Sears, Oprah, , Hysteria, Verizon
– Chad Brand has a great piece on Sears
– TV in a fridge, an attempt to get more men in the kitchen?
– Felix Salmon has a notable piece on those who push hysteria.
– Another reason to hate Verizon.
Jane Genova has this tidbit from an attorney on the Rhode Island Supreme Court on Sherwin Williams (SHW) litigation.
The last paragraph is the most interesting:
“Our Midwest attorney lead-paint watcher who doesn’t encourage the third gen in the family to enter law differs with my take on the Rhode Island Supreme Court. This attorney opines, off the record:
“I respectfully disagree with your perception that the Rhode Island Supreme Court will not overturn the lower court’s decision. There are so issues which are under appeal. Surely, the Rhode Island Supreme Court will sense that it’s called upon to address and correct some of what might have been errors from the original trial. At the top of that list are the instructions which were given to the jury.
“As I see it, it would be best for Rhode Island if the Supreme Court there corrects all or at least most of all that. Therefore, the damage of those rulings could be fixed in the eyes of those who reside outside of the state.
“If this winds up going to the U.S. Federal Court, it will take decades for Rhode Island to re-brand itself. That will only occur with a complete political overhaul. In addition, if this goes to the U.S. Supreme Court, it will be a major embarrassment for Motley Rice, the lower court and even the Rhode Island Supreme Court. Due process was never afforded to the defendants and legal interpretations were of one man’s mind.
“Furthermore, I am not sure if everyone realizes that if nothing is overturned and if all goes forward, each property to be abated is technically a separate trial. Plus, the defendant bar is in a position to use the dysfunctional rulings used against them to sue each local city and landlord for contributing to the public nuisance. That is the strange thing: Rhode Island can collect their money as does Motley Rice and then each city can be sued for not enforcing laws already in the books. These cities have fewer resources and have a great chance of losing and/or depleting their resources fighting each case.”
The recent Fed meeting minuted were released today and for those counting on another rate cut in 3 weeks, you might want to rethink that.
From the Meeting:
“In their discussion of individual sectors of the econ-omy, participants noted that the recent declines in housing activity—while substantial—had largely been anticipated. Nonetheless, the potential for significant further weakening in housing activity and home prices represented a downside risk to the economic outlook. Most participants pointed to the deterioration in non-prime mortgage markets as well as higher interest rates and tighter credit standards for prime nonconforming mortgages as factors that had exacerbated the deterio-ration in housing markets, and they noted that these developments could further limit the availability of mortgage credit and depress the demand for housing.
Some participants also pointed to downside risks to the housing market stemming from the large volume of substantial upward interest-rate resets that were likely on subprime mortgages in coming quarters, which could lead to a faster pace of foreclosures in the near term, thereby intensifying the downward pressure on house prices. Participants generally agreed that the available data suggested that consumer spending had been well main-tained over the past several months and that spillovers from the strains in the housing market had apparently been quite limited to date. Nevertheless, a number of participants cited notable declines in survey measures of consumer confidence since the onset of financial turbulence in mid-summer, along with sharply higher oil prices, declines in house prices, and tighter under-writing standards for home equity loans and some types of consumer loans, as factors likely to restrain con-sumer spending going forward.
Moreover, anecdotal reports by business contacts suggested a softening in retail sales in some regions of the country. Participants expressed a concern that larger-than-expected declines in house prices could further sap consumer confidence as well as net worth, causing a pullback in consumer spending. All told, however, participants envisioned that the most likely scenario was for consumer spend-ing to continue to advance at a moderate rate in com-ing quarters, supported by the generally strong labor market and further gains in real personal income. Meeting participants noted that capital expenditures had grown at a solid pace in recent months and that the financial turmoil generally appeared to have had a limited effect on business capital spending plans to date. Nevertheless, business sentiment appeared to have eroded somewhat amid heightened economic and financial uncertainty, potentially restraining investment outlays in some industries.
However, participants noted that conditions in corporate bond markets had improved since the September FOMC meeting, and that credit availability generally appeared to be ample, albeit on somewhat tighter terms. Participants judged that moderate growth of investment outlays going for-ward was the most likely outcome. A number of par-ticipants saw downside risk to the outlook for nonresidential building activity, reflecting elevated spreads on commercial-mortgage-backed securities and a further tightening of banks’ lending standards for commercial real estate loans.
Data on economic growth outside the United States indicated that the global expansion, though likely to slow somewhat in coming quarters, was nevertheless on a firm footing. The continued strength of global growth and the recent decline in the foreign exchange value of the dollar were seen as likely to support U.S. exports going forward. Readings on core inflation received during the inter-meeting period continued to be generally favorable, and meeting participants agreed that the recent moderation in core inflation would likely be sustained.
The slower pace of economic expansion anticipated for the next few quarters would help ease inflationary pressures. Nonetheless, participants expressed concern about the upside risks to the outlook for inflation. The recent increases in the prices of energy and other commodities, along with the significant decline in the foreign exchange value of the dollar, were cited as factors that could exert upward pressure on prices of some core goods and services in the near term. Increases in unit labor costs also could add to inflationary pressures.
Moreover, participants expressed concern that some measures of inflation compensation calculated from TIPS securities had risen this year, although they viewed inflation expectations generally as remaining contained. Participants were concerned that if headline inflation remained above core measures for a sustained period, then longer-term inflation expectations could move higher, a development that could lead to greater inflation pressures over the longer term and be costly to reverse.”
Energy prices have to eventually find their way into the CPI number and when they do, any chance of a rate cut is zero. What the Fed may choose to do instead rather than have their hands tied when that eventually happens is keep rates where they are now to force a mild slowdown and let that take the pressure off oil demand and thus its impact on consumers. This then leaves them the flexibility they want down the road should growth slow dramatically to cut rates to spur it.
Bank stocks like Citigroup (C), Bank of America (BAC), Wachovia (WB) and Wells Fargo (WFC) may get hit again on the news but they are all in fine shape and any additional selling will be a great chance to pick up more cheap.
The only way I see another rate cut in December is if there is another dramatic shock to the system. Barring that count on the status quo..
Friday’s Picks
No Picks
Wednesday’s Results
Jeff Macke recommended buying Microsoft (MSFT). Open $34.58 Close $34.23 LOSS
Guy Adami preferred Freeport McMorRan (FCX).Open $91.85 Close $90.06 LOSS
Karen Finerman said to short iShares Dow Jones US Real Estate ETF (IYR).Open $67.05 Close $66.55 GAIN
Pete Najarian is buying Pulte Homes (PHM) Open $10.60 Close $9.25 LOSS
Records: Since 6/21/2007
Guy Adami= 46-40 = 60%
John Najarian= 13-4 = 76%
Jeff Macke= 53-35 = 62%
Pete Najarian= 35-36 = 48%
Tim Seymore= 5-5 = 50%
Karen Finerman= 29-21 = 59%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
UPGRADES
EDS EDS Bernstein Mkt Perform » Outperform
BB&T Corp BBT Oppenheimer Sell » Neutral
Orient-Express OEH UBS Neutral » Buy
NOVA Chemicals NCX UBS Neutral » Buy
Office Depot ODP Credit Suisse Underperform » Neutral
Deutsche Telekom DT Lehman Brothers Underweight » Equal-weight
Dick’s Sporting Goods DKS Citigroup Hold » Buy
DOWNGRADES
Smithfield Foods SFD Davenport Buy » Neutral
eHealth EHTH FTN Midwest Buy » Neutral
Highwoods Prop HIW Stifel Nicolaus Buy » Hold
Colonial Properties CLP UBS Neutral » Sell
Jamba JMBA Morgan Joseph Buy » Hold
Stein Mart SMRT Sun Trust Rbsn Humphrey Buy » Neutral
Hibbett Sporting HIBB CIBC Wrld Mkts Sector Outperform » Sector Perform
Gorman-Rupp Company GRC Friedman Billings Mkt Perform » Underperform
Office Depot ODP Bear Stearns Outperform » Peer Perform
Circuit City CC JP Morgan Overweight » Neutral
Telecom Italia TI Lehman Brothers Equal-weight » Underweight
Hot Topic HOTT Citigroup Buy » Hold
WEN Wendy’s International … 27.46
WCI WCI Communities, Inc 3.74
WBSN Websense Inc 16.18
TWX Time Warner Inc 16.55
TWP Trex Inc 6.47
TWB Tween Brands Inc 25.13
RGS Regis Corp 26.35
RGCI Regent Communications … 2.06
RCMT RCM Technologies Inc 4.95
R Ryder System, Inc 39.43
PER Perot Sys Corp 12.90
PEIX Pacific Ethanol Inc 4.30
MS Morgan Stanley 48.51
MRX Medicis Pharmaceutica … 25.47
MRT Mortons Restaurant Gr … 12.44
MOT Motorola, Inc 15.33
LOW Lowe’s Companies, Inc 22.11
LLY Eli Lilly and Company 49.09
HSY Hershey Co 38.30
CEM Chemtura Corp 7.13
CCFH CCF Holding Company 12.00
CC Circuit City Stores, … 5.45
C Citigroup, Inc 30.73
BZH Beazer Homes USA, Inc 8.00
BX Blackstone Group L P 21.02
Adam Warner, Gruffalo, Prostitutes,
– Adam just put a dent in my holidays with the realization I may not get “24” in January. Like I needed another reason to disdain Hollywood?
– Nothing reads like Gruffalo for your kids.
– What would you rather be arrested for?
–
Why does Wall St. want Sears Holdings (SHLD) Eddie Lampert to buy more stores, doesn’t he have enough already? Aren’t they always saying that mergers never work? If that is true, why are shareholders wanting a big one and why are they disappointed he is trying to buy a small specialty retailer.
Two news item shed light into what Lampert is doing and no it does not include the purchase of Circuit City (CC), Home Depot (HD) or even the oft speculated about Macy’s (M) .
First: The New Retail Concept In Georgia (this location was a former Kmart).
“Sears will come to life by offering customers a “store-of-shops,” and a fresh design layout with different flooring, fixtures, and displays. Marquee brand names now found in the new Sears include Sony, Hanes, Workwear – by Craftsman, Carhartt, Timberland and Diehard apparel, Levi’s, and Nordic Track. The store will also feature expanded Home Electronics and Home Appliance showrooms, organized around favorite manufacturers, that will also help customers choose the right look, feel and function with other brands Sears carries.
A newly remodeled hardware department will feature innovative and interactive Garage Organization, Mechanics and Carpentry shops to help customers find the right item quickly and efficiently.
Five central internet workstations located throughout the sales floor will provide free high-speed Web access to enable both the customers and associates to quickly access the internet, verify prices, shop online and contact store personnel if help is needed.
The store will also carry a wide range of convenience items previously available at the former Kmart location including full pharmacy services, health and beauty, cosmetics and greeting cards.
This new format will help customers create the look they want and find the gifts they need all in one convenient location. Shoppers will find the quality brands they have come to know and love like Diehard, Craftsman, Ty Pennington, and Kenmore plus extended assortments of national brands from Nordic Track, Schwinn, Reebok and more. Customers can also shop for great fashions with the first 23,000 sq. foot mega Lands’ End shop that brings the legendary brand to life with items for women, men, kids, baby and home. Now families can touch and feel the quality and see the details of Lands’ End products. A special monogramming service is also available to easily personalize just about any Lands’ End item that will take a stitch. There’s even free shipping on any catalog or landsend.com order placed from the store.”
Another Brand:
Sears Holdings take a 13% stake in Restoration Hardware and is looking at acquiring entire operation.
Now, if you are going to build a nationwide operation of these stores, what do you need? BRANDS. Lampert already has about 3,5000 locations is both the US and Canada. Why would he need to buy another retailer and adopt more locations?
Think about it. What is the most expensive thing a growing retailer experiences? Building new locations. Just ask Target, they are begging Lampert to sell them hundreds of his prime locations because it is cheaper than building them. More space is not what Lampert needs.
What is Lampert going to do? Smaller acquisition of brands that he can then plug into the new concept. Worse case scenario with the Restoration Hardware deal if it goes through, they close up its “back of the house” operations and sell the products through the Land’s End catalog and stores and it is still a winner for him. One good thing about a successful mail order business, no matter who owns it, it makes money. Land’s End, who has years or success here can only make it better.
So, if we go with the Brands thesis, what do we look for? Women. Sears has men with Craftsmen and Kenmore. How about going after Victoria’s Secret or Bath & Body
Works from the struggling Limited Brands (LTD). Either would bring women into Sears for their products and traffic is what Lampert needs and has been shedding assets. Or, buy the whole company currently valued at $6.5 billion and then sell off the unwanted pieces to help pay for it. Maybe for just over a billion dollars he could go for Carter’s (CTI) and create a top notch children’s “store in a store”. Any mother knows Carter’s makes some of the best children’s clothing out there.
Either way, next week’s earnings announcement will be a fun one.
Target (TGT) announced earnings this morning and while the EPS numbers were not good, (below estimates), revenues were good (up 9.3%). This is good news for folks like Wal-Mart (WMT) because it means people are still shopping at discount retailers. since nobody controls costs like Wal-Mart does, investor ought to be comforted that folks are still spending.
Here is more bad news. If we back out the credit card operations that Bill Ackman has them selling, EBIT in 2007 was $801 million vs $823 million in 2006. That equates to a 3% drop this year. Now, one must also understand earnings without the credit card results would be 17% lower and that this segment is growing at 17%. Retail results without the credit operation will be far worse than they are now.
Regarding the credit card sale? Maybe it is not a sure thing. “At this point in the review, it is clear that if a transaction occurs, it would involve sharing a meaningful portion of our future pre-tax credit card contribution with a new partner,” said Doug Scovanner, chief financial officer. “As a result, we are continuing to evaluate whether the benefits of a potential transaction outweigh its expected dilutive impact on earnings per share. Regardless of the outcome, we remain committed to maintaining our core financial services operation and growing and developing our best-in-class Target Financial Services team.”
Keep it….
Good News?
“Target also announced today that its board has authorized a new $10 billion share repurchase program that replaces the prior authorization. At recent share price levels, this authorization represents more than 20 percent of outstanding shares. The program is expected to be completed within three years, with the pace of repurchase activity being dependent on many factors, including: the strength of our business operations, the maintenance of an appropriate credit profile, capital reinvestment opportunities, access to adequate liquidity and debt and equity capital market conditions. Based on current conditions and outlook, a significant portion of the program is expected to be completed by the end of 2008. This new authorization is not contingent on any specific outcome from the review of the ownership of Target’s credit card receivables.”
Now that is how you announce a buyback. Target produces about 10% of its market cap a year in cash flow from operations so it can easily finish the repurchase plan without mortgaging the future of the company like Home Depot (HD) is trying to do.
Target is being very conservative with both it cash and the credit card sale possibility and both are good form investors.
I have no position in Target.
UPGRADES
Dillard’s DDS Oppenheimer Sell » Neutral
Evergreen Solar ESLR Janco Partners Mkt Perform » Buy
Nucor NUE Soleil Sell » Hold
Celgene CELG BMO Capital Markets Market Perform » Outperform
Tyson Foods TSN BMO Capital Markets Market Perform » Outperform
Polaris Inds PII Banc of America Sec Sell » Neutral
WellCare Group WCG CIBC Wrld Mkts Sector Perform » Sector Outperform
Fresh Del Monte FDP Piper Jaffray Neutral » Buy
Under Armour UA UBS Neutral » Buy
Progressive Gaming PGIC Roth Capital Hold » Buy
iGATE IGTE Roth Capital Hold » Buy
China Petroleum (Sinopec) SNP UBS Sell » Neutral
Kendle KNDL UBS Neutral » Buy
Statoil ASA STO UBS Neutral » Buy
United Rentals URI JP Morgan Underweight » Neutral
Home Inns HMIN Susquehanna Financial Negative » Neutral
Starbucks SBUX Friedman Billings Mkt Perform » Outperform
Dollar Tree DLTR Lehman Brothers Equal-weight » Overweight
Embarq EQ Lehman Brothers Underweight » Equal-weight
Hess HES UBS Neutral » Buy
Exxon Mobil XOM UBS Neutral » Buy
Buckeye Tech BKI Citigroup Sell » Buy
Knight Trading NITE Keefe Bruyette Underperform » Mkt Perform
Franklin Bank Corp FBTX Keefe Bruyette Underperform » Mkt Perform
Wynn Resorts WYNN Jefferies & Co Hold » Buy
McAfee MFE Jefferies & Co Hold » Buy
Sykes Enterprises SYKE Susquehanna Financial Neutral » Positive
Suncor Energy SU CIBC Wrld Mkts Sector Perform » Sector Outperform
DOWNGRADES
Pharmion PHRM BMO Capital Markets Outperform » Market Perform
Transdigm Group TDG Calyon Securities Buy » Neutral
Quadra Realty QRR Wachovia Outperform » Mkt Perform
Kennametal KMT Wachovia Outperform » Mkt Perform
Ashford Hospitality Trust AHT RBC Capital Mkts Sector Perform » Underperform
Starbucks SBUX CIBC Wrld Mkts Sector Outperform » Sector Perform
Wednesday’s Picks
Jeff Macke recommended buying Microsoft (MSFT). Open $34.58
Guy Adami preferred Freeport McMorRan (FCX).Open $91.85
Karen Finerman said to short iShares Dow Jones US Real Estate ETF (IYR).Open $67.05
Pete Najarian is buying Pulte Homes (PHM) Open $10.60
Tuesday’s Results
Jeff Macke recommended Dick’s Sporting Goods (DKS) Open $29.01 Close $30.54 GAIN and Target (TGT) Open $53.90 Close $51.69 LOSS for a “quickie trade” of Nordstrom (JWN). Open $30.52 Close $34.21 GAIN
Pete Najarian would buy Echostar (DISH).Open $47.49 Close $43.24 LOSS
Karen Finerman reiterated her frequent final trade: Long Goldman Sachs (GS) Open $220.54 Close $218.28 LOSS, short Lehman Brothers (LEH).Open $60.55 Close $60.77 LOSS
Guy Adami was bullish on Vodafone (VOD). Open $38.97 Close $39.10 GAIN
Guy Adami= 46-39 = 62%
John Najarian= 13-4 = 76%
Jeff Macke= 53-34 = 64%
Pete Najarian= 35-35 = 50%
Tim Seymore= 5-5 = 50%
Karen Finerman= 28-21 = 58%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
Add almost all the homebuilders to the list
XJT Expressjet Holdings Inc 2.37
WOLF Great Wolf Resorts Inc 11.22
WNC Wabash National Corpo … 7.12
WMAR West Marine Inc 9.07
WGO Winnebago Industries, Inc 22.03
PZN Pzena Investment Mgmt Inc 12.79
NUTR Nutraceutical Intl Corp 11.86
NTRI Nutri Sys Inc New 21.97
NANX Nanophase Tchnologies … 3.58
MZ Milacron Inc 3.44
MU Micron Technology Inc 8.51
JXSB Jacksonville Bancorp … 10.60
JRC Journal Register Co 2.00
JOE St. Joe Company 28.95
FRE Freddie Mac 27.89
FNM Fannie Mae 30.75
D Dominion Resources Inc 46.11
CPB Campbell Soup Company 34.48
COHT Cohesant Technologies Inc 6.00
AVR Aventine Renewable Energy 8.33
ALG Alamo Group Inc 17.09
AIM Aerosonic Corporation 4.90
AIB Allied Irish Banks, P … 40.15
Romney, Lampert, Confirmation, Murdoch
– Now, if you truly believe the nation is “in trouble” and you honestly will vote for the “most qualified person”, how can you vote for anyone other than this guy?
– Sears Holdings boards member Richard Perry’s thoughts on Eddie Lampert
– Like me, this blogger enjoys the validation his thought process gets when the worlds greatest investors are buying the same stocks he is.
– Remember the dire predictions when Ruppert bought Dow Jones, right, all crap.
Wachovia (WB) director Lanty smith is at it again.
He followed up his 100,000 share purchase last week with another 37,000 share purchase on Wednesday (11/15). since the end of August smith has purchased almost $8 million dollars of Wachovia stock at prices between $38 and $48 a share. Smith now owns 220,000 shares of the bank.
The purchases make smith the third largest individual shareholder at Wachovia.
Superinvestor Peter Lynch famously once said, “There are a multitude of reasons insiders sell shares that have nothing to do with the health or the future of the company. I can only think of one reason they would use their own money to buy shares, they think the share price is going up.”
Wachovia insiders are placing big bets on the company and that is worth noting
Full disclosure. I am no longer a CSX (CSX) shareholder as we swapped out of it and into Citigroup (C) recently. Now, to the letter.
First things first. Here is the letter.
The letter essentially lays out the accomplishments of management the past several years as the reason to dismiss every proposal made by TCI. Here is the problem with doing it that way. CSX still trails and ranks at the bottom of the major railroads in several key metrics.
Yes they have improved but, and this is the point that TCI was making, that improvement was due to a resurgence of the industry they operate in, not necessarily due to deft management. TCI argues that had management been better, the improvement at CSX would have been much greater and shareholders would have been rewarded much more.
What CSX is saying is akin to a sprinter after a race saying, “I beat my best time by 4 seconds, but still came in fourth, can I have a medal please?” No, you can’t. I does not go that way. Your improvement still places you in last place.
CSX has placed itself into a precarious situation now. They are triumphing the stock price as a reason not to change. But, if we slide into a recession one can bet that the stock price will reverse and then CSX needs another excuse to ignore TCI. This will make the board look questionable at best, hen pecked at worst.
CSX is ignoring the railroad industry fundamentals and how much that has driven their success while at the same time taking too much credit for them. Their improvement, while very good, was not as good as their peers and when the economy slows down and their situation deteriorates faster than the other railroads, the reasons they gave for brushing off TCI will come back to haunt them.
