Starbucks, Iraq, Rodgers, Inflation
– Nothing like telegraphing the move. If I were the terrorists I would be insulted he thinks they are so stupid..
– Uh, Jim, who has said this is happening?
– More dangerous than slow growth
\
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Starbucks, Iraq, Rodgers, Inflation
– Nothing like telegraphing the move. If I were the terrorists I would be insulted he thinks they are so stupid..
– Uh, Jim, who has said this is happening?
– More dangerous than slow growth
\
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I think it depends on what you own..
Just as I am skeptical when something falls 49% in a couple days barring extreme circumstances I am equally un-enthused when the converse happens.
Watch the following discussion:
Now, holders in JP Morgan (JPM) and Wells Fargo (WFC) can be assured that the rally in their share is for real for the simple reason that the sell-off in them was far overdone. A word of caution, this isn’t really so much a rally of enthusiasm that “bad news is done” as much as it is a rally of confirmation of quality. Dramatic share gains from here ,may not be likely but a slow climb probably is.
But, holder of shares in Washington Mutual (WM), Merrill (MER), Wachovia (WB), Lehman (LEH), National City (NCC) and other weak firms ought not get too caught up in what is happening. There are plenty of dark clouds out there still and you are going to get rained in sooner, rather than later. That is not to say we may have seen a bottom but a return to year earlier price levels won’t be seen for a while. There is a very real chance that 6 months from now you are staring at prices level you see today.
All in all it is very good news. For the first time in a long while we are now going to be able to look at individual firms and have some level of expectation that share performance will track firm performance rather than what has happened the past 6 months, everything was killed.
Disclosure (“none” means no position):Long WB,WFC, none
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Here is a nice post by Jeff Annello on Sears Holdings (SHLD) in which he gives it a valuation
Disclosure (“none” means no position):Long SHLD
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Upgrades
CB&I (CBI)- Stanford Research Sell » Hold
Steven Madden (SHOO)- Wedbush Morgan Hold » Buy
EOG Resources (EOG)- RBC Capital Mkts Underperform » Sector Perform
Starwood Hotels (HOT)- Wachovia Mkt Perform » Outperform
PF Chang’s (PFCB)- Piper Jaffray Neutral » Buy
ACE Limited (ACE)- Citigroup Hold » Buy
Marshall & Ilsley (MI)- Keefe Bruyette Underperform » Mkt Perform
Microchip (MCHP)- UBS Neutral » Buy
Colnl BancGrp (CNB)- JP Morgan Neutral » Overweight
Linear Tech (LLTC)- UBS Neutral » Buy
Blackboard (BBBB)- Robert W. Baird Neutral » Outperform
Downgrades
Jamba (JMBA)- Piper Jaffray Buy » Neutral
ProLogis (PLD)- JP Morgan Overweight » Neutral
St. Joe Company (JOE)- Wachovia Mkt Perform » Underperform
Host Hotels (HST)- Stifel Nicolaus Buy » Hold
eBay (EBAY)- AmTech Research Neutral » Sell
InterVoice (INTV)- Wedbush Morgan Strong Buy » Hold
Polycom (PLCM)- Wedbush Morgan Buy » Hold
Omnicom (OMC)- Citigroup Buy » Hold
Albany Molecular (AMRI)- Jefferies & Co Buy » Hold
InterVoice (INTV)- Brean Murray Buy » Hold
Host Hotels (HST)- Susquehanna Financial Positive » Neutral
Diamondrock Hospitality (DRH)- Wachovia Outperform » Mkt Perform
FelCor Lodging (FCH)- Wachovia Outperform » Mkt Perform
Host Hotels (HST)- Wachovia Outperform » Mkt Perform
Ashford Hospitality Trust (AHT)- Wachovia Mkt Perform » Underperform
Strategic Hotels & Resorts (BEE)- Wachovia Mkt Perform » Underperform
Starbucks (SBUX)- Piper Jaffray Buy » Neutral
Wells Fargo (WFC)- UBS Buy » Neutral
AMB Property (AMB)- JP Morgan Overweight » Neutral
Georgia Gulf (GGC)- Lehman Brothers Equal-Weight » Underweight
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Upgrades
CB&I (CBI)- Stanford Research Sell » Hold
Steven Madden (SHOO)- Wedbush Morgan Hold » Buy
EOG Resources (EOG)- RBC Capital Mkts Underperform » Sector Perform
Starwood Hotels (HOT)- Wachovia Mkt Perform » Outperform
PF Chang’s (PFCB)- Piper Jaffray Neutral » Buy
ACE Limited (ACE)- Citigroup Hold » Buy
Marshall & Ilsley (MI)- Keefe Bruyette Underperform » Mkt Perform
Microchip (MCHP)- UBS Neutral » Buy
Colnl BancGrp (CNB)- JP Morgan Neutral » Overweight
Linear Tech (LLTC)- UBS Neutral » Buy
Blackboard (BBBB)- Robert W. Baird Neutral » Outperform
Downgrades
Jamba (JMBA)- Piper Jaffray Buy » Neutral
ProLogis (PLD)- JP Morgan Overweight » Neutral
St. Joe Company (JOE)- Wachovia Mkt Perform » Underperform
Host Hotels (HST)- Stifel Nicolaus Buy » Hold
eBay (EBAY)- AmTech Research Neutral » Sell
InterVoice (INTV)- Wedbush Morgan Strong Buy » Hold
Polycom (PLCM)- Wedbush Morgan Buy » Hold
Omnicom (OMC)- Citigroup Buy » Hold
Albany Molecular (AMRI)- Jefferies & Co Buy » Hold
InterVoice (INTV)- Brean Murray Buy » Hold
Host Hotels (HST)- Susquehanna Financial Positive » Neutral
Diamondrock Hospitality (DRH)- Wachovia Outperform » Mkt Perform
FelCor Lodging (FCH)- Wachovia Outperform » Mkt Perform
Host Hotels (HST)- Wachovia Outperform » Mkt Perform
Ashford Hospitality Trust (AHT)- Wachovia Mkt Perform » Underperform
Strategic Hotels & Resorts (BEE)- Wachovia Mkt Perform » Underperform
Starbucks (SBUX)- Piper Jaffray Buy » Neutral
Wells Fargo (WFC)- UBS Buy » Neutral
AMB Property (AMB)- JP Morgan Overweight » Neutral
Georgia Gulf (GGC)- Lehman Brothers Equal-Weight » Underweight
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Looks like in banking it is now a two horse race. JP Morgan (JPM) reported today and like Wells Fargo (WFC) yesterday, investors were undoubtedly pleased.
From the Release:
JPMorgan (JPM) today reported 2008 second-quarter net income of $2.0 billion, compared with net income of $4.2 billion in the second quarter of 2007. Earnings per share of $0.54 were down 55%, compared with earnings per share of $1.20 in the second quarter of 2007. Current-quarter results include the effect of merger-related items amounting to a net loss of $540 million (after-tax) related to the acquisition of The Bear Stearns Companies Inc., which closed on May 30, 2008. Excluding these items, net income would have been $2.5 billion.
Jamie Dimon, Chairman and Chief Executive Officer, commented on the quarter: “Our earnings were down significantly due to the unfavorable credit environment and market conditions. The Investment Bank took additional markdowns on leveraged loans and mortgage-related positions. Retail Financial Services experienced further deterioration in its home lending portfolio, which resulted in higher charge-offs and an increase in the allowance for credit losses. However, the firm overall continued to maintain solid underlying business momentum. We had market share gains in Investment Banking fees and key product areas. Retail Financial Services posted organic revenue growth of 15%, and all of our major businesses produced growth in accounts, balances and volumes. Further positive results in the quarter included record performance from both Commercial Banking and Treasury & Securities Services.”
Mr. Dimon added, “We also completed the highly complex Bear Stearns acquisition as planned. Through the truly remarkable partnership and efforts of our people in extremely difficult times, we made great progress towards full integration, while also significantly reducing our combined risk positions. We now have an expanded platform to better serve our institutional clients – one which we fully expect will make our franchise stronger over time.”
Mr. Dimon further remarked, “I am pleased with the strength of our balance sheet and capital positions, particularly in the context of the market challenges we have faced during the past year. During the quarter, we added $1.3 billion to our allowance for credit losses (which now totals $13.9 billion) and maintained strong capital ratios.”
Discussing the firm’s outlook, Dimon said, “Our expectation is for the economic environment to continue to be weak – and to likely get weaker – and for the capital markets to remain under stress. We remain conscious that since substantial risks still remain on our balance sheet, these factors will likely affect our business for the remainder of the year or longer. However, the firm has delivered underlying growth across most of our businesses, and with our substantial capital base we can continue to invest for the future. In spite of the environment, we are confident that we are building an increasingly strong and profitable company.”
Dick Bove said:
Bove is right, Dimon is tempering expectations as there is still some ambiguity out there. Rather than thump his chest and make flashy predictions, Dimon reminds people it is tough out there.
Now here is the good part for shareholders. Because of his superior management ability, like Sherwin Williams (SHW) and Harley Davidson (HOG) earlier today results were not nearly as bad as expected. Poor operating environments will inevitably lead to earnings decline but superior management will soften the losses compared to peers while positioning the company to take advantage of the eventual economic rebounds.
Meanwhile people over0react to the operating environment forgetting the superior management and thus “value” investing opportunities are created….
Disclosure (“none” means no position):Long WFC, SHW, HOG, None
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Just a day after banning “naked shorting” in financial stocks, the Chris Cox and his decides it is necessary to let some people do it. You know what? Just shut them down….the SEC that is. They are more aggravation than they are worth. Let’s get our act together over there kids…
The WSJ reported today:
“By putting the kibosh on so-called naked short-selling in companies like Fannie Mae and Freddie Mac, the SEC would complicate life for market makers who take the opposite side of orders to trade stocks and options.
Early Wednesday, one day after the SEC issued the order for 19 financial companies, representatives from the seven U.S. options exchanges contacted SEC officials to convey concerns and raise the possibility of an exemption.
The SEC is now considering such a move, an agency spokesman said, although no decision had been made at press time.
The SEC’s order stirred immediate panic in the options market. Market makers often short-sell companies’ stock in order to hedge positions they take in options contracts. If they sell put contracts, they turn around and sell stock in the same company.
“If market makers can’t hedge themselves,” said Andy Schwarz, founder of AGS Specialist Partners, “they will be unable to sell puts and buy calls.”
Ooops!!
Did anyone over there actually think this thing through? How can this happen? We are now going to need a scorecard just to tell who can do what in what stocks.
As I watch Cox sit in front of Congress doing his best impersonation of a constipated toll collector contemplating a potentially lethal dose of Metamucil, I get angry. He has let this stuff go on for years and only now, when the shorts are actually right, decided to jump in with both feet and screw things up even more.
Again, why not investigate Lehman’s (LEH) Erin Callan, citi’s (C) Chuck Prince, Merrill’s (MER) Stan O’Neil, Wachovia’s (WB) Ken Thompson and on and on. They all told shareholders “things were great” only to have those who bought shares listening to them get slaughtered. What does Cox do? Investigate the guys who were screaming “things are not alright” the whole time and oh yea……were right!!
Chris, just please go back to whatever it is you have been doing for the past 4 years and get out of our way please…. we really don’t need you
Disclosure (“none” means no position):Long C,WB none
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As much as a doubter of Six flags (SIX) that I am, even this dramatic move surprised me.
Six Flags’ shares lost 37 cents to close at 48 cents, after touching an all-time low of 25 cents during the day yesterday. Shares have lost more than 90 percent from its 52-week high of $5.92 last July. Today they trade at 60 cents each.
On Tuesday, research firm IBISWorld predicted that fewer Americans will visit U.S. amusement parks this year and admissions will improve only slightly in 2009. Is this really news to anyone?
Something else is happening. Someone is dumping shares in a big way.
Disclosure (“none” means no position):None
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Sherwin Williams (SHW) posted results this mornings and more than a few people are going to be surprised.
Profit for the quarter slid to $171.7 million, or $1.45 per share, from $202.6 million, or $1.52 per share, in the same quarter last year. Revenue edged up about 1 percent to $2.23 billion from $2.2 billion. Analysts polled by Thomson Financial, on average, predicted a profit of $1.38 per share on revenue of $2.19 billion.
Sherwin-Williams said acquisitions and strong global results partly offset what Christopher M. Connor, company chairman and chief executive, called “an unprecedented downturn in the U.S. housing market that is both deep and wide.”
How well did the International Group do? Seven acquisitions completed after the second quarter of 2007 increased consolidated net sales 2.4% in the quarter and 2.5% in the first six months. Favorable currency translation rate changes increased consolidated net sales 1.1% in the quarter and 1.3% in the first six months.
Acquisitions and currency translation rate changes had a combined favorable impact on diluted net income per common share of approximately $.02 per share in the quarter.
The Global Group’s net sales stated in U.S. dollars increased $54.6 million, or 12.6%, to $488.9 million in the quarter and $114.3 million, or 13.7%, to $950.8 million in the first six months due primarily to volume gains, selling price increases, currency translation impact and acquisitions. Favorable currency translation rate changes increased net sales of the Global Group by 5.8% in the quarter and 6.3% in the first six months. Acquisitions increased this Group’s net sales in U.S. dollars by 3.8% in the quarter and 3.7% in the first six months.
This part really surprised me, domestic net sales in the Paint Stores Group decreased $10.4 million, or 0.8%, to $1.355 billion in the quarter and $30.2 million, or 1.2%, to $2.386 billion in the first six months due primarily to soft domestic architectural paint sales in the new residential, residential repaint, DIY and commercial markets as well as weak sales in non-paint categories. Acquisitions added 2.6% to this Group’s net sales in the quarter and 2.9% in the first six months. Net sales from stores open for more than twelve calendar months decreased 4.5% in the quarter and 5.4% in the first six months over last year’s comparable periods.
I would have expect a much greater decline. This really does bode very well for the eventual turn in housing. If we can see housing conditions not seen since the Depression, and only see a 4.5% sales decline, when housing normalizes, things will look just great.
The Company acquired 2.1 million shares of its common stock through open market purchases during the quarter and 6.2 million shares during the first six months. The Company had remaining authorization at June 30, 2008 to purchase 20.8 million shares.
Looking forward:
“During the third quarter of 2008, we anticipate consolidated net sales will be slightly below last year’s third quarter. We expect diluted net income per common share for the third quarter will be in the range of $1.20 to $1.45 per share compared to $1.55 per share last year. For the full year 2008, we are reaffirming our June 3, 2008 guidance that we anticipate consolidated net sales will be slightly lower than 2007. We are also reaffirming our June 3, 2008 guidance that we expect diluted net income per common share for full year 2008 will be in the range of $3.60 to $4.10 per share compared to $4.70 per share earned in 2007.” CEO Chris Connor
You know, great management always manages to steer through tough times and come out stronger. With lead litigation effectively behind it and results holding their own despite unprecedented conditions, Connor is doing just that with Sherwin.
Disclosure (“none” means no position):Long SHW
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So, maybe it would seem high gas prices are providing a buffer for Harley Davidson (HOG) against the economy?
Harley-Davidson (HOG) reported Q2 EPS of $0.95 this morning, 19 cents better than estimates. Revenue for the quarter was $1.57 billion vs. consensus of $1.4 billion.
“During the second quarter we shipped 80,326 Harley-Davidson® motorcycles to our dealers and distributors around the world. While this result exceeds our guidance range of 76,000 to 80,000 units for the quarter, it is a decrease of 15.6 percent from the year-ago period. This decrease reflects the impact of the shipment reduction we announced April 17th in response to ongoing weakness in the U.S. economy,” said Jim Ziemer, CEO.
For the first six months of 2008, revenue totaled $2.88 billion, a 2.9 percent increase over the year-ago period. Earnings per share were $1.74, a decrease of 7.9 percent compared to the same period last year.
Through the first six months of this year, shipments of Harley-Davidson motorcycles were 152,194 units, a 6.6 percent decrease compared to last year’s 162,878 units.
The Company expects to ship between 74,000 and 78,000 Harley-Davidson motorcycles during the third quarter of 2008. For the full year of 2008, Harley-Davidson still plans to ship between 303,500 and 307,500 units. The Company continues to expect full-year EPS of $3.00 to $3.18.
The Company repurchased 1.3 million shares of its common stock at a cost of $50.0 million during the second quarter of 2008. On June 29, 2008, the Company had 235.3 million shares of common stock outstanding. As of June 29, 2008, there were 19.3 million shares remaining on a board- approved share repurchase authorization.
When one consider the current economic environment and credit conditions out there, these results really are fantastic. Far from a “luxury item”, it would seem motorcycles, especially Harley are becoming the alternative of choice for gas pained consumers.
Here is the kicker, when credit conditions improve, sales ought to increase even further. One really ought not expect oil and gas prices to fall very far anytime soon so motorcycles as an alternative will remain while becoming more affordable.
International sales, the current growth of the company grew 11%. What will be interesting and I hope it is asked on the earnings call is what contribution can be expected from the recent acquisition. Also, can someone ask is the double digit growth these is expected to continue for a while?
Disclosure (“none” means no position):Long HOG
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AutoNation’s (AN) CEO Mike Jackson was on NBC’s Nightly News the other night.
Here is the appearance:
Now, Jackson is both being right and a little self-serving which, as a shareholder is just fine. $4 gas for a prolonged period will lead to a fundamental shift in consumer behavior. The tens of millions of SUV’s that have been sold in the past decade are going to be traded in for smaller, more efficient models in droves.
As the largest auto-dealer in the nation, Jackson (and shareholders) will benefit from that activity. As gas prices inch higher ($4.25 around here) that activity will begin sooner and become greater. Good….
While auto sales are currently down (along with AN’s stock price), this is not an evaporated demand situation. It isn’t like retail where I may pass on something and just never get it. People need cars as they age and deteriorate (or trade in a gas guzzler). The demand builds over time as the purchases are put off, then it releases and the longer the build, the faster the release.
The key here is Jackson’s market share. As dealerships close, Jackson is getting an even bigger piece of a shrinking pie without expending more capital to do so. The Kiplinger Letter recently predicted 15 million auto units to be sold this year. Here is what got me. They said “expect 1,200 dealerships, mostly US only brands to be gone by the end of the year”.
Since they will not be Jackson’s, this is good news for AutoNation shareholders.
Disclosure (“none” means no position):Long AN
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AutoNation’s (AN) CEO Mike Jackson was on NBC’s Nightly News the other night.
Here is the appearance:
Now, Jackson is both being right and a little self-serving which, as a shareholder is just fine. $4 gas for a prolonged period will lead to a fundamental shift in consumer behavior. The tens of millions of SUV’s that have been sold in the past decade are going to be traded in for smaller, more efficient models in droves.
As the largest auto-dealer in the nation, Jackson (and shareholders) will benefit from that activity. As gas prices inch higher ($4.25 around here) that activity will begin sooner and become greater. Good….
While auto sales are currently down (along with AN’s stock price), this is not an evaporated demand situation. It isn’t like retail where I may pass on something and just never get it. People need cars as they age and deteriorate (or trade in a gas guzzler). The demand builds over time as the purchases are put off, then it releases and the longer the build, the faster the release.
The key here is Jackson’s market share. As dealerships close, Jackson is getting an even bigger piece of a shrinking pie without expending more capital to do so. The Kiplinger Letter recently predicted 15 million auto units to be sold this year. Here is what got me. They said “expect 1,200 dealerships, mostly US only brands to be gone by the end of the year”.
Since they will not be Jackson’s, this is good news for AutoNation shareholders.
Disclosure (“none” means no position):Long AN
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Callan, Naked Shorting, SEC, Heating oil
– Finally http://feeds.wsjonline.com/~r/wsj/xml/rss/3_7011/~3/336326064/SB121614671139755285.html
– Hasn’t this been illegal anyway?
– Why are they doing this? What about the folks who got themselves into this mess?
– This is when things get ugly, AC can be turned off, heat, no
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Callan, Naked Shorting, SEC, Heating oil
– Finally http://feeds.wsjonline.com/~r/wsj/xml/rss/3_7011/~3/336326064/SB121614671139755285.html
– Hasn’t this been illegal anyway?
– Why are they doing this? What about the folks who got themselves into this mess?
– This is when things get ugly, AC can be turned off, heat, no
Visit the ValuePlays Bookstore for Great Investing Books