The head of Countrywide (CFC) stated his case, once more, that the mortgage lender is not a candidate for Chapter 11. But, Angelo Mozilo does appear to like the topic. He brought it up again on CNBC.
He says he is not in talks with Bank of America (BAC). But, according to Reuters he "declined to comment on whether Countrywide would maintain its 15 cents-per-share quarterly common stock dividend."
Douglas A. McIntyre
On tonight’s MAD MONEY on CNBC, Jim Cramer was promoting his new book and he advised buying one share of stock for your kids out there in a product and company they interact with and can track. He was reviewing the merger pact for Activision (NASDAQ: ATVI) from Vivendi’s Blizzard, but his real play here was in Viacom (NYSE: VIA) based upon it winning from the music of Rockband video game that is in his opinion even better than Activision’s "Guitar Hero" franchise.
Cramer briefly also noted that he doesn’t buy into the notion that Electronic Arts (NASDAQ:ERTS) should have traded lower because the new Blizzard would be stronger competition. In fact, he said that he thinks some of the larger conglomerates should take a look at maybe reviewing the possibility of making a move to buy Electronic Arts for $70 per share.
24/7 Wall St. was expecting a merger in Activision as one of the candidates in the video game sector, although this merger came from an entirely angle. We are retooling our video game industry sector for our Special Situation Investing Newsletter subscribers to show which stocks would benefit from which partners now that the merger game changed in here.
Perfect World Co., Ltd. (NASDAQ:PWRD) is a Chinese MMORPG operator that actually does report normal financials that he has overlooked in the past because of skepticism over Chinese names that sound fishy. But now that he’s looked at it, he thinks you can own it. Shares closed up 0.45% at $24.33 but shares are at $26.30 since he touted it. The 52-week trading range is $17.40 to $37.00. Cramer said to use a limit and not to play it after-hours, but he said he thinks it can see $40 next year.
Jon C. Ogg
December 3, 2007
Semtech (NASDAQ:SMTC) has purchased a total of 9,836,066 shares of its common stock for an aggregate price of $169.4 million under an accelerated buyback plan; it intends to resume purchasing shares of its common stock under its existing stock repurchase program, under which approximately $50.3 million of remaining authority exists.
CMGI Inc. (NASDAQ:CMGI) noted along with its earnings that it had spent $8 million over the last quarter of its $50 million share buyback plan.
American Safety Insurance Holdings Ltd. (NYSE:ASI) has approved a buyback program for up to 500,000 shares of common stock. This is only about $9.5 million at current prices, and the company’s market cap is $204 million.
Equity Residential (NYSE: EQR) has authorized an additional $500 million to be used in its share repurchase program. Since the beginning of 2007, the company has repurchased and retired 26,694,346 of its common shares at an average price of $44.88 per share for an aggregate purchase of approximately $1.2 billion. Approximately $3.8 million currently remains available under the $500 million program previously announced.
Discover Financial Services (NYSE:DFS) will record a non-cash impairment charge related to its Goldfish MasterCard and Visa credit card business in the United Kingdom in the quarter ending Nov. 30, 2007 estimated as approximated $422 million in goodwill writedowns. Separately, the company has approved a share repurchase program for up to $1 billion of its common stock through November 30, 2010.
Lifetime Brands, Inc. (Nasdaq: LCUT) will close 30 underperforming outlet stores and its Board of Directors authorized an increase in the amount of its stock repurchase program to $40 million from $20 million. Its market cap is $164 million.
IBM (NYSE: IBM) announced that it plans to repurchase up to $1 billion of its outstanding common stock in open market transactions by the end of February 2008 rather than its original plans for March and April of 2008, are in addition to a $12.5 billion accelerated share repurchase announced earlier this year.
Camden Property Trust (NYSE:CPT) updated progress made on its stock repurchase program: During November 2007, Camden repurchased 1.6 million common shares at an average price per share of $52.03, for a total of $81.9 million. Year-to-date, Camden has now repurchased 2.9 million shares of common stock at an average price per share of $57.60, for a total of $168.4 million.
Jon C. Ogg
December 3, 2007
CMGI Inc. (NASDAQ:CMGI) earnings have been released. Surprisingly enough, it seems as though that because it is not a $1 or $2 stock any longer that no one is trading the stock.
We recently noted CMGI in our "10 Stocks Under $10" weekly subscriber newsletter with ten stocks that trade under 10-bucks. Here are today’s earnings (with percentage changes year over year where applicable):
Joseph C. Lawler, Chairman, President & CEO of CMGI: “Revenue was expectedly lower compared with last year due to two specific previously announced client programs that were discontinued, however we are very pleased with the growth we are seeing from other client engagements. Excluding those discontinued programs, revenue grew by approximately 15% compared to the year ago period. Gross margin performance was higher than expected, driven by work mix, continuous improvement initiatives and higher volumes for certain client programs.”
CMGI continues to expect revenue of $1.10 billion to $1.15 billion and operating income to be approximately 2.0% to 2.5% of revenue in fiscal 2008, before any restructuring. During the first quarter ended October 31, 2007, CMGI repurchased 568,000 shares (after giving effect to the recent reverse stock split) for aggregate consideration of $8.0 million, and pursuant to which the Company has authorized the repurchase of up to $50 million of common stock over an 18-month period.
We are going to look for "new contract awards" for an area we’d like to see here. The company needs more contracts for longer periods of time and it needs to demonstrate that customer losses are either in-sourcing or are from natural attrition that would be expected at larger companies. Otherwise we think that traders will get tired of hearing about customer defections.
Shares were initially down by about 0.5%, but now shares are up $0.01 in after-hours. The stock closed at $10.33 today and the implied 52-week trading range to account for the reverse split is $9.66 to $26.00.
Jon C. Ogg
December 3, 2007
Verifone (PAY) Company says it will restate results. Down to $23.67 from 52-week high of $50.
Bearingpoint (BE) CEO leaves. Big quarterly loss. Falls to $2.65 from 52-week high of $8.56.
Blockbuster (BBI) No signs that people will ever rent movies from stores again. Drops to $3.39 from 52-week high of $7.30.
ParkerVision (PRFR) Negative piece in Barron’s. Trades off to $7 from 52-week high of $16.
Borland Software (BORL) Not any news, just a dead stock getting deader. Down to $2.97 from 52-week high of $6.22.
Douglas A. McIntyre
GM’s (GM) shares sold off almost 5% on news that it sold 261,273 cars and light trucks in the United States in November compared to 293,558 vehicles a year earlier, an 11% drop.
Douglas A. McIntyre
It’s of no surprise when you see a furniture maker or anything at all tied to "in home buying" very weak. But some of these sell-offs go from mild, to bad, to outright atrocious. Enter La-Z-Boy Inc. (NYSE:LZB). La-Z-Boy shares are down another 1% today at $5.40, and the 52-week trading range is $5.46 to $15.20. The maker of the good old recliner isn’t immune from a weak housing and consumer discretionary spending environment. Despite there being a very soft environment, La-Z-Boy’s books are actually in decent shape even after its revenue warning last month. It would seem that this company could easily trim costs to keep the bottom line better.
This was briefly a $30 stock in 2002, and it has again been cut in half since this summer. How far back on the chart do you have to go before you find these recent stock prices? The early 1990’s. Other furniture makers are in the same negative spending environment soup:
Jon C. Ogg
December 3, 2007
November was supposed to be ugly for domestic car sales, but Ford (F) did fine.
Ford sales totaled 182,951, up 0.4 percent versus a year ago. The company had seen 12 straight months of sales declines.
Total sales of crossover utilities, including the redesigned Ford Escape, Ford Taurus X, and Mercury Mariner were 33,271, up 119 percent compared with a year ago. Escape Hybrid and Mariner Hybrid models set November sales records.
Ford Fusion and Mercury Milan also contributed to the company’s November sales increase. Fusion sales were up 39 percent and Milan sales increased 43 percent.
In the first quarter of 2008, the company plans to produce 685,000 vehicles in North America. This is the initial forecast of first quarter production. In the first quarter of 2007, the company produced 740,000 vehicles. Fourth-quarter 2007 production is 645,000 units, unchanged from the previously announced plan.
Ford shares, which were trading down, moved up on the news.
Douglas A. McIntyre
Jim Cramer on TheStreet.com videos is staying positive on his "Horsemen of Tech" and he said that today is mark-up day and fund managers will want to own these winning names going into year-end. He noted that he’d buy calls out to FEBRUARY & MARCH 2008 that are "in the money":
Cramer also noted a couple other stocks. Amazon.com (NASDAQ:AMZN) was removed from Cramer’s "New Four Horsemen of Tech" some time ago, but he even thinks that it will win over Christmas from strong sales. He also noted that Garmin (NASDAQ:GRMN) is having a monster Christmas, although he still thinks Nokia (NYSE:NOK) is going to be major competition next year for Garmin.
Interestingly enough, at last week’s VALUE INVESTING CONGRESS hedge fund manager Larry Robbins of Glenview Capital Management (with something like $9 Billion under management) on Wednesday said that "the horsemen" had been the lead stocks on his short sale list. Whether or not that had or has changed is not known because the market sentiment has changed over the last few days.
Jon C. Ogg
December 3, 2007
General Electric Co. (NYSE:GE) shares are feeling a sting today after Citigroup lowered certain targets for the company:
Citigroup’s call appears a pre-meeting maintenance call as analyst Jeffrey Sprague did maintain his official BUY Rating on GE, and noted that he expects GE to continue buying back stock and may raise its dividend to show another vote of confidence on its earnings front.
This call is a week and a day ahead of Jeff Immelt hosting GE’s annual performance review and business outlook meeting in New York on December 11. We’d expect to see more research notes over the next few days ahead of the GE meeting.
Deutsche Bank had already been cautious over the last 60 days. First Call’s consensus estimate for 2008 is $2.50.
GE shares are down 2.7% at $37.22 today, and the 52-week trading range is $33.90 to $42.15. This also takes the stock back under the $37.76 level that is the 200-day moving average.
Jon C. Ogg
December 3, 2007
Research-In-Motion (RIMM), the famous Blackberry marketer, is having a rough time. After its stock made a huge run taking it up over 200% YTD in early November, it has sold off. Over the last month, shares are down 10% and the stock has underperformed Apple (AAPL) and Nokia (NOK) for that period.
Wall St. might argue that the shares are simply experiencing some profit-taking, but it may be more than that.
As Verizon Wireless opens up its network to new devices and software, it is not clear which device-makers will benefit from the ability of customers to migrate to the national cellular provider. An open systems does not necessarily help the Blackberry because of the new, competing products coming to market. Verizon pushes the Motorola (MOT) Q and Palm (PALM) Treo, both of which compete with the Blackberry. There is no way to know how this will turn out, but an open Verizon system is a wild card.
AT&T (T) Wireless is aggressively promoting the Samsung BlackJack. Sounds like Blackberry, but it isn’t. The new product could take RIMM share.
The Google (GOOG) open wireless device software, called Android, will certainly allow developers to put "Blackberry-like" features onto a number of handsets. Again, it is not clear that this hurts RIMM, but it is not likely to help it.
RIMM’s competitive position does not look as good as it did at the beginning of the year, and it is starting to show.
Douglas A. McIntyre
VeriFone (NYSE:PAY) is seeing shares crushed today after the company issued a release stating that it was going to restate financial results and quarterly financial statements for 2007. This is due to errors in accounting related to the valuation of in-transit inventory and its allocation of manufacturing and distribution overhead to inventory that affects the cost of revenues.
Its revenue forecast for Q4 actually looks above plan, but the results are being delayed and no one wants to trust a company that restates recent results.
It is under a planned share sale under a 10b5-1 plan, but the CEO sold 43,300 shares just last week and that will bring additional criticism over the timing of this news. This will draw additional fire today.
This seems to be the worst drop in the share price in memory. "Accounting irregularities" and "sudden financial restatements" are never good things to hear. We caution against believing that these huge drops are immediate buying opportunities because these historically only pop a bit before drifting lower. That being said, we do expect that some who have been waiting for a chance to buy the stock after its huge run since early 2005 may have a hard time resisting the decision to buy shares.
VeriFone shares opened down huge at just under $30.00, and now shares are down 46% at $25.50 in early trading. Morgan Keegan was the first of the firms to downgrade this almost 60 days ago, but you can expect the other analysts may have to bail on backing a company after a blunder like this. VeriFone makes the credit and debit card transaction swipe machines you use at the grocery store and elsewhere.
Jon C. Ogg
December 3, 2007
The median target price for E*Trade (ETFC) among analysts polled by Thomson/First Call is $9. Today, Bank of America cut the stock to "sell" and it is trading below $4. B of A’s new price target is $2.
Bank of America said in its research note the "best-case scenario for E*Trade to be another $1 billion addition to its reserves, while the worst case would be a continued fire sale of assets resulting in an outright sale of the company’s home equity portfolio."
Those folks with the $9 target are looking a bit off.
Douglas A. McIntyre
Below is the top pre-market news out of individual stocks:
Jon C. Ogg
December 3, 2007
These are not the only impact analyst calls this morning, but these are the ones that 24/7 Wall St. is focusing on:
Jon C. Ogg
December 3, 2007
Markets in Europe were mixed at 7 AM New York time.
The FTSE fell .3% to 6,417. Northern Rock is down 4.7% to 112.6. Rio Tinto (RTP) is down 2% to 5527.
The DAXX is up .1% to 7,880. Adidas is up 1.6% to 46.2.
The CAC 40 is off .1% to 5,665. Societe Generale is off 1.4% to 104.1
Data from Reuters
Douglas A. McIntyre
According to Reuters "the Federal Reserve will cut interest rates by 100 basis points before June to help the housing market, Citigroup’s (C) chief economist, Lewis Alexander, said on Monday."
Douglas A. McIntyre
According to MarketWatch, "Bank of America downgraded online discount brokerage firm E-Trade Financial (ETFC) to sell from hold, saying it no longer believes the value of its retail brokerage business can offset negative value at the bank." E*Trade may have to take another $1 billion in new reserves according to the report.
Douglas A. McIntyre
Going back a year, it would be inconceivable that a large American bank might need to be bailed out. But, Citigroup (C) is facing two daunting problems. One is that Moody’s is probably going to downgrade another $103 billion in SIV assets. According to Bloomberg, the agency is taking the action in part because "20 SIVs sponsored by banks including New York-based Citigroup Inc. and ING Groep NV declined to 55 percent from 71 percent a month ago."
In addition, the Citadel purchase of banking assets from E*Trade (ETFC) set a price on similar assets of 26 cents on a dollar. "The portfolio sale, one of the few observable trades of such assets, has very clear, generally negative, implications for the valuation of like assets on brokers’ balance sheets," Credit Suisse analyst Susan Roth Katzke told Reuters.
Based on the E*Trade math, Citi cold face a total of $26 billion in after-tax write offs.
Citi may not be able to survive this kind of drop in big parts of its balance sheet, at least not with the company intact and in its current form.
Will the government step in to help the bank? It may not have to. The E*Trade deal could be done, on a much larger scale, to get Citi out of its current jam.
A bail-out of Citi may well be done by private equity interests. That could involve a purchase of $60 billion in distressed assets by a group of buy-out firms. There is the money in place to do it. And, the value of Citi’s battered portfolio will almost certainly come back. It may not be to a dollar on a dollar. But, it will almost certainly be better than 26 cents. Buy-out operators could clear billions of dollars in a year or two.
Citi cannot afford to keep the assets. It cannot afford the write-downs because of banking regulations and because it is a public company.
Citi may have to pay a monumental price for a bail out. If a company buys the distressed assets, it will want a big convertible preferred in the big bank which will flip to common stock. And, it will want to have that set up so that it gets a big coupon and a chance to make a fortune if Citi’s stock price rises.
That’s that. Citi is going to have to be bailed out. It will cost the bank, but it will save it.
Douglas A. McIntyre
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