ValuePlays

ValuePlays will be hosting the 10/15 edition of the “Festival of Stocks”. Please submit your articles..

Sprint (S) said Monday that Chief Executive Gary Forsee is stepping down, effective immediately. It the stock a buy now?

Forsee, who has also served as chairman and president, has come under fire as telecommunications giant Sprint’ subscriber growth and share price have disappointed investors since 2003. The last straw was today when the company announced it expects to report a net loss of approximately 337,000 post-paid subscribers in the third quarter. Paul Saleh, Sprints current CFO, will serve as acting CEO until a permanent replacement is named.

Saleh, 50, has served as chief financial officer since the merger of Sprint and Nextel. Prior to the merger he had been EVP and CFO for Nextel since joining the company in 2001. Before joining Nextel, Saleh was SVP and CFO at Walt Disney International from 1997 to 2001, and also served as SVP and treasurer for The Walt Disney Company. Prior to Disney, Saleh served as treasurer of Honeywell, where he spent 12 years in various leadership positions in finance, treasury, investor relations, strategic planning and operations.

Last week, The Wall Street Journal reported that the company has been actively seeking a replacement for Forsee, who has served since 2003. That news followed a report in the same newspaper that activist investor Ralph Whitworth had lost confidence in Forsee, and was threatening a proxy fight for board seats unless Sprint dealt with the situation “immediately.” Whitworth is best known for ending the reign of Home Depot’s (HD) Robert Nardelli, only to watch the stock price tumble.

Why is this a good thing? Aside from Forsee’s departure Sprint did say the search for selecting its next chief executive “will focus on candidates outside the company,” said Hockaday. “We fully expect that the search will be concluded in a timely manner and we are focused on selecting the right candidate to guide the company to achieve its full potential. Sprint Nextel has the assets, spectrum, customer base and technology to be the leader in wireless mobility services.” said non executive chairman, Irvine Hockaday.

This means that Sprint is looking to change the culture and bring in fresh ideas to the company currently suffering an abysmal deterioration of customer service rankings for almost three years running now. If you are a shareholder (I am not) this can only be good news for you as without it, your investment is going nowhere except maybe down.

As for buying shares? Not yet. Let’s wait to see who takes over and what their plans are first. Unless he or she makes customer service priority one, expect more customer defections and further deterioration of share price.

UPGRADES

Supertex SUPX Oppenheimer Neutral » Buy
Garmin GRMN AmTech Research Sell » Neutral
Vishay VSH AmTech Research Neutral » Buy
Powerwave PWAV Needham & Co Hold » Buy
Capital Senior CSU Stifel Nicolaus Hold » Buy
NovaGold Resources NG Citigroup Hold » Buy
Novatel Wireless NVTL CIBC Wrld Mkts Sector Perform » Sector Outperform
Valero Energy VLO Citigroup Hold » Buy
Sunoco SUN Citigroup Hold » Buy
American Reprographics ARP Sun Trust Rbsn Humphrey Neutral » Buy
Lehman Brothers LEH Credit Suisse Neutral » Outperform
CenterPoint CNP Credit Suisse Neutral » Outperform

DOWNGRADES

Smithfield Foods SFD BB&T Capital Mkts Buy » Hold
Hibbett Sporting HIBB Wedbush Morgan Strong Buy » Buy
Drew Industries DW Ferris Baker Watts Buy » Neutral
Aeropostale ARO Caris & Company Above Average » Average
Verifone PAY Morgan Keegan Outperform » Mkt Perform
Visual Sciences VSCN Needham & Co Buy » Hold
Senior Housing SNH Stifel Nicolaus Buy » Hold
Capital One COF Stifel Nicolaus Buy » Hold
CIT Group CIT Stifel Nicolaus Buy » Hold
AmeriCredit ACF Stifel Nicolaus Buy » Hold
US Cellular USM Citigroup Hold » Sell
Ceragon CRNT Morgan Joseph Buy » Hold
Sovereign Banc SOV Friedman Billings Outperform » Underperform
ASE Test ASTSF Friedman Billings Outperform » Mkt Perform
Rudolph Tech RTEC Friedman Billings Outperform » Mkt Perform
KLA-Tencor KLAC Friedman Billings Outperform » Mkt Perform
ASML Holding ASML Friedman Billings Outperform » Mkt Perform
Occidental Petro OXY Friedman Billings Mkt Perform » Underperform
Hess HES Friedman Billings Outperform » Mkt Perform
Merrill Lynch MER Credit Suisse Outperform » Neutral
Procter & Gamble PG Sun Trust Rbsn Humphrey Buy » Neutra

Tuesday’s Picks

Jeff Macke liked McDonald’s (MCD). Open $56.87

Tim Seymour recommended selling Banco Itau (ITU). Open $54.83

Stacey Gilbert preferred Titanium Metals (TIE). Open $33.06

Pete Najarian said ValueClick (VCLK). Open $25.52

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= 29-19 = 59%
Eric Bolling= 10-11 = 48%
John Najarian= 13-3 = 81%
Jeff Macke= 35-25 = 57%
Pete Najarian= 22-19 = 52%
Tim Seymore= 3-2 = 60%
Karen Finerman= 14-8 = 63%
Stacey Briere-Gilbert= 2-0 = 100%

ZZ Sealy Corp 12.69
USAK USA Truck Inc 14.85
R Ryder System, Inc 45.94
GEE Global Entmt Corp 4.25
EPEX Edge Petroleum Corpor … 10.62
DEIX Directed Electronics Inc 3.69
CSCD Cascade Microtech Inc 9.01
CALC California Coastal Cm … 11.62
AYA Alyst Acquistion Corp 7.20
ANEU American Cmnty Newspa … 4.55
AMMD American Med Sys Hldg … 16.2

The NY Times this weekend detailed Citigroup’s (C) CEO’s missteps since he took office.

The article made 6 essential assertions:

* Citigroup stock has not moved from essentially where it was when Prince took over in 2003.
* Citigroup’s corporate strategy is flawed. The idea behind predecessor Sandy Weill’s acquisition strategy was to create an organization which would be able to earn consistently high profits because when one business unit was doing poorly, another one would take up the slack. But the latest earnings miss shows otherwise, problems in the mortgage market hurt Citigroup’s consumer and fixed income units. With the deal financing business at a standstill, yet another pillar of Citigroup’s corporate strategy is evaporating.
* Citigroup has had five significant blow ups since Prince took over. Recently, Citigroup warned that it planned to take a $5.9 billion write down in the third quarter, causing a 60% profit plunge. This was the fifth time since becoming CEO that Prince had to disclose a major problem to his board.
* Citigroup lacks management depth and one reason Prince has held on so long is that his direct reports are so weak. Some analysts in the past have described it as a convenient survival tool for the bank’s chief executives. Neither Mr. Weill nor John S. Reed, who also ran Citigroup before Mr. Prince, ever really tolerated the presence of strong No. 2’s. After Robert B. Willumstad left his post as chief operating officer in 2005, that crucial job remained unfilled for over a year and a half.
* Citigroup does not have a handle on its finances. This summer the depth of Citigroup’s ignorance about the risk on its balance sheet became ever more apparent. Citigroup’s problems grew more serious with prices of subprime mortgage bonds and other complex securities deteriorating rapidly. But despite hiring a highly touted outsider as CFO, it appears that Citigroup still lacks a specific understanding of how deep the hole is likely to be.
* Citigroup lacks financial discipline. Prince has been slow to fire executives overseeing money losing operations and has been slow to lead any executives to the chopping block, even though top-level firings have already taken place at UBS, Bear Stearns and Merrill Lynch.

Here is the thing. Everything said by the Times is true. But, and this is a big but, Citi did have two consecutive quarters before this upcoming one in which it surprised the street to the upside and made progress against all these former shortcomings. Prince has the public backing of major shareholders and almost every financial institution got hammered recently by the sub-prime issue. Consider Lehman (LEH), Morgan (MS), Bear Sterns (BSC), Goldman Sachs (GS), Washington Mutual (WM), Deutche Bank (DB) and others all got hit hard and took massive write downs in this area. It would have been shocking had Citi NOT had issues. The fact that his firm was one of a bout a dozen major institution that got caught will give Prince a pass this time and allow him to keep his job for now.

This is where it gets tricky. He is on record saying Q4 will be “much better” and all but promised shareholders will be very happy about it. This now makes it “do or die” for him. If Citi stumbles in Q4 then the Q’s 1 and 2 were just the aberration and more shareholder disappointment from him is on the way and he assuredly will be shown the door. If Citi comes through, then Q3 was the aberration this year and Prince has essentially put together a good year for the bank considering the performance of other institutions and this may just be enough to allow him to stick around.

Q4 has to be very good , not just good for this to happen though..

Wal-Mart (WMT), the world’s largest retailer, has announced plans to more than double its stores in China in the next 5 years in an effort to tap the growing personal wealth of the country’s over 1 billion people.

The planned expansion will enable the company to increase its reach beyond its current 84 stores across 46 Chinese cities into smaller cities. Wal-Mart has already opened 12 stores in China to date and is well on track to beat 2006’s total of 15. It sped up its expansion earlier this year by acquiring a 35 percent stake in China’s Trust-Mart and then said the move may lead to its taking a controlling ownership of Trust- Mart’s more than 100 hypermarkets but no further details have been announced.

The US may be “Wal-Marted out” but in foreign nations, the retail giant is not only well liked, but coveted. The fact that Wal-Mart to date has increased same store sales overseas at an almost 16% clip this year underscores that popularity. This is the right move for Wal-Mart. Domestically, monies should be invested in refurbishing old stores, increasing the dividend and buying back stock by the truckload at its current levels. Any aggressive expansion plans need to be relegated to international operation as this is clearly the best use of funds in that area.

The recent deal with India illustrates that even the historically most reluctant atmospheres for “outsiders” recognizes the value and expertise Wal-Mart brings to the table. What folks at Wal-Mart need to do is stop looking at Target (TGT) as it’s competition and recognize that it is the largest global retailer and focus its effort on that goal to truly reward shareholders. There is not any reason, like most of the S&P 500 currently that Wal-Mart should not be getting the majority of it profits from its international operations in a few years.

If they are making real progress in that area, Lee Scott really missed a big opportunity,,,

Not much happening this week………Look for more action as earning start rolling in during the next few weeks.

CCA Industries (CAW)= 28%

Watsco (WSO)= 22%

General Growth Properties (GGP)= 11%

Gentex (GNTX)= 11%

Atlantic Coast Federal (ACFC)= 7%

“There are many reasons insiders sells shares but there is only one reason they buy, they think the price is going up” Peter Lynch

Energy Transfer Equity (ETE)= $9,878,000

Valley Financial Corp. (VYFC)= $1,921,000

Credit Acceptance Corp. (CACC)= $1,064,000

Par Pharmaceutical (PRX)= $1,043,000

Fortress International Group (FIGI)= $936,000