Stockmaster’s, WSJ, Sprint, “Under The Radar”
– A lot on bloggers “claim” results but these guys document their stuff.
– Good. A free site would have become clogged with ads and junk..
– This is really good news, the house cleaning has begun..
– For those who do not get it (it is free), Seeking Alpha has a great email they end out daily that contains the news you will not hear 10,000 times before lunch. I highly recommend it.
Whitney Tilson was kind enough to send this to me regarding Borders (BGP)
Borders Group (BGP), Kian Ghazi, Hawkshaw, 9/07
Here’s a pitch on Borders…we’ve taken advantage of a significant pull back to ramp the position to one of the larger investments in our fund. We’ve been involved with Borders (BGP) for over a year now. Currently trading at ~$15.50, we believe BGP is worth at least $30/share with scenarios that could make it worth $35-45/share over time. Importantly, our view is in no way predicated on a merger or sale of BGP.
BGP has three divisions: Super Stores, Walden Books and an International Division (primarily UK and Australia). In March 2007, BGP management proposed a turnaround plan for the business that called for the divestiture of the International business, the closing of 250 of 564 Walden locations, and a renewed focus on every operational aspect of the Super Store business. BGP is in the midst of a multi-year capital spending program that has depressed historically strong free cash flows. However, we believe that the capital spending in the areas of inventory systems, store remodels to reduce sq. ft. to music (a major drag on comps the last few years), and development of an online channel represent the proper strategy to allow the Super Stores to generate a 9% EBITDA margin by 2009. This 9% margin is below past peak margins of 9.5-10% achieved as recently as 2004-2005. To generate this margin, one has to believe that the Super Stores can achieve a 2% comp and generate a 28.5% gross margin (vs 29.5% GMs in 2004-2005) as they reduce exposure to music and refine the loyalty program, which was launched in 2006.
BGP also has a significant working capital opportunity in the form of increasing inventory turns. BGP currently turns inventories at 1.6-1.7x vs. competitor Barnes and Noble at >2.5x. This gap represents a ~$500mm opportunity (vs the current EV of $1.3bn using average debt and cash). Importantly generating at least $200mm of this improvement is firmly with management’s control as they redefine current store level inventory management decisions and invest in new IT systems to go along with the recently added new distribution center.
Assuming that BGP can:
1. Get to 9% EBITDA margins in 2009 in its super store segment,
2. Generate $200mm of working capital from improved inventory turns.
3. Sell its International Business for $100mm [~0.2x estimated 2006 revs of assets for sale], and
4. Reduce current capex spending to ~$100mm starting in 2008,
Then:
Applying a 7.5x EBIT multiple to 2009 EBITDA-Maintenance Capex of $250mm (we use $75mm of maintenance capex to be conservative vs. management guidance of ~$50mm) suggests a value of $30 share. We use EBITDA less maintenance capex because depreciation is overstated.
The ~$40/share scenario comes from the possibility that BGP may be able to close the sales productivity gap between it and BKS. The $30 scenario assumes no improvement in relative productivity. However we believe that if BGP management can address the current problems in the business, it will then have a credible operating platform to attempt to address this productivity gap, which we believe is largely driven by BKS’ seasoned loyalty program, superior Starbucks productivity, and higher margin merchandise mix. In addition, a more rationale pricing posture between Borders and Barnes and Noble could dramatically improve the ROIs of both companies.
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Now, with Ackman pushing his ownership to 18% and his economic stake to 26%, I think it is time to get on board here. These number make sense and are doable. With Pershing on the Board now, one can only assume management will begin to take step to accomplish these metrics.
Disclosure (“none” means no position):None
Priceless…ypu have got to see this..
Adam Warner found this originally and has more commentary on his
site.
Here is another Cramer Classic:
Disclosure (“none” means no position):Agree with Santelli
When you compare Netflix’s (NFLX) recent results to those of Blockbuster (BBI), you can only shake your head.
Netflix said Wednesday that its fourth-quarter profit rose 6% as subscribers increased. Net income was $15.8 million, or 24 cents a share for the quarter ended Dec. 31, compared with a profit of $14.9 million, or 21 cents a share a year earlier. Revenue rose to $302.4 million from $277.2 million, an increase of 9%. Subscriber acquisition costs in the quarter were $34.60 per gross add, down from $37.91 in the third quarter.
Analysts were expecting a profit of 14 cents a share on revenue of $301.7 million. Subscribers rose to 7.48 million from 6.32 million a year earlier.
On the conference call CEO Reed Hasting said, “For 2008, we expect to have more net adds than 2007, with a positive factor being less aggressive competition from Blockbuster Online ….”
He continued “Blockbuster Online is still active and still has several million subscribers. While they appear to have shifted to valuing profit over growth, they can change their mind again at any time. We are widening the gap between us however, and any further attack is unlikely to be as painful as their 2005 or 2007 thrusts.”
Even he does not expect Blockbuster to get its act together online for the next year
Since December 2005 the subscriber base has grown by 79% to 7.5 million subscribers., revenue has grown by 77% to $1.2 billion and they have nearly doubled free cash flow to $46 million.
It would appear based on ALL evidence to date Netflix took Blockbusters best shot (twice) and has come out the clear victor. Now it is on the the online game. Hastings did say that they are seeing good business from their younger subscribers in downloads and should in 2008, have the downloads ready for the Mac, high-definition DVD players, to game consoles and to dedicated Internet set-top boxes broadening the audience further.
A note: Not once in the entire call did they once mention “getting into the video store game”. The reason? It is over…
As a matter of fact, Hastings actually said “Unless video stores are reinvented, it may be that in five years, there are tens of thousands of kiosks, millions of online DVD renters and very few video stores.”
I have been saying this since last summer, get rid of the stores Blockbuster!!
Disclosure (“none” means no position): None
UPGRADES
St. Jude Medical (STJ)= Stanford Research Hold » Buy
Endo Pharm (END)=P Pacific Growth Equities Neutral » Buy
Informatica (INFA)= Pacific Growth Equities Neutral » Buy
Netflix (NFLX)= Utendahl Under-weight » Equal-weight
Quintana Maritime (QMAR)= Ferris Baker Watts Neutral » Buy
F5 Networks (FFIV)= Ferris Baker Watts Neutral » Buy
ITT Educational (ESI)= Barrington Research Mkt Perform » Outperform
Varian Medical (VAR)= Leerink Swann Mkt Perform » Outperform
Entercom ETM (SMH)= Capital Sell » Neutral
QLT Inc (QLTI)= Caris & Company Average » Above Average
NVE Corp ( NVEC)= Northland Securities Market Perform » Outperform
Intl Paper (IP )= Soleil Hold » Buy
NDS Group (NNDS)= RBC Capital Mkts Outperform » Top Pick
Range Resources (RRC)= BMO Capital Markets Market Perform » Outperform
EOG Resources (EOG)= Citigroup Hold » Buy
Thornburg Mortg (TMA)= Citigroup Sell » Hold
Microchip (MCHP)= Morgan Keegan Mkt Perform » Outperform
Intersil (ISIL)= Morgan Keegan Mkt Perform » Outperform
General Dynamics (GD)= Wachovia Mkt Perform » Outperform
Manhattan Assoc (MANH)= Jefferies & Co Hold » Buy
Cephalon (CEPH)= Soleil Hold » Buy
StatoilHydro (STO)= Citigroup Hold » Buy
Western Digital (WDC)= Deutsche Securities Hold » Buy
McAfee (MFE0= Bear Stearns Peer Perform » Outperform
Human Genome (HGSI)= Bear Stearns Peer Perform » Outperform
Sonus Networks (SONS)= Cantor Fitzgerald Hold » Buy
BioMed Realty (BMR)= Wachovia Mkt Perform » Outperform
Packaging Corp (PKG)= Deutsche Securities Hold » Buy
Repsol SA (REP)= Deutsche Securities Sell » Hold
AmSurg (AMSG)= Lehman Brothers Underweight » Equal-weight
Healthsouth (HLS)= Lehman Brothers Underweight » Overweight
Anglo American (AAUK)= Citigroup Hold » Buy
McAfee (MFE)= Citigroup Hold » Buy
Lifepoint Hospitals (LPNT)= Lehman Brothers Equal-weight » Overweight
Tenet Healthcare (THC)= Lehman Brothers Underweight » Equal-weight
Novacea (NOVC)= Broadpoint Capital Neutral » Buy
Stryker (SYK)= Robert W. Baird Neutral » Outperform
Human Genome (HGSI)= Robert W. Baird Neutral » Outperform
Garmin (GRMN)= Oppenheimer Perform » Outperform
Ametek (AME)= Friedman Billings Mkt Perform » Outperform
NVE Corp (NVEC)= Broadpoint Capital Neutral » Buy
Gilead Sciences (GILD)= Friedman Billings Mkt Perform » Outperform
F5 Networks (FFIV)= Robert W. Baird Neutral » Outperform
DOWNGRADES
Yamana Gold (AUY)= UBS Buy » Neutral
Google (GOOG)= Stanford Research Buy » Hold
THQ Inc (THQI)= Kaufman Bros Buy » Hold
Legg Mason (LM)= Credit Suisse Neutral » Underperform
Hospitality Props (HPT)= Wachovia Outperform » Mkt Perform
Hersha Hospitality Trust (HT)= Wachovia Outperform » Mkt Perform
Strategic Hotels & Resorts (BEE)= Wachovia Outperform » Mkt Perform
Apollo Investment (AINV)= Bear Stearns Outperform » Peer Perform
DuPont (DD)= Oppenheimer Perform » Underperform
Royal Philips Electronics (PHG)= Credit Suisse Neutral » Underperform
Vertex Pharm (VRTX)= Citigroup Buy » Hold
eBay (EBAY)= Citigroup Buy » Hold
Omnicare (OCR)= Lehman Brothers Equal-weight » Underweight
THQ Inc (THQI)= Broadpoint Capital Neutral » Sell
Motorola (MOT) Charter Equity Mkt Perform » Mkt Underperform
In a filing after the close on Thursday, Leucadia (LUK) purchased 10,000 more options on AmeriCredit (ACF).
Leucadia now holds 32,500 contracts for 3.5 million shares. The options are exercisable at $9 a share and expire 3/14/2008
AmeriCredit closed at $12.76 on Thursday.
Disclosure (“none” means no position):
Friday’s Picks
Tim Seymour likes refiners such as Tesoro (TSO) $39.81
Guy Adami prefers Cisco Systems (CSCO) $25.11
Karen Finerman says get long Goldman Sachs (GS) $199.20
Pete Najarian thinks ConocoPhillips (COP) $74.47
Thursday’s Results
Jeff Macke recommends buying the Financial Select SPDR (XLF) $27.9 Close $27.91 GAIN
Guy Adami prefers Apple (AAPL) $139.07 Close $135.60 LOSS
Karen Finerman suggests shorting Simon Properties (SPG) $90.19 Close $ 87.80 GAIN
Pete Najarian likes YRC Worldwide (YRCW) $18.72 Close $18.00 LOSS
2008 Records:
Brian Schaeffer= 0-1
Carter Worth= 0-1
Jon Najarian= 3-1
Jeff Macke= 6-3
Tim Seymore= 2-1
Guy Adami= 4-6
Pete Najarian= 3-4
Karen Finerman= 5-3
2007 Results (Since 6/21):
Guy Adami= 58-46 = 56%
Jeff Macke= 60-40 = 60%
Pete Najarian= 49-41 = 54%
Karen Finerman= 40-30 = 57%
In a recent filing moments ago, Berkshire Hathaway (BRK.A) added shares of Burlington Northern (BNI)
Berkshire bought 10,300 shares through its National Indemnity subsidiary on 1/22 at $75.51, bringing the total number of shares held to 63,785,418
Disclosure (“none” means no position): None
I have yet to get a good answer on this…
Can anyone tell me how Kuwait investing $10 billion in either Citigroup (C), Bank of America (BAC), Merrill Lynch (MER) or Morgan Stanley (MS) and owning in most cases less than 5% of the institution would enable them to enact any more “negative undue influence” than say China holding trillions of dollars of US treasuries gives them the ability to stonewall our goverment on trade, human rights, piracy etc….?
this is really fun, this means these loans are working for these folks..
From KIVA:
“The business you have loaned to, run by Yusif Musayev, has made a
repayment of $86.00. The total amount repaid is now $86.00. This
repayment will be divided amongst all the lenders who helped to fund
this business, depending upon the percentage each lender contributed.”
(FIGI )Fortress Intl Group Inc
(DUF ) Duff & Phelps Corp New
(DLX ) Deluxe Corporation
(BLD ) Baldwin Technology Co …
(ATE ) Advantest Corp
(ALO ) ALPHARMA Inc
(RJF ) Raymond James Financi …
(PLNR) Planar Systems Inc
(PEBK ) Peoples Bancorp N C Inc
(MXC ) Mexco Energy Corp
(MTSC ) MTS Systems Corporation
(MRCY ) Mercury Computer Sys
Disclosure (“none” means no position):
Dow Chemical (DOW) CEO Andrew Liveris told CNBC’s Becky Quick this afternoon in an interview “From a trend point of view, we haven’t seen anything that reflects a recessionary environment in the United States,”.
This is an important proclamation as Liveris’s Dow is invloved in virtually every industry in the US and his company is acutely sensitive to conditions here.
He continued, “”We’ve seen a slowdown that suggests there’s a shallow drop, or soft landing … in the back half of this year, we think there is a chance this slowdown will start reversing as the housing crisis abates.”
Regarding US demand decreases for Dow’s products he said “It’s no more acute now than it was a few months ago. Therefore, the first half (of 2008) I think will be a continuation of this, which suggests that the overall year will be a slower year than last year — there’s no question about that,”
Offsetting the US slowdown will be “A global economy growing at 2.8 to 3 percent is probably the adjustment we are making to annual plans versus a global economy of higher than 3 percent, maybe 3.2 or 3.3,” said Liveris.
As he left he reminded Quick to ask him about Dow current strategy after they release results next week. Hmmmm..
Disclosure (“none” means no position): Long DOW
Financials, Blackrock, Retail, iPhone
– Eric makes a good case for financials..
– Sometimes boring is just better..
– James Cullen makes the case for retail stocks (some of them)
– May be just a rumor, or may be the reason for the disappointing projections
After reading Bank of America’s (BAC) and now Wachovia’s (WB) earnings call transcripts my optimism for this year for financials is stronger than ever..
Investors have focused on mortgage write-downs. On the call, CEO Thompson address that:
“Golden West acquisition, we looked at the Golden West experience of the early 1990s. At that time, California had 10% unemployment and 20% house price depreciation, and charge-offs peaked in 1994 at 20 basis points. Based on our portfolio today, that 20-basis point peak would translate to about $250 million in charge-offs. Our expectations for the this year are that charge-offs will exceed that historical peak. But even if charge-offs reach three or four times that peak, our Pick-a-Pay portfolio will generate very meaningful bottom-line profits in 2008. And I do not believe that investors grasp that fact today.”
Wachovia’s second lien home equity portfolio of $32 billion has a delinquency rate that is one quarter as high as the industry and currently has a higher Tier 1 capital ratio at the end of the year than it did at September 30th. The balance sheet should be further enhanced as A.G. Edwards FDIC sweep deposits will also be coming onto their balance sheet over the first three quarters of the year.
They have $4.178 billion of the super senior ABS CDO exposures, hedged with financial guarantees, of which $2.2 billion is hedged with mono-lines and $2 billion with AA-rated financial companies with market caps in excess of $80 billion each.
The Dividend (currently an 8% yield):
Again Thompson “Will Wachovia cut its dividend? And the answer to that question is we have no plans to cut the dividend, because we don’t need to cut the dividend. We are confident in our ability to meet our 2008 business plan and that plan, as we have said before, will generate cash earnings that will cover our dividend payments, continue to build necessary credit reserves, improve our capital ratios and support growth in our business lines.”
Housing:
Don Truslow – Senior Executive Vice President and Chief Risk Officer
“I hate to forecast just giving what’s happening in the housing markets, but I mean I would not be surprised to see the same sort of pace that we have had in the last couple of quarters, for the next couple of quarters.”
Earnings:
Wachovia is expecting to earn “in excess” of a dollar per share each quarter for about $4.12 a share total in 2008. The economic expectations they use for that prediction? “Overall, we are thinking it’s going to be environment that has GDP growth of somewhere around 2%. We would expect it to be an environment with lower short-term rates and a steepening yield curve and that should be an environment, where can expect good net interest income growth driven by deposit loan growth, wider spreads and the dilution we have taken with the balance sheet.”
Conservative..
Wachovia will hit the $4 a share in earnings and when the banks trade around the 12 to 14 times earnings they traditionally do, that equates to a price of $48 to $52 share or 40% to 50% higher than now. Oh yea.. buying today also gives you and 8% yield on your invested funds. Real nice..
Disclosure (“none” means no position): Long Wachovia, None
Wal-Mart (WMT), may expand into Russia in the next two years in order to capitalize on a swelling economy and a stunning lack of competitors said UBS AG (UBS) analysts last week.
The bank said, “Open markets and independent grocers generate most Russian retail sales, according to UBS. The country’s $145 billion food- retailing industry accounts for almost half of total spending and will expand on average by 17 percent annually through 2010 as rising incomes boost demand for better food”.
The country is in its 10th consecutive year of expansion grew 7.6% in 2007, the Economy Ministry said in December, beating a prior forecast of a 6.7% pace. Auto sales in the country may rise 13% this year and surpass deliveries in the U.K.
Because the five largest chains control just 7.4% of sales, compared with 35% in the U.S. and as much as 80 percent in Europe, UBS said the country is “ripe for consolidation”.
Wal-Mart will most likely use the JV format it has used in India or enter through acquisitions like it did in Japan. Like China, Russia present a host of difficulties in its bureaucracy, but also offer a stunning opportunity. When one looks at the near 20% annual sales growth of Wal-Mart’s international operations, the thought that the rapidly growing Russian market could become part of that has to make shareholders excited.
I have long pushed the need for increased spending on international operation at the expense of domestic ones as the opportunities Wal-Mart has abroad dwarf those at home.
Disclosure (“none” means no position):Long Wal-Mart