Crude oil (USO) has had a large run the past 5 months. Having sold out of all my USO positions, I am waiting for a price drop to buy back in. Gartman is a top notch trader and a guy worth listening to when it comes to commodities.
I also agree with his opinion re: the fed and unemployment.
Disclosure (“none” means no position):None
Goldman Sachs (GS) last week released the following note on Borders Group (BGP). Not sure many of you have notice but Borders has jumped from $2.50 to $4.50 in less than a week.
Price jump aside, what is even more promising is that their reasoning backs what we have been talking about here for the better part of 6-8 months now. Borders is heading in the right direction in a simply brutal environment….
In a group that has moved, BGP stands out as an underappreciated turnaround situation with significant potential upside off a low base. We are raising our 12-month price target sharply, to $4.50 from $2.00, reflecting BGP’s solid 1Q performance relative to expectations, strong short-term cash flow dynamics, and the more generous multiples being rewarded to levered turnaround stories in the early stages of economic recovery. The firm’s new management team is driving financial discipline, with significant cost controls, and implementing merchandising improvements, i.e. driving the children’s business, gradually exiting music and video, and reducing cycle times with vendors. BGP faces structural and financial risks, but there is a price for every security, and its riskadjusted upside has become increasingly appealing as the firm emerges from financial distress, and EBITDA looks poised to stabilize off 2008 troughs.
Implications
We are raising our 2010/2011 EPS estimates to ($0.16)/($0.08) from ($0.60)/($0.40), respectively, reflecting the 1Q beat, as the company delivered a loss of ($0.31) per share, vs. our ($0.49) and last year’s ($0.53), reflecting both gross margin and expense upside. We are flowing additional margin improvement through to the year, and expense control to 2Q & 3Q, noting that the firm does cycle substantial expense cuts at 4Q. We are also introducing a 2011 estimate of ($0.07).Valuation
Our new $4.50 target, up from $2.00, is derived using risk/reward EV/EBITDA analysis. Note that the stock appears quite inexpensive on FCF yield, but that cash flows are not sustainable at these levels given the depressed state of cap-ex relative to D&A.
So what happens to Borders? My friend on twitter @Dasan thinks the paper book biz is headed the way of the CD via amazon (AMZN). I disgaree. While an increasing number of folks will get digital books, children’s books will never be digitized and books, unlike a CD are a hands-on experience for most folks.
That being said, Borders and Barnes & Noble (BKS) need to merge. While they cannot compete separately with Amazon’s Kindle, Border’s deal with Sony’s Reader can enable them to compete combined. Further, rather than competing with each other on price, the combined entity would see margin improvement in the physical stores & give them more bargaining strength with suppliers. Anit-trust issues are minor as Wal-Mart is a huge book retailer and the combined entity would still be dwarfed by Amazon. There is store overlap but working off that excess is less of a concern that the benefit they would see from a merger.
Let’s not forget that it was just last year that BKS looked at BGP but declined to make an offer. Let’s also not forget this was last year at a time when credit markets were collapsing and BGP’s turnaround was in doubt by many. Now that both of those issues are far less urgent, do not be surprised to see BKS take another look at its brick and mortar rival.
Pershing Square ans Bill Ackman have become a 40% shareholder.
Patience is required on this one. This is a hold because selling now, to try and buy back in later could cost you. I can easily see a scenario in which we wake up one day and either BKS or another private equity firm make an offer for the company.
Disclosure (“none” means no position):Long BGP
For any of those not sure Bill Ackman would be able to influence General Growth Properties (GGWPQ) to put forward the most shareholder friendly plan of reorganzation possible, comes this:
GENERAL GROWTH PROPERTIES, INC. today announced the appointment of William A. Ackman to its Board of Directors. Mr. Ackman brings more than 16 years of investment fund manager and advisor experience to the Company.
Mr. Ackman is the founder and managing member of the general partner of Pershing Square Capital Management, L.P., an investment advisor founded in 2003. He is a member of the Board of Dean’s Advisors of Harvard Business School and a Trustee of the Pershing Square Foundation. Pershing Square Capital Management and its affiliates own slightly less than 7.5% of the Company’s outstanding common stock.
“Bill brings an important perspective and creative thinking to our Board at this critical time in the Company’s development of a sustainable long-term capital structure and we look forward to his future contributions to the Company,” said Adam Metz, chief executive officer of General Growth Properties.
GGP Information
For those who do not know, Ackman controls approx. 25% of the outstanding shares of General Growth either directly or through total return swaps. Having him on the Board is fantastic news for those holding shares. It assures mutual alignment.
Disclosure (“none” means no position):Long GGWPQ
After a brief lull from the serial insurance acquisitions of last year, Wells Fargo (WFC) is back at it.
Chicago, June 4, 2009 – Wells Fargo Insurance Services, Inc. – part of Wells Fargo & Company (NYSE: WFC) – announced today that they have signed a definitive agreement to acquire Grady & Associates, a single office, retail insurance broker in Las Vegas, Nevada. The acquisition closed June 1, 2009, and the terms of the transaction were not disclosed.
Grady & Associates has served customers across in Nevada since 1999. Founded by John Grady, the agency focuses exclusively on health and benefits insurance. The company serves a broad customer base, including customers in the hospitality, construction, hospitals, auto sales and home development industry.
“We’ll continue to service our customers in the same ways we have in the past,” said John Grady, Managing Director of Employee Benefits. “Joining Wells Fargo Insurance Services is a great benefit for our customers. We will expand our health and benefit capabilities to help customers protect their business and employees, and also be able to help them to grow their assets through our Wells Fargo connection.”
“Grady & Associates boasts a highly respected team of professionals,” said Nick Rossi, Regional Managing Director, Mountain West Region. “The team will strengthen and further support Wells Fargo Insurance Services’ existing health and benefits insurance professionals in serving our customers.”
“Grady & Associates is an outstanding retail brokerage firm and we’re excited to welcome the company to Wells Fargo,” said H. David Wood, Executive Vice President, insurance brokerage operations, West. “They will strengthen our growing presence in Nevada and further support Wells Fargo Insurance Services and the Wells Fargo commitment to help our customers succeed financially”.
About Wells Fargo Insurance Services
Wells Fargo & Company is a diversified financial services company with $1.3 trillion in assets, providing banking, insurance, investments, mortgage and consumer finance through more than 10,400 stores, over 12,000 ATMs and the internet (wellsfargo.com) across North America and internationally.Wells Fargo Insurance Services, Inc., along with Wachovia Insurance Services, is the fifth largest insurance brokerage in the world and the largest bank-owned insurance brokerage in the U. S.
Wells is quietly becoming not only one of the largest banks in the US but one of the largest insurance brokers. With Warren Buffett being the largest shareholder in Wells and his Berkshire Hathaway (BRK.A) essentially being an insurance company, this does fit.
I currently hold shares and while I do not trust the veracity of banks earnings currently, I do know this:
1- We need banks
2- Wells Fargo & JP Morgan (JPM) may just be the only two that continue from here on out as is. Citi (C) and Bank of America (BAC) are just very weak.
3- Warren Buffett is a backstop for Wells shareholders that no other bank shareholders have and that means something.
4- Insurance, when run right is VERY profitable and diversifies Wells away from pure banking in a very positive way. This focus by Wells is a very good idea.
What you essentially have is a shrinking base of banks that will handle what banking there is out there. That means a far greater piece of the pie for those left. With that greater piece of the pie will come the profits associated with it.
Yes, Congress has plans for increased regulation but one thing we know, Bankers are smarter that those who write the laws designed to thwart them. They will still find a way to make money after all is said and done.
Would I be running out and buying banks shares now? Personally I am not as I see far other more compelling opportunities elsewhere. That does not mean I am a seller though. I am going to hold and see how this plays out.
Disclosure (“none” means no position):Long WFC, none
Cable, Palm, Digital, Economy
– This deserves a closer look, there could be some value here
– Anyone have any first hand accounts of the new “Pre”? Not looking for “tech reviews”. Looking for one of us common folk who have used it.
– OK, I’m sorry but if you were not aware by now that TV was going digital, perhaps you really do not need one?
– I agree with this. Just because things are “not as bad”, it does not automatically equate to they are “getting better”. It is my believe we are in a soft spot that has huge risk for another leg down (in housing this is all but certain). Just be careful out there.
Disclosure (“none” means no position):
Now the “Cap and Trade” looks as thought is might be a reality. Let’s take a look at a possible cause might be. The Sun? You mean it isn’t my SUV?
Disclosure (“none” means no position):
“Over the past two years, the U.S. government has collected almost a billion and a half dollars in fines in foreign bribery cases,” says Mark Mendelsohn, the Department of Justice prosecutor in charge of more than 100 ongoing cases, one of which culminated in a record seven-year prison term for the former CEO of a subsidiary of the Halliburton Corp., and another which ended in a record $800 million fine against the German giant Siemens. “There’s a whole world of conduct that rarely sees the light of day.”
In Black Money, FRONTLINE correspondent Lowell Bergman investigates this shadowy side of international business, shedding light on multinational companies that have routinely made secret payments — often referred to as “black money” — to win billions in business.
Disclosure (“none” means no position):
The journey begins as FRONTLINE correspondent Forrest Sawyer takes viewers to a secret location: the Treasury’s debt auction room, where the U.S. government sells securities backed by the “full faith and credit of the United States.” On this day, the government is auctioning $67 billion of Treasury securities. The money borrowed will be used to fund services and programs that the government cannot pay for through tax revenues alone.
Observers warn that the United States’ reliance on borrowing to fund essential programs is a dangerous gamble. For the first time, investors are beginning to question the ability of federal government to meet its growing financial obligations, and fading confidence can have dire consequences. “You might have a situation where there is one day when the government says we need to sell several billion dollars of bonds, and nobody shows,” Economist reporter Greg Ip tells FRONTLINE. “No money to pay the Social Security checks, no money to give to the states for their Medicaid programs. Cut, cut, cut, cut, cut.”
Disclosure (“none” means no position):
As regular readers know, weekends are for whatever. Whether it be humor, video, politics, whatever…
Here is today’s:
Immediately after Dr. Tiller was gunned down President Obama said:
I am shocked and outraged by the murder of Dr. George Tiller as he attended church services this morning. However profound our differences as Americans over difficult issues such as abortion, they cannot be resolved by heinous acts of violence.
3.5 days after the killing of an Army recruiter and the wounding of another President Obama said:
“I am deeply saddened by this senseless act of violence against two brave young soldiers who were doing their part to strengthen our armed forces and keep our country safe. I would like to wish Quinton Ezeagwula a speedy recovery, and to offer my condolences and prayers to William Long’s family as they mourn the loss of their son.”
For the record, I think both murders were heinous and I am shocked and outraged by both acts, I just wonder why our President isn’t…..
Please use the comments section for your opinion…
Disclosure (“none” means no position):
The Seventh Annual John M. Templeton, Jr. Lecture on Economic Liberties and the Constitution considers the social, cultural, and moral causes of the current financial crisis in the United States.
In doing so, the Lecture revisits basic lending principles and examines our nation’s skyrocketing debt, our lack of savings, and basic understanding of economic principles within the household, as well as corporate America, and the effects of our political and legislative effort to reduce discriminatory credit practices.
Disclosure (“none” means no position):
Proof insanity knows no limits. GM (GMGMQ) shares are rising despite everyone, including GM saying they are worthless.
Late Monday, U.S. bankruptcy court judge Robert Gerber gave interim approval for the Detroit-based automaker’s use of a total of $33.3 billion in bankruptcy financing, with $15 billion available for use over the next three weeks. He will rule on final approval of the financing on June 25. Gerber also approved GM’s sale procedures, setting a sale approval hearing for June 30.
“Our agreement with the U.S. Treasury and the governments of Canada and Ontario will create a leaner, quicker more customer and completely product-focused company, one that’s more cost competitive and has a competitive balance sheet,” CEO Fritz Henderson said at a news conference in New York. “This new GM will be built from the strongest parts of our business, including our best brands and products.”
The Detroit automaker said warranty coverage, service and customer support will continue uninterrupted, plants will continue to make cars and trucks, and essential suppliers and GM’s 235,000 employees worldwide will continue to be paid. GMAC Financial Services said in a statement that it will continues to provide automotive financing to GM and Chrysler dealers and customers, and the federal Pension Benefit Guaranty Corp. said workers’ pension plans remain safe.GM will follow a similar course taken by smaller rival Chrysler LLC, which filed for Chapter 11 protection April 30. A judge on Sunday gave Chrysler approval to sell most of its assets to Italy’s Fiat, moving the U.S. automaker closer to a quick exit from court protection, possibly this week.
The plan is for the federal government to take a 60 percent ownership stake in the new GM. The Canadian government would take 12.5 percent, with the United Auto Workers getting a 17.5 percent share and unsecured bondholders receiving 10 percent. Existing GM shareholders are expected to be wiped out.
In case you are still not convinced, GM on its own website says:
Will I receive payments on any shares or cancelled shares?
We think it is unlikely that you will receive payment. We cannot predict what the ultimate value of GM’s common stock may be or whether stockholders should expect any financial recovery in the Chapter 11 proceedings. When a company files for Chapter 11, its primary obligation shifts to maximizing the value of the company for its creditors. Stockholders of a company in Chapter 11 generally recover value only if the claims of the secured and unsecured creditors are fully satisfied. Thus, in most Chapter 11 cases, stockholders receive little or no recovery of value from their investment.
Yet despite all that, GM shares have rallied from $.27 cents each the moment of the filing to $.71 cents a share on Thursday. For those who do not want to do the math, that is 162%. Yup….a 162% gain for shares the company just told you will not be worth anything soon.
Why not? The company said it has $172.81 billion in debt and $82.29 billion in assets when it filed for Chapter 11 protection. In a Chapter 11, the ONLY way shareholders collect is if there is anything left AFTER debtholders are satisfied. With federal government getting 60% ownership, the Canadian government 12.5%, the United Auto Workers 17.5% share and unsecured bondholders receiving 10%, there is NOTHING left for current shareholders…nothing…
If you own them and think they may have value someday, they will not. Take what you can get and move on…
Disclosure (“none” means no position):None
If we subtract those folks who own their home free and clear, US homeowners essentially own what their home is worth or more.
Bad news, we can look for these number to worsen over the next year.
Disclosure (“none” means no position):
GM, Fed, Mozillo, Jobs
– Romney could fix it
– Interesting comments on regulation
– Will he go quietly?
– Coming back to Apple?
Disclosure (“none” means no position):
We knew folks were buying General Growth Properties (GGWPQ) in bulk he last couple weeks, now the news as to who is coming out. Hat Tip reader Mark for the information
Ackman’s Ira Sohn Presentation on General Growth
Disclosure (“none” means no position):Long GGWPQ
Let start out with the premise that we as American’s love convenience and anything that saves us time. We love it for our coffee, our lunch and our prescriptions. A liquor store near me actually has a drive thru window. Anything that saves us from getting out of the car we like and will use anytime we can.
So, why not drive thru retail? If I can go online and order soap, shampoo, water, soda and other household items and then go to the store and have them bring them out to my car, can anyone tell me why I would rather wander around the store and get them myself? I mean think about it. I have 4 kids, all under 6. As relaxing and fun as you might think taking all 4 of them to the store to buy household items is, I am finding it really hard to wonder why I would rather not have someone just bring them out to my car for me when I pull up. To be even more honest, I’m finding it hard to think of a reason why I would not do that even if I did not have the kids with me.
A recent study found that convenience is becoming almost as important as price for consumers today.
Enter Sears Holdings (SHLD) concept Mygofer:
Brenda Storch, a spokeswoman for MyGofer and Sears Holding said:
“Our goal is to make life easier for customers and to offer options that were not available before, all designed to save customers time and money. The Joliet store will feature a large online assortment and will cater to shoppers seeking both convenience and value, from the busy parent with three kids in the back seat to the person who needs a last minute gift, the DIY’er or the host that needs to throw a party with very little notice.”
Another way MyGofer provides convenience, she pointed out, is by carrying a broader assortment of products and brands than a traditional retailer including appliances, bed and bath, baby essentials, daily consumables including food, electronics, sporting goods and workwear. “Our customers can browse our expanded assortment which includes thousands of products and trusted brands to meet a variety of budget ranges,” she added. “Over time we will be able to tailor our assortments based on the needs of our customers in a given market.”
Order and pick up are designed to be convenient, too. Customers put together an order at www.mygofer.com, by phone, or at terminals in the store’s showroom lobby, then select when they’d like to receive their merchandise. They can pick up their MyGofer order immediately – or at least within a few minutes – at some other point in the day or days later. Joliet visitors retrieve their products through a drive-thru, via in-store pick-up or by shipment. “MyGofer offers its customers more flexibility than ever before, more choices, more shopping options, and we will save them valuable time on top of that,” Storch said.
Think about it. Family cookout coming this weekend and the wife give you a list Friday night of everything she wants from plastic plates, napkins, soda chips etc. Would you just go online that night, place the order and then go have it brought out to your car in the morning? Or would you rather trudge around the store on a Saturday morning? To me it is a no-brainer.
The service also lets you creates lists so that you can simply 1-click a list rather than searching for all the items each time.
The stores that have it available are listed on this link
We American’s love saving time. If Sears does this right, meaning they have plenty of staff available so it is truly convenient and time saving, this could catch on very easily. But, because it is a new retail concept, execution from day one has to be seamless, otherwise the negative word of mouth will cause the idea to flame out.
Disclosure (“none” means no position):Long SHLD