Shelby Steele, NY Times, Obama, SEC
– Doesn’t everyone outside of Manhattan?
– If you say anything enough, it becomes seen as true, whether it really is or not.
– They have become a hindrance to the market..
Visit the ValuePlays Bookstore for Great Investing Books
Well Q1 as an independent company is in the books for Phillip Morris International (PM) and of to a great start we are.
On Wednesday, Philip Morris reported double-digit sales and profits increases in the second quarter, boosted by higher prices and the weaker dollar.
Philip Morris shipped 223.2 billion cigarettes in Q2, up 1.0% from a year earlier. For the year, Philip Morris forecast earnings of $3.32 to $3.38 a share, up from its previous forecast of $3.18 to $3.24. This represents a growth of about 19% to 21% from a 2007 pro-forma adjusted base of $2.79 per share. Analysts had expected the company to earn $3.25 per share.
The company has just started to return cash to shareholders in the form uf a multi-billion dollar share repurchase which will further support EPS. How much you ask? During Q2, Philip Morris repurchased 41.4 million common shares for $2.1 billion, which is a part of its two year $13 billion share repurchase program that began in May of this year.
PM also declared its inaugural regular quarterly dividend of 46 cents during the quarter, which represents an annualized rate of $1.84 per share and a dividend yield of 3.6%.
In the quarter, Philip Morris International said profits rose 20.0%, to $1.8 billion, or 86 cents per share, from $1.5 billion, or 70 cents per share, in the year-earlier quarter. Revenues jumped 20.1%, to $16.7 billion, up from $13.9 billion last year. The sales include excise taxes totaling $10.0 billion. Excluding those taxes, revenue rose 15.5%.
Sales in the Eastern Europe, Middle East and Africa segment jumped 19% with operating income climbing 28%. Europe, its largest market, saw a 15% increase in sales and a 20% profit increase. Latin America and Asia recorded earnings jumps of 44% and 22%, respectively.
Just buy this stock and look back at it in ten years….you’ll be very happy
Disclosure (“none” means no position):Long PM
Visit the ValuePlays Bookstore for Great Investing Books
Another fantastic management job at Dow Chemical (DOW) this quarter and more affirmation as to why the Rohm & Haas (ROH) deal went for the price it did and why it is a great purchase.
Results:
Sales for the second quarter set another Company record, rising 23 percent from the same period last year to $16.4 billion. Double-digit price increases were recorded in all operating segments and all geographic areas.
· Volume grew 5 percent, with 12 percent growth in geographic areas outside of North America, including an 11 percent volume increase in Europe.
· Earnings for the quarter were $0.81 per share, compared with earnings per share of $1.07 in the same quarter last year.
· Purchased feedstock and energy costs surged 42 percent, or $2.4 billion, compared with the same quarter last year, the largest year-over-year increase in the Company’s history.
· EBIT(1) in the combined Performance segments rose compared with the same period last year despite substantial increases in raw material and supply chain costs.
· Agricultural Sciences set a new quarterly record for both sales and EBIT. Sales rose 25 percent, and EBIT grew more than 60 percent versus the same period last year.
· Equity earnings were $251 million for the quarter, once again demonstrating consistent contributions from joint ventures to the Company’s results.
In my interview with Andrew Liveris he stated why he was most excited about Dow Ag. Today’s results would show why
The Agricultural Sciences segment posted record sales of $1.4 billion, 25 percent higher than the same period last year. All geographic areas posted double-digit increases in sales, reflecting organic growth and growth from recent acquisitions. Dow AgroSciences’ broad portfolio of both agricultural chemicals and seeds benefited from rising prices and low global inventories of farm commodities. Price was up 12 percent, with strong increases in all geographic areas. Volume was up 13 percent compared with the same period last year, with double-digit increases in North America, Europe, Latin America and Asia Pacific. Ag chemicals showed particular strength. Sales were up sharply for new cereal and rice herbicides, and for spinetoram insecticide, which continued its successful launch in the United States. Seeds and traits continued to benefit from a strong ag economy with global demand for agricultural output at record levels. The recent acquisitions of Agromen, MTI and Duo Maize continue to perform well, and the integration of newly acquired Triumph Seeds is progressing. Second quarter EBIT for Agricultural Sciences was $335 million, compared with $208 million in the year ago period.
For Dow currently it comes down to costs for the remainder of the year. Oil surged in the quarter and the price increases did not take effect until the second half of the quarter. Now that oil has come back and the full price increases are in effect, Q3 will show far better results.
At the end of the year, the commodity business goes to the Kuwaiti’s, the Rohm deal closes and the earnings profile is forever changed. Until then, you can still get shares on the cheap, oh yea, and they pack a 5% yield.
Full release:
Why Rohm & Hass(ROH)? The specialty chemical maker today reported an 8% increase in earnings. Liveris on CNBC (below) confirmed there was a 3-way bidding war for the company and the other finalist was BASF (BASF), who ultimately lacked the financial flexibility Dow now has to finalize a deal.
What is being lost currently is the cost synergies the two companies will now enjoy. Rohm is a major purchaser of Dow materials and Liveris has stated the amount come close to $800 million in annual cost savings. Should we believe it? I think when one considers every other deal he has done has recognized in excess of his stated synergies in a time frame that exceeded his estimates, I think we ought to expect more than the $800 million. In materials like Latex, the combined company with be a behemoth and enjoy added pricing power.
Disclosure (“none” means no position):Long Dow, None
Visit the ValuePlays Bookstore for Great Investing Books
Another fantastic management job at Dow Chemical (DOW) this quarter and more affirmation as to why the Rohm & Haas (ROH) deal went for the price it did and why it is a great purchase.
Results:
Sales for the second quarter set another Company record, rising 23 percent from the same period last year to $16.4 billion. Double-digit price increases were recorded in all operating segments and all geographic areas.
· Volume grew 5 percent, with 12 percent growth in geographic areas outside of North America, including an 11 percent volume increase in Europe.
· Earnings for the quarter were $0.81 per share, compared with earnings per share of $1.07 in the same quarter last year.
· Purchased feedstock and energy costs surged 42 percent, or $2.4 billion, compared with the same quarter last year, the largest year-over-year increase in the Company’s history.
· EBIT(1) in the combined Performance segments rose compared with the same period last year despite substantial increases in raw material and supply chain costs.
· Agricultural Sciences set a new quarterly record for both sales and EBIT. Sales rose 25 percent, and EBIT grew more than 60 percent versus the same period last year.
· Equity earnings were $251 million for the quarter, once again demonstrating consistent contributions from joint ventures to the Company’s results.
In my interview with Andrew Liveris he stated why he was most excited about Dow Ag. Today’s results would show why
The Agricultural Sciences segment posted record sales of $1.4 billion, 25 percent higher than the same period last year. All geographic areas posted double-digit increases in sales, reflecting organic growth and growth from recent acquisitions. Dow AgroSciences’ broad portfolio of both agricultural chemicals and seeds benefited from rising prices and low global inventories of farm commodities. Price was up 12 percent, with strong increases in all geographic areas. Volume was up 13 percent compared with the same period last year, with double-digit increases in North America, Europe, Latin America and Asia Pacific. Ag chemicals showed particular strength. Sales were up sharply for new cereal and rice herbicides, and for spinetoram insecticide, which continued its successful launch in the United States. Seeds and traits continued to benefit from a strong ag economy with global demand for agricultural output at record levels. The recent acquisitions of Agromen, MTI and Duo Maize continue to perform well, and the integration of newly acquired Triumph Seeds is progressing. Second quarter EBIT for Agricultural Sciences was $335 million, compared with $208 million in the year ago period.
For Dow currently it comes down to costs for the remainder of the year. Oil surged in the quarter and the price increases did not take effect until the second half of the quarter. Now that oil has come back and the full price increases are in effect, Q3 will show far better results.
At the end of the year, the commodity business goes to the Kuwaiti’s, the Rohm deal closes and the earnings profile is forever changed. Until then, you can still get shares on the cheap, oh yea, and they pack a 5% yield.
Full release:
Why Rohm & Hass(ROH)? The specialty chemical maker today reported an 8% increase in earnings. Liveris on CNBC (below) confirmed there was a 3-way bidding war for the company and the other finalist was BASF (BASF), who ultimately lacked the financial flexibility Dow now has to finalize a deal.
What is being lost currently is the cost synergies the two companies will now enjoy. Rohm is a major purchaser of Dow materials and Liveris has stated the amount come close to $800 million in annual cost savings. Should we believe it? I think when one considers every other deal he has done has recognized in excess of his stated synergies in a time frame that exceeded his estimates, I think we ought to expect more than the $800 million. In materials like Latex, the combined company with be a behemoth and enjoy added pricing power.
Disclosure (“none” means no position):Long Dow, None
Visit the ValuePlays Bookstore for Great Investing Books
AutoNation (AN) released results today and the news was far better than one would expect given its current operating environment.
America’s largest automotive retailer, today reported 2008 second quarter net income from continuing operations of $53 million or $0.29 per share, compared to year-ago net income from continuing operations of $79 million or $0.38 per share. After adjusting for certain items disclosed in the attached financial tables, net income from continuing operations for the 2008 second quarter was $59 million or $0.33 per share, compared to $76 million or $0.36 per share in the prior year. analysts had expected $.30 cents a share.
Second quarter 2008 revenue totaled $3.9 billion, compared to $4.5 billion in the year-ago period, driven primarily by lower new vehicle sales. In the second quarter, total U.S. industry retail sales declined 16%, based on CNW Research data. In comparison, in the second quarter AutoNation’s new vehicle unit sales declined 12%.
Commenting on the second quarter, Mike Jackson, Chairman and Chief Executive Officer, said, “Despite the fact that this past quarter was the most challenging automotive sales environment any of us have encountered, AutoNation delivered solid profitability.” Mr. Jackson also noted, “In the second quarter, the industry encountered $4.00 per gallon gasoline on top of the continued housing depression and credit crisis, resulting in a significant challenge as consumers are either postponing the purchase of vehicles or they are purchasing smaller vehicles that are more economical both at the time of purchase and at the pump. We now believe that, in 2008, U.S. new vehicle industry sales will decline to the low-14 million unit level.”
Mr. Jackson added, “In continuing response to the ongoing macroeconomic and industry challenges, we are executing a cost reduction plan with a targeted annualized run rate pre-tax savings of $100 million. In the first half of the year, we achieved approximately $25 million of this benefit. In the second half of the year, we expect to achieve approximately $50 million of savings, for a full-year 2008 impact of $75 million on a pre-tax basis. Our targeted annualized cost savings include reductions in advertising spending, corporate overhead expense and store personnel expense.”
Full release:
I don’t think (at least I hope) anyone is buying share of AutoNation now expecting an immediate payoff. This is a true value investment. The deal here is that when auto’s rebound, AutoNation, being the largest and also the most well run organization of the lot will benefit the most from its currently depressed levels.
Jackson is cutting costs and making the necessary moves to position the company for the rebound.
Watch him on CNBC this morning:
Nissan CEO Carlos Ghosn seems to back Jackson’s thoughts. The advantage Jackson has is that he will benefit from all the automakers, and whatever trend(s) emerge not just one.
With famed investors like Berkshires’s (BRK.A) Buffett, Sears’ (SHLD) Lampert, Gates, Leucadia (LUK) and Sullivan jumping into the sector, now it the time to be buying shares.
Disclosure (“none” means no position):Long AN
Visit the ValuePlays Bookstore for Great Investing Books
John Paulson made $3.7B in 2007 betting against an over levered financial system. The ability to go left when everyone else is going right is truly the mark of a great investor.
I would like to point out some of Paulson’s superhuman abilities:
1. Paulson had an almost clairvoyant insight into the machinations of Bear Stearns, who at the time was propping up faltering Mortgage Backed Securities (MBS),
“..by purchasing individual mortgages that were rapidly losing value to avoid doling out billions in swap payments”.
2. In the days leading up to the Bear Stearns collapse Paulson instinctively cashed out of all Bear Stearns related investments.
I would also point out what his detractors say:
1. Paulson’s insight was more like insider information.
“Back in January (2007).. Bear’s head mortgage trader, Scott Eichel, talked with a small group of traders over drinks in the Venetian hotel about propping up the ABX index by buying and rescuing some struggling subprime bonds, say two people who were there.”
and,
“In April .. Paulson executives called Mr. Eichel to ask whether he was contemplating a plan to repurchase mortgage-backed securities. ‘Maybe we are, maybe we’re not,’ Mr. Eichel replied, according to two Paulson executives, who say he added they should call him if they were interested.”
2. Paulson’s early cash-out even made the SEC suspicious of wrong doing:
“Bear Stearns Cos. plans to turn over documents to securities regulators showing that several financial giants, including Goldman Sachs Group Inc., Citadel Investment Group and Paulson & Co., slashed their exposure to the securities firm in the weeks before its collapse.”
and just days before the fall of Bear Stearns,
“Beginning March 10, Paulson .. unloaded dozens of credit-default swaps with Bear Stearns.. In every case, Bear Stearns owed Paulson money on the swaps, based on mark-to-market values at the time of the transfer.”
Disclosure (“none” means no position): None
Visit the ValuePlays Bookstore for Great Investing Books
John Paulson made $3.7B in 2007 betting against an over levered financial system. The ability to go left when everyone else is going right is truly the mark of a great investor.
I would like to point out some of Paulson’s superhuman abilities:
1. Paulson had an almost clairvoyant insight into the machinations of Bear Stearns, who at the time was propping up faltering Mortgage Backed Securities (MBS),
“..by purchasing individual mortgages that were rapidly losing value to avoid doling out billions in swap payments”.
2. In the days leading up to the Bear Stearns collapse Paulson instinctively cashed out of all Bear Stearns related investments.
I would also point out what his detractors say:
1. Paulson’s insight was more like insider information.
“Back in January (2007).. Bear’s head mortgage trader, Scott Eichel, talked with a small group of traders over drinks in the Venetian hotel about propping up the ABX index by buying and rescuing some struggling subprime bonds, say two people who were there.”
and,
“In April .. Paulson executives called Mr. Eichel to ask whether he was contemplating a plan to repurchase mortgage-backed securities. ‘Maybe we are, maybe we’re not,’ Mr. Eichel replied, according to two Paulson executives, who say he added they should call him if they were interested.”
2. Paulson’s early cash-out even made the SEC suspicious of wrong doing:
“Bear Stearns Cos. plans to turn over documents to securities regulators showing that several financial giants, including Goldman Sachs Group Inc., Citadel Investment Group and Paulson & Co., slashed their exposure to the securities firm in the weeks before its collapse.”
and just days before the fall of Bear Stearns,
“Beginning March 10, Paulson .. unloaded dozens of credit-default swaps with Bear Stearns.. In every case, Bear Stearns owed Paulson money on the swaps, based on mark-to-market values at the time of the transfer.”
Disclosure (“none” means no position): None
Visit the ValuePlays Bookstore for Great Investing Books
Icahn files this with the SEC today in Guaranty Financial (GFG)
Item 4 of the Initial 13D is hereby amended by adding the following:
On July 21, 2008, the transactions contemplated by the Investment Agreement
and the Purchase Agreement closed. At the closing, the Reporting Persons
received, in exchange for aggregate consideration of $230,000,011 in cash,
1,469,830 shares of Series B Preferred Stock and $175 million in principal
amount of Subordinated Notes. Approval by the Issuer’s stockholders is required
before the conversion feature of the Series B Preferred Stock can be exercised.
In connection with the closing, the Reporting Persons and certain of their
affiliates entered into an Agreement for Rebuttal of Rebuttable Determination of
Control (the “Rebuttal of Control Agreement”) with the Office of Thrift
Supervision, substantially in the form required by OTS regulations at 12 C.F.R.
Part 574. Under the Rebuttal of Control Agreement, unless otherwise approved by
the Office of Thrift Supervision, the Reporting Persons and certain of their
affiliates are obligated not to:
o Seek or accept representation of more than one member of the board of
directors of the Issuer or its principal savings bank subsidiary,
Guaranty Bank (“Guaranty Bank”);
o Have or seek to have any representative serve as the chairman of the
board of directors, or chairman of an executive or similar committee
of the Issuer’s or Guaranty Bank’s board of directors or as president
or chief executive officer of the Issuer or Guaranty Bank;
o Engage in any intercompany transaction with the Issuer or the Issuer’s
affiliates, except as provided in an existing agreement;
o Propose a director in opposition to nominees proposed by the
management of the Issuer or Guaranty Bank for the board of directors
of the Issuer or Guaranty Bank, other than as permitted above;
o Solicit proxies or participate in any solicitation of proxies with
respect to any matter presented to the stockholders of the Issuer
other than in support of, or in opposition to, a solicitation
conducted on behalf of management of the Issuer;
o Do any of the following, except as necessary solely in connection with
the performance of duties by the Reporting Persons’ representative as
a member of the Issuer’s board of directors:
(a) Influence or attempt to influence in any respect the loan and
credit decisions or policies of the Issuer or Guaranty Bank,
the pricing of services, any personnel decisions, the location
of any offices, branching, the hours of operation or similar
activities of the Issuer or Guaranty Bank;
(b) Influence or attempt to influence the dividend policies and
practices of the Issuer or Guaranty Bank or any decisions or
policies of the Issuer or Guaranty Bank as to the offering or
exchange of any securities;
(c) Seek to amend, or otherwise take action to change, the bylaws,
articles of incorporation, or charter of the Issuer or
Guaranty Bank;
(d) Exercise, or attempt to exercise, directly or indirectly,
control or a controlling influence over the management,
policies or business operations of the Issuer or Guaranty
Bank; or
(e) Seek or accept access to any non-public information concerning
the Issuer or Guaranty Bank; or
o Assist, aid or abet any of the Reporting Persons’ affiliates or
associates that are not parties to the Rebuttal of Control Agreement
to act, or act in concert with any person or company, in a manner
which is inconsistent with the terms of the Rebuttal of Control
Agreement or which constitutes an attempt to evade the requirements
therein.
Item 5. Interest in Securities of the Issuer
Item 5(a) of the Initial 13D is hereby amended and restated as follows:
(a) The Reporting Persons may be deemed to beneficially own, in the
aggregate, (i) 3,455,493 Shares, representing approximately 7.73% of the
Issuer’s outstanding Shares (based upon the 44,684,585 Shares stated to be
outstanding by the Issuer as of July 14, 2008) and (ii) 1,469,830 shares of
Series B Preferred Stock, representing approximately 23.78% of the Issuer’s
outstanding shares of Series B Preferred Stock (based upon the 6,181,934
shares of Series B Preferred Stock stated to be outstanding by the Issuer
as of July 14, 2008).
Item 5(c) of the Initial 13D is hereby amended and restated as follows:
(c) Except as described in Item 4, no transactions with respect to
Shares were effected during the past sixty (60) days by any of the
Reporting Persons.
Disclosure (“none” means no position):None
Visit the ValuePlays Bookstore for Great Investing Books
Bill Gates’ Cascade Investments and The Gates Foundation in a recent SEC filing disclosed a 5.5% stake in the auto retailer.
From the filing:
“(1) Cascade Investment, L.L.C. (“Cascade”) holds 5,263,588 shares of Common Stock. For purposes of Rule 13d-3 under the Securities Exchange Act of 1934, as amended, all shares of Common Stock held by Cascade may be deemed to be beneficially owned by William H. Gates III as the sole member of Cascade. Michael Larson, the Business Manager of Cascade, has voting and investment power with respect to the shares of Common Stock held by Cascade. Mr. Larson disclaims any beneficial ownership of the shares of Common Stock beneficially owned by Cascade and Mr. Gates.
(2) The Bill & Melinda Gates Foundation Trust (“Trust”) holds 4,640,000 shares of Common Stock. For purposes of Rule 13d-3 under the Securities Exchange Act of 1934, as amended, all shares of Common Stock held by the Trust may be deemed to be beneficially owned by William H. Gates III and Melinda French Gates as Co-Trustees of the Trust. Michael Larson has voting and investment power with respect to the shares of Common Stock owned by the Trust. Mr. Larson disclaims any beneficial ownership of the shares of Common Stock beneficially owned by the Trust or Mr. and Mrs. Gates.”
Disclosure (“none” means no position):Long AN
Visit the ValuePlays Bookstore for Great Investing Books
Still on vacation but some things need attention. Read some of Goldman Sachs’ (GS) research report on Sherwin Williams (SHW) today..
“Although the company’s long-term growth potential remains intact, we are cautious that the cost and demand headwinds will continue challenging SHW in the near term: (1) our economists expect existing home sales (key indicator for paint demand) to trough in 1H2009; (2) the overall non- residential market is poised for a downturn as a substantially tighter credit condition and slowing overall activity weigh on the sector; (3) the raw material cost spike will reach a crescendo on SHW’s P&L in 2H2008 and the consolidation among leading paint ingredient suppliers (DOW & ROH)
may exert additional cost pressure on the paint industry; (4) the double blow of demand weakness and cost spikes could limit the success of SHW’s ongoing aggressive price hikes. Therefore, we see meaningful downside risk to SHW’s earnings and share price in the short term.”
So, short term problem but long term, everything ok. Sell???
Isn’t this a textbook case of what Berkshire Hathaway’s (BEK.A) Warren Buffett means when he say “buy fear”?
I mean, things look tough so sell the hell out of it? Ought we not buy it when there are short term problem that do not affect the long term outlook and growth potential? If you are a current shareholder, Goldman is saying that sell you shares even though long term they expect them to be fine because they may dip for the next months.
These “buy” and “sell” ratings really ought to be ignored by anyone who holds securities for more than a month. They are only good for the day they are issued. Anyone remember all the “buy” recommendations on Google as it neared $700 a share?
If not, read here:
Not sure why much if this matters anyway, Dow chemical (DOW) is going to buy Sherwin anyway…
Disclosure (“none” means no position):Long SHW, DOW
Visit the ValuePlays Bookstore for Great Investing Books
Reid, Borders, Dimon, Sherwin
– Hey Harry!!! Why not “tackle” the LACK OF OIL…?
– The new site is great
– Dividend
Visit the ValuePlays Bookstore for Great Investing Books
Reid, Borders, Dimon, Sherwin
– Hey Harry!!! Why not “tackle” the LACK OF OIL…?
– The new site is great
– Dividend
Visit the ValuePlays Bookstore for Great Investing Books
You may have notice a new blogger here at ValuePlays. Vlado ia taking a shot at it and will occasionally contribute. I think the value folks out there will find is style , topics and ability to find information has real merit.
Vlado’s first post is here
Visit the ValuePlays Bookstore for Great Investing Books
In a recent interview Bruce Berkowitz, of Fairholme Capital Management (FAIRX), revealed that he was leaving Energy and heading into the Health Care sector. Was Berkowitz sincere? Or was it a quarterback misdirection?
A Google search revealed this unreferenced pdf presentation from June 2007 that points out (on page 19) that Fairholme Capital Management (FAIRX) is Clarke Inc‘s second largest institutional investor, with 1,142,400 shares (4.5% equity stake).
Also came across this article on a man often compared to Carl Icahn, George Armoyan whose private holding company Geosam Investments controls Clarke Inc (CLKFF) (a Canadian-based parent company of 6 subsidiaries, involved in transportation/shipping). This page describes their value-based investment process: Clarke value investment process.
This blog raves about Clarke Inc like it was a baby-Berkshire Hathaway.
Further digging reveals that Bruce Berkowitz is also holding an 8.44% stake in TAL International Group, Inc. (TAL), which is involved in Maritime container management services, Dry freight containers, etc.- and describes itself as a premier container leasing company.
Notice Berkowitz’s transportation-themed investments? Need I remind you about another well respected investor who recently became interested in transportation by way of Burlington Northern Santa Fe Corp (BNI).
Bottom line, two All-American quarterbacks have called the play: “Go long” (transportation).
Disclosure (“none” means no position): None
Visit the ValuePlays Bookstore for Great Investing Books