Google, Citi & Merrill, Gphone, Analysts
– Here is a really interesting take on Google (GOOG) shares.
– Here is a great post on the craziness of it all.
– More gPhone information
– A stunning story on why “analysts” are not to be trusted.
The lead paint litigation saga is just about over after yet another victory for Sherwin Williams (SHW), this time in
In “Thomas,” Sherwin-Williams, NL Industries (NL), DuPont (DD), Millennium Holdings and ARCO were acquitted in Milwaukee with the jury finding:
From Jane Genova’s Law and More:
“In “Thomas” the jury found:
* Steven Thomas ingested white lead carbonate – yes 12-0
* Has Steven Thomas brain been damaged – no -12-0
* Was Steven Thomas injured as a result of being admitted to the hospital for chelation or as a result of having his blood lead level sampled white a young child – no 12-0
No other questions answered – defense verdict – Judge has dismissed jury from service.”
That essentially leave the California litigation that was won by the defendants but is under appeal and the Rhode Island case, lost by defendant but so legally flawed in the way it was handled by both the State and the Judge that evisceration on appeal by the Rhode Island Supreme Court is all but assured.
Lead paint, done, let’s move on..
Wow, could Sandy Weill be back at the helm of Citigroup (C)?
It turn out that Alwaleed meet with Weill in October 29th in Saudi Arabia about taking over the CEO role for he company. Alwaleed has lost $4 billion the last few weeks with the Citigroup plunge and told Prince late last week “I can no longer support you as CEO”.
Weill flew to Saudi Arabia on the Citigroup corporate jet to meet with Citi’s largest invesor.
Citigroup has said that now that the search has opened, Weill will be considered as a replacement.
Blockbuster (BBI) managed to do it, under-perform dismal expectations.
Revenues of $1.24 billion (down 2% from Q2, down 5.7% y/y) and a $.20 per share loss (same as Q2, 5 cents worse than last year) were both worse than estimates. If that was not bad enough, the company’s “Total Access” program, the presumed savior of it, actually lost 500,000 subs in the latest quarter. What happened? In September they essentially ruined the advantage of the service by limiting the video trade-ins to 5 per month, and began charging more for the unlimited trade-ins. Any wonder people walked? Blockbuster is now actually trying to jettison “unprofitable” subscribers. Who are they talking about, those who actually use the service regularly? Have they been talking to execs at Sprint (S)?
Any good news? Sure. Online download increased 15%. But the problem here is again too little too late. Blockbuster did not begin to enter the online download game until around June and that put them 6 months behind their nemesis, Netflix (NFLX).
Blockbuster did close 526 stores in the last year and those still open saw sales essentially flat and while that may seem good, when you consider they are basically the only brick and mortar video store left, that is not good news. Again, I have been saying this since early August, just close them. Put the money you spend on the stores into more profitable ventures. Think of the labor savings alone!
Blockbuster is losing members from its program and it seems from Netflix’s latest earnings that they are going directly there. Why? NetFlix has a few easy to use options and when they change the program, it benefits users, it does not restrict their use of the program.
Blockbuster just cannot seem to accept the direction their industry has gone in and for shareholders, that is unfortunate.
The rumors are flying rampant and financial share are getting hit like crazy. There are so great opportunities out there.
Goldman Sachs (GS) on Friday denied a rumor that they could announce billions of dollars in write-downs. “We’ve said there’s no truth to these rumors,” said Ed Canaday, a spokesman for the brokerage. Despite that, shares finished down $10 or 4%. Shares that fetched an all time high earlier in the week at $249, now fetch $229.
Perhaps the epitome of the silliness was Deutsche Bank (DB) analyst Mike Mayo. Mayo predicted late Thursday night that the investment banks will need to take another $10 billion in writedowns in the fourth quarter, with hits of $4 billion each at Citigroup (C) and Merrill Lynch (MER) and a total of $2 billion at places like Wachovia (WB)and Bank of America (BAC).
Then, after the Wall Street Journal suggested Merrill Lynch could be under investigation over its handling of mortgage debt, Mayo issued a new note downgrading Merrill to “Hold” from “Buy” and saying it could face $10 billion in write-downs on its own. No additional facts were disclosed, nothing was said, just a Journal article and Mayo increased his estimates of write-offs by 150%. The Journal article essentially said Merrill Lynch struck deals with hedge funds to take certain positions that did not transfer risk, but merely delayed it so Merrill Lynch would not have to disclose its exposure now. That practice is under investigation by the Securities and Exchange Commission according to then paper.
Merrill Lynch said in a statement that it has “no reason to believe that any such inappropriate transactions occurred,” adding they would violate the company’s policy. Again a denial but no matter, the analysts are racing for the largest number.
On Thursday, the before never heard of Meredith A. Whitney of CIBC World Markets, said Wednesday night that Citigroup (C) “might” be forced to cut its dividend or sell assets to head off what she said was a $30 billion capital shortfall. The call lead to a 7% decline in Citi stock to a 4 year low.
Could they be right? Sure. Could they be wrong? Most likely. Mayo and Whitney are just guessing and giving investors guidance because of that. Investors reactions smell like fear and we all know what Warren Buffett says about fear…..”buy it”.
Citigroup’s (C) Charles Prince officially resigned Sunday saying “Given the size of the recent losses in our mortgage-backed securities business, the only honorable course for me to take as chief executive is to step down.” Former Treasury Secretary Robert Rubin has been named Chairman.
More announcements are expected Monday regarding the exact leadership structure until a new CEO is found. Citigroup is also announced it will report billions of dollars in additional write-downs on mortgage-related securities this week. Citigroup said “These declines in the fair value of Citi’s sub-prime related direct exposures followed a series of rating agency downgrades of sub-prime U.S. mortgage related assets and other market developments, which occurred after the end of the third quarter. The impact on Citi’s financial results for the fourth quarter from changes in the fair value of these exposures will depend on future market developments and could differ materially from the range above.”
This crushes the roughly $2.2 billion in mortgage-related write-downs in Q3 reported just last month. They also said “Citi expects that market conditions will continue to evolve, and that the fair value of Citi’s positions will frequently change. Given these anticipated fluctuations, Citi does not intend to update the information provided in this release until it announces its fourth quarter 2007 earnings in January 2008. Investors also should not expect Citi to provide information about the results of future quarters in advance of scheduled quarterly earnings announcement dates.”
Regarding the rumored dividend cut, Citigroup said Sunday that it “has no plans to reduce its current dividend level” and that “capital ratios will return within the range of targeted levels by the end of the second quarter of 2008,” despite “significant uncertainty” in the markets.
Now the fun begins. Shares at their current level yield 5.6% and rose as much as 5.8% in trading in Tokyo this morning (in Tokyo). Down 30% for the year and 9% last week look very enticing. We already own shares and they make up about 9% of the portfolio weighted by value and will be looking to add more soon. Citi has a worldwide reach no other bank can meet and under the right leadership will make investors very happy again, especially with shares coming from the depths they are now.
UPGRADES
Ambassadors Group EPAX DA Davidson Neutral » Buy
Open Text OTEX BMO Capital Markets Market Perform » Outperform
Cognex CGNX Barrington Research Mkt Perform » Outperform
Cognex CGNX Bear Stearns Peer Perform » Outperform
Aventine Renewable Energy AVR Credit Suisse Underperform » Neutral
Westlake Chemical WLK Credit Suisse Neutral » Outperform
Opnext OPXT Needham & Co Buy » Strong Buy
Peet’s Coffee PEET Wedbush Morgan Sell » Hold
Perrigo PRGO Oppenheimer Neutral » Buy
Votorantim Cel VCP Deutsche Securities Hold » Buy
Enbridge Energy EEP RBC Capital Mkts Underperform » Sector Perform
Taleo TLEO KeyBanc Capital Mkts Buy » Aggressive Buy
Enterprise GP Holdings EPE Morgan Keegan Mkt Perform » Outperform
Western Digital WDC Caris & Company Above Average » Buy
Marathon Oil MRO Credit Suisse Neutral » Outperform
Millennium Pharm MLNM Friedman Billings Mkt Perform » Outperform
Big 5 Sports BGFV Nollenberger Capital Neutral » Buy
Enbridge Management EEQ RBC Capital Mkts Underperform » Sector Prform
Modine Manufacturing MOD Robert W. Baird Underperform » Neutral
Tercica TRCA Friedman Billings Underperform » Mkt Perform
Vitesse Semi VTSS CIBC Wrld Mkts Sector Underperform » Sector Perform
Diageo plc DEO Lehman Brothers Underweight » Equal-weight
Coca-Cola Ent CCE Citigroup Hold » Buy
RadiSys RSYS Jefferies & Co Hold » Buy
Sprint Nextel S Deutsche Securities Sell » Hold
DOWNGRADES
Merrill Lynch MER Deutsche Securities Buy » Hold
Rainmaker Sys RMKR Needham & Co Strong Buy » Buy
Glu Mobile GLUU Needham & Co Buy » Hold
Cell Genesys CEGE Needham & Co Buy » Hold
Ditech DITC Wedbush Morgan Hold » Sell
RADVision RVSN Wedbush Morgan Buy » Hold
American Reprographics ARP Longbow Buy » Neutral
Town Sports Intl CLUB BB&T Capital Mkts Buy » Hold
Town Sports Intl CLUB RBC Capital Mkts Outperform » Sector Perform
Alesco AFN RBC Capital Mkts Outperform » Sector Perform
CACI Intl CAI Cowen & Co Outperform » Neutral
Glu Mobile GLUU Kaufman Bros Buy » Hold
OPNET OPNT Stanford Research Buy » Hold
GSI Technology GSIT Stanford Research Buy » Hold
NiSource NI KeyBanc Capital Mkts Buy » Hold
Intermec IN Morgan Keegan Outperform » Mkt Perform
Guess GES Caris & Company Above Average » Average
Tesoro Corp. TSO Caris & Company Buy » Above Average
Cutera CUTR RBC Capital Mkts Outperform » Sector Perform
PG&E PCG BMO Capital Markets Outperform » Market Perform
GPC Biotech GPCB Piper Jaffray Market Perform » Underperform
Greenbrier Comp GBX Wachovia Outperform » Mkt Perform
Cogent COGT Soleil Buy » Hold
Korea Electric Power Corp KEP Lehman Brothers Overweight » Equal-weight
Clearwire CLWR Pali Research Neutral » Sell
Glu Mobile GLUU Cantor Fitzgerald Buy » Hold
eBay EBAY Bear Stearns Outperform » Peer Perform
Monday’s Picks
Nobody stepped up to the plate for Monday..
Friday’s Results
Jeff Macke recommended buying Electronic Arts (ERTS). Open $58.74 Close $60.46 GAIN
Guy Adami liked Intel (INTC). Open $26.50 Close $26.80 GAIN
Karen Finerman preferred Flowserve (FLS). Open $75.39 Close $88.33
Pete Najarian said Cypress (CY) is a buy. Open $36.08 Close $35.65 LOSS
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks). The percentage is the percentage of successful picks
Guy Adami= 41-24 = 63%
John Najarian= 13-4 = 76%
Jeff Macke= 46-32 = 55%
Pete Najarian= 30-28 = 52%
Tim Seymore= 4-3 = 57%
Karen Finerman= 24-13 = 63%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Here are the most viewed stories for the month of October.
1- Warren Buffett On Fox Business News
2- The Dow Chemical and DuPont Drama Deepens
3- It’s Lampert Rumor Season Again
4- Berkshire Hathaway vs Sears Holdings: The Early Years
5- The Hidden Value in Sears Holdings
Well, Monday ought to be an interesting day for Citigroup (C) shareholders.
Just yesterday I said the emergency meeting of the Board of Directors Sunday was going to mean “more write-down and the end of the reign of Prince.” It looks like that will come to fruition.
Prince suffered mainly from being “the guy who followed the guy” who was very dynamic and made shareholders very wealthy. You never want to be the follower. You always want to be “the guy who follows the guy who followed the guy”. Expectation are so low now any improvement at all will be met with immense enthusiasm where the same improvement with Prince would have been looked at with an “its about time” scorn. Fair or not, it is just the way it is.
Folks expect Prince to be an extension of Sandy Weill and when he wasn’t, he was doomed. We have to give Prince some credit though. The Citigroup he inherited was in legal and regulatory trouble and he did calm the waters and clear the decks of these issues. That being said, his job now is done. What Citi needs is a far more dynamic leader and one with a Wall St. pedigree.
Who?
Vikram S. Pandit, who was elevated to head Citigroup’s investment bank and alternative investments group in early October? No. Not enough experience heading an institution as large and diverse as Citigroup.
Robert Druskin, the chief operating officer and the former head of Citigroup’s investment bank? No. The last thing Citi needs now is another internal appointment and his friendship with Prince will hurt his chances.
Board member Robert Rubin, who has been one of Mr. Prince’s advisers and advocates? No, but he should be forced to take over in the interim as he need to do something to justify the $100 million he has made with Citi. His reputation has been blighted by his seemingly blind support for Prince despite Citi’s obvious problems and he needs to take action to rectify it. Should Rubin not elect to take over in the interim, he ought to be asked to leave as one has to then seriously wonder what he has done to justify any monies he has received.
Who then?
Two names, Hank Paulson or John Thain, both former Presidents at Goldman Sachs (GS). The hiring of either of these two would focus shareholders and the market on the future and “what can be” rather than having both entities spending their time looking on the rear view mirror longing for the “good ole’ days”.
Thain, who is the current President of the NYSE may not be able to resist getting back into the game and playing with Citi’s operations. Paulson recognizes he only has a year left at his current post in Washington and would command a pretty penny to run Citi, a penny shareholders would gladly pay at this point. Now, with the Merrill Lynch (MER) job open also, the competition for a Chief will be intense assuming both firms will be looking to the outside for a replacement (they really ought to be). When you add Bear Sterns (BSC) possibly looking for a replacement for James Cayne, things may heat big time very quickly. That being said, one cannot underestimate the importance of this hire form Citi as it will frame expectations for the company through the current decade.
Citi is a massive operation with immense value at current prices for the right CEO who can make its diverse part work cohesively together. The new CEO is going to get a grace period and Citi can then use that to announce any additional write-downs should they then be necessary.
All this will have to take place before the next earning filing with the SEC though as whomever is in charge will have to certify the filing and any write-downs will then have to be done.
Here are the weeks top stories at Value Investing News…
Look’s like I’m not the only one that won’t buy Apple, Vitaliy shares my sentiment on the popular tech stock. Vitaliy also discusses his investment framework presented in Active Value Investing.
1973 and 1976 unpublished letters
Excerpt: “Note especially page four of the 1976 letter where a table of Berkshire Hathaway’s equity holdings is provided. Below, I’ve reformatted the table to show each position as a percentage of Berkshire’s equity portfolio at cost:
David Einhorn’s Prepared Remarks on 17th annual Graham & Dodd Breakfast Speech
“Weyerhaeuser’s asset value may exceed more than $100 a share, some 50% above its current stock price of 68.” This conclusion caught my attention. What do you think of the analysis?
Barron’s article on Sears.
Excerpt:”With a market value of nearly $220 billion, Google also is now worth more than Warren Buffett’s holding company, Berkshire Hathaway Inc”
This is an article on my favorite blog. The blog is about the follies of Wall Street rather than value investing.
Analysis of Johnson & Johnson
My Current Top 25 Websites for Stock Research
The Board of Citigroup (C) has scheduled an emergency meeting for this weekend.
When a company worth nearly a quarter trillion dollars loses 1/4 of that worth in half a month, folks need to know what is going on.
– Is Prince finally out?
– Is the dividend safe?
– Are more write-downs coming?
My guess? More write-downs and the end of the reign of Prince. More write downs will be bad depending on the size of them obviously. The end of Princes reign wil be greeted with glee from investors.
Prince did what he was hired to do, get the company out of the legal and regulatory mess it was in. Now Citi needs someone to take them to the next level and Prince just is not the guy for the job.
Shares are up almost 2% after hours on the news…
WOW…….
WTS Watts Industries, Inc 26.86
WTFC Wintrust Financial Co … 34.31
WNC Wabash National Corpo … 8.04
WMG Warner Music Group Corp 9.03
WM Washington Mutual Inc 24.04
WB Wachovia Corp 42.62
TWC Time Warner Cable Inc 27.09
TLB The Talbots, Inc 13.63
RHD R H Donnelley Corp 50.50
PNRA Panera Bread Co 38.53
PMI The PMI Group, Inc 12.97
PKY Parkway Properties, Inc 39.35
MNI McClatchy Newspapers, Inc 16.13
MI Marshall & Ilsley Cor … 31.10
MHP The McGraw-Hill Compa … 46.14
MER Merrill Lynch & Co., Inc 56.30
MDC M.D.C. Holdings, Inc 38.20
MAT Mattel, Inc 20.30
LOW Lowe’s Companies, Inc 25.82
LIZ Liz Claiborne, Inc 26.40
KSS Kohl’s Corporation 52.06
KNX Knight Transportation Inc 15.09
JWN Nordstrom Inc 36.53
JOSB Jos A Bank Clothiers Inc 26.67
JMBAU Jamba Inc 6.95
JEN Jennifer Convs Inc 3.98
JCP Penney (J.C.) Company … 53.16
HD Home Depot, Inc 30.20
FNM Fannie Mae 51.84
COLM Columbia Sportswear Co 46.20
COH Coach Inc 35.02
COA Coachmen Industries, Inc 5.98
CC Circuit City Stores, … 7.37
CBS CBS Corp New 27.37
CBG Cb Richard Ellis Grou … 22.47
CALC California Coastal Cm … 8.50
CAKE The Cheesecake Factor … 21.64
C Citigroup, Inc 36.93
BPOP Popular Inc 9.50
BONT The Bon-Ton Stores Inc 16.06
AIG American Internationa … 57.84
AGO Assured Guaranty Ltd 14.89
AEC Associated Estates Re … 11.12
AEB Aegon N V 21.77
