Barron's interviews free-cash guru Bruce Berkowitz, CEO of Fairholme Capital Management, whose no-load Fairholme Fund boasts returns of 16.27% since its 1999 inception. Berkowitz advocates buying stocks capable of reacting to a variety of economic conditions, with an emphasis on companies with above-average free cash flow.
Stocks he likes:
Conglomerates Berkshire Hathaway (BRK.A) and Leucadia National (LUK) -- "they are always playing defense, because you never know when something bad will happen." Berkshire is still "reasonably priced," and stands to have "one more good growth spurt" as it capitalizes on current economic soft spots.
WellCare Health Plans (WCG) -- shares plunged when its headquarters were raided by federal agents in October. Past history shows that after a fine and some executive firings, firms in similar situations move on. With $5/share ($37) of free cash flow, it's too cheap.
Mohawk Industries (MHK) -- despite a rough residential real-estate market, MHK can earn $7/share of free cash flow. CEO Jeffrey Lorberbaum is growing the business while cutting costs.
St. Joe (JOE) -- an international airport is being built in the middle of its Florida land. Long-term, its holdings of oceans, rivers, lakes and sand make it a "very, very valuable company."
Sears (SHLD) -- despite recent turmoil, CEO Eddie Lampert understands retail. Sears' properties provide a downside cushion; shares are priced for a worst-case outcome.
Sunday, March 16, 2008
Saturday, March 15, 2008
Friday's Trading Summary...
U.S. Markets
Dow -194.65 (-1.60%)
Nasdaq -51.12 (-2.26%)
S&P 500 -27.34 (-2.08%)
News That Moved the Market
With A Name Like Bear, Why Didn't I Buy Puts? Financial news continues to determine the direction of the market and today's news was bad. Before the open, information was released that Bear Stearns (BSC, -47.4%) would receive emergency funding from the Fed through JP Morgan (JPM, -4.1%). The Fed used a little-known law that allows it to lend funds to companies after a special FOMC vote. The funds went through JP Morgan because it was operationally simpler than a direct loan, according anonymous staff member. The Fed made a pivotal decision to save Bear, understanding that a major bank going under would create an enormous financial crisis. JP Morgan is also looking to purchase at least some parts of Bear, and will help the troubled brokerage to locate additional funding. T he markets fell sharply on the news, with the VIX jumping to a 7-week high.
CPI Shows Tame Inflation. Though the news was forgotten after Bear Stearn's bombshell, the Labor Department announced this morning that inflation had moderated last month. The CPI and core-CPI, which does not include food and energy costs, both came in flat. The data said energy prices fell 0.5%, which surprised many considering the huge run up in energies recently. Most economists believe the Fed will lower interest rates by half a point next week.
Lehman Obtains Credit Line. Lehman Bros. (LEH, -14.6%) got a $2 billion, three year credit line from 40 banks. Lehman dropped dramatically after Bear Stearn's news came out. We will get a look at Lehman's numbers next week, when it reports its latest quarterly earnings.
Quick Tics:
Microsoft (MSFT, -2.3%) and Yahoo (YHOO, -2.9%) met earlier this week without reaching an agreement on Microsoft's merger proposal…
Gold hit an all-time high of $1,007.30 today...
Boeing (BA, +2.7%) traded higher after getting an upgrade from Morgan Stanley (MS, -4.9%).
Monday's Notable Earnings
Bear Stearns (BSC) Before Open
Economic Events:
8:30 AM: NY Empire State Index
9:00 AM: Net Foreign
9:15 AM: Capacity Utilization
9:15 AM: Industrial Production
Dow -194.65 (-1.60%)
Nasdaq -51.12 (-2.26%)
S&P 500 -27.34 (-2.08%)
News That Moved the Market
With A Name Like Bear, Why Didn't I Buy Puts? Financial news continues to determine the direction of the market and today's news was bad. Before the open, information was released that Bear Stearns (BSC, -47.4%) would receive emergency funding from the Fed through JP Morgan (JPM, -4.1%). The Fed used a little-known law that allows it to lend funds to companies after a special FOMC vote. The funds went through JP Morgan because it was operationally simpler than a direct loan, according anonymous staff member. The Fed made a pivotal decision to save Bear, understanding that a major bank going under would create an enormous financial crisis. JP Morgan is also looking to purchase at least some parts of Bear, and will help the troubled brokerage to locate additional funding. T he markets fell sharply on the news, with the VIX jumping to a 7-week high.
CPI Shows Tame Inflation. Though the news was forgotten after Bear Stearn's bombshell, the Labor Department announced this morning that inflation had moderated last month. The CPI and core-CPI, which does not include food and energy costs, both came in flat. The data said energy prices fell 0.5%, which surprised many considering the huge run up in energies recently. Most economists believe the Fed will lower interest rates by half a point next week.
Lehman Obtains Credit Line. Lehman Bros. (LEH, -14.6%) got a $2 billion, three year credit line from 40 banks. Lehman dropped dramatically after Bear Stearn's news came out. We will get a look at Lehman's numbers next week, when it reports its latest quarterly earnings.
Quick Tics:
Microsoft (MSFT, -2.3%) and Yahoo (YHOO, -2.9%) met earlier this week without reaching an agreement on Microsoft's merger proposal…
Gold hit an all-time high of $1,007.30 today...
Boeing (BA, +2.7%) traded higher after getting an upgrade from Morgan Stanley (MS, -4.9%).
Monday's Notable Earnings
Bear Stearns (BSC) Before Open
Economic Events:
8:30 AM: NY Empire State Index
9:00 AM: Net Foreign
9:15 AM: Capacity Utilization
9:15 AM: Industrial Production
Friday, March 14, 2008
Gold and Oil Soar...
Gold (GLD) topped $1,000/ounce Thursday and crude (USO) hit a record $111, as a weak U.S. dollar, concerns over a shaky U.S. economy, and inflationary fears saw investors moving money to tangible assets. "The funds keep throwing big-time money at commodities," a gold analyst said. Some experts say the gold rush is likely far from over, while noting sentiment can and does change quickly.
Zumiez 4Q Net Climbs 10%...
Zumiez's (ZUMZ) net income rose despite challenges late in quarter and the surf-and-skate company said it remains "upbeat" about its prospects going forward. The company offered 2008 guidance bracketing analysts' expectations, sending shares up after-hours. Zumiez's net income rose 10% to $12.4 million, or 42 cents a share, up from $11.3 million, or 39 cents a share, a year earlier. Revenue grew 13% to $126.6 million from $112.4 million while same-store sales rose 4%, compared with a 12% rise a year earlier.
Analysts' latest mean estimates were for earnings of 38 cents a share on revenue of $126 million. Gross margin slid to 38.4% from 39.3%.
Looking ahead, Zumiez, which has most of its stores in the West, expects fiscal year per-share earnings of 90 cents to 93 cents on same-store sales flat or up in the low single digits. Analysts' mean estimate was for fiscal year earnings of 92 cents.
Analysts' latest mean estimates were for earnings of 38 cents a share on revenue of $126 million. Gross margin slid to 38.4% from 39.3%.
Looking ahead, Zumiez, which has most of its stores in the West, expects fiscal year per-share earnings of 90 cents to 93 cents on same-store sales flat or up in the low single digits. Analysts' mean estimate was for fiscal year earnings of 92 cents.
Aeropostale Beats Estimates...
Aeropostale (ARO) reported net income of $64.7 million, or 95 cents a share, up 13% from $57.3 million, or 72 cents a share, a year earlier. The quarter for all three firms ended Feb. 2. Excluding items, earnings rose to 93 cents a share from 67 cents.
Aeropostale in January raised its earnings guidance to 87 cents a share.
Analysts' latest mean estimate was for earnings of 88 cents a share, according to a poll by Thomson Financial.
Aeropostale in January raised its earnings guidance to 87 cents a share.
Analysts' latest mean estimate was for earnings of 88 cents a share, according to a poll by Thomson Financial.
Genentech Boosts 2008 Forecast...
Biotech company Genentech (DNA) now expects 2008 earnings excluding items of $3.35 to $3.45 a share, revised from a prior forecast of $3.30 to $3.45 a share.
CPI Shows Inflation Slowing...
Consumer prices were unexpectedly flat last month, paving the way for a large interest rate reduction by the Fed next week to shore up the economy. Wall Street economists had expected a sharper 0.2% rise in both the headline and core indexes.
Bear Stearns to Get Financing From JP Morgan...
J.P. Morgan Chase says it agreed, in combination with the Federal Reserve Bank of New York, to provide secured financing to Bear Stearns as needed for an initial period of up to 28 days. Bear Stearn's CEO Alan Schwartz says the firm's liquidity position in the last 24 hours has significantly deteriorated. Bear Stearns shares are down 43%.
Today's Top Stories....
• Carlyle studying ways to compensate Carlyle Capital investors - report
• Target, JP Morgan in talks on credit card deal - report
• Exxon Mobil upgraded to ‘outperform’ at Credit Suisse
• Boeing upgraded to 'overweight' from 'equal-weight' at Morgan Stanley
• Napster and Telefonica's O2 link up to offer 5 million tracks - report
• Steris names Michael Tokich as CFO; to buy back up to $300 million of stock
• Target, JP Morgan in talks on credit card deal - report
• Exxon Mobil upgraded to ‘outperform’ at Credit Suisse
• Boeing upgraded to 'overweight' from 'equal-weight' at Morgan Stanley
• Napster and Telefonica's O2 link up to offer 5 million tracks - report
• Steris names Michael Tokich as CFO; to buy back up to $300 million of stock
Thursday, March 13, 2008
Thursday's Market Summary....
U.S. Markets
Dow +35.50 (+0.29%)
Nasdaq +19.74 (+0.88%)
S&P 500 +6.71 (+0.51%)
News That Moved the Market
Market Gets a Boost From Standard & Poor's. Stocks began the session lower after a couple pieces of negative news, but were able to recover nicely following S&P's report that the bulk of the writedowns from subprime securities may be behind us. The ratings agency did increase its estimate for the total amount of the writedowns by $20 billion to $285 billion, but investors focused on the news that the end of this subprime mess could be in sight.
Another Fund Goes Under. Late Wednesday Carlyle Capital, a bond fund affiliated with the private-equity firm Carlyle Group, announced it had failed to find new financing or strike new a deal with its lenders, and would have to give up all its current assets. The collapse of the fund weighed on stocks in Europe and pushed U.S. futures into negative territory before the open. The fund, which had received more than $400 million in margin calls since March 5th, was severely crippled by the declines in demand and price of mortgage-backed securities.
Retail Sales Tumble. Retail sales unexpectedly decreased by 0.6% last month, raising fears of a recession. Economists were anticipating an increase of 0.1%. The figure is a key indicator of the strength for the U.S. consumer, and this report showed that perhaps a weaker economy combined with record high commodity prices are taking their tole. U.S. consumer spending makes up 70% of the GDP.
Quick Tics:
Time Warner (TWX, -1.7%) agreed to buy social networking site Bebo for $850 million…
Gold traded above $1,000 for the first time, but ended the session up $13.30 at $933.80/ounce...
Visa's $16 billion IPO, set for March 20th, is oversubscribed.
Tomorrow Notable Earnings
AnnTaylor Stores (ANN) Before Open
Liz Claiborne (LIZ) Before Open
Economic Events:
8:30 AM: CPI
10:00 AM: Michigan Sentiment-Prel.
Dow +35.50 (+0.29%)
Nasdaq +19.74 (+0.88%)
S&P 500 +6.71 (+0.51%)
News That Moved the Market
Market Gets a Boost From Standard & Poor's. Stocks began the session lower after a couple pieces of negative news, but were able to recover nicely following S&P's report that the bulk of the writedowns from subprime securities may be behind us. The ratings agency did increase its estimate for the total amount of the writedowns by $20 billion to $285 billion, but investors focused on the news that the end of this subprime mess could be in sight.
Another Fund Goes Under. Late Wednesday Carlyle Capital, a bond fund affiliated with the private-equity firm Carlyle Group, announced it had failed to find new financing or strike new a deal with its lenders, and would have to give up all its current assets. The collapse of the fund weighed on stocks in Europe and pushed U.S. futures into negative territory before the open. The fund, which had received more than $400 million in margin calls since March 5th, was severely crippled by the declines in demand and price of mortgage-backed securities.
Retail Sales Tumble. Retail sales unexpectedly decreased by 0.6% last month, raising fears of a recession. Economists were anticipating an increase of 0.1%. The figure is a key indicator of the strength for the U.S. consumer, and this report showed that perhaps a weaker economy combined with record high commodity prices are taking their tole. U.S. consumer spending makes up 70% of the GDP.
Quick Tics:
Time Warner (TWX, -1.7%) agreed to buy social networking site Bebo for $850 million…
Gold traded above $1,000 for the first time, but ended the session up $13.30 at $933.80/ounce...
Visa's $16 billion IPO, set for March 20th, is oversubscribed.
Tomorrow Notable Earnings
AnnTaylor Stores (ANN) Before Open
Liz Claiborne (LIZ) Before Open
Economic Events:
8:30 AM: CPI
10:00 AM: Michigan Sentiment-Prel.
Updating our Beats and Raises Portfolio...
Here is an updated list of companies that have Beat Earnings Expectations AND have Raised Guidance for 2008. These are the kind of stocks that should lead the market higher in a recovery:
Potash (POT)
Terex (TEX)
Intuitive Surgical (ISRG)
Hewlett-Packard (HPQ)
Medco Health (MHS)
Buffalo Wild Wings (BWLD)
Gamestop (GME)
Mosanto (MON)
JC Penney (JCP)
Zimmer Holdings (ZMH)
Sohu (SOHU)
Dolby Labs (DLB)
Research in Motion (RIMM)
Express Scripts (ESRX)
Boeing (BA)
Chattem (CHTT)
Corning (GLW)
IBM (IBM)
Netflix (NFLX)
EOG Resources (EOG)
Joy Global (JOYG)
Ciena (CIEN)
Steel Dynamics (STLD)
JA Solar (JASO)
Mastercard (MA)
Potash (POT)
Terex (TEX)
Intuitive Surgical (ISRG)
Hewlett-Packard (HPQ)
Medco Health (MHS)
Buffalo Wild Wings (BWLD)
Gamestop (GME)
Mosanto (MON)
JC Penney (JCP)
Zimmer Holdings (ZMH)
Sohu (SOHU)
Dolby Labs (DLB)
Research in Motion (RIMM)
Express Scripts (ESRX)
Boeing (BA)
Chattem (CHTT)
Corning (GLW)
IBM (IBM)
Netflix (NFLX)
EOG Resources (EOG)
Joy Global (JOYG)
Ciena (CIEN)
Steel Dynamics (STLD)
JA Solar (JASO)
Mastercard (MA)
Key Reversal.....
The market is now trading higher after gapping down lower this morning. At one point the Down was down over 250 points. Currently, the Dow is up 33 points.
This is key as the market is now shaking off bad news...something we haven't seen since before Christmas... Maybe a bottom is in.
This is key as the market is now shaking off bad news...something we haven't seen since before Christmas... Maybe a bottom is in.
Today's Upgrades...
Stocks that have been Upgraded this morning:
UnionBanCal (UB) by Punk, Ziegel & Co
JA Solar (JASO) by Needham & Co
Unisource Energy (UNS) by Soleil
Leap Wireless (LEAP) by Wachovia
Millennium Pharm (MLNM) by Piper Jaffray
Humana (HUM) by UBS
JA Solar (JASO) by Lehman Brothers
NIDEC (NJ) by JP Morgan
GSI Commerce (GSIC) by Jefferies & Co
Wimm-Bill-Dann Foods (WBD) by Credit Suisse
Monsanto (MON) by Banc of America Sec
AstraZeneca (AZN) by UBS
UnionBanCal (UB) by Punk, Ziegel & Co
JA Solar (JASO) by Needham & Co
Unisource Energy (UNS) by Soleil
Leap Wireless (LEAP) by Wachovia
Millennium Pharm (MLNM) by Piper Jaffray
Humana (HUM) by UBS
JA Solar (JASO) by Lehman Brothers
NIDEC (NJ) by JP Morgan
GSI Commerce (GSIC) by Jefferies & Co
Wimm-Bill-Dann Foods (WBD) by Credit Suisse
Monsanto (MON) by Banc of America Sec
AstraZeneca (AZN) by UBS
Carlisle Capital on Verge of Collapse...
Carlyle Capital, managed by private-equity firm Carlyle Group LLC, says it expects its lenders will soon seize "substantially all" of its remaining assets after banks including Deutsche Bank (DB) and J.P. Morgan (JPM) refused to extend it new financing terms.
The firm's leveraged $22B portfolio consists entirely of securities issued by government-sponsored lenders Fannie Mae (FNM) and Freddie Mac (FRE), the value of which has plummeted in recent weeks.
The firm's leveraged $22B portfolio consists entirely of securities issued by government-sponsored lenders Fannie Mae (FNM) and Freddie Mac (FRE), the value of which has plummeted in recent weeks.
Southwest Airlines Grounded...
Southwest Airlines (LUV) grounded 38 of its older planes amid government and internal probes over "ambiguity" in its inspection protocols. The groundings reduce its scheduled flights by 4%; the company said the aircraft would be reinspected Wednesday and return to service by this morning.
Last week the FAA confronted Southwest with a $10.2M fine for missing deadlines to inspect planes for fuselage cracks and continuing to fly them after acknowledging the oversight.
Last week the FAA confronted Southwest with a $10.2M fine for missing deadlines to inspect planes for fuselage cracks and continuing to fly them after acknowledging the oversight.
Paulson to Address Credit Crunch...
The Working Group on Financial Markets, led by Treasury Secretary Henry Paulson, will today release its recommendations to avoid a repetition of the liquidity freeze now threatening the U.S. economy. Highlights include "strong nationwide licensing standards" for mortgage brokers; a clearer differentiation in credit ratings between bonds and complex, riskier structures coupled with greater disclosure by rating agencies; and increased regulation of the dealings of issuers of mortgage-backed securities.
US Dollar Dives...
The dollar fell to 12-year lows against the yen, dropping to less than 100 yen, and hit record lows against the euro, as Asian/European markets and U.S. equity futures dived in overnight trading [see below], raising concerns of more turmoil in the financial markets. "Investors are getting out of dollar assets and this is going to lead to a dollar crash," a Tokyo currency manager said.
On four previous occasions since 1995, Japanese authorities have sold the yen when it approached the 100 mark to support its country's exports.
On four previous occasions since 1995, Japanese authorities have sold the yen when it approached the 100 mark to support its country's exports.
Earnings Due Today....
COMPANIES REPORTING EARNINGS
• Aeropostale Inc. (ARO). Expected to report Q4 earnings of $0.88 a share, according to analysts polled by Thomson Financial.
• Flanders Corp. (FLDR). Expected to post Q4 profit of $0.15 per share.
• TICC Capital Corp. (TICC). Expected to report Q4 profit of $0.34 per share, which is a decrease of 12.82% from the same quarter last year when the company earned $0.39 a share.
• Aeropostale Inc. (ARO). Expected to report Q4 earnings of $0.88 a share, according to analysts polled by Thomson Financial.
• Flanders Corp. (FLDR). Expected to post Q4 profit of $0.15 per share.
• TICC Capital Corp. (TICC). Expected to report Q4 profit of $0.34 per share, which is a decrease of 12.82% from the same quarter last year when the company earned $0.39 a share.
Today's Top Stories....
• Dollar tumbles below 100 yen for first time in 12 years
• Treasury secretary Henry Paulson to propose revamp of credit rules - report
• Treasury deputy secretary Robert Kimmitt says U.S. economy should pick up in Q2
• Home foreclosure filings rise 60% in Feb.
• Abbott's diabetes treatment gets FDA nod
• Electronic Arts makes $26-a-share hostile bid for Take-Two Interactive
• Monsanto upgraded to 'buy' at Banc of America
• AIG cut to equal-weight from overweight at Morgan Stanley; target cut to $50
• Tyco Electronics to buy back additional $500 million of stock
• Treasury secretary Henry Paulson to propose revamp of credit rules - report
• Treasury deputy secretary Robert Kimmitt says U.S. economy should pick up in Q2
• Home foreclosure filings rise 60% in Feb.
• Abbott's diabetes treatment gets FDA nod
• Electronic Arts makes $26-a-share hostile bid for Take-Two Interactive
• Monsanto upgraded to 'buy' at Banc of America
• AIG cut to equal-weight from overweight at Morgan Stanley; target cut to $50
• Tyco Electronics to buy back additional $500 million of stock
Wednesday, March 12, 2008
Wednesday's Summary....
U.S. Markets
Dow -46.57 (-0.38%)
Nasdaq -11.89 (-0.53%)
S&P 500 -11.88 (-0.90%)
News That Moved the Market
Stocks Fizzle Out. A late sell-off ensured the market would finish lower; one day after the Dow was up more than 4%. Stocks did trade higher for a large part of the session, but could not gain any momentum and looked overextended after huge gains yesterday. Oil topped $110/barrel for the first time, despite a greater than expected build in inventories. Instead of trading lower, investors seemed to have a "buy on the dip" mentality, pushing oil up another $1.17 to finish at $109.92. Government data showed speculators and fund managers are making bets for higher oil, with net long positions tripling in the last month. The rally should end when hedge funds and speculators decide to start taking profits, and will depend less on economic data, as exhibited today.
Target In Talks To Sell Half of Credit Card Division. Mega-retailer Target (TGT, -0.95% day; +1.45% A.H.) announced after the close it is in negotiations to sell about half of its credit-card loans for $4 billion. The potential acquirer was not named. The money could be used for stock buybacks, increasing shareholder value, and would create more stability on Target's balance sheet.
Quick Tics:
Caterpillar (CAT, +3.6%) and G.E. (GE, +1.7%) were both up after each company released positive outlooks…
Eliot Spitzer resigned as New York Governor after news surfaced yesterday of his connection to a prostitution ring…
Humana (HUM, -13.7%) dropped after cutting its earnings outlook.
Tomorrow Notable Earnings
Aeropostale, Inc. (ARO) Time Not Supplied
Economic Events:
8:30 AM: Retail Sales
8:30 AM: Jobless Claims
8:30 AM: Import and Export Prices
10:00 AM: Business Inventories
Dow -46.57 (-0.38%)
Nasdaq -11.89 (-0.53%)
S&P 500 -11.88 (-0.90%)
News That Moved the Market
Stocks Fizzle Out. A late sell-off ensured the market would finish lower; one day after the Dow was up more than 4%. Stocks did trade higher for a large part of the session, but could not gain any momentum and looked overextended after huge gains yesterday. Oil topped $110/barrel for the first time, despite a greater than expected build in inventories. Instead of trading lower, investors seemed to have a "buy on the dip" mentality, pushing oil up another $1.17 to finish at $109.92. Government data showed speculators and fund managers are making bets for higher oil, with net long positions tripling in the last month. The rally should end when hedge funds and speculators decide to start taking profits, and will depend less on economic data, as exhibited today.
Target In Talks To Sell Half of Credit Card Division. Mega-retailer Target (TGT, -0.95% day; +1.45% A.H.) announced after the close it is in negotiations to sell about half of its credit-card loans for $4 billion. The potential acquirer was not named. The money could be used for stock buybacks, increasing shareholder value, and would create more stability on Target's balance sheet.
Quick Tics:
Caterpillar (CAT, +3.6%) and G.E. (GE, +1.7%) were both up after each company released positive outlooks…
Eliot Spitzer resigned as New York Governor after news surfaced yesterday of his connection to a prostitution ring…
Humana (HUM, -13.7%) dropped after cutting its earnings outlook.
Tomorrow Notable Earnings
Aeropostale, Inc. (ARO) Time Not Supplied
Economic Events:
8:30 AM: Retail Sales
8:30 AM: Jobless Claims
8:30 AM: Import and Export Prices
10:00 AM: Business Inventories
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