ValuePlays

Sex, Gadget, Curve, Gas

– How did they study this?

– This is cool

– Folks are raving about this

– 48 straight days of decreases

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Mohawk, which has Bruce Berkowitz, Raune / Cunniff and Wally Weitz as major holders saw operating profits fall 38%.

Mohawk Industries Inc.,(MHK) the Calhoun, Ga., producer of flooring and carpet, swung to a $1.39 billion third-quarter net loss, after impairment write-downs on intangibles and deferred tax assets. The loss equaled $20.37 a share, after the charges of $1.22 billion for intangibles and $253 million for tax assets. Adjusted profit was $76 million, or $1.10 a share. That’s off 38% from the year-earlier period’s net income of $122 million, or $1.78 a share. Sales fell 9% to $1.76 billion from $1.94 billion, Mohawk reported late on Monday. A survey of analysts by FactSet Research produced consensus estimates of $1.11 of profit on $1.77 billion of sales. Accounting rules required the write-offs due to the company’s lower stock price and to weakening industry conditions, Mohawk said. U.S. consumers are “reducing discretionary expenditures,” Chairman and CEO Jeffrey S. Lorberbaum said.

“Residential home sales and remodeling are at low levels and commercial projects are being impacted by tightening credit and softening business conditions. The European economy has become significantly weaker and affected both our flooring and non-flooring products.” The company expects to earn an adjusted 20 cents to 30 cents a share in the fourth quarter. The figures exclude a charge of $25 million to $30 million tied to closing facilities. FactSet’s survey was looking for 95 cents. Results in 2009 should improve from second-half 2008, Mohawk said.

Mohawk follows building materials maker USG (USG) who also slipped to a loss this quarter.

Bottom fishers might find large value here in these names. They will also have to exercise extreme patience as the recovery might be a rocky one.

Disclosure (“none” means no position):none
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This wasn’t even close…

Archer Daniels Midland (ADM) said Tuesday that first-quarter earnings were $1.05 billion, or $1.63 a share, compared to $441 million, or 68 cents a share, in the same period a year ago. Net sales rose 65% to $ 21.16 billion for the quarter ended September 30, mostly due to higher average selling prices resulting primarily from year-over-year increases in underlying commodity costs. Analysts polled by FactSet Research estimated, on average, earnings per share of 67 cents and sales of $15.79 billion.

“This record quarter again demonstrates the ability of our people to utilize our integrated global network and financial strength to capitalize on opportunities and further affirms our business model and strategy,” said Chairman of the Board and Chief Executive Officer Patricia Woertz. “Our strong balance sheet and credit rating provide us with the flexibility to access the most cost-efficient credit markets. Our market acumen coupled with this financial strength enables us to recognize and promptly act upon opportunities when they arise.”

Segment operating profit for the quarter increased 48 % to
$ 1.18 billion from $ 797 million last year.

* Oilseeds Processing operating profit increased on improved global crushing and origination margins, improved margins for value-added products and increased equity earnings of our Asian affiliates.
* Corn Processing operating profit decreased due principally to sharply higher net corn and energy costs partially offset by increased sales volumes and average selling prices for sweeteners and starches, ethanol and lysine.
* Agricultural Services operating profit increased due principally to improved margins resulting from opportunities created by market volatility, global shifts in sources of grain supplies and the delayed US harvest.
* Other operating profit increased due principally to improved cocoa processing volumes and margins and improved wheat processing margins.

For some inexplicable reason, investors still view ADM as an ethanol company like Pacific Ethanol (PEIX) and recent bankruptcy victim VeraSun (VSE). It isn’t. ADM is a food commodity company. Like Exxon (XOM) is a play on the commodity oil, ADM is a play on food and food items.

Yes, ethanol is a significant contributor to the overall picture but it is far from being the whole picture. ADM produces bio-diesel, cocoa, cooking oil, bio-plastics and has a massive commodity trading arm. The volatility is agricultural prices help ADM in this area.

As the world’s population grows and as it develops from a pure agrarian society to one that is more protien based, ADM is at the crux of that transition.

It will profit for years from it.

Disclosure (“none” means no position):Long ADM, none
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Long time readers would have seen this coming as we have covered LeapFrog (LF) for over a year now.

For the third quarter 2008, the company reported net sales of $194.6 million and net income of $24.0 million, or $0.38 per share. This compares to net sales of $144.0 million and a net loss of $10.3 million, or $0.16 per share, for the third quarter 2007. In addition to the 35% increase in net sales, the improved financial results included higher gross margin and lower operating expenses year-over-year.

LeapFrog President and Chief Executive Officer Jeffrey G. Katz stated, “We entered 2008 planning for our largest and most important launch year ever, and our third quarter results were on track with our expectations. Third quarter sales were driven by the continued roll-out of our new products, notably our Leapster2 and Didj educational gaming systems, and the Tag reading system in our international markets. These launches went well and our products have already won numerous awards and strong holiday toy accolades in the media, which we think bodes well for when holiday consumers finally come out of their bunkers. And we think they will come out. But, we doubt we can completely compensate for the recent softness in retail trends and so we are going to moderate our expectation for full year sales growth.”

Leapfrog updated full year guidance and bow sees revenue up 10%-15%, which implies $486.5 million to $508.6 million, below the Street at $524.8 million.

The full-year guidance implies Q4 revenue of $163.3 million to $187.4 million, considerably below Q3, and short of the Street at $219.8 million.

This is a very conservative estimates based in the current retail condition. I am not sure I agree with it. I think Leapfrog sits in an enviable position. Its products are sought after but not budget busters. Rather than skip a Leapfrog purchase for the holidays, I am thinking customers will still buy the Leapfrog and ensure the money for it by omitting some of the other more miscellaneous purchases.

Katz has always been one to under promise and over delivers, there is no reason to think he is not doing the same thing now.

Disclosure (“none” means no position):Long LF
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Some thoughts before we vote tomorrow….I can’t wait until this thing is over..

A Note. These are observations. I am not saying that people who may or may not think this way are “right or wrong”, I am saying that this is a thought process based on my observations. You can vote for a candidate for whatever reason you want. I don’t care. It is your vote, cast it as you so choose. The media will attempt to explain it all to us and I am simply placing my two cents in the ring since I have not heard it said yet..Take them for what you will..

1- Race:
An Obama loss will have nothing to do with his race. If it really did, he would not even be sitting where he is right now. A racist society, or one with a “race issue” would not have allowed an Obama candidacy to even develop much less get to its present state. He does not need to win to prove the US is “not racist”. His existence as a serious candidate is proof of that. Now, the argument can be made that certain folks will not vote for him because of race. That is true. It is also true that millions are voting for him simply because of it. The existence of racists in a society does not make the society itself racist. The implication that it does means that any society or class of people is defined by its lowest element. Since we reject that in classes of people, we cannot extrapolate that to a society as it is the sum of those very people. It is the action of the society as a whole that defines it. The fact that society is on the precipice of possibly electing a leader from a minority class of it mandates that a large portion of the majority must vote for that candidate. That eliminates the argument the society is inherently racist. Were is so, the minority candidate would not stand even a remote chance.

If we have to have the race commentary (we do since it will be all that it is talked about after), let’s break it down to simple math. We know well in excess of 90% of African American’s (is that still the proper vernacular?) are voting for Obama based on votes cast in the primaries. This crushes the percentage of any other election for any candidate the group has voted for. The only conclusion is that they are voting for him simply due to his race. Isn’t that the very thing Martin Luther King tried to avoid? Wasn’t the quote “I hope one day men are judged by the content of their character, not the color of their skin”? Is voting “for” anyone because of the color of their skin any less racist that voting “against” one due to it? Or is not mentioning it simply the acceptable rationalization?

Oprah Winfrey can tell us all day long that Obama is right for America and she believes in him. But, if we are being honest, really honest, we all know why Oprah backs him. Oprah has been silent on politics until now. No candidate for public office before has caused her to speak out. No subject, no legislation and no gender has caused her public backing of a candidate. Yet she backs Obama. Fine, but lets just come out and give us the real reason. His race. If that is the reason she wants him there, fine. She can vote for whomever for whatever reason she wants, let just not try and pretend he is that unique. He has no special policy or unheard of idea that make him unlike any other politician that has run during her public life. He does have one thing.

I find very little difference between folks who refuse to vote for person “a” because of their race or gender and those who will only vote for “a” because of their race or gender and aren’t honest enough to admit it. Either way you dragging MLK’s “Dream” through the mud.

This is the “Race Issue” of this election, not what the media would try and have us believe..

2- Electoral College:
It really does not matter if 99% of those living in NY or California vote for Obama, he will still only get the 86 electoral votes those states offer. It really does not matter if Obama wins the popular vote, you only need 1 more vote than the other guy to get the electoral votes. In this way the college works exactly the way the framers meant it to. It moderates the influence one group from one area has over the whole. For more on it and its origins, read here

3- Taxes:
This summer Obama said he would raise capital gains taxes. Then he said he wouldn’t. Then he said 95% of people get a tax break. Then he said people under $250k would. Then Joe Biden said people under $150K would. Now his adviser Bill Richardson said people under $120k will. Call it the “incredible shrinking tax break”. People in the current environment has no problem with “rich folks” getting a tax increase. The problem is that the definition of rich has been plummeting recently and now encompasses those who just aren’t. People see it for what it is and will think twice about voting for a candidate with a fluctuating definition of who deserves to pay more. These voters will have a last minute change of heart and no polls will reflect it.

4- MSM.
We American’s know a snow-job when we see it. Every poll taking at every levels says the same thing. The media has treated Obama with kid gloves. This isn’t a GOP vs Dem thing, this goes back to Dems vs Dems saying it when the issue was one of their own, Hillary. It is just acceptable now that it is the “other guy” we are talking about. What happens is people, feeling that they are not getting the straight story from the MSM go looking for it in other places. They begin to discount and distrust what is said from the MSM. The easiest place to find alternative information is the internet. Here is where that hurts Obama. We all know about political information on the internet and it questionable veracity. When people do their own research and find negative information on Obama, it is viewed as “this is what the media is hiding from us” and looked at more truthfully, providing a negative effect for Obama. When the same information is seen about McCain, the effect is negligible as we have already heard it from the MSM and this cause it to be discounted. Whether what is being said is true or not is immaterial, it is the perception of the information that leads to it acceptance or ejection.

Again, right or wrong, is irrelevant, is what it is. The media, in it zeal to effect the outcome, hurts its own cause. If anyone thinks the average voter has forgotten CBS’s “National Guard forged document” story in 2004 that cost Dan Rather his career and that is not the lens most people put any media report through, is living in denial.

5- The “Undecided”:
They aren’t. They just want pollsters to leave them alone. They are the un-ideological masses in the middle. They tend to lean center-right. They are social liberal and economic conservatives. They are the group that most identifies with Palin and her family. They are also the group most sensitive to the attacks on her children, her clothing and her “inexperience”. They are the group who can’t understand how a Governor has less experience than a 2 year Senator. They are also the group not thrilled with politicians and like someone who reminds them of themselves. The hockey mom, mom of a “challenged” kid, mom of a unwed pregnant daughter, mom of five, dedicated wife….they like that. Where the media sees “black eyes” , they see themselves, their neighbor, their sister. When the MSM attacks her, they attack them. This causes the gut reaction of “circling the wagons” and an innate sense protection. This will sway their vote.

6- Divided government.
The electorate has done a decent job over the years not giving one group a blanket mandate. They will do so again this year. This means either of two things. The congressional races do not go the way the pundits say they will, OR Obama loses. We know congressional democrats will raise taxes. We know we don’t want that. We also know if we vote in Ohio we cannot affect a vote in Wisconsin for Congress. How can we assure government is divided? Vote for McCain.

7- Polls
People are now playing games with pollsters. They are meaningless. George Bush trailed both Gore and Kerry late in October only to win. Bush trailed in “exit polls” in several states only to win them also. Both parties have found a way to game pollsters in order to keep races looking tight to keep voters coming out for their candidate. For this reason, polls are not only worthless, they may actually be a counter indication. If a organization thinks they may be losing or have a razor thin margin, they will make the exit polls reflect a negative outcome to keep their folks coming out and the others to stay home. We know it happened in Florida in 2000 and Ohio in 2004, no reason to think anything has changed.

My prediction?

Obama beats McCain in the popular vote and losses the election…..

I would also be shocked if there was not a legal challenge somewhere to whatever outcome there is..

It will give the media years of angst about the electoral college and enable them to try an re-write the constitution. The Constitution was purposely set up to eliminate as best it could government by a few, a whim, or emotion. It does a very good job or that. The electoral college also does a great job of not minimizing smaller states and their minority of the population. It matters and is important, it forces all views and needs to be considered.

Then again, if Obama wins in a landslide……never mind…

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As much as I do tend to disagree with Rogers on his doomsday scenario, he is right about the bailout, I still think hew is off on the degree.

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Can’t we just call it quits n this? It been over a year now..

The Blackstone (BX) IPO in June of 2007 was the peak of the Private Equity market.

Dealbook has a nice take on it. This is not the time for an IPO. Doing so now, looks just a little bit desperate. It also must make potential investors think twice about KKR. Why has it taken so long?

Either do it or don’t, but enough is enough..

Disclosure (“none” means no position):None
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I really wish I had discovered Grant years ago…From a FT interview.

Part 1

Part 2

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The “Black Swan” author made a killing in October…

The WSJ Reports

To execute its strategy, Universa buys far-out-of-the-money “put” options on stocks and stock indexes. These are bets that the market will see a sharp, sudden downturn. They become extremely valuable in a market decline of 20% or more in a one-month period.

When times are good, such options are cheap and Universa gobbles them up, taking small losses along the way. When the market makes a quick, steep turn south, as it has recently, Universa’s positions gain value as investors scramble to protect themselves in the downturn by buying puts. The strategy, which keeps more than 90% of assets in cash or cash equivalents such as Treasury bonds, either breaks even or loses small amounts in most months while waiting for periodic, infrequent spikes in volatility.

Here’s an example of a trade the fund made recently. In late September, when the Standard & Poor’s 500-stock index (.INX) was trading around 1200, Universa purchased put options that would pay off if the index fell to 850 by late October. Since such a plunge was considered highly unlikely, such options cost only 90 cents. On Oct. 10, those options cost $60 as the S&P 500 tumbled sharply. Universa sold most of its position in the high-$50 range.

Universa also purchased a number of puts on financial stocks, such as Goldman Sachs Group Inc. In late July, it paid $1.29 apiece for options on American International Group Inc., the insurance giant that by September was on the brink of bankruptcy. The puts were priced to pay off if AIG dipped below $25 a share by September. Universa eventually sold them for about $21 apiece.

Recently Taleb tried to make a point to an economist. You’ll notice his frustration?

The Book:


Disclosure (“none” means no position):
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Best Fed Chairman we have had to date….bears listening to.

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Felix, should you moronically (on their part) “be allowed to seek other opportunities” from Portfolio, feel free to contact me. I can’t offer a salary, benefits or nearly as much exposure…BUT, I can offer you the title of your choice and my gratitude, you can’t put a price on that??!!>>

On the Virtue of Hiring Bloggers:
Thanks very much to Tyler and Brad for the kind words; I hope to be here for a while yet. But Tyler also makes an interesting point about blogonomics:

Media, like new library books, are being hurt by the downturn and the slowing of advertising dollars. I fear that the non-independent blogosphere may be in for a bit of a financial bloodbath. So often the bloggers were an “investment in long-term name and image” rather than a profit center.

There’s no doubt that ad dollars are going to be harder to come by in the coming quarters. Websites are getting better and more popular, but that also means inventory is rising faster than ad budgets. And with financial-services advertising providing the backbone of many websites, the consolidation and budget cuts in that industry will hit us content providers very hard.

It’s also true that if you put a blogger on payroll, it’s not going to be easy for a startup site to cover that payroll from selling ads against the blogger’s pageviews alone — especially now that bloggers make just as much money as regular journalists, and a good ad sales person costs much more still.

But if you are going to invest in your own editorial content, bloggers are often a very smart way to go. They’re lean, since they need very little editing and often work from home. They build a reliable readership: in a world where loyal readers are defined as those who visit five times a month or more, blogs often get readers coming back more than once a day, especially if and when the comments streams get lively. And, yes, they’re cheap, compared to any other original content. On a dollars-per-word or even on a dollars-per-pageview basis, it’s hard for other forms of editorial content to compete with bloggers.

If you’re a monthly magazine like, say, the Atlantic, and you want people to visit your website, you need something to draw them in. You can buy traffic, of course — but unless those bought visitors come back, that’s going to get very expensive very quickly. It’s generally preferable to build something great instead, so that people want to visit regularly. And one relatively easy way of doing that is to hire some good bloggers. (When I say “relatively easy”, I mean that it’s easier than most of the alternatives, not that it’s easy.)

On the other hand, there’s no law which says that every major magazine has to have a hugely popular website if it is to be a success. Yes, you have to have some kind of web presence. But elaborate websites don’t come cheap, and if you’re in a cutting-back mode and websites aren’t your core competency, then those websites — bloggers and all — can quite find themselves on the chopping block much more quickly than they ever anticipated.

ORIGINAL POST

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From the site:
“At Wayzata Investment Partners, our experience in the alternative investment market is reflected in the structure of our investment vehicles: a family of long-term funds. A private equity and hedge fund strategy serve as the cornerstones of our investment activities.

Focusing on opportunities in undervalued debt, equity and assets, our team has brought success to institutional investors for more than 15 years. Today total assets under management are over $5 billion.”

Wayzata now owns 17 million shares or 13.5% of Owens corning (OC) up from 7 million in the June SEC Filing. It is the fund’s largest holding.

Why OC? Here are some thoughts

Disclosure (“none” means no position):Long OC
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