Citi, Crox, DOW, Goldman
– Part 2 in Chad Brand’s Citi analysis.
– Crox at $28? The Master’s think that’s a Crock
– Looks like the MSM is finally recognizing what Dow Chemical is doing
– Goldman Sachs want your distressed mortgage debt..
Whitney talks about what to look for in the current environment.
Frannie Mae (FMN), Freddie Mac (FRE), Merrill Lynch (MER), Sears Holdings (SHLD)and Target (TGT) are discussed.
Whitney says the “break up” value of Sears is $250 a share. He goes into good detail on it.
Disclosure (“none” means no position):Long SHLD, None
After reading about Whole Foods (WFMI) recent quarter, I revisited a post I did on the subject last May.
In it I said “Here is an equation that does not work for me. Paying 32 times earnings for a company who, if it hits the high end of analyst estimates, will grow 9.4% this year and maybe 17% next. When you consider this company has missed the last three quarters estimates, and four of the past 6, one has to wonder what investors are thinking.”
Well, things are currently worse than at that time and investors are still paying 30 times this years earnings that, far from only increasing the 9% anticipated in May of 2007 are now declining.
Whole Foods in 2008 will most likely finish its second consecutive year of declining results. In the recent earnings call CEO John Mackey took time out from pumping his stock on Yahoo (YHOO) message boards to affirm that even with the estimated impact of the Wild Oats acquisition excluded, adjusted net income was $51 million and adjusted diluted earnings per share was $0.36 vs. 38 last year.
Read the conference call. I haven’t seen a call in a long time that went so far to avoid the word “earnings”. Macke focused extensively on sales. They even went as far to create a new metric to measure earnings, EBITANCE or earnings before interest, taxes and non-cash expenses.
Here is the thing. It really does not matter what you want to try to do to slice earnings, the only thing that matters is what drops to the bottom line. Unfortunately, even if we subtract the cost of the wild Oats merger, that number is falling.
The stock now sits just above its 52 week low and is still trading at an excessive premium to earnings. With organic food being found at about every grocer including club stores like Costco (COST), BJ’s (BJ) and Wal-Mart’s (WMT) Sam’s Club, a pinched consumer is far less likely to visit Macke’s locations.
The stock is down about 10% from my initial post and I cannot see any reason to think there is any upside in shares anytime soon.
Disclosure (“none” means no position): Long Wal-Mart, None
For those of you looking for a reason for the recent shift in consumer sentiment from Target (TGT) to Wal-Mart (WMT), here is a big one.
So, the kids had a birthday recently and true to form, we had a party for their friends at school and one for family. In short, lots of very nice gifts. That being said, the odds of not getting a gift that you may already have or having every piece of clothing fit right is well, very, very low.
So we got an item of clothing that did not fit just right and I made the trip to Target Sunday to exchange them for a pair that fit better because they were great and the kids loved them. I did not try to return them for cash, but to simply exchange them for another pair. Simple, right???? Not so fast…
It would seem that I have had the audacity to be there twice in the 12 months without a receipt to return items. Apparently once I have done this, I am not allowed any more!! I have been “blacklisted” at Target..
Now, I have three kids and a wife. That means 6 kids birthdays (one school and one family for each), two parents birthdays, a fathers day and a mothers day, Easter, and Christmas etc… What are the odds that for every one of those events every gift will not be a duplicate and have a receipt and fit properly?
Wondering of this was a retailing trend, I drove across the street to the Wal-Mart. I took the clothing in and asked the question, “I have no receipt for these, can I exchange them?”. I was told with a license I could but for store credit only. No problem, that was all I wanted. Now, here comes the big one.
“How many times can I do this?” I asked.
“What do you mean?”, the girl asked?
“Is there a limit?” I said
“Oh”, she giggled, “were you just at Target?”.
I replied yes and she said that she gets people complaining all the time about Target’s policy. I was informed that if my “returns” were excessive “like once a week” it would get flagged but other than that, no limit. I know this is true because I have been there to do an exchange several times in the past year.
So, why would I shop at Target now? If I lose the receipt (or do not get one in the case of a gift) and have to return an item, I am stuck. I cannot be the only person looking at this scenario saying to myself, see ya’ later Target. I am also more than sure countless other people have run into the same situation. Here is the best part. I asked the girl “when am I off probation?” and she could not tell me. The system just has me blocked out.
Could there me a more misguided policy? I mean really…. I just will not shop there anymore for us OR for presents for the dozens or birthday parties and countless Christmas gifts we buy for other people. If I buy something for someone, I want them to be able the enjoy it. If I want aspirin, I may go there but if it is clothing or any item I am not 100% sure of its accuracy, no way.
Quick phone calls to Sears (SHLD), Kmart (SHLD),Kohl’s (KSS), Home Depot (HD), Lowe’s (LOW) and JC Penny (JCP) revealed no “two return” policy according to the folks I spoke too.
Target has said recently that apparel sales, once its strength have weakened. If they are looking for an answer, they now have it.
Oh yea.. while at Wal-Mart we bought the “Floor Mate” cleaner we have been wanting, Doritos for the hockey game today and hamster bedding for “Digger” the schools hamster we babysat over winter break. The total bill? $145 that would have gone to Target has they just exchanged $5 worth of clothing. Insane. Add this to the additional sales they will not see this year because of this return policy and is it any wonder they are suffering?
Target releases earnings Tuesday, lets see if the negative trend continues…
Disclosure (“none” means no position):Long Wal-Mart, None
Upgrades
Nalco (NLC)- UBS Neutral » Buy
MacQuarie Infrastructure (MIC)- Stifel Nicolaus Hold » Buy
Innovative Solutions (ISSC)- Northland Securities Under Perform » Market Perform
Bristow Group (BRS)- Credit Suisse Underperform » Neutral
DIRECTV (DTV)- Cowen & Co Neutral » Outperform
DCP Midstream (DPM)- Wachovia Mkt Perform » Outperform
Imclone (IMCL)- Cowen & Co Neutral » Outperform
American Equity Investment Life (AEL)- KeyBanc Capital Mkts Hold » Buy
Discovery (DISCA)- Credit Suisse Underperform » Neutral
Verenium (VRNM)- JP Morgan Underweight » Neutral
Williams Cos (WMB)- RBC Capital Mkts Sector Perform » Outperform
Asbury Automotive (ABG)- JP Morgan Underweight » Neutral
Kilroy Realty (KRC)- Robert W. Baird Neutral » Outperform
Linear Tech (LLTC)- UBS Neutral » Buy
Northeast Utilities (NU)- UBS Neutral » Buy
Arcelor Mittal (MT)- Deutsche Securities Hold » Buy
Dynavax Technologies (DVAX)- Oppenheimer Perform » Outperform
Trans1 (TSON)- Lehman Brothers Equal-weight » Overweight
Downgrades
eTelecare (ETEL)- Janney Mntgmy Scott Buy » Neutral
ChoicePoint (CPS)- Barrington Research Outperform » Underperform
NICOR (GAS)- Robert W. Baird Outperform » Neutral
BankFinancial (BFIN)- Sterne Agee Buy » Hold
MDS Inc (MDZ)- Scotia Capital Sector Outperform » Sector Perform
McGrath RentCorp (MGRC)- RBC Capital Mkts Outperform » Sector Perform $29 » $21
ChoicePoint (CPS)- William Blair Outperform » Mkt Perform
Utd Nat Foods (UNFI)- Piper Jaffray Buy » Neutral
Universal Truckload Services (UACL)- Stifel Nicolaus Buy » Hold
LTC Properties (LTC)- Stifel Nicolaus Buy » Hold
Sovereign Banc (SOV)- Keefe Bruyette Mkt Perform » Underperform
Barrick Gold (ABX)- UBS Buy » Neutral
Kinross Gold (KGC)- UBS Buy » Neutral
K-Swiss (KSWS)- Brean Murray Buy » Hold
Meadowbrook Ins (MIG)- KeyBanc Capital Mkts Aggressive Buy » Buy
Movado Group (MOV)- Morgan Joseph Buy » Hold
Allied Healthcare (AHCI)- Friedman Billings Outperform » Mkt Perform
Univ Elec (UEIC)- Deutsche Securities Buy » Hold
BioMed Realty (BMR)- Robert W. Baird Outperform » Neutral
Vital Images (VTAL)- Deutsche Securities Buy » Hold
Gilead Sciences (GILD)- Bernstein Outperform » Mkt Perform
ChoicePoint (CPS)- GARP Research Buy » Neutral
Disclosure (“none” means no position):
Monday’s Picks
Jeff Macke likes Disney (DIS) $32.57
Guy Adami prefers Wachovia (WB) $34.33
Karen Finerman recommends Yahoo! (YHOO) $28.42
Tim Seymour thinks Home (HXM) $58.81 is a buy.
Friday’s Results
The enthusiasm for Starbucks (SBUX) $17.83 is gone, Jeff Macke said. That means it’s time to buy. Close $18.25 GAIN
Guy Adami would take the risky trade and buy Genentech (DNA) $71.75 before the Avastin decision comes down. Close $71.60 LOSS
Karen Finerman’s still playing defense with Altria (MO) $73.39 Close $73.60 GAIN
Tim Seymour would take this opportunity to sell Stillwater Mining (SWC) $18.22 which is up 100% over the last month. Close $18.90 GAIN
2008 Records:
Brian Schaeffer= 0-1
Carter Worth= 0-1
Jon Najarian= 4-1
Jeff Macke= 13-9
Tim Seymore= 4-4
Guy Adami= 12-13
Pete Najarian= 12-8
Karen Finerman= 13-10-1
2007 Results (Since 6/21):
Guy Adami= 58-46 = 56%
Jeff Macke= 60-40 = 60%
Pete Najarian= 49-41 = 54%
Disclosure (“none” means no position):
Autonation Inc (AN)= $ 9,778,491
General Growth Properties Inc (GGP)= $ 6,088,897
Opko Health Inc (OPK) = $5,695,800
Align Technology Inc (ALGN )= $3,882,138
Hugoton Royalty Trust (HGT)= $ 3,818,759
Colonial Bancgroup Inc (CNB)= $3,442,914
Amicus Therapeutics Inc (FOLD) = $3,169,470
Fidelity National Info Services Inc Ga (FIS)= $2,080,400
Smithfield Foods Inc (SFD) = $2,056,643
Vertex Pharmaceuticals Inc (VRTX)= $ 1,526,544
Borders (BGP) is “thrilled” with the response to its new concept store in Michigan.
“It’s running substantially ahead of our (sales) plans,” CEO George Jones said shortly after the 10 a.m. ribbon-cutting ceremony, which marked the grand opening of the nearly 29,000-square-foot store on Lohr Road, Ann Arbor.
“We are absolutely thrilled with the reaction we’re getting from customers, and that’s what it’s all about,” he said.
Pershing Square’s Bill Ackman recently upped his stake to over 25%, making Borders worth a very close look.
Disclosure (“none” means no position):None
Hey, listen to this, Ackman explains his recent proposal regarding both Ambac (ABK) and MBIA (MBI). It is the best explanation yet..
Listen to it here:
Disclosure (“none” means no position):None
Here are the top stories of the week at Value Investing News
Pabri, Ackman, Berkowitz all added shares last quarter.
A list of 5 interesting super-investor buys in the fourth quarter. Includes picks from Eddie Lampert, Mohnish Pabrai, Joel Greenblatt, and Warren Buffett.
Consider the following scenario: A great company faces a languishing stock price. A few quarters of managerial efforts fail to revive profits. The stock continues to decline. As a result, the CEO is ostracized for having lost his ability. Sound all too familiar?
I’ve updated my stock report, and am stepping up to the plate and buying AEO.
This shareholder friendly company is exposed to housing but has durability and a consistent dividend. It is a good contrarian investment before the housing industry picks up again.
Recent financial market events, including subprime loan losses, hedge fund and quant fund woes, and the bailout or takeover of numerous financial institutions and structured vehicles, that are suddenly strapped for cash, highlight the extreme risk taking and leverage that have lately permeated our financial system.
Surprisingly, Value Investing at one point did not exist. At the turn of the 20th century, Wall Street was a place where insider information and speculation ruled.It was until a man by the name of Benjamin Grossbaum brought structure to a rather lethargic Wall Street. Below is a list of defining moments that in my opinion has molded value investing to what it is today.
Comparing the Microsoft/Yahoo! merger to past mega-mergers shows that these two companies are unlikely to live in perfect harmony.
VIN favorite Vitaliy Katsenelson makes some 2008 predictions on the Value Investing Congress Blog
These 3 small caps have strong financial positions and bargain valuations. But can they grow in the midst of strong competition?
Whitney Tilson talks about getting investing ideas from 13-f filings.
Hi, this is a link to the Buffett MBA Talk link at www.ei-forum.com
There are a total of 10 posts that summarize and have video links to the talk. This is a 10 part series that is really woth watching… Warren at his best!
Scroll down to the bottom of the page to start – Enjoy!
The London Business School’s Global Investment Returns yearbook shows investment winners since 2000 have been old industries such as tobacco and mining. Anthony Hilton says finding such sectors is the secret of success for legendary investor Warren Buffett…
Barron’s examines Wells Fargo and finds them in better shape than most other banks and likely to come out of this credit crisis unscathed.
Detailed analysis of a great DOW stock
A pitch for Bed, Bath, and Beyond – a best in class retailer and rock solid company trading at it’s lowest multiples ever.
Fairfax Financial Holdings Ltd. Chief Executive Officer Prem Watsa, whose insurance company posted record earnings last year by betting against financial firms, said credit problems in the U.S. aren’t over yet. “It’s still early days,” Watsa said in an interview today from his Toronto office. “This is a very extensive credit problem.”
Michael Chren, senior director of large-cap value investing for Allegiant Asset Management, says that the topsy-turvy market is a “fertile hunting ground [for value stocks], but the problem is that a lot of stocks are cheap for a very good reason. Those are value traps and you want to avoid them.”
Ackman calls the bond insurers bluff..
Sears Holdings (SHLD) Chairman Eddie Lampert disclosed Friday that through his RBS Partners hedge fund he added an additional 1,148,900 shares of AutoNation (AN) on 2/21 at prices between $15.10 and $15.30 a share.
This brings his total ownership through RBS and other affiliates to 34.1% of the total shares outstanding.
Disclosure (“none” means no position): Long SHLD, None
It seems when ever shares of AmeriCredit (ACF) hit $13 or below, Leucadia (LUK) steps up to the buying window..
Leucadia disclosed late Friday that on 2/21, they purchased an additional 1 million shares at $12.99 each. This brings their total ownership to (through Leucadia and their affiliates) 29,661,440 shares or just over 25% of the total outstanding.
Disclosure (“none” means no position):None
Selling puts, Patience, Getting “Cramered”
– I still say this is the best way to buy a stock…
– Perhaps an investors best friend
– Check this out….. people who have followed CNBC’s Jim Cramer and got burned now have a place to vent…. igotcramered.com
Research in Motion (RIMM) released updates subscriber growth and unlike Apple (AAPL), they are not seeing a slowdown.
RIM now expects net subscriber account additions for Q4 to be approximately 15-20% higher than the 1.82 million net subscriber account additions forecasted by RIM on December 20, 2007. The total BlackBerry® subscriber account base is expected to be approximately 14 million at the end of the quarter.
“BlackBerry smartphones proved to be a big hit throughout the holiday selling season and we’re pleased to see RIM’s business momentum continuing in the new year,” said Jim Balsillie, Co-CEO at RIM. “The seasonal slowdown in net subscriber account additions that we expected in the new year did not occur and our focused execution with partners has continued to produce strong results within both enterprise and consumer segments.”
While Apple’s recent cutback in orders was seen as a “seasonal” cutback by Apple supporters, and not a sign of slowing sales, what can we now make of RIMM’s results?
Well, we now know people are still clamoring to buying smarts phone, just not iPhones. A 20% increase over estimates is massive. The reason? I can get a Blackberry Pearl for $99 from almost all wireless carriers. Before the iPhone was even released I said “lower the price to $299 and you may have something, a $599 phone will not gain mass acceptance no matter what it does.”
Now rumors are out that just might be happening. It would be the second price drop on the phone in less than a year (8 months).
Jobs missed the market on this one. The iPod was unlike any other device at the time it was introduced and thus the reason for its price in-elasticity. Apple was able the charge “less for less” (lower prices were only had on lower memory products) rather than giving customers more for a lower price in order to keep pace with competition.
Now that cell phone are beginning to become customers music players, we are noticing price drops in iPods.
The iPhone is unique but its features are had by many other devices at a fraction of the price. Now, one can argue all day about the intricacies of those features and whose are better but for the vast majority of people, those intricacies are irrelevant, price is not. In a slowing economy, people will choose price for a commodity like device. Based on the results, even the most ardent Apple supporters must admit this. The only other option is that consumers feel the Blackberry is a superior product and thus the reason for diverging sales trends.
Just watching local TV one would witness a huge push by Verizon (VZ) and Sprint (S) in their Blackberry promotions. Even AT&T (T) is sending me mailers pushing the Blackberry. The most common price is the $99 for a Pearl.
An Apple price drop to $299 is confirmation of the above. The thing is, RIMM is packing more and more into its $99 and $199 models. $299 may not be enough for Apple, they may to go lower…
Disclosure (“none” means no position):Sold Apple $280 calls in Jan. , None
MBIA (MBI) immediately dismissed Bill Ackman’s plan for them yesterday after barely a cursory view.
“Like Mr. Ackman’s open-source model, his statements in the media and the barrage of letters he has sent to regulators and the rating agencies — which contain half truths, innuendo and faulty analysis — this proposal is simply a continuation of Mr. Ackman’s campaign to profit from his short positions and credit default swaps in the bond insurance industry,” MBIA said.
“Our preference, like the regulators, continues to be finding a solution that would be in the best interest of all policyholders,” MBIA said.
Here is where the hypocrisy comes in. In the Wall St. Journal MBIA indicated it agrees with a spokesman for the New York insurance department who said Mr. Ackman’s proposal would split the company and likely lead to a substantial downgrade for the structured side.
Splitting bond insurers into two sectors — one focused on lower-risk municipal bonds and another to handle higher-risk collateralized debt obligations — allows shareholders of the lower-risk holding company to benefit while holders of the CDOs suffer.
Thus the dismissal of Ackmans plan. It should be noted this was probably done before it was read but that is another issue.
Here is the rub. Later is the same article it is noted that MBIA Chief Executive Joseph W. Brown Jr, upon returning to the the CEO post, vowed to work with regulators to restore confidence in the company. He also said he would consider splitting the company.
Now, on one hand we have the company coming out and dismissing Ackman because his proposal would spit the company then we have the CEO coming out and saying he would consider that very split idea.
The bottom line is they have no plan. What they are waiting for is a State or Federal bailout. They have been “talking” to insurance regulators for months now and nothing has been forthcoming from them. There has been no plan, only stonewalling.
They have dismissed plans from Berkshire Hathaway’s (BRK.A) Warren Buffett and now Bill Ackman. Wilbur Ross has stated he was interested in investing in them but talks with management have gone nowhere.
Here is the thing. Ackman, Buffett and Ross are all self made billionaires (maybe not yet for Ackman) and all are obviously smarter than those in charge of the now failing bond insurers. The fact that they cannot get anywhere with management ought to be a sign… a bad one..
Disclosure (“none” means no position): None