ValuePlays

Barry Ritholtz has a great post on the companies currently under siege by short sellers.

Here is a portion:

“We’ve heard from oh-so-many people how whisper campaigns have brought down so many firms like Bear Stearns (BSC) and Indy Mac (IMB) and Fannie (FNM) and Freddie (FRE) and now Lehman Brothers (LEH).

Why is it that all these rumor-mongerers and shorts are only bringing some firms to their knees? How come they always seem to be the over-leveraged, under-capitalized, unhedged, most poorly-managed companies? Isn’t it funny that all of the firms that are the subject of such rumors have so many similar characteristics? Bear and Lehman and Fannie Mae and Freddie Mac and AIG and . . . the list goes on and on.”

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Disclosure (“none” means no position):None

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I really hope no one out there is surprised by this..

Back in April I said folks ought to get used to Wam-Mart (WMT) increasing its guidance. Today was no exception.

Wal-Mart reported a 5.8% increase in same store sales for the five weeks ending 7/4. Wal-Mart US was 6.1%, Sam’s Club was 4.6%. International sales held strong at 25% of the total.

Wal-Mart U.S.

All six merchandise units (grocery, entertainment, health and wellness, apparel, home and hardlines) achieved comparable store sales increases in the June five-week period. The strongest results remain in grocery, entertainment and health and wellness. Favorable weather and improved assortments helped drive seasonal sales in apparel, toys and hardlines. In addition, the economic stimulus checks contributed to increases in overall comparable store traffic results.

“Our underlying business is strong because of price leadership, clearly defined product offerings and a better store experience that continue to drive customers to our stores,” said Eduardo Castro-Wright, Wal-Mart U.S. president and chief executive officer. “Customers like what they are seeing and they’re shopping more of the store. Assortments and brands have improved, which bodes well for the upcoming seasons, including back-to-school.”

Sales in entertainment were strong, with flat panel television sets continuing to run high double-digit comparable store increases. Within apparel, sales of swimwear and sportswear were strong.

Sam’s Club

Sam’s Club sales during the June period had strengths in fresh foods, dry grocery and consumables. Video games and mattresses were among the best performing general merchandise categories. House wares and jewelry were soft. Seasonal hardline sales were also behind plan.

“Both traffic and ticket continued to increase with both our Business and Advantage members in June, even excluding fuel sales,” said Doug McMillon, Sam’s Club president and chief executive officer. “We continue to see a shift in the overall mix toward fuel, food and consumables, as our members manage through the current environment. Small business is especially price conscious in this environment and we remain committed to delivering value for them.”

Fuel sales were higher both in gallons and dollars sold, increasing comparable club sales with fuel by 3.7 percentage points. The transition of the clubs to back-to-college and fall merchandise is on schedule for later in the month.

“Our estimate for U.S. comparable store sales, excluding fuel, for the July four-week period is between two and four percent,” said Tom Schoewe, executive vice president and chief financial officer. “The Wal-Mart U.S. underlying business remains strong. However, consumers and small business owners remain concerned about the economy, inflation and most of all, higher gas prices. With the last large mailing of economic stimulus checks due this Friday, it is difficult to forecast the benefit from the economic stimulus through the remainder of the year.

“Because of our improved sales results during the quarter, we have updated our guidance estimate for earnings per share for the second quarter of fiscal year 2009 to a range of $0.82 to $0.84,” Schoewe said.

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This all goes back to last fall when the “Save More Live Better” campaign was rolled out. At the the time I said:

“What Wal-Mart does with the ads is remind you what you can do with the money you save at their stores. Rather than the previous ad campaign that only told you they had “low prices” they are now saying “look at the fun things you can do with the money you save”. The images of a family vacation with the kids is sure to spur memories in people of their childhood and the desire to create similar memories with their kids”

It has resonated as folks pinched by fuel prices are going to Wal-Mart to stretch their dollars and be able to afford those very vacations in the commercial. It was the perfect campaign at the perfect time.

You know, I was hard on Scott for a while last year and actually called for him to go. Not long after he seems to have become far more shareholder friendly.

Glad I was wrong about him…… 🙂

Disclosure (“none” means no position):Long WMT, None

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GE (GE) must be getting low ball offers for the unit.

GE said it continues to explore all options for the consumer and industrial operations, but believes it makes the most sense to spin off the entire unit to existing shareholders, keeping its leadership teams and employees intact. The company hopes to complete the move next year.

“As we explored our options for appliances, it became clear that the fastest, most efficient step we could take in completing the transformation of our industrial portfolio would be to focus on a possible spin-off of the entire unit,” General Electric Co. Chairman and Chief Executive Jeff Immelt said in a statement. “This is consistent with the strategy we have been executing to transform the GE portfolio for long-term growth and makes sense for GE shareholders.”

The spin-off would create a separate publicly traded company owner by GE shareholders.

Immelt is between a rock and a very hard place. He made a promise and failed to deliver. He has shareholders that have been frustrated since the turn of the century. He is “the guy who followed the guy (Jack Welch)”, and that is never a good place to be. In short, he now has to do something very drastic is a market that is very poor for sellers.

This is the best move for him to make now for shareholders but, it is not the move he wanted to make…

Disclosure (“none” means no position):None

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Well, at least he did not make any promises..

If I am being honest, I was pulling for JP Morgan’s (JPM) Jamie Dimon to be the new head of the bank.

Wachovia (WB) introduce CEO Robert Steel but the bank provided no details about its future direction other than to call “silly” the rumors that it will sell itself to its recently hired advisor, Goldman Sachs Group(GS). Steel suggested he would provided more details about the bank’s direction on July 22, when Wachovia fully reports and explains its second-quarter earnings results.

During a conference call presentation, Chairman Lanty Smith said banking regulators are “delighted” with the choice of Steel, a 28 year Goldman alumnus who left his position as under secretary of the U.S. Treasury to take the helm of the bank.

Steel has decades of experience in the banking industry, as both a banker and regulator but has no experience running a large commercial bank. Smith said during the presentation that finding a leader with extensive experience running retail banking operations, Wachovia’s main business, wasn’t a priority for Wachovia, which has lately found itself in the middle of both regulators and Department of Justice probes.

It would seem that possibly political and industry connection were at this point the priority.

Consider at the Treasury Department, he worked with lawmakers on legislation to strengthen the agency that regulates mortgage companies Fannie Mae (FNM) and Freddie Mac (FRE). Steel was also involved in JPMorgan Chase (JPM) spring bailout of the investment bank Bear Stearns (BSC).

If that was not enough,bank also said it has set aside $4.2 billion pretax to cover bad loans for the quarter, leading to an estimated second-quarter loss of about $2.6 billion to $2.8 billion.

The quarterly loss will equal $1.23 to $1.33 per share, excluding an expected write-down of goodwill and the bank declined to offer specifics on whether it needs more capital or might again cut its dividend

All in all, it is a mess but they got a guy connected enough to fix it. Time will tell

Disclosure (“none” means no position):Long WB,None

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