Realty Income is a dividend achiever as well as a component of the S&P 1500 index. It has been increasing its dividends for the past 14 consecutive years. From 1998 up until June 30 2008 this dividend growth stock has delivered an annual average total return of 14.90 % to its shareholders.
An important aspect of dividend growth investments is the ability for these types of stocks to provide a growing income stream that keeps pace with inflation. Additionally, dividend paying stocks tend to be less volatile in down markets. This can be an added benefit if one is relying on their investment portfolio for retirement income.
These are the days that value and dividend investors long for. There have been times in the past where I struggled to find stocks worthy of purchasing. Now, the challenge is to pick the best available stocks that will maximize my chances of future success.
Stanley Works is a worldwide producer of tools, hardware and specialty hardware for home improvement, consumer, industrial and professional use. Linked here is a detailed stock analysis of SWK and commentary.
M&T Bank Corporation operates as the holding company for M&T Bank and M&T Bank, National Association, which provides commercial and retail banking services. Linked here is a detailed stock analysis of MTB and commentary.
One problem with Value Investing is that sometimes in trying to determine when to buy a Stock, an investor will try to wait too long, and miss an opportunity. On July 3, 2008, I posted on The DIV-Net on a company called Barrett Business Services (BBSI).
At the beginning of the 21st century most young people are told that social security won’t be there for them when they retire from the work force. Thus, in order to be able to completely retire from the workforce, a person has to invest as early as possible in order to take full advantage of the power of compounding.
MBIA (MBI) is considering suing Pershing Square and Bill Ackman. I think the last thing MBIA want to so is get into a “whose statements were more truthful” pissing contest with Ackman.
Bloomberg Reports “MBIA Inc. said it may sue Bill Ackman, striking back against the hedge fund manager who waged a six-year campaign against the bond insurer and said this year that the company may be insolvent.
MBIA is “assessing all our options, including litigation” against Ackman’s Pershing Square Capital Management LP, Chief Executive Officer Jay Brown said on a conference call today after the Armonk, New York-based company reported a $1.7 billion profit. Ackman, in an e-mail, said he stands by his comments.
Brown’s decision to consider legal action escalates a feud that began when Ackman wrote a 2002 report criticizing MBIA’s use of credit-default swaps to guarantee debt. Ackman has appeared before Congress and written letters to the U.S. Securities and Exchange Commission, at the same time betting against the stock.”
Ackman in the article said “Ackman, 42, said in his e-mail that “we continue to believe that MBIA is insolvent” under one of two tests in state insurance law. The test relies on whether an insurer can afford to reinsure its liabilities in the current market. MBIA appears solvent under the other test, Ackman wrote, based on statutory filings which rely on management predictions of future losses, though he called those estimates “understated.”
Here is the thing. It looks as though MBIA and Ambac (ABK) have avoided BK for the near future. It was done in no small part from help from NY Insurance Commissioner Eric Dinallo’s constant assurances on TV the insurers were in fact solvent and his work behind the scenes. Does anyone really think that if Ackman is sued he will not call for all conversations and emails between the bond insurers and the Commissioners office to be made public?
Do we really think Dinallo wants that to happen?
Ackman has been right on MBIA up until this point. It appears MBIA may have escaped the worse, perhaps because folks grew tired of the story and moved on the bigger fish (Fannie (FNM) and Freddie(FRE)).
One would think that the last things either insurer want is a court of law going over their books line by line and forcing them to disclose everything to the world. They can’t want that and I get the feeling Ackman would welcome the chance.
Sun Tzu in the “Art of War” said that many times it is better to “retreat in order to survive to do battle another day” (paraphrase).
In a just released SEC filing Fire Tree Value has announced it has 5.5% of Ambac’s (ABK) stock . Full Filing
Ownership. (a) Fir Tree Value, Fir Tree Capital Opportunity, and Fir Tree Mortgage Opportunity are the beneficial owners of 11,122,050 shares of Common Stock (6,885,250 of which are shares of Common Stock held by Fir Tree Value and 4,236,800 of which are shares of Common Stock purchasable upon the exercise of American-style call options held by Fir Tree Value), 2,806,950 shares of Common Stock (1,591,750 of which are shares of Common Stock held by Fir Tree Capital Opportunity and 1,215,200 of which are shares of Common Stock purchasable upon the exercise of American-style call options held by Fir Tree Capital Opportunity), and 1,351,100 shares of Common Stock (343,000 of which are shares of Common Stock held by Fir Tree Mortgage Opportunity and 1,008,100 of which are shares of Common Stock purchasable upon the exercise of American-style call options held by Fir Tree Mortgage Opportunity), respectively. Fir Tree may be deemed to beneficially own the shares of Common Stock held by Fir Tree Value, Fir Tree Capital Opportunity, and Fir Tree Mortgage Opportunity as a result of being the investment manager of Fir Tree Value, Fir Tree Capital Opportunity, and Fir Tree Mortgage Opportunity.
7
(b) Fir Tree Value, Fir Tree Capital Opportunity, and Fir Tree Mortgage Opportunity are the beneficial owners of 3.9%, 1.0%, and 0.5%, respectively, of the outstanding shares of Common Stock. Collectively, the Reporting Persons beneficially own 15,280,100 shares of Common Stock which represent 5.3% of the shares of Common Stock outstanding, which such percentage is determined by dividing (i) (a) the 8,820,000 shares of Common Stock beneficially owned by Fir Tree Value, Fir Tree Capital Opportunity, and Fir Tree Mortgage Opportunity plus (b) the 6,460,100 shares of Common Stock purchasable upon the exercise of American-style options held by Fir Tree Value, Fir Tree Capital Opportunity, and Fir Tree Mortgage Opportunity by (ii) 286,833,756, the number of shares of Common Stock issued and outstanding as of May 5, 2008, as reported in the Issuer’s 10-Q filed on May 12, 2008.
(c) Fir Tree Value may direct the vote and disposition of 11,122,050 shares of Common Stock. Fir Tree Capital Opportunity may direct the vote and disposition of 2,806,950 shares of Common Stock. Fir Tree Mortgage Opportunity may direct the vote and disposition of 1,351,100 shares of Common Stock. Fir Tree has been granted investment discretion over the Common Stock held by Fir Tree Value, Fir Tree Capital Opportunity, and Fir Tree Mortgage Opportunity.
It looks like the free lunch RI AG Patrick Lynch promised the residents of Rhode Island may end up being very expensive indeed both for the State and its legal team of Motely Rice.
In the first step in recouping 9 years of legal fees from the state for the litigation that, according the the State Supreme Court “should have been dismissed at the ouset” Sherwin Williams (SHW) has asked a judge to force the state to pay more than $242,000 for the cost of a special master who evaluated cleanup plans, transcript fees and conference call charges. According to lead paint watcher Jane Genova: “That first step by the three defendants is a motion to the RI Supreme Court for reimbursement of what it coughed up – $242,271.21 – in complying with the court order to work with the Co-Examiners and their assistants on abatement. That order was made even though the verdict was still being appealed. During the RI Supreme Court oral arguments, the Justice asked if that abatement process was still under way. The pathetic answer: Yes.
On August 15th, at 11 AM, before Superior Court Judge Michael Silverstein, that motion will be presented. As Brandie Jefferson reports in THE PROVIDENCE JOURNAL, “A spokeswoman for Attorney General Patrick Lynch did not immediately return a call seeking comment.”
The next step will be to seek reimbursement for some of the actual litigation costs such as filing fees and deposition transcripts.”
I have discussed here the need for a shareholder suit to recoup legal costs and it is great to see Sherwin taking the matter into it own hands.
My guess is down the road this will be settled by the State. It would be the height or irony thought. A suit brought essentially to extort a settlement from the paint companies will end up forcing the State and its attorney’s to do the same to get themselves out of the mess they created.
We now have Ambac (ABK), Assured Guarantee (AGO) and now MBIA (MBI) handily beating estimates.
MBIA (MBI), the holding company for MBIA Insurance Corporation, today reported a net loss of $706.4 million, or $3.37 per share, for the first half of 2008, compared with net income of $410.4 million, or $3.07 per share, during the same period in 2007. For the second quarter, net income was $1.7 billion, or $7.14 per share, compared with $211.8 million, or $1.61 per share, for the same period of 2007. Net income in the quarter was driven primarily by unrealized gains on insured credit derivatives, which totaled $3.3 billion on a pre-tax basis. The majority of the unrealized gain was the result of a substantial widening of credit default swap spreads on MBIA Insurance Corporation during the second quarter. The Company did not materially alter its projection of ultimate loss on mortgage-related exposures. As a result, loss reserves had an insignificant impact on net income.
Net income was also affected by $742 million of pre-tax realized losses resulting from the rebalancing of the asset/liability portfolio in the Company’s Asset/Liability Management (ALM) business. The $742 million in realized losses consisted of $306 million on asset sales related to the rating downgrades of MBIA Insurance Corporation during the second quarter and $436 million of impairments on assets sold or that are expected to be sold in the third quarter to further enhance liquidity in the ALM business.
After-tax operating loss, a non-GAAP measure that excludes the effects of timing-related gains and losses (all non-GAAP measures used herein are defined in the attached Explanation of Non-GAAP Financial Measures), for the first half of 2008 was $339.4 million, or $1.62 per share, compared with after-tax operating income of $408.1 million, or $3.05 per share, for the first half of 2007. After-tax operating income for the second quarter of 2008 was $228.9 million, or $0.96 per share, compared with after-tax operating income of $206.9 million, or $1.57 per share in the same period of 2007.
Here is a quick video on it:
It appears the worst is over for the bond insurers. This isn’t to say it will not be a bumpy ride but their extinction is not in the cards…..
Billionaire Wilbur Ross got a nice report on his investment in Assured Guaranty (AGO) today
Assured Guaranty (AGO) said late Thursday that second-quarter net income came in at $545.2 million, or $5.97 a share, up a lot from the same period a year earlier when the bond insurer made $32.8 million, or 47 cents a share. The big increase was driven mainly by $518.3 million in after-tax unrealized gains on credit derivatives. Operating income, which excludes such gains and losses, was $38.7 million, or 42 a share.
In its most recent 10-Q for the first six months of 2008 Leucadia is booking another $31 million dollar loss on the investment.
In short it is now down a total of $116 million or 58% in just about exactly a year.
It is funny. One has to assume Ackman saw the credit and housing trouble far before anyone else did based on his Ambac (ABK) and MBIA (MBI)shorts. It is equally apparent he did not foresee the credit issues creeping into the general economy as they have. You would think that if he did he would have held off on purchases like Target (TGT) and Sears Holdings (SHLD).
Long term I am sure Ackman will recognize gains on these just not the out-sized gains he could have.
Even Leucadia bet against mortgages in Jan. of 2007 and is still profiting from them now as they have booked a $10 million gain in the years first 6 months
So far as of this writing 47% of the responders back my claim that most people go Whole Foods (WFMI) for specialty items and 17% say “its too expensive“.
Here is where it gets bad for Whole Foods. If we take out the 20% of the folks who took the poll and do not have a Whole Foods near them, then 60% only go there for specialty items and 21% say it is too expensive.
This is really good stuff. Einhorn is great to listen to..
I like how cerebral he is. He does not get to worked up about what folks say ans sees the situation for what it is. I think to be a visual short seller you have to be that way. It is easy to see how Ackman and he get along so well (or at least work together so well).
So when Jud emailed me this yesterday I spit coffee out my nose. I recommend not doing that, it hurts. Anyway, since things are slow here for the moment, let look at it.
So the jist of the article was that: “It’s the economy, stupid. We are in a recession, sales and profit margin are falling year over year at Sears. Commercial real estate values are falling. Eddie wil unlikely sell any property at an attractive price anytime soon. In recent years, under the leadership of Eddie Lampert, Sears cut marketing expenses to the bone. There’s nothing left to cut. In its latest quarter ended May 3, 2008, the company posted a pretax loss of $64 million vs. pretax income of $381 million in the same period last year. As the economy gets tough for some extended period and the housing bust continues to get worse, departement stores like Sears will lose more business to the discount retailers. It will be increasingly more diffcult to turn a profit at Sears and K-Mart.
Sears Holding has bought back $2.96 billion dollars worth of stock in 2007, and that leaves Sears with very little or no money on hand to endure an economic downturn. That stress has clearly shown up in its latest quarter, as it had to borrow $646 million dollars in short term commercial paper to cover some cash flow issues.
I have a hard time believing that Sears will turn a profit this year, with almost $10 billion dollars in total current liability, and only $13 billion dollars in current assets, mainly comprised of $10.3 billion in inventory. A bankruptcy filing for Sears Holdings is a real possibility in the next two years if it continues to struggle.”
Where to start. Yes Sears did lose $64 million last quarter its first quarterly loss in over three years. That also left it with $1.4 billion (yes billion) in cash on the books. It should be noted that almost three times Macy’s (M) and Kohl’s (KSS) combined! That number is twice what sits on the books over at Home Depot (HD). It is also essentially equal to that of JC Penny (JCP) and Lowes (LOW). The main difference between JC Penny, Lowes and Sears is that Sears carries 40% LESS long term debt that Penny’s and Lowes do.
Sears carries the same amount of debt as Kohl’s does despite having in excess of three times Kohl’s sales and has 1/4 the debt of Macy’s despite almost doubling its sales. If we look at Home Depot, Sears tallies 65% of the sales the Depot does yet carries less than 20% of the debt of its appliance rival. In short Sears has the strength of balance sheet second only to Wal-Mart (WMT) and Target (TGT).
The exercise here is that if we are looking for a retailer that may face bankruptcy, I think a cursory look could find more likely candidates.
But hey, why listen to me? Let’s hear what none other than Bruce Berkowitz has to say.
“But one part of the $50.7 billion company is sparkling: Lands’ End (SHLD). The apparel subsidiary is thriving with its reputation for impeccable customer service and sturdy-but-stylish designs. While Sears doesn’t break out numbers, retail analyst Anne Brouwer of Chicago’s McMillan/Doolittle estimates the unit made $200 million on $2.2 billion in sales last year. The Lands’ End Web site, where the brand rings up 80% of sales, is among the retailing industry’s top 10 by several measures. And offline sales are rising as Sears has put Lands’ End boutiques in more than 200 of its 935 mall stores. Retail consultant Howard Davidowitz calls the business “Sears’ shining star.”
More: “Lands’ End was not such a gem when Sears acquired the company in 2002 for $1.9 billion. At the time, its apparel was available only online or through catalogs, and was generally seen as well-made but staid preppy gear. Seeking a chance to broaden its apparel offerings, Sears quickly began stocking Lands’ End shirts and slacks in stores, though it kept the two brands’ Web sites separate. But Lands’ End got lost in the aisles until Lampert took over Sears and pushed to build the brand. In mid-2005, a month after McCreight became president, Sears opened the first Lands’ End boutique in a White Plains (N.Y.) store.
With its own look and branding, McCreight’s store-within-a-store worked. He says transforming the brand’s catalog image into a physical space was “a once-in-a-lifetime career opportunity.” Analyst Brouwer figures the Lands’ End boutiques bring in at least $200 in sales per square foot annually. That’s just a third what a top retailer such as Nordstrom (JWN) produces, she says, but it’s far ahead of the $137 per square foot Sears averages from its goods and apparel.”
Almost forgot. The “had to borrow $646 million for cash flow issues” statement. A quick read of the last earnings release told us that as of the time of the release $400 million of it has been repaid. In other words it was a non-issue.
No folks, a Sears BK is not in the cards. Think of it this way. Sears is heavily levered to housing (a top appliance seller) yet despite the worst housing environment in 6 decades they lost $64 million. If housing just returns to historically average levels (it will) the profit again begin to flow.
I am buying more after the next earnings release. Do I expect a loss. Probably a nominal one unless Lampert pulled a rabbit out of his hat with the excess inventory. Chumps will sell off shares and I will pick some more up. I bet Ackman and Berkowitz will be there with me.
Good company…..
Disclosure (“none” means no position):Long SHLD, WMT none
As of August 7, 2008, as reflected in this Amendment No. 1, the Reporting Persons are reporting beneficial ownership on an aggregate basis of 3,137,659 shares of Common Stock (approximately 8.8% of the outstanding shares of Common Stock). The Reporting Persons also have economic exposure to approximately 4,540,896 notional shares of Common Stock under certain cash-settled total return swaps (“Swaps”), bringing their total economic exposure to 7,678,555 shares of Common Stock (approximately 21.5% of the outstanding shares of Common Stock). Item 3. Source and Amount of Funds or Other Consideration
Item 3 is hereby amended and restated in its entirety, as follows: Pershing Square advises a number of client accounts, including the accounts of Pershing Square, L.P., Pershing Square II, L.P. and Pershing Square International, Ltd., a Cayman Islands exempted company (collectively, the “Pershing Square Funds”), which owns an aggregate of 3,137,659 shares of Common Stock and 4,540,896 notional shares underlying certain cash-settled total return swaps, and paid therefor total consideration (including brokerage commissions) of $136,609,962 derived from the capital of the Pershing Square Funds.
Seems like only minutes after hitting the “publish” button on my Wal-Mart (WMT) post, Target (TGT) made my point.
Target (TGT) today reported that its net retail sales for the four weeks ended August 2, 2008 increased 4.7 percent to $4,566 million from $4,363 million for the four weeks ended August 4, 2007. On this same basis, July comparable store sales declined 1.2 percent.
“Our comparable store sales performance in July was near the low end of our -1% to +1% planned range,” said Gregg Steinhafel, president and chief executive officer of Target Corporation.
Uh, Greg. Let’s do a little basic math here. -1.2% is actually “greater than” -1.0% remember this little sign, -1.2 > 1.0? I think it was from “Intro to Algebra”? It is not “near the low end” Greg, it is officially “past it”.
Analysts expected a decline of -.4% once again proving the fruitlessness is listening to them. The news here is not that Target missed analysts expectations just as it was not in the case of Wal-Mart. The point here is that Target missed their own expectations meaning things for them are even worse than they thought they were. Perhaps the worse news is that their CEO does not seem to realize they missed it.
Year to date, Target comp sales are down .6% vs a 4.6% rise at this time last year. That, is not good no mater what the expectations.
Disclosure (“none” means no position):Long WMT, none
So, in June Wal-Mart (WMT) forecast July same store ales to rise 2% to 4%. Today they announced they came in at 3%, this is bad. Only on Wall St.
Net sales grew 9.4% overall (Wal-Mart 6.7%, Sam’s 7.7% and International Stores 17%). Not bad for a company selling $1 billion dollars a day of merchandise.
“Walmart’s clear price leadership position continues to meet the needs of our customers in a difficult economy,” said Eduardo Castro-Wright, Walmart U.S. president and chief executive officer. “Better merchandise presentation, our everyday low price message and an improved store experience resonate with customers. With the end of the stimulus checks, we know consumers are spending more cautiously, and we continue to see a pronounced paycheck cycle at the end of the month. We also continue to see improvement in our customer traffic, relative to last year.”
The big news is the customer traffic increasing relative to last year. With virtually every other retail operation out there experiencing declines (Sears (SHLD), JC Penny (JCP), Macy’s (M), etc.) the fact Wal-Mart is selling more to more people should please shareholders.
The fact some people are gnashing teeth and calling for the “end of days” over the fact sales came in at .4% less that predicted (not by the company, by the “analysts”)is proof investors and the media are currently in a hyper reactive mode. Was the report great? No. Was it bad? Not by a long mile. Had they missed their own projections, that would have been bad. Nailing it right in the middle is good, no way around it.
From the “perfect timing” department regarding analysts posts. Check out Jeff Mathews this morning. Jeff points out, “Friedman Billings, it seems, is throwing in the towel and downgrading insurance has-been AIG (last trade, $29), cutting their price target from $53 to $38.” Until this morning they still “expected” AIG to hit $58 in a year, a price it likely will not see the remainder of the decade.
The moral of the story is here is what matters is how companies perform based on their own projections because we all know expectations are rarely very accurate…
Mr. Market is a fickle dude..
Guidance
“We believe our businesses are well positioned for the current economy,” said Tom Schoewe, executive vice president and chief financial officer. “We estimate U.S. comparable store sales, excluding fuel, for the August four-week period to be between one and two percent, because we still see sales volatility from week to week, especially around paycheck cycles.”
Anyone want to bet Wal-Mart is lowering projections to avoid the current scenario next month? Now Wall St. will lower “estimates”, Wal-Mart will beat them and everyone will be happy…..strange stuff.
Disclosure (“none” means no position):Long WMT, SHLD, none
