Thursday, February 25, 2010

My Current View

I'm always reading market commentary.  Where will the market go from here? etc.  While I read quite a bit, there is very little that I actually listen to and act on.  My criteria for this is someone who A) I respect and has an investment view similar to my own; B) Has been successful in the past; and C) Has their own money at stake.  Believe it or not, that narrows the list down to a select few.

One of those people is Carl Icahn.  I read his recent letter to shareholders over at Marketfolly.com.  While he says he's concerned about a double-dip recession, he sees a unique opportunity for cash-rich companies with access to capital to scoop up assets of good companies that have have poor balance sheets.  This market has punished those with too much leverage, and those in better positions will benefit.  The General Growth deal is a prime example of this.  You have a large company with a lot of great assets that had too much debt, and because of market conditions, was forced to enter Chapter 11.  Smart investors saw an opportunity from the start.  Companies with access to the capital (Brookfield, Simon, etc) want the opportunity to acquire these high-quality assets.

This is the kind of opportunity I see in this market.  I don't like the prospects of the broad economy expanding at a strong pace.  It will improve, but we're too reliant on stimulus which alone cannot create sustainable growth.  But there are opportunities, and I'm optimistic about those.  I'll continue to try and spot those, and share them here.  The biggest goal of this site is to share my knowledge with whoever would like to read it.  I spend a lot of time filtering out what I believe to be the best information, and pass that along.  I may not be an expert at investing, but I feel I'm pretty good at knowing who to listen to, and who to ignore, and that can usually get you pretty far.

Disclosure: Long GGWPQ

Tuesday, February 23, 2010

Misc. Items

The market action has been fairly quiet as we navigate through earnings season.  Most investors appear to be a little cautious at this juncture, and I'd classify myself as "cautiously optimistic."  I'll continue to pick away at stocks I like if they pull back.

Brookfield appears ready to enter the contest for General Growth Properties.  Shareholders of GGP are enjoying this, as we can sit back and wait while this gets sorted out.  Things continue to look good here.

Bloomberg had a story out about ABB today.  Nothing too new in there, but a nice overview of their businesses and demographics.

Disclosure: Long GGWPQ, ABB.

Friday, February 19, 2010

Bought Some Jamba Juice

I bought some Jamba Juice (JMBA) today at $1.66.  I've been doing some work on the stock and company, and I like what I see for the most part.  I'm not that familiar with the brand.  I've never visited one of their locations either, so maybe some people could chime in if they like it/don't like it as far as product goes.

They have an aggressive management group that is really looking to branch out and build the brand.  They currently operate 729 stores, and 511 are corporate owned.  They've been launching new products over the past year like various foods and hot beverages, and the goal is to become a more "anytime" attraction.  They are also getting more aggressive with franchising and marketing products to schools.  They just announced an agreement for their products to be offered Core-Mark, who services 24,000 convenience stores, and that's a big step for them.

The stock is fairly cheap, but this is really about a company trying to take the next step.  If these new products and offerings work, earnings are what are going to ultimately drive this stock.  They are sitting on a decent cash position, which should help them if the economy continues to struggle.

I did hear about this originally when Todd Sullivan was talking about it, but didn't look at it seriously until a few days ago.

Just took a small position to start.  We'll see how it acts.  Earnings are upcoming, and that should give us a little clearer picture, and at that point I may decide to add some shares.

Disclosure: Long JMBA

Thursday, February 18, 2010

ABB Posts Solid Results

Swiss industrial-electrical company ABB reported earnings this morning, and the results were solid.  I've been bullish on this company for awhile, and the stock has been, okay.  I love the story here.  They can service all the electrical infrastructure being built in the coming years.  That includes wind, solar, hydro.  You name it.  They'll play an integral part in updating power grids to handle new power sources.  The best part is they are truly global, so they are ready for wherever the growth comes from.  I keep an eye on their order updates, and they receive big orders from Brazil, China, the Middle East and Africa, which are all high growth areas.  They also have large operations in the US and Europe.

As far as results, here are some highlights from the release.  Take a look at the link for a detailed story and many stats.



  • Fast cost take-out keeps full-year EBIT margin well within target range – 2-year savings program expanded to $3 billion


  • Pace of base order decline year-on-year slows in Q4, stabilizes versus Q3 2009


  • Q4 net income was $540 million after approx. $350 million of restructuring-related expense


  • Record cash from operations for Q4 of $1.8 billion


  • Proposal to increase dividend 6 percent to CHF 0.51 per share

Zurich, Switzerland, Feb. 18, 2010 – ABB reported earnings before interest and taxes (EBIT) of almost $800 million in the quarter, despite approximately $350 million in restructuring-related charges. Full-year profitability was well within the company’s EBIT margin target range of 11-16 percent on a combination of rapid cost take-out and solid operational execution.

Combined with record cash from operations and double-digit order growth from emerging markets, the results “show the resilience of ABB’s business portfolio and geographic scope, as well as our ability to execute in a tough market environment,” said Chief Executive Officer Joe Hogan.







Results were helped by cost-cutting, but they are obviously delivering on their goals.  Lots of cash coming in as well, and as you can see the dividend was increased, which is always nice.


I've considered selling this stock a few times because I do have stocks that I think may perform better.  But, I like the story, and if they continue to deliver, the stock will be a steady performer, and will probably take off once we see things heat up again in the emerging markets.


They got an upgrade this morning, and the stock is up 6%.


So, good stuff for now.  I'll continue to hold my shares, and we'll see where we're at next quarter.


Disclosure: Long ABB

Wednesday, February 17, 2010

Market Continues to Like GGWPQ

Yesterday's bid for GGP has raised a lot of speculation as to how things will end up.  The market continues to like the news and is speculating that value for GGP shareholders will be higher as the stock moved higher another 7.5% today.  We'll have to just wait and see, but for now it looks good.

We're seeing the quarterly filings come out, and they are always worth keeping an eye on.  In particular, I take a look at Einhorn, Ackman, Buffett, Klarman, Soros and Icahn.  Market Folly does an excellent job in covering these, and you should take a look at that site if you're interested.

I'm still looking to buy quite a few names.  Etrade, Loews, and Forest Labs are probably at the top of my list right now.

Other than that, just enjoying the Olympic Games.  Go USA!

Disclosure: Long GGWPQ, ETFC, L

Tuesday, February 16, 2010

SPG Makes Offer to General Growth Properties

Interesting Tuesday as we awoke to news that Simon Property Group made an offer for General Growth Properties.  For equity holders, it amounts to about $9/share, which was below last Friday's close.  This is a classic low-ball offer.  This type of offer may have worked a few months back, but GGP is on track to emerge from bankruptcy, and many have expressed interest in their assets.  The market obviously feels shares are worth more, as they are currently up 25% as I write this. 

When I see statements like this from their CEO, I knew it was a low-ball offer. " Simon is in a unique position of being able of being able to offer General Growth creditors and shareholders full, fair and immediate value."  Immediate value is the key statement.  They're looking for a quick close before the competition heats up for GGP's assets.  I think its too late for that at this point.  It will be interesting to see the response not only from GGP, but from some of the large shareholders like Bill Ackman.  

Todd Sullivan at Value Plays has had the playbook for this whole thing, and I thank him for that.  If you haven't seen his site, you need to get there and subscribe.  

I'm into GGP at $1.79 after reading Todd's analysis.  My only regret is not buying more shares.  

We'll see where this takes us, but its likely a lot more will be happening here soon.  

Disclosure: Long GGWPQ

Friday, February 12, 2010

End of Week Update

Lots of back and forth action this week, without any real pattern.  Good market for traders.  The more time we spend at these levels, the more confidence returns back to the market.  I'm seeing much more bullish commentary and buying amongst small traders compared with this time last week.

Berkshire Hathaway is joining the S&P 500 today, so there is a lot of talk about that stock.  I like their businesses and I like Buffett.  Whether the stock is a good deal, I couldn't say, as I haven't looked too hard at it.  My guess is the stock will make a run over the next few weeks though as many will look to ride the wave of the index funds who are buying in.  Berkshire also closed on the Burlington deal today.  I like the rail space moving forward, but as many have reported, Buffett paid fair value for BNI.  It almost felt like Buffett was just committing a huge amount of capital to something he feels good about for the next few decades in case he's not around (he is 79).

Lots of uncertainty around Greece, Dubai, and China.  Any of these issues could shake the market, but any impact on the market will probably be short lived.

I'm still pretty bullish, but have been taking my time and buying small amounts of shares at a time.

The market is closed Monday, so enjoy the long weekend.

Wednesday, February 10, 2010

Wednesday Misc.

Carefusion (CFN) reported yesterday after the bell.  Earnings were pretty solid, and they upped their guidance for the upcoming quarter and the remainder of the year.  The market sold the news this morning as they were hoping for a bit better numbers.  I'm not particularly worried about the stock here and am taking no action.  Stocks tend to be quite volatile around earnings as we all know.

I'm still waiting for Compass Diversified (CODI) to report.  They have a great business model and I really appreciate the transparency of their management.  Here's a nice presentation of their business model and various stats.

Market volatility has picked up and most are trying to figure out whether buyers will step back in and buy the dips, or if the correction is on.  Right now, it feels like we're headed lower.  As someone looking to pickup stocks, that is a good thing.  I'll be buying or adding to these stocks if the opportunity presents itself: FRX,CODI,L,ETFC and a few others.

Disclosure: Long CFN, CODI, L, ETFC

Tuesday, February 9, 2010

Carefusion Reports

Portfolio holding Carefusion (CFN) reported earnings after the bell today.  I just had time for a quick glance at the numbers, and I'll listen to the call later today, but I wanted to get a quick post up here.  At first glance, the numbers look pretty solid with a beat on revenue, and EPS excluding non-recurring items.  They also raised revenue and net income guidance for FY 2010.  Overall, nice to see this report, but we'll have to see the reaction the market gives because lately it has been selling numbers like this, so we'll see.  Some commentary from the CEO:


"We continued to execute well during our second quarter and performed ahead of our expectations," said David Schlotterbeck, chairman and CEO of CareFusion. "Hospital capital spending made modest improvements during the quarter and we continued to win key customer contracts. We also benefited in our respiratory business from government and hospital flu preparedness planning.

"As I look ahead to the second half of the fiscal year, we will make progress on our long-term plans for growth, stepping up our investments in R&D and sales and marketing to grow our key franchises and extend into important market adjacencies."

Disclosure: Long CFN

Jim Tisch Tells It Like It Is

We bought Loews yesterday after their quarterly results.  I always like to listen to their call (or read the transcript; thank you Seeking Alpha), because CEO Jim Tisch always gives some great commentary.  It usually is during the Q&A portion, and he speaks about the economy, often in detail.  To me, there is aren't many better places to get good info than someone like this, who oversees businesses in many industries.

Bloomberg had a great article out today.  They must have interviewed Jim Tisch because these are not quotes from the call.  Either way, he tells it like it is, and I agree with him 100%.

Regarding the hotel industry:

 Jim Tisch, the leader of Loews Corp., said the U.S. did a “good job of killing” the hotel business by lambasting corporate travel and hurt American International Group Inc.’s ability to return bailout funds by curbing pay.
“The criticism that took place of group travel was really a death knell for the industry,” Tisch said yesterday in an interview at an office of the New York-based holding company, which owns hotels. “It’s easy for the politician to get the sound bite. What they are doing with those sound bites is putting maids and bellmen out of work.”
About AIG:
Loews also owns natural gas exploration operations and the majority of commercial insurer CNA Financial Corp., which competes against AIG selling commercial insurance. Loews reported its third straight quarterly profit yesterday on improved results from gas exploration and Chicago-based CNA.
Loews has hired AIG staff, primarily to manage investments, who “do a phenomenal job for us,” Tisch said. New York-based AIG has a harder time retaining the “best and the brightest” managers after lawmakers criticized the company’s retention bonus awards and the Obama administration limited compensation for top executives, he said.
“Last time I looked, we don’t have indentured servitude in the United States,” he said. “The situation is such that the good people have every incentive to leave to maximize their income.”
Regarding the new bank tax:
Tisch joined billionaire Warren Buffett in opposing the Obama administration’s proposed fee on lenders to repay bailout funds. He said it is unfair to penalize financial firms when regulators, mortgage brokers and borrowers contributed to the recession as well.
“It sounds good when you say it fast,” Tisch said. “To take out this retribution solely on the banks makes sense from the populist politician’s perspective but is not necessarily good economic policy. If they put this tax in place, it will simply make it more expensive for people to borrow money because banks are in the business of earning a rate of return on their capital.”

This is one of the main reasons why Loews is so attractive to me.  Not only does the company have great assets, and is trading at value prices, but their management is top notch and knows how things really work.  These guys are conservative managers who don't over leverage their businesses, but know when its time to deploy capital and take risks.  

Disclosure: Long L

Monday, February 8, 2010

New Purchase

Loews Corp. (L) reported earnings this morning, and I'll be listening to the call momentarily.  The numbers were pretty solid as operations continue to improve at CNA financial, which could really propel earnings in the next couple of quarters.  Diamond Offshore was off just a bit, as we found out late last week.  But overall, things are strengthening here as book value improved to $39.76.  I bought some shares this morning at $35.08 to get started.

Here are the details from the announcement.  I'll be posting again after I listen to the call, if there is anything noteworthy.  Also, they did buyback 5.8 million shares during the past quarter, which they said they will continue to do as long as the stock stays undervalued.

We'll see what happens here, but I'd ultimately like to build this stock into one of my largest positions.

Disclosure: Long L

Monday, February 1, 2010

Predictable Monday

Today's action was pretty predictable considering what happened last week.  We got what appeared to be a oversold bounce.  When I say oversold, I mean very short-term.  I still would like to see a few more percentage points come off before I like valuations.  Plus, looking back over the past few months, Mondays have been very very good.

Some stocks I am close to buying: Loews, Forest Labs, and adding to Compass Diversified Holdings.

Not much otherwise to talk about today.  I'll be watching earnings in these names tomorrow: COCO,CMI,FISV,MTW,NWSA,OESX,DOW,UPS.

Disclosure: Long CODI