ValuePlays

Is anyone really surprised Goldman Sachs (GS) was right on this? We have only been talking about it here since October.

The Wall St. Journal reported Friday “The group’s big bet that securities backed by risky home loans would fall in value generated nearly $4 billion of profits during the year ended Nov. 30, according to people familiar with the firm’s finances. Those gains erased $1.5 billion to $2 billion of mortgage-related losses elsewhere in the firm. On Tuesday, despite a terrible November and some of the worst market conditions in decades, analysts expect Goldman to report record net annual income of more than $11 billion.”

While the other banks and brokerages like Citigroup (C), Bank of America (BAC), Lehman (LEH), Morgan Stanley (MS) and Bear Sterns (BSC) all bet one way, Goldman went the other.

The report goes on to question the “morality” of one segment of Goldman packaging these products while another was betting against them. Now, had Goldman’s bet gone terribly wrong for the bank, would we be having this conversation? If not then lets just forget it because it is just sour grapes by those who did not see what was coming or nifty conspiracy theories by those with not much else to do. Yes I did see Ben Stein’s take on it in the NY Times but let’s be real honest here, Ben has been wrong on this whole mortgage mess since day one to such a staggering degree, one must think long and hard before taking to the bank anything he now says on it other than, “oops”.

One cannot blame Goldman for playing the game all of them play the best. They are within the rules, if you do not like the rules, change them but until you do, too bad.

Goldman reports earnings on Tuesday and current estimates are in the neighborhood of $6.61 a share, essentially flat from last years $6.59. What this means is that people have no idea what Goldman is going to earn. When you throw the fact that two of the last three quarters Goldman has beaten the estimates by about 40%, one should take the estimates at a floor, rather than the actual number.

Look for revenues coming in around $11 billion, up from $9.4 last year and earnings approaching $8 a share. Perhaps then we can get this sucker back to where the stock should be, $250 a share and rising?

Donate to the ValuePlays Project for KIVA

Subscribe in a reader

UPGRADES
Telus TU Canaccord Adams Hold » Buy
Penn Virginia PVA RBC Capital Mkts Outperform » Top Pick
Syniverse Holdings SVR Wedbush Morgan Buy » Strong Buy
Enersis S.A. ENI UBS Neutral » Buy
Empresa Ncnl Elec EOC UBS Neutral » Buy
Walt Disney DIS UBS Neutral » Buy
Cintas CTAS Barrington Research Mkt Perform » Outperform
Universal Truckload Services UACL Stifel Nicolaus Hold » Buy
Canadian Natl Rail CNI Stifel Nicolaus Hold » Buy
Jetblue Airways JBLU Bear Stearns Underperform » Peer Perform
Network Equip NWK Brean Murray Hold » Buy
United Online UNTD Jefferies & Co Hold » Buy
Jack In The Box JBX Wachovia Mkt Perform » Outperform
Rigel Pharms RIGL Lehman Brothers Equal-weight » Overweight
Hecla Mining HL CIBC Wrld Mkts Sector Underperform » Sector Perform
Affymetrix AFFX UBS Neutral » Buy

DOWNGRADES
Quebecor World IQW BMO Capital Markets Market Perform » Underperform
Aon AOC Wedbush Morgan Buy » Hold
Pennant Investment PNNT Bear Stearns Outperform » Peer Perform
MGI Pharma MOGN BMO Capital Markets Outperform » Market Perform
Citigroup C Sandler O’Neill Buy » Hold
Mettler-Toledo MTD Robert W. Baird Outperform » Neutral
Hub Group HUBG Stifel Nicolaus Buy » Hold
Heartland Express HTLD Stifel Nicolaus Buy » Hold
Phase Forward PFWD Brean Murray Buy » Hold
Panera Bread PNRA Sun Trust Rbsn Humphrey Buy » Neutral
Exelon EXC Deutsche Securities Buy » Hold
GSI Commerce GSIC Jefferies & Co Buy » Hold
Neurocrine Biosci NBIX Bear Stearns Peer Perform » Underperform
Hollywood Casino HWD RBC Capital Mkts Outperform » Sector Perform
Frontier Oil FTO Credit Suisse Outperform » Neutral
Devon Energy DVN Credit Suisse Outperform » Neutral
Quicksilver Resrcs KWK Credit Suisse Outperform » Neutral
EOG Resources EOG Credit Suisse Neutral » Underperform
Newfield Expl NFX Credit Suisse Neutral » Underperform
Marshall & Ilsley MI Banc of America Sec Buy » Neutral
U.S. Concrete RMIX Citigroup Hold » Sell

Donate to the ValuePlays Project for KIVA

Subscribe in a reader

The United States Senate passed the Energy Bill 86-8 after $13 billion in oil company taxes were dropped from the bill.

Voting on an earlier version of the bill with the tax package still included, the Senate came up one vote short (59-40) of ending a filibuster staged by Senate Republicans in support of the oil companies. The bill will now go to the House where it is expected to pass, and the President is expected to sign the legislation into law before the end of the year.

The Bill mandates that 36 billion gallons of biofuel fuel consumption by 2022, or more than 25 percent of total fuel use based on 2006 consumption.

The big winners here clearly are both the biofuels industry, lead by Archer Daniel’s Midland (ADM), Pacific Ethanol (PEIX) and Verasun (VSE) and oil companies like Exxon (XOM) and Chevron (CVX) who avoided a large tax increase. Actually consumers are the winners in the tax break because if anyone thinks for a minute these taxes would not have been passed onto us, they are void of any reality. That is not to say the oil companies are bad, is just the reality.

That being said, let look at the biofuel mandate. Clearly we cannot get 36 billion gallons of ethanol from corn at current production capabilities. Now that we have acknowledged that, do we really think that we will be producing the fuel exactly the same way 15 years from now? When you consider we get almost 30% more yield per bushel that we did 5 years ago, progress is clearly being made.

Notice also the mandate is for “biofuels”, not just “ethanol”. That includes biodiesel in the mix. The largest US biodiesel producer is ADM. Now we have the ability in the US to dramatically expand the biodiesel use and recent breakthroughs in that arena, can give us a clue into what can happen in the ethanol arena.

In Germany, Choren Industries announced recently that it will build a 57 Mgy biodiesel plant in Schwedt. The plant, scheduled to open in late 2010, will use a second-generation process, called biomass-to-liquid, which uses sawdust and wood chips as feedstock among other waste materials. The plant will eventually have five production units and has a total planned capacity of 285 Mgy by 2015. Choren’s first commercial-scale plant, which will produce 4 Mgy of biodiesel from wood waste, opens in spring 2008 in Freiburg.

This is essentially the “cellulose” process that had been so touted as the answer. It is too. We can currently produce ethanol from biomass using similar processes, we are now working on making them economically viable. Costs have fallen dramatically in only the past two years and most in the industry feel it is only a couple years before we begin production this way.

While it may seem a lofty goal, when one sits back and looks at it and notices the advancements done in the area just in the past two year, the goal seem like the current “ethanol mandate”, a mandate that the biofuels industry will blow right pass when the time comes.

Donate to the ValuePlays Project for KIVA

Subscribe in a reader

Insider Purchases
Limited Brands Inc LTD = $6,561,000
Goodrich Petroleum Corp GDP= $6,110,000
Rick’s Cabaret International Inc RICK = $4,033,000
Patriot Coal Corp PCX = $3,265,000
Centennial Bank Holdings Inc CBHI = $2,975,000
Post Properties Inc PPS = $2,956,000
Lions Gate Entertainment Corp LGF = $2,568,000
Aquila Inc ILA = $2,542,000
Revlon Inc REV = $2,049,000
Hercules Offshore Inc HERO = $1,912,000
Syntax Brillian Corp BRLC = $1,771,000

Dividend Increases
Anworth Mortgage-ANH = 140%
Balchem Corp-BCPC = 83.3%
Agnico Eagle Mn-AEM= 50.0%
Interactive Data Corp-IDC= 20.0%
Sinclair Broadcasting A-SBGI= 16.7%
Boeing Co-BA = 14.3%
Myers Industries-MYE= 14.3 %
AT & T Inc-T = 12.7%
General Electric Co-GE = 10.7%

Donate to the ValuePlays Project for KIVA

Subscribe in a reader

Do Not Call, Black or Vick, Activist blogger, Signs

– Congress does something that makes sense.

– I would rather be Conrad Black, he will have a future when he gets out.

– Blogger Zack Bissonette is running an activist shareholder campaign, it seem to be working.

– This is very interesting

Donate to the ValuePlays Project for KIVA

 Subscribe in a reader

This saga is just about over. Sherwin Williams (SHW) just keeps getting good news almost daily now.

Jane Genova posted on Wednesday:

“Toldeo, OH Lead Public Nuisance Case Dismissed by Judge Franks

The news is that today Judge Ruth Franks dismissed the City of Toledo, Ohio lead paint public nuisance case against the former lead-paint companies, including Sherwin-Williams. The plaintiff was represented by law firm Motley Rice. The only remaining city lawsuit in this category in OH is that of the City of Columbus.

But it is the line of argument used by Judge Franks in her opinion that is getting the attention of lead-paint watchers, especially attorneys on both sides. This Judge goes through each of the plaintiff’s claims and the defendants’ contentions why the case should be dismissed. Then in this 12-page opinion she cites each legal issue and why or why not it led her to her decision.

Because of this painstaking analysis of the legal matters and that the Judge dismissed the case, a number of defense attorneys predict this is a promising sign that it is the legal arguments which will win out in any future litigation and reviews of the lead-paint public nuisance matter.

What is also encouraging to the defense bar is that in this particular situation, as Judge Franks writes, “When ruling on a motion to dismiss, the complaint is to be construed in a light most favorable to the plaintiff and material allegations are taken as admitted … To sustain a motion to dismiss it must appear beyond doubt from the complaint that no set of facts exists which may entitle the plaintiff to the relief requested.” [Complimentary copy of the opinion is available from MGenova981@aol.com.]

In its first cause of action, the City of Toledo claimed a public nuisance. It alleged that the defendant had created it by negligent or intentional conduct. This breached its duty to exercise the highest degree of care in the design, manufacture etc. of lead. As a direct and proximate cause of this public nuisance, plaintiff has suffered and will continue to suffer substantial injuries and damages.

In their motion to dismiss, the defendants argued:

* Public nuisance claim is subsumed and barred by Ohio’s Product Liability Act
* The claim is barred by the statue of limitations
* Plaintiff fails to allege that defendants control the alleged public nuisance
* Continued presence of intact lead cannot be considered a nuisance because it is legislatively permitted. [the lead-safe issue].

Given that Judge Franks explicitly addressed each side’s contentions, this is a key opinion in the lead-paint public nuisance saga.

Note: The law firm Motley Rice is not representing the State of OH in its public nuisance lead-paint lawsuit filed by state Attorney General Marc Dann.” End Post

Donate to the ValuePlays Project for KIVA

 Subscribe in a reader

Am I the only one who just does not see the big deal here?

Citigroup (C) announced it is bringing $49 billion in assets onto its balance sheet by adding seven SIV’s to the company’s ledgers. The SIVs currently have $49 billion in assets, down from $87 billion in August. Like other banks, it has been selling the SIVs’ assets recently to ease pressure on the vehicles. Banks such as HSBC (HBC) and Bank of America (BAC), have also sold assets to support their SIVs.

Why is this just not a huge deal? When you talk about Citi, unless you are talking about figures in the hundred of billions of dollars, it just does not add up to much when you look at Citi’s near two trillion dollar asset base.

Witness, by bringing the SIV assets onto its balance sheet, Citigroup will see Tier 1 capital ratio, the gauge of the bank’s ability to absorb huge losses drop 16 basis points from about 7.3% as of Sept. 30, to 7.14%. While that is below the company’s internal target level of 7.5%, it still will remain above regulatory requirements.

Now the usual talk is out there about a dividend cut as Betsy Graseck, a Morgan Stanley analyst said that if the SIV assets were brought onto Citigroup’s balance sheet, the company would need to cut its quarterly dividend to 30 cents from 54 cents next year.

Won’t happen. Should the dividend get cut, after the board has denied it will and Pandit has supported that with his statements, the stock would get decimated. Will there be asset sales to assure it will not happen? Probably. If one of Pandit’s first moves at the helm is to announce a dividend cut, he is dead in the water.

Investors will call for his and the boards heads…. assuming they have some sort of desire for self preservation in their DNA, I will say that avoid that scenario at all cost. It does give the analysts nice headlines every time they come out and say it though…

Donate to the ValuePlays Project for KIVA

 Subscribe in a reader

UPGRADES
Biogen Idec BIIB Piper Jaffray Sell » Neutral
Sunoco SUN Deutsche Securities Hold » Buy
Cree CREE Piper Jaffray Neutral » Buy
Kilroy Realty KRC Friedman Billings Mkt Perform » Outperform
Cynosure CYNO Citigroup Hold » Buy
BMC Software BMC Credit Suisse Neutral » Outperform
Biogen Idec BIIB Credit Suisse Underperform » Neutral
SLM Corp SLM Keefe Bruyette Mkt Perform » Outperform
ADC Telecom ADCT Merriman Curhan Ford Neutral » Buy

DOWNGRADES
American Dental ADPI Dougherty & Company Buy » Neutral
Select Comfort SCSS Northland Securities Outperform » Market Perform
Colnl BancGrp CNB Morgan Keegan Outperform » Mkt Perform
Dynegy DYN Calyon Securities Buy » Add
Capital One COF Jefferies & Co Buy » Hold
Baldor Electric BEZ Bear Stearns Outperform » Peer Perform
Par Pharmaceutical PRX Lehman Brothers Overweight » Equal-weight
Plantronics PLT JP Morgan Neutral » Underweight
Washington Mutual WM Banc of America Sec Neutral » Sell
Red Hat RHT Banc of America Sec Buy » Neutral

Donate to the ValuePlays Project for KIVA

 Subscribe in a reader

Friday’s Picks
Jeff Macke likes Corning (GLW). Open $24.70

Guy Adami thinks Biogen (BIIB) is a buy on its recent dip.Open $57.91

For the second day in a row Karen Finerman recommends shorting MBIA (MBI).Open $29.51

Pete Najarian prefers Energy Conversion Devices (ENER).Open $32.45

Thursday’s Results
Jeff Macke recommends shorting the Dow with Shrt Dow30 Proshares (DOG).Open $58.90 Close $58.64 LOSS

Guy Adami thinks Cisco (CSCO) is a buy. Open $28.80 Close $29.06 GAIN

Karen Finerman prefers shorting MBIA (MBI).Open $31.92 Close $29.51 GAIN

Pete Najarian likes Johnson & Johnson (JNJ). Open $67.70 Close $67.87 GAIN

Guy Adami= 54-42 = 58%
John Najarian= 13-4 = 76%
Jeff Macke= 58-38 = 64%
Pete Najarian= 43-39 = 54%
Tim Seymore= 6-7 = 57%
Karen Finerman= 35-29 = 54%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%

Donate to the ValuePlays Project for KIVA

 Subscribe in a reader