ValuePlays

Monday’s Picks

Nobody stepped up to the plate for Monday..

Friday’s Results

Jeff Macke recommended buying Electronic Arts (ERTS). Open $58.74 Close $60.46 GAIN

Guy Adami liked Intel (INTC). Open $26.50 Close $26.80 GAIN

Karen Finerman preferred Flowserve (FLS). Open $75.39 Close $88.33

Pete Najarian said Cypress (CY) is a buy. Open $36.08 Close $35.65 LOSS

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks). The percentage is the percentage of successful picks

Guy Adami= 41-24 = 63%
John Najarian= 13-4 = 76%
Jeff Macke= 46-32 = 55%
Pete Najarian= 30-28 = 52%
Tim Seymore= 4-3 = 57%
Karen Finerman= 24-13 = 63%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%

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Well, Monday ought to be an interesting day for Citigroup (C) shareholders.

Just yesterday I said the emergency meeting of the Board of Directors Sunday was going to mean “more write-down and the end of the reign of Prince.” It looks like that will come to fruition.

Prince suffered mainly from being “the guy who followed the guy” who was very dynamic and made shareholders very wealthy. You never want to be the follower. You always want to be “the guy who follows the guy who followed the guy”. Expectation are so low now any improvement at all will be met with immense enthusiasm where the same improvement with Prince would have been looked at with an “its about time” scorn. Fair or not, it is just the way it is.

Folks expect Prince to be an extension of Sandy Weill and when he wasn’t, he was doomed. We have to give Prince some credit though. The Citigroup he inherited was in legal and regulatory trouble and he did calm the waters and clear the decks of these issues. That being said, his job now is done. What Citi needs is a far more dynamic leader and one with a Wall St. pedigree.

Who?
Vikram S. Pandit, who was elevated to head Citigroup’s investment bank and alternative investments group in early October? No. Not enough experience heading an institution as large and diverse as Citigroup.

Robert Druskin, the chief operating officer and the former head of Citigroup’s investment bank? No. The last thing Citi needs now is another internal appointment and his friendship with Prince will hurt his chances.

Board member Robert Rubin, who has been one of Mr. Prince’s advisers and advocates? No, but he should be forced to take over in the interim as he need to do something to justify the $100 million he has made with Citi. His reputation has been blighted by his seemingly blind support for Prince despite Citi’s obvious problems and he needs to take action to rectify it. Should Rubin not elect to take over in the interim, he ought to be asked to leave as one has to then seriously wonder what he has done to justify any monies he has received.

Who then?

Two names, Hank Paulson or John Thain, both former Presidents at Goldman Sachs (GS). The hiring of either of these two would focus shareholders and the market on the future and “what can be” rather than having both entities spending their time looking on the rear view mirror longing for the “good ole’ days”.

Thain, who is the current President of the NYSE may not be able to resist getting back into the game and playing with Citi’s operations. Paulson recognizes he only has a year left at his current post in Washington and would command a pretty penny to run Citi, a penny shareholders would gladly pay at this point. Now, with the Merrill Lynch (MER) job open also, the competition for a Chief will be intense assuming both firms will be looking to the outside for a replacement (they really ought to be). When you add Bear Sterns (BSC) possibly looking for a replacement for James Cayne, things may heat big time very quickly. That being said, one cannot underestimate the importance of this hire form Citi as it will frame expectations for the company through the current decade.

Citi is a massive operation with immense value at current prices for the right CEO who can make its diverse part work cohesively together. The new CEO is going to get a grace period and Citi can then use that to announce any additional write-downs should they then be necessary.

All this will have to take place before the next earning filing with the SEC though as whomever is in charge will have to certify the filing and any write-downs will then have to be done.

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Allegheny Technologies (ATI)= +38%
Comfort Systems (FIX)= +28%
CBS (CBS)= 13%
Dominion Resources (D)= +11%
Perrigo (PRGO)= +11%
Snap-On (SNA)= +11%
Cascade Bancorp (CACB)= +11%

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Harrington West Financial (HWFG)= $5,085,000
Smithfield Foods (SFD)= $4,677,000
Private Media Group (PRVT)= $3,300,000
World Acceptance Corp. (WRLD)= $2,374,000
Sandisk (SNDK)= $2,038,000
Whirlpool (WHR)= $843,000
Wachovia (WB)= $448,000
Americredit (ACF)= $440,000

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The Board of Citigroup (C) has scheduled an emergency meeting for this weekend.

When a company worth nearly a quarter trillion dollars loses 1/4 of that worth in half a month, folks need to know what is going on.

– Is Prince finally out?
– Is the dividend safe?
– Are more write-downs coming?

My guess? More write-downs and the end of the reign of Prince. More write downs will be bad depending on the size of them obviously. The end of Princes reign wil be greeted with glee from investors.

Prince did what he was hired to do, get the company out of the legal and regulatory mess it was in. Now Citi needs someone to take them to the next level and Prince just is not the guy for the job.

Shares are up almost 2% after hours on the news…

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Talk about about running and hiding….

Citigroup (C) CEO Chuck Prince canceled his Sunday speech at the U.S.-Japan Business Conference, a conference official said on Friday. A spokesman for the Conference said Prince had canceled his appearance because he was busy preparing for the company’s new listing of its shares on the Tokyo Stock Exchange that begins on Monday. Prince had been scheduled to address the annual meeting of the group in Washington on Sunday evening for some time and the Tokyo listing has been schedule for almost as long. Citi’s Nicholas Calio, a senior vice president and chief global public affairs officer, will address the group in place of Prince.

Not for nothing but with the events of the past few days, not only is this NOT the time to cancel an appearance that has been in the works for a long time but all things considered, this would have been the PERFECT time to make the speech and put shareholder fears to rest. Now shareholders fears are being stoked to higher levels.

I think we all know that at this point Prince’s role preparing for the Monday listing is done. So with that, it now leads us to guess the real reason.

– Is he afraid to take the heat?
– Did the board tell him to lay low?
– Is there validity to the dividend cut rumors that he does not want to publicly deny in a Sarbanes society?
– Is he on the way out and since anything he will say will eventually be meaningless anyway there is just no point?
– Are there additional write-downs coming that he does not want to answer questions about?
– Are things looking better and he just has nothing to add to his previous statements?

Who knows? We do know this though, if you cancel a previously announced engagement two days before it happens when your company is under siege and you give a BS explanation for it, the only thing that will happen is the guessing games will begin and nothing positive will be assumed.

Unfortunately this type of thing has been indicative of Prince’s reign and ultimately will be his undoing….

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iPhone, Jessie Jackson, Cancer, Immigration

– Time Magazine loves the iPhone.

– It really is amazing, Jessie Jackson can manage to find racism in almost anything.

– A book on the problem with cancer and the medical community. Medicine focuses on treatment, not prevention.

– An interesting immigration discussion

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When a guy beats the market for 15 years in a row, it is in all our interest to listen to what he says.

He said:

“The equity sell-off on October 19 was precipitated by the market’s reaction to the earnings of two stalwarts of the commodities cabal, Caterpillar (CAT) and Schlumberger (SLB), both of which surprised their fans by issuing less than stellar guidance. Cat went so far as to opine that the US might be in recession already; its earnings gains were solely due to non-US growth.

If credit is becoming harder to come by, if spreads are widening, if growth is slowing, then it seems to me the leadership is about to change. The same strategies that led when the global economy was emerging from fears of deflation and entering a period of accelerating growth and synchronized recovery are very low probability bets to lead if the global economy is peaking, the US is slowing appreciably, and credit spreads are widening, not narrowing.
Where will the new leadership come from? The same place it usually does: the old laggards. I think the new leadership will be US, large-cap, dollar-based, and grow to encompass what no one wants to own today, especially financials and consumer. I also think so-called growth stocks will continue to do fine. When growth becomes scarcer and the discount rate becomes lower, growth becomes more valuable.

More particularly, just as the right thing to do in 2002 was to buy what everyone was panicked about, I think the greatest gains over the next 5 years will be made in those securities people are panicked about today. For specific names, consult the 52-week new low list.”

52 Week low financial? Washington Mutual (WM), Citigroup (C), Wachovia (WB), Bank of America (BAC), Wells Fargo (WFC) Merill Lynch (MER) and every homebuilder.

We have been buying Citigroup, Wachovia and Goldman Sachs since the late summer and financials now make up almost 60% of the portfolio. Like Miller, I am expecting big gains over the next several years out of this group. I also expect some short term pain and hey, no pain no gain, right?

Read Miller’s full letter here:

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Nonfarm payrolls rose 166,000 in October, the Labor Department said Friday, up from September’s 96,000 gain, which was revised down by 14,000. August payrolls were revised up to a 93,000 gain from 89,000. The unemployment rate was unchanged last month at 4.7%. Why is this so great?

The Fed put inflation back on the table in Wednesday’s release and the really good news in this payroll report was that average hourly earnings increased $0.03, or 0.2%, to $17.58. That was up just 3.8% from a year earlier, suggesting relatively tight labor markets are not putting much pressure on labor costs. If labor costs are contained, their impact on inflation is minimized and then the Fed is able to act and cut rates should the economy weaken.

Had this number been higher than the expected .3%, wages would have then become an inflationary force and may have handcuffed the Fed at the Dec. 11th meeting. It also bodes well for the upcoming Holiday season. A well employed consumer is a shopping consumer and that is good for everyone at this point.

Details:
*Out of 278 industries, 53.4% added jobs in October, down from 55.6% in September. Of 84 manufacturing industries, 43.5% added October, the best since July.
*Jobs in goods-producing industries fell 24,000.
*Construction jobs dropped 5,000, bringing the total loss to 124,000 since the peak a year ago.
*Manufacturing jobs fell by 21,000 in October and 203,000 over the year.
*Jobs were also lost not surprisingly at banks and mortgage brokers, where employment fell by 5,000 in October, bringing the total loss to 56,000 since February.
*Job growth was strong in services where employment rose by 190,000, the most since May.
*Food services added 37,000
*Health care added 34,000 jobs
*Employment services added 34,000

A “big picture” view show just how well Bernanke & Co. are managing things. The Dec. 11th meeting will mark the 4th in a row that the Fed has put itself in a position to have total flexibility in its action or inaction. Unlike the Greenspan era in which he was constantly having his actions dictated by events, Bernanke now has total freedom to act to them as he sees fit.

I have said it since the spring and to this point nothing has happened to change my mind yet, Bernanke will go down as the best Fed Chairman we have ever had, no matter how hard Greenspan tries to undermine him.

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The LeapFrog (LF) turnaround is shaping up nicely in a very challenging retail environment.

LeapFrog reported a Q3 net loss of $2.8 million, or 4 cents per share, compared with a net loss of $49.7 million, or 79 cents per share last year. Sales were $144 million, down from $184.7 million a year ago. Analysts had expected a loss of 5 cents per share on revenue of $143 million. The company said its gross margin improved to 42.2% of sales vs. 26.6%, helped by lower charges for excess and obsolete inventory and purchase-order cancellations. Looking ahead, Leapfrog said it 2007 revenue will be 10% to 15% below 2006 and it estimates a significant improvement in gross margin and net losses for the year.

Inventory management has also improved as inventories net of allowances, were $110.3 million at September 30, 2007, compared with $73.0 million at December 31, 2006 and $154.5 million at September 30, 2006.

The Outlook?
“We’re positioned well to enter the “Grow” phase of our strategic plan with improved gross margins, a strong cash position, and prudent inventory levels. We expect continued improvements in our business fundamentals over the next 12 months,” said Bill Chiasson, chief financial officer.

LeapFrog expectations for full year 2007 results are:

— A revenue decrease of approximately 10% to 15% compared to 2006.
— A significant improvement in gross margin compared with 29.3% for 2006.
— A reduction in overall operating expenses from $271.7 million for 2006.
— An improvement in net loss over 2006.
— Cash and investments of approximately $100 million at December 31, 2007.

These results were far better than expected and Leapfrog may actually be benefiting from the recent lead filled recalls at Mattel (MAT). Last month I wondered “is anyone going to buy any toys from Mattel (MAT) this year given the recent problems they have had? If the answer is no, you eliminate 20% of the list. Not for nothing but I would rather not have my Christmas present to my sons cause them brain damage but, that is just me.”

It may just be that other folks are thinking the same way as me to date. LF has been immune to the lead problems to date. Now, I know it is only a penny better that the estimates but, I was expecting worse not knowing how the consumer would react and one must be very happy with these results.

This is encouraging news to say the least.

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The Univesity of Illinois and Archer Daniels Midland (ADM) have developed a natural fertilizer to be sold under the name NaturStim.

Currently used fertilizers are made from urea, ammonium sulfate or ammonium nitrate and are synthesized from natural gas and each is acidifying in nature and can impact the soil pH with overuse. The lines ADM will be producing are contain lysine, a bio-product from fermented corn. University of Illinois researcher Tom Fermanian says “One advantage of these lysine-based products is that they dissolve quickly in water and can be mixed with other turf products that are normally applied as a spray.” “Lysine in its granular form is 15 percent nitrogen and soluble in water so it is quickly available for turf use, similar to most synthetic fertilizers.”

In tests of three separate plots, the plots that received fertilizer materials generally had better quality than the unfertilized control. And the three newly formulated NaturStim fertilizers made from lysine were rated as well as the ammonium sulfate and Sustane controls applied at the same rate.

“Research shows that the NaturStim products perform as well as synthetic fertilizers, but have the added benefit of providing golf course managers with a more natural alternative to traditional fertilizers,” said Fermanian.

If anyone has seen shares of fertilizer companies like Agrium (AGU) and Potash (POT) recently, these companies are booming. Many communities are demanding a natural alternative to the chemical fertilizers currently on the market. ADM, currently the world leader in bio-fuels and bio-plastics is announced the recent formation of a bio-chemical unit and this fertilizer product fits into that line perfectly.

ADM in the past year has transformed itself from a food processor and ethanol company to a diversified bio-products company.

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