Daily Archives: December 21, 2007

52-Week Low Club (CC, DBD, FIC, GTOP, IMB, MSSR, RECN, MU, RT, STI)

Some of these recovered off lows but here are some of the more active stocks that hit 52-week lows today:

  • Circuit City (NYSE: CC)… after posting wider losses and then forecasting a loss next quarter.  Even losers like them, how does a retailer lose money over Christmas????
  • Diebold (NYSE: DBD) hit a new 52-week low on a "continuing dialog" with Office of The Chief Accountant and a D.O.J. investigation into related matters.
  • Fair Isaac (NYSE: FIC) people keep asking us if FIC is the next implosion in being tied to system-wide credit woes.
  • Genitope (NASDAQ:GTOP) hit the FUBAR button after failing to meet endpoints in PHASE III.  With no revenues it’s close to biotech zombie status.
  • IndyMac Bancorp (NYSE:IMB) recovered but its subprime woes remain.
  • McCormick & Schmicks (NASDAQ:MSSR)… steakhouse sales soft in weak consumer economy.  Don’t you think the private equity firms wish they could sell those steakhouses back now????
  • Resource Connection (NASDAQ:RECN)… too few resources?  Nope, it gave employees an extra week off of paid vacation.  Those employees are some lucky SOB’s for that, but shareholders "NOT SO MUCH!!!"
  • Micron Tech (NYSE: MU) after a piss poor earnings report.  Trivia Question: Is there a worse technology business than DRAM?  It’s just like trading a commodity except the prices never seem to go up!
  • Ruby Tuesday (NYSE:RT) after a downgrade and an earnings warning, mid-level restaurant spending is weak and they don’t offer very much special.
  • SunTrust (NYSE:STI) weak again.  Maybe Buffett wishes he stayed away.

Jon C. Ogg
December 21, 2007

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Posted on: December 21, 2007 – 4:01 pm in HI/LOW, , , , , , , , , ,

Dell & Tesco European PC Retail (DELL)

Dell (NASDAQ:DELL) and Tesco have announced that Dell notebook and desktop computers will become avaliable in Tesco stores starting next month.

Dell XPS and Inspiron products will be sold on the floor in Tesco stores primarily in the UK, but will also be sold in Ireland, Poland, Czech Republic, and Slovakia.

Dell’s head of the EMEA region has noted that this will put another 13 million retail shoppers per week in Tesco stores with the opportunity to buy a PC.  This is also an expansion of Dell’s retail store sales initiative after it has similar deals in the U.S. with 2007 announcements to put PC’s on retail floors at Wal-Mart and Best Buy. It also signed a pact with Gome in China to sell PC’s in those retail electronics stores throughout China.  It also earlier this year signed similar pacts with Carphone Warehouse in the U.K. and Bic Camera in Japan.

Jon C. Ogg
December 21, 2007

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Posted on: December 21, 2007 – 10:33 am in PC Companies,

E*Trade Previews Turnaround Plans (ETFC, AMTD, SCHW)

E*TRADE (NASDAQ: ETFC) has announced an ‘aggressive customer win-back campaign’ as one component of its ‘comprehensive’ turnaround plan.   Since this is a preview, that comprehensive plan is more of a promise for a comprehensive turnaround plan. 

The company said the turnaround plan has been developed in conjunction with a thorough evaluation of E*TRADE’s core business strategy with an assessment of its organizational structure, operating expense base reviews, and balance sheet transition.

The customer win-back campaign supposedly began earlier this month and incorporates targeted engagement incentives and outreach initiatives to current and prospective customers alike.  The company said it will detail its formal turnaround plans after its Q4 and fiscal results are released on January 24, 2008.  So there is another month before the  investment community can really see how the company will do down the road.

Obviously there have been many client defections.  We just haven’t gotten a hard number on it.  You know Joe Moglia at TD Ameritrade (NASDAQ:AMTD) and Charles Schwab of Charles Schwab (NASDAQ: SCHW) are ready and eager to take any unhappy or nervous E*Trade accounts after the malaise there. 

We still think that one of these larger firms may decide to pounce on E*Trade and acquire it while it is down and out.  But it really really boils down to how many clients they can steal away for next to nothing.  If you can spend $25 million on an aggressive ad campaign and to staff more account openers to get 5 million accounts, it might make more business sense to do that rather than a couple to few billion dollars where you may be assuming many more liabilities.

Jon C. Ogg
December 21, 2007

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Posted on: December 21, 2007 – 9:51 am in Brokerage Firms, , ,

Investor Optimism Rising, Sort Of

Investor optimism gained slightly in December rising 6 points to a level of 50 according to the UBS/Gallup Index of Investor Optimism. Most surveys refer to this as "investor sentiment" on their reports. That rise might sound OK until the next data point.

The report says that this is the second lowest level for the Index this year and is 40 points below that of December 2006.  The Index is conducted monthly and had a baseline score of 124 when it was established in October 1996.

Here are the details: Most of the improvement in December’s Index can be found in the Economic Dimension of the Index, which measures investors’ feelings about the direction of the overall US economy. The Economic Dimension increased 5 points from -12 in November to -7 in December. Despite this uptick, 78 percent of investors describe the current U.S. economy as being in a slowdown or recession – essentially unchanged from the 79% who felt this way in November and up from 68 percent who felt this way in October.  Investor sentiment towards their own investments remained basically unchanged with the Personal Dimension of the Index, which measures Investors’ optimism about their individual investment portfolios, increasing 1 point to 57 from its level of 56 in November.

The real truth about sentiment is that most traders use this as a "fade the trade" so the want to sell when sentiment is too high and they want to buy when sentiment is too low.

Posted on: December 21, 2007 – 9:35 am in Economy,

Top 10 Pre-Market Analyst Calls (GTOP, HAS, MAT, ITRI, MVL, RIMM, RAD, SGP)

If analysts were cowboys they’d say, "It’s getting pretty darn thin out there on the research front."  Here are the few analyst calls we are looking at today ahead of what most of Wall Street and Main Street will be treating as a 4 or 5 day weekend:

  • Genitope (NASDAQ: GTOP) downgraded to Underperform from Sector Perform at RBC.
  • Hasbro (NYSE:HAS) and Mattel (NYSE:MAT) both started as Hold at Citigroup.
  • Itron (NASDAQ:ITRI) raised to Outperform from sector Perform at RBC.
  • Marvel Enterprises (NYSE: MVL) started as Sell at Citigroup.
  • Research in Motion (NASDAQ:RIMM) raised to Outperform from Peer Perform at Bear Stearns; Goldman Sachs raised estimates.
  • Rite Aid (NYSE: RAD) raised to Buy from Neutral at UBS.
  • Schering-Plough (NYSE: SGP) raised to Overweight from Equal Weight at Lehman Brothers.

Yep, that’s right.  It is really only the TOP EIGHT RESEARCH CALLS today.

Jon C. Ogg
December 21, 2007

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Posted on: December 21, 2007 – 8:36 am in Analyst Calls, , , , , , , ,

Circuit City Results & Comments Show Incompetence (CC, BBY)

Circuit City (NYSE: CC) has just posted its earnings, or at least its results.  The company posted a loss of $140 million from operations.

Quarterly net sales decreased 3.1 percent to $2.96 billion from $3.06 billion in the same period last year, with consolidated comparable store sales decreasing 5.6 percent.  Excluding the charges, the company lost $0.64 on an EPS basis.  First Call had estimates at -$0.31 EPS on revenues of $3 Billion.

We named Philip Schoonover as a CEO that needs to go, and the board should revolt after you read further down here on the outlook.  Cherkasky is out at Marsh-Mac, and Circuit City needs to follow the same path.

It did announce a new $1.3 Billion credit facility, but it also recorded a non-cash tax expense of $102.8 million to establish a full valuation allowance against its deferred tax assets in the domestic segment.

Philip J. Schoonover, chairman, president and chief executive officer, said: "We are very dissatisfied with our third quarter results.  We underestimated the financial impact from the disruption of our transformation work…..………. "We believe that these issues are primarily self-induced……"  What a dope.

But the outlook is for a loss, as well even though First Call had been looking for the retailer to post a gain in the Christmas quarter: "Assuming that current sales and margin trends continue for the balance of the fourth quarter of the fiscal year, the company expects to deliver a modest loss from continuing operations before income taxes for the quarter."  That is unacceptable for a retailer, even if you have a bozo CEO.  Best Buy (NYSE: BBY) is obviously kicking these guys in the teeth, and if you have been to a both stores back to back you’ll know why.

Shares are down about 15% at $5.65 pre-market and the 52-week trading range is $5.35 to $22.02.  With a $6.66 closing price yesterday you have to wonder if it was an Omen?  It’s a cold winter in the board room this morning.

Jon C. Ogg
December 21, 2007

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Posted on: December 21, 2007 – 8:14 am in Earnings, Earnings Warning, Retail, ,

Marsh & McLennan: Cherkasky Out! (MMC)

Marsh & McClennan (NYSE: MMC) has announced that its CEO Michael Cherkasky is out.  The board of directors is searching for a new CEO.  Over the last two weeks 247WallSt.com named a list of 10 CEO’s WHO NEED TO GO for 2008, and Mr. Cherkasky was one of those 10 CEO’s. 

Shares were up 3% initially on this news but now it appears that shares are up roughly 5% in thin pre-market trading volume.  Now all of a sudden the volume disappeared and the indications are not there, so we aren’t able to say where this will open.  We would like to take the opportunity here though to tell the board of directors that they may be part of the problem.  When companies have known for a long time that their CEO is disliked and not doing the right job and DON’T have a list of 20 successor candidates then they are inept.

Here is the list of our other CEO’s to go:

Jon C. Ogg
December 21, 2007

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Posted on: December 21, 2007 – 7:52 am in Management Change, ,

A Lesson From RIM (RIMM) And Oracle (ORCL)

Most people with a college education would guess that the near-spectacular results posted by Research In Motion (RIMM) and Oracle (ORCL) are a sign that the broad tech industry has not been hit by the problems at financial services companies and banks.

But, what is hidden a bit is the breadth of strength still pushing tech along. Oracle and RIMM are at the opposite extremes of hardware and software sales. Oracle sells million dollar database management and customer control products and services. Their upgrade licenses can be worth many times the initial license, so revenue for one customer can stretch over several years.

At RIMM, the product is an "every man" business special. The Blackberry costs about $300 and the service fee is worth less than the price of a cup of coffee a day.

Both ends of tech are not just holding up. They are accelerating.

What will make the tech "trifecta" complete is a strong report on PC sales from Hewlett-Packard (HPQ) or Dell (DELL). Good news on Microsoft (MSFT) Vista or Office would do. Sales of PCs and servers are the great central avenue on the technology map. Companies big and small buy what MSFT and HPQ have to sell.

But, even without reports from the hardware operations, tech has legs.

Douglas A. McIntyre

Posted on: December 21, 2007 – 5:50 am in Software, , , , ,

US Private Equity On Sidelines As Singapore Goes For Merrill (MER)

Now that news has gotten around that Singapore’s Temasek may put $5 billion into Merrill Lynch to offset fourth quarter write-downs, the cycle of sovereign funds investing in US financial companies seems almost routine.

Troubled brokerages and banks are turning to money from China, Singapore, and the Middle East but US private equity firms have stayed out of all of these potential investments.

The easy theory to draw from the pattern is that banks do not want private equity firms to own any of their shares. There are potential conflicts of interest between bank and customer. But, in Japan and Germany, cross investments between firms with related interests were, at one point, routine.

Investors could also guess that foreign governments would be more likely to stay out of management’s hair. Sovereign funds are willing to take non-voting shares and appear to be happy getting a decent chance for an upside several years out.

But, these may not be the only reasons that large private equity operations have not invested in any of the current opportunities to own a piece of Wall St. Private equity companies are facing their own crisis as some of the recent deals that they have closed hit the wall of the bad economy. Reports are that Chrysler is already in financial trouble and its takeover by Cerberus is only a few months old.

There is no way of saying what the "balance sheets" of private equity firms look like today. Few are public like Blackstone (BX). That leaves a black box which is hard to open.

If there ends up being a big upturn in the value of US banks and investment houses in two or three years, domestic private equity firms will not be there to reap the benefits.

Douglas A. McIntyre

Posted on: December 21, 2007 – 5:25 am in Financial Stocks

Media Digest 12/21/2007 Reuters, WSJ, NYTimes, FT, Barron’s

According to Reuters  India’s Tata is about to close a deal to buy Jaguar and Rover from Ford (F).

Reuters writes that the IMF says that the subprime mortgage problem will slow growth in the US and Europe.

The Wall Street Journal writes that Merrill Lynch (MER) is in talks with Singapore’s Temasek Holdings about a $5 billion investment.

The Wall Street Journal reports that Chrysler is in a severe financial situation and may have to sell assets.

The Wall Street Journal writes that profits at RIM (RIMM) more than doubled in the last quarter.

The New York Times report that several studies about risks of cholesterol drug Zetia where not released by Merck (MRK)

Barron’s reports that the heir apparent at Cicso (CSCO) has left to join a private equity firm.

CNN Money writes that Campbell sold Godiva chocolates for $850 million

Douglas A. McIntyre 

Posted on: December 21, 2007 – 4:38 am in Press Digest, , , , ,

Asia Markets 12/21/2007

Markets in Asia rose.

The Nikkei was up 1,5% to 15,257.

The Hang Seng rose 2.3% to 27,627.

The Shanghai Composite rose 1.2% to 5,102.

Douglas A. McIntyre

Posted on: December 21, 2007 – 4:17 am in International Markets