’ve
maintained a strong balance sheet and are benefiting from a solid capital structure that provides more than adequate liquidity.”
Owens Corning continues to estimate that 2008 adjusted EBIT will be at least $265 million. The company previously announced that strength in Roofing and Asphalt performance creates an additional upside of up to 10 percent in that adjusted EBIT guidance. The company excludes from this estimate items impacting comparability.
During the first quarter of 2007, Owens Corning announced a share buy-back program under which the company was authorized to repurchase up to 5 percent of Owens Corning’s outstanding common stock. During the third quarter, the company repurchased 1.9 million shares at an average price of $22.23 per share. For the nine-month period ending September 30, 2008, the company repurchased 2.9 million shares at an average price of $22.70 per share. On September 30, 2008, the company had 128.8 million shares outstanding and approximately 3.6 million shares remaining
available for repurchase under the current program.
We have been saying this for a while now, after two years of no storm activity in the US, even a few moderate storms would be a boom for Owens Corning. We got a couple this year and the results reflect that.
If you look at the business of OC, they have hit a “perfect storm” (pun intended) the last couple years. Housing activity ground to a halt and there were no storms to boost the repair business. The argument can be made that OC earnings bottomed last year and early this one. It is hard to imagine the same or worse scenario happening again in the near future.
If that is true then earnings for OC have bottomed and ought to continue to rise from here..
Disclosure (“none” means no position):Long OC
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Short Sears, Derivatives, Refiners, T. Boone
– It seems the bears are getting out
– 60 minutes did a great piece
– Why a winfall tax won’t work…they’ll just produce less
– T. Boone is a great interview
Disclosure (“none” means no position):
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So, on Monday I wondered why Citi (C) has so little interest in a Goldman Sachs (GS) deal. Hint: It starts with a “D” and Goldman does not have them.
On the last earnings call CFO Gary Crittendon said regarding potential uses for the TARP funds, “And it does present, then, the possibility of our taking advantages of opportunities that otherwise might have [inaudible] to us. Now, as we think about that, the way we approach it is in the same disciplined manner that we’ve approached these other opportunities over the last few weeks. So I think in total now we have looked in detail at the possibility of acquiring three institutions, two of which you’re aware (Wachovia (WB) and Washington Mutual (WM)) of and one that we haven’t talked about publicly in any way.
And as we approached that, we did it with a very well-defined set of parameters. There is only a certain set of circumstances which made sense for us to do that. We will think about the use of this capital in the same way. It is an attractively priced amount of equity capital, and as you correctly said, an attractively priced amount of fixed income, that can match with that.”
In response to another question about the “next opportunity” he replied:
“Here is what I think we would say internally, what we are saying to ourselves. Basically we had a strategy that we outlined at Citi Day that had us focused on growing five businesses. Two of those are asset businesses, our Card business and our markets and banking business; and three of those are liability gathering businesses, deposit gathering businesses. That is our Wealth Management business, our Consumer retail business, and our GTS business.
Our focus is behind those businesses; and that remains exactly as it was before. In order to fund those businesses, we have the program underway that you just talked about. We are cutting our expenses; we are showing good traction on that. We are moving assets out of categories that don’t fit with that profile. We have been selling businesses that didn’t match there. We have carefully managed down our headcount.
So we have worked very hard to execute against that strategy — and that is our strategy. Now opportunistically, we had the chance, obviously, to acquire Wachovia. For all of the reasons you are aware of, that is not going to happen.
But the net result of that is not a change in our strategy.”
So, the question then becomes. Where does Goldman fit? Answer? It doesn’t. Citi wants deposits and neither Goldman nor Merrill (MER) have any. Sources at Citi indicated to me if it does a deal it will be with a depository institution that has minimal branch over lap with current operations, not a broker.
So, then the next, obvious question is “who fits the bill”? In order to figure that out, let’s look at what Citi was trying to accomplish with the Wachovia deal. The following image has the Red (Citi) and Blue (Wachovia) branch coverage post then proposed merger.
Who then, could give Citi this type of coverage?
With 1600 branches throughout DC, Alabama, Tennessee, Virginia, Florida, Georgia, Maryland, Arkansas, Mississippi, N. & S. Carolina, Ohio and West Virginia SunTrust Banks (STI) looks to fit the bill.
SunTrust is fresh off a $3.5B Treasury infusion. Last Thursday it reported that Q3 profit fell 25 percent, hurt by the effects of the credit environment. Net income fell to $307.3 million, or 88 cents per share, from $412.6 million, or $1.18 a share, a year earlier. Revenue rose 20.7 percent to $2.46 billion. SunTrust set aside $503.7 million for loan losses, up from $147 million a year earlier.
Earlier this year, SunTrust announced plans to dispose of its 43.6-million-share stake in Coca-Cola (KO), worth roughly $2 billion to bolster capital. It has held the soft drink maker’s shares since 1919. That move would make it more appealing to a potential suitor.
Citi seems intent on doing something, Suntrust may just be the best of what is still out there..
Disclosure (“none” means no position):Long GS, C, none
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One month does not make a trend…
I am finding it real hard to believe that we may be bear the bottom of this housing mess.
I am solidly in the camp that it does not turn until the end of 1009 at the earliest. I have put the reasoning in this post from the Value Investing Congress.
Since then we have seen the employment picture deteriorate and banks like JP Morgan (JPM), Bank of America (BAC) and Wells Fargo (WFC) have tightened LTV levels down to 65% in many of the hardest hit markets. How does any of the situations, far from dictating a housing rebound, not infer more damage ahead?
It just doesn’t add up….at all…
But, like I said before, if you are looking for that summer house, 2009 will be a great buying opportunity..
Disclosure (“none” means no position):Long WFC, none
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