24/7 Wall St. » KFT

Kraft Gets IRS Nod for Spin-off

Paul Ausick — Fri, 18 May 2012 13:59:12 +0000

Kraft Foods Inc. (NYSE: KFT) announced this morning that it has received a “favorable private letter ruling” from the US Internal Revenue Service “confirming the tax-free status of the planned spin-off of the company’s North American grocery business and certain related internal reorganization transactions.” This clears the way for the spin-off of the company’s grocery business from its snack foods business in a split first proposed last August.

The proposed split would create a $35 billion snack food company with brands like Oreo, Cadbury, Tang, and Trident, and a $14 billion grocery business that would continue to supply grocers with Maxwell House coffee, Jell-O, and Philadelphia-brand cream cheese.

One investor who is not excited by the news is Warren Buffett, who recently reduced his holdings of Kraft shares from 87 million to 78 million. Buffett never liked the deal Kraft made for Cadbury and has been lightening his holdings of the food giant ever since.

Paul Ausick

Filed under: Buffett, Food, Shareholder Issues Tagged: KFT

Big Changes to Buffett and Berkshire Hathaway Stock Holdings, A to Z

Administrator — Tue, 15 May 2012 21:05:01 +0000

Berkshire Hathaway Inc. (NYSE: BRK-B, BRK-A) and Warren Buffett have just released their most recent U.S.-listed equity holdings for the Berkshire Hathaway empire. This cut off date is as of March 31, 2012 and Mr. Buffett has already said that he was buying some shares since the end of the quarter on weakness.

Also, keep in mind that portfolio managers Todd Combs and Ted Weschler are still new and those new positions of under $200 million $300 million are likely tied to them.

24/7 Wall St. has gone through line by line of each position to see which stocks have been bought and sold as new positions, as well as having added in whether or not the number of shares grew or shrank on each since the prior quarter. We had added some color in on some of the positions if applicable.

Be advised that the number of subsidiaries that this filing covers is 14 entities rather than 18 entities in the prior quarter. There is also a note in the 13F filing showing that the SEC has granted “Confidential Treatment” on some Berkshire stock holdings and that likely suggests that Buffett is still acquiring a position he does not want the public to know about yet. This filing does not signal the half-dozen or more European shares that Buffett said he bought so that remains an outstanding issue as well.

The value of the stock portfolio was $66,151,587,000 at the end of 2011 and this was listed as $75,300,250,000 at the end of March 2012.

American Express Co. (NYSE: AXP) was over 151.6 million shares, SAME AS last quarter.

Bank of New York Mellon Corp. (NYSE: BK) is now 5.6 million shares, HIGHER THAN the 1,793,915 shares last quarter.

CVS Caremark Corporation (NYSE: CVS) is the SAME SIZE at 7.106 million shares after having been a new holding in a recent quarter and having been raised one quarter ago.

Coca Cola Co. (NYSE: KO) was right at 200 million shares, SAME AS BEFORE.

ConocoPhillips (NYSE: COP) is roughly 29.1 million shares, roughly the SAME AS BEFORE but it is still lower than previous quarters in past reports.

Costco Wholesale (NASDAQ: COST) 4,333,363 Shares, SAME AS last quarter after having lowered it before.

Da Vita Inc. (NYSE: DVA) is now 6 million shares worth $541 million and that LARGER THAN BEFORE after having been a new position of 2.684 million shares.

DirecTV (NASDAQ: DTV) is a LARGER POSITION listed at 22.999 million worth over $1.13 billion. This one had been 20.348 million shares worth $870 million one quarter earlier and it had been a new position just two quarters ago at 4.249 million shares.

Filed under: Activist Investor, Buffett, Buffett Holdings, Compensation, Conglomerates, Insider Activity, Mutual Funds Tagged: AXP, BK, BRK-A, BRK-B, CDCO, COP, COST, CVS, DG, DVA, featured, GCI, GE, GM, GSK, IBM, INTC, IR, JNJ, KFT, KO, LMCA, MA, MCO, MTB, PG, SNY, TMK, UPS, USB, USG, V, VIA, VRSK, WFC, WMT, WPO

Smucker’s Drops Coffee Prices: Will Others Follow?

Paul Ausick — Tue, 15 May 2012 12:59:54 +0000

Food processor J.M. Smucker Co. (NYSE: SJM) announced this morning that it was lowering the price on its coffee brands by an average of 6% “in response to sustained declines in green coffee costs.” Smucker’s brands include Folgers, Millstone, Cafe Bustelo, and Dunkin’ Donuts under license from Dunkin’ Brands Group Inc. (NASDAQ: DNKN) in retail channels only.

The question now, of course, is whether Kraft Foods Inc. (NYSE: KFT), maker of Maxwell House and Gevalia brands among others, Starbucks Corp. (NASDAQ: SBUX), Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR), Peet’s Coffee & Tea Inc. (NASDAQ: PEET), and Coffee Holding Co. Inc. (NASDAQ: JVA) will follow suit. Kraft would seem like a good bet to lower prices to compete in the retail space, but the premium coffee roasters are more likely to leave prices where they are as long as they can in order to make a little extra margin.

Last week’s price for arabica beans was about $1.90/pound. A year ago the price was just over $3.00/pound. Robusta (cheaper) beans currently cost about $1.14/pound, about 10% below the five-year high of $1.26/pound set last June.

A continued decline in arabica prices may force the premium roasters to lower prices because the story will hit the headlines and consumers will start making some noise about being gouged by the coffee companies. But that day is a ways off yet. But imagine, both gasoline and coffee prices falling at the same time. What an idea!

Paul Ausick

Filed under: Food, Retail Tagged: DNKN, GMCR, JVA, KFT, PEET, SBUX, SJM

Investors Seeking Defensive Stocks Where 3% to Over 5% Dividends Rule!

Administrator — Mon, 14 May 2012 17:14:54 +0000

A stock market that sells off eight of nine days is not a good market. Even the Facebook IPO is being viewed as a one-off item rather than a systemic item which will make the market stronger. With “Sell in May and go away!” remaining prevalent and with Europe in meltdown as Asia slows, the big question is where to hide. Some investors just refuse to accept the floor-level rates of CDs and Treasury bills and Treasury notes, so they go hide out in the defensive stocks like tobacco, consumer staples, basic level food, utilities, big-pharma, and maybe even those high-yields in telecom. This is a market where defensive stocks should rule the roost.

People are going to buy Coke and Pepsi, most likely, in almost any economy. Pepsico, Inc. (NYSE: PEP) is actually up 0.6% at $67.23 against a 52-week high of $71.89; Coca-Cola Company (NYSE: KO) is down 0.6% at $76.95 against a 52-week high of $77.82. With yields of about 3% on average, these pay about the same as the 30-Year Treasury’s long-bond. The beer segment remains uncorrelated to defensive stocks as it did last week (in part due to currencies): Anheuser-Busch InBev SA (NYSE: BUD) is down by 0.7% at $71.43 and Molson Coors Brewing Company (NYSE: TAP) is down 1.2% at $40.81. Even the best water utility in America via American Water Works Company, Inc. (NYSE: AWK) is down another 1% $33.99 against a 52-week and all-time high of $34.89.

Food is supposed to be defensive. You gotta eat, right? McDonald’s Corporation (NYSE: MCD) is down almost 0.4% at $91.55 and getting further and further away from that $102.22 all-time high recently seen. The rest of the defensive food segment is up to mixed as food is defensive and with dividends:

Kraft Foods Inc. (NYSE: KFT) is up 0.4% at $39.20 with a 3% yield that challenges the long-bond;
ConAgra Foods, Inc. (NYSE: CAG) is down 0.2% at $25.67 with a 3.7% yield that beats the long-bond;
Campbell Soup Co. (NYSE: CPB) is up 0.25% at $34.49 with a 3.4% yield that beats the long-bond;
Hormel Foods Corporation (NYSE: HRL) is down only 0.1% at $29.08 but its 2.1% yield is ‘only’ paying what the 10-year has been paying recently.

Smoking has those nice 5%-plus yields for the defensive tobacco sector: Altria Group Inc. (NYSE: MO) is down only 0.1% at $31.75 against a 52-week high of $32.62; Vector Group Ltd. (NYSE: VGR) is down 0.5% at $16.73; and Reynolds American Inc. (NYSE: RAI) is down only 0.2% at $40.41 against a high of $42.81.

Diapers, toothpaste, deodorant, and shaving… consumer products are acting defensive: Procter & Gamble Co. (NYSE: PG) is down only 0.3% at $63.50 with a 3.5% yield; Kimberly-Clark Corporation (NYSE: KMB) is up by 0.3% at $79.62 with a 3.7% yield; Colgate-Palmolive Co. (NYSE: CL) is down 0.1% at $99.20 but it only pays about 2.5% for a dividend yield.

Drug and medical is mixed to positive: Merck & Co. Inc. (NYSE: MRK) is up by over 0.8% at $38.35 with its 4.4% yield; Pfizer Inc. (NYSE: PFE) is down only $0.01 at $22.64 with its 3.9% yield; and Johnson & Johnson (NYSE: JNJ) is down 0.5% at $64.00 with its 3.8% yield.

Those smartphones and telephones are not acting defensive at all today with Verizon Communications Inc. (NYSE: VZ) down 0.9% at $40.80 with its 5% yield and with AT&T, Inc. (NYSE: T) down 0.7% at $33.36 with a 5.4% yield.

Some investors are willing to suffer from the near-zero return of Treasuries, while others are going to try to look for the safest of stocks to seek safe and steady dividends. The DJIA is down 0.7% and the S&P 500 was down 0.6% at last look. Both are actually much better than what we were looking at just two hours or so ago.

JON C. OGG

Filed under: Defensive Stocks, Dividend Tagged: AWK, BUD, CAG, CL, CPB, HRL, JNJ, KFT, KMB, KO, MCD, MO, MRK, PEP, PFE, PG, RAI, T, TAP, VGR, VZ

The Market Where Defensive Shares Are Working Again (PEP, KO, BUD, TAP, AWK, MCD, KFT, CAG, CPB, HRL, MO, VGR, RAI, PG, KMB, CL, MRK, PFE, JNJ, T, VZ)

Administrator — Tue, 08 May 2012 16:07:03 +0000

Blame whatever you want. A weaker U.S. economy, a weakening and flailing Europe, a move to socialism in France and Greece, a weaker BRIC and emerging market story, commodity prices and on and on… Commodity prices and their tracking shares are getting hosed today. Why does the “Sell in May and go away!” profile often coincide with sell-offs so well?

After the weakness in the broad market has the DJIA down 140 points (or -1.1%) and the S&P 500 Index down 15 points or 1.1%, it turns out that most of the defensive stock sector leaders are holding up far better than the broad market in our go-to defensive stock portfolio. We have taken a look at each of these with share price snapshots right before Noon EST.

No matter what, you gotta drink! Pepsico, Inc. (NYSE: PEP) is down 0.5% at $66.28 against a 52-week high of $71.89; Coca-Cola Company (NYSE: KO) is down 0.4% at $76.97 against a 52-week high of $77.82. With yields of about 3% on average, these are now challenging the 30-Year Treasury yields. The beer segment is not acting defensive as it should, perhaps because they are foreign issues now with more currency risks: Anheuser-Busch InBev SA (NYSE: BUD) and Molson Coors Brewing Company (NYSE: TAP) are not acting very defensive with price corrections of 3% and 2$ respectively.

Perhaps the most defensive you can get is water, and the top water utility is American Water Works Company, Inc. (NYSE: AWK) with a premium valuation. This water leader is down 0.8% at $33.73 against a 52-week and all-time high of $34.89.

Food is supposed to be defensive, although a drop of 1.5% in McDonald’s Corporation (NYSE: MCD) to $94.10 is causing some added stress in what was the darling of the DJIA in 2011. The rest of the defensive food segment seems to be less damaged when you evaluate the moves: Kraft Foods Inc. (NYSE: KFT) is down only 0.4% at $39.11; ConAgra Foods, Inc. (NYSE: CAG) is down 0.7% at $25.52; Campbell Soup Co. (NYSE: CPB) is down only 0.3% at $33.97; and Hormel Foods Corporation (NYSE: HRL) is down only 1 penny at $28.92 as the world is getting excited about Spam again.

Smoking is defensive again and the tobacco stocks are holding up much better than the broad market with those 5% and higher dividends: Altria Group Inc. (NYSE: MO) is down only $0.3% at $32.10 against a 52-week high of $32.62; Vector Group Ltd. (NYSE: VGR) is down only 0.2% at $16.88; and Reynolds American Inc. (NYSE: RAI) is down only 0.2% at $40.18 against a high of $42.81.

Shaving, diapers, toilet paper, and other consumer products are acting defensive with some gains on a weak day. Procter & Gamble Co. (NYSE: PG) is trading up $0.11 at $64.36 and Kimberly-Clark Corporation (NYSE: KMB) is up $0.08 at $79.08 with KMB challenging the 52-week high. Colgate-Palmolive Co. (NYSE: CL) is down ‘only’ 0.5% at $99.10 against a 52-week high of $100.81.

Drug and medical is holding up on the consumer end with losses look far less than the broader market: Merck & Co. Inc. (NYSE: MRK) is down 0.35% at $38.40; Pfizer Inc. (NYSE: PFE) is down 0.3% at $22.38; and Johnson & Johnson (NYSE: JNJ) is down the least with a drop of 0.2% at $64.65 against a 52-week high of $68.05.

Those smartphones and telephones are somewhat defensive, and those 5%-plus yields sure shield investors who are worried about chasing the hottest growth stocks. Verizon Communications Inc. (NYSE: VZ) is down only 1-penny at $40.52 with a 5% dividend yield and AT&T, Inc. (NYSE: T) is actually up 0.2% at $33.08 with a yield of about 5.4%.

When investors want safety and when the Treasury yield is so low on the longer-term Treasury market, many investors turn to the safety of the higher dividends and safer stocks that are defensive. Greece and the rest of PIIGS may fall again, but the logic is that U.S. consumers still have to eat, drink, shave, put on deodorant, and tend to stick with their core vices as best as they can.

JON C. OGG

Filed under: Consumer Goods, Defensive Stocks, Dividend, Drug companies, Food, Telecom, Tobacco Tagged: AWK, BUD, CAG, CL, CPB, HRL, JNJ, KFT, KMB, KO, MCD, MO, MRK, PEP, PFE, PG, RAI, T, TAP, VGR, VZ

24/7 Wall St. Closing Bell (TRP, DMD, ARII, CHK, KFT, DG, KALU, LDK, HUM, SNH, SOHU, ACI, ADM, RATE, BRCM, DPZ, ODP, PFE, SIRI, VLO, BKS, SUN, PAY)

Paul Ausick — Mon, 30 Apr 2012 20:13:01 +0000

The major US stock indexes opened slightly lower this morning and continued drifting lower all day. The Chicago PMI report got the day started on the wrong foot, showing a decline in spending even though personal income rose in March (our coverage here). Spain’s slip into recession did not help (our coverage here) and a report on global unemployment doesn’t offer much hope for economic expansion (our coverage here). The US dollar index rose slightly today, now up 0.05% at 78.780. The GSCI commodity index is up 0.35% at 684.45, with commodities mixed. Cocoa and orange juice posted sharp declines today. WTI crude oil closed down -0.1% at $104.87/barrel, and Brent crude trades down -0.24% at $119.54/barrel. Gold settled down less than -0.1% today, at $1,664.20/ounce, and an overall loss for the month of April of -0.5%.

The unofficial closing bells put the DJIA down nearly 15 points to 13,213.63 (-0.11%), the NASDAQ fell nearly 23 points (-0.74%) to 3,046.36, and the S&P 500 fell -0.39% or more than 5 points to 1,397.91.

There were several analyst upgrades and downgrades today, including Demand Media Inc. (NYSE: DMD) cut to ‘equal weight’ at Evercore; TransCanada Corp. (NYSE: TRP) cut to ‘hold’ at Desjardins; American Railcar Industries Inc. (NASDAQ: ARII) raised to ‘neutral’ at UBS; Chesapeake Energy Corp. (NYSE: CHK) raised to ‘outperform’ at BMO Capital; Kraft Foods Inc. (NYSE: KFT) raised to ‘overweight’ at JPMorgan; Dollar General Corp. (NYSE: DG) raised to ‘strong buy’ at Raymond James; and Kaiser Aluminum Corp. (NASDAQ: KALU) raised to ‘buy’ at Dahlman Rose.

Earnings reports since markets closed last Friday have led to some price changes as of the last half hour of trading today: LDK Solar Co. Ltd. (NYSE: LDK) is up 10.8% at $3.28 (our coverage here); Humana Inc. (NYSE: HUM) is down -8.4% at $80.49; Senior Housing Properties Trust (NYSE: SNH) is up 0.32% at $22.09; and Sohu.com Inc. (NASDAQ: SOHU) is down -7.4% at $51.62.

Tomorrow we get earnings from Arch Coal Inc. (NYSE: ACI), Archer Daniels Midland Co. (NYSE: ADM), Bankrate Inc. (NASDAQ: RATE), Broadcom Corp. (NASDAQ: BRCM), Chesapeake Energy Corp., Domino’s Pizza Inc. (NYSE: DPZ); Office Depot Inc. (NYSE: ODP); Pfizer Inc. (NYSE: PFE); Sirius XM Radio Inc. (NASDAQ: SIRI); and Valero Energy Corp. (NYSE: VLO).

Other standouts from today include the following stocks:

Barnes & Noble Inc. (NYSE: BKS) is up about 54% at $21.07 after posting a new 52-week high of $26.00 earlier today. The company has created a joint venture with Microsoft Corp. (NASDAQ: MSFT). More coverage here.

Sunoco Inc. (NYSE: SUN) is up 19.5% at $48.89 after posting a new 52-week high of $49.50 earlier today. The company is merging with Energy Transfer Partners L.P. in a deal worth about $5.3 billion. More coverage here.

VeriFone Systems Inc. (NYSE: PAY) is down -12.7% at $47.52. The company’s stock was downgraded at Deutsche Bank, along with comments that the company was inflating its organic growth estimates.

Stay tuned for Tuesday. Richmond Fed President Jeffrey Lacker, Minneapolis Fed President Naryana Kocherlakota, San Francisco Fed President John Williams, and Philadelphia Fed President Charles Plosser are all giving speeches. Motor vehicle sales are expected to be reported throughout the day. We have noted the following events on the schedule (all times Eastern):

10:00 a.m. – Institute for Supply Management manufacturing index
10:00 a.m. – Construction spending
11:30 a.m. – 4- and 52-week bill auctions

Paul Ausick

Filed under: HI/LOW, Market Close Tagged: ACI, ADM, ARII, BKS, BRCM, CHK, DG, DMD, DPZ, HUM, KALU, KFT, LDK, ODP, PAY, PFE, RATE, SIRI, SNH, SOHU, SUN, TRP, VLO

Who Would Replace Walmart’s CEO and Its Chairman?

247wallst — Sun, 22 Apr 2012 15:44:34 +0000

The Walmart statement of ethics is the core of the company’s values:

Each business organization Walmart operates is expected to have a complete set of policies providing guidance to associates for whatever country they are working in. Walmart also publishes several “global policies,” which are designed to give associates a set of rules that are the same for all locations. — “Walmart Statement of Ethics”

Some members of Walmart’s board and its senior management are likely to be without jobs soon. The independent members of the board will have to replace them, if that happens

The extremely damaging article in The New York Times about a bribery scandal at Walmart’s Mexico operations may do more harm to the company, both legally and to its reputation, than any incident in the company’s history. The career of current Walmart Vice Chairman and former CEO of the firm’s Mexico operation, Eduardo Castro-Wright is over. He could face disciplinary actions by the company’s board and face bribery charges in the U.S. and Mexico if most of the Times piece is accurate. H. Lee Scott Jr, former CEO, may be asked to resign from the board as well because he “rebuked internal investigators for being overly aggressive” when he was head of the company and was informed of the investigation in Mexico. In addition, current CEO Michael T. Duke could be fired. The paper reports that he ran Walmart’s international operations during part of the company’s internal investigation. Writing about the investigation, the Times reports that “Michael T. Duke, Wal-Mart’s current chief executive, was also kept informed.”

If the scandal, and legal charges, spread to Walmart operations in other countries, even S. Robson Walton, current chairman and a board member since 1978, may have to leave to support the perception that Walmart’s ethics standards are the responsibility of every senior person involved in Walmart’s operations.

The four powerful board members who would be called on to oversee any investigation and perhaps handle the replacement of board members would be James W. Breyer, The Managing Partner of Accel Partners, the huge venture capital firm; Roger C. Corbett, the former CEO of Woolworths Limited: c, the former chairman and CEO of The Coca-Cola Company (NYSE: KO); and Linda S. Wolf, the CEO of Leo Burnett Worldwide, Inc. Each has experience as the head of a large company, and most have extensive board experience as well. Among these, the most well-qualified to head an independent director’s committee is Daft because he had the experience of being at Coke , with its its global presence in manufacturing and retail operations around the globe. In addition, he has the experience of a long career at Coke, beginning in 1969 and ending as CEO from 2000 to 2004. He has the experience of overseeing Coke during a period when federal prosecutors and the SEC investigated fraud allegations raised in a whistleblower law suit.

The logical person to take the chairman’s job is Jim C. Walton, who has been on the board since 2005. The family of founder Sam Walton will insist on retaining at least one seat. Jim Walton already has the background as a Walmart board member of long-standing. If the Walton family want to have a second board member, that person might come from the generation of Robson and Jim’s children.

The replacement of Duke will not be as simple. Walmart’s independent directors could believe it is essential to go outside the corporation for a CEO to show that they are prepared to tap someone who has had no relationship to the company management. The most logical internal candidates–C. Douglas McMillon, the President and CEO of Walmart International and William S. Simon the President and CEO of Walmart U.S., would have to be passed over.

Walmart’s sheer size means that a new CEO would have to come from a major corporation. Its revenue this year will probably reach $450 billion. Walmart employs over two million people around the world. The new chief executive would also need the governance experience to manage this extensive investigation and handle the legal fall-out both in the US and abroad.

Douglas N. Daft would be the most logical candidate to become the interim CEO, because of his experience as head of Coke and his time on the Walmart board. He is 70, however, and may not want to take on the challenge.

In a chief executive search, Gregg Steinhafel, the chairman of the board, president and chief executive officer of Target Corporation (NYSE: TGT) would be a candidate. Target is Walmart’s largest competitor, and its ethical standards are considered high. In 2011, Ethisphere Institute ranked Target as one of the “World’s Most Ethical Companies” for the fifth year in a row. But, Steinhafel may have no interest in leaving what is already a highly prized job. The third massive global retailer is Tesco, but it has had operational problems that would probably rule out any members of its senior management team

The other candidates would come from the largest US consumer multi-nationals. These corporations share a number of characteristics with Walmart–particularly worldwide marketing and logistics. Based on that standard, the CEO of Procter & Gamble (NYSE: PG), Robert A. McDonald, would be on the list, So would Indra K. Nooyi of PepsiCo (NYSE: PEP), and Irene B. Rosenfeld of Kraft (NYSE: KFT).

It may take years for Walmart to go through the process of rebuilding and repairing the damage to its reputation from this bribery scandal. That would make the challenges for a new chief executive extraordinary.

Douglas A. McIntyre

Filed under: Corporate Governance, General, Management Change Tagged: KFT, PEP, TGT, WMT

Best Buy Appoints Weak CEO Search Committee as Chairman Lurks

247wallst — Sat, 21 Apr 2012 13:41:08 +0000

Best Buy’s (NYSE: BBY) board selected an astonishingly weak committee to begin the search for a new CEO after former chief executive Brian Dunn made a disgraceful exit. The committee’s opinion will not matter. Chairman and founder Richard M. Schulze continues to have de facto control over the large consumer electronics company which has savaged investor value through a series of poor management decisions. As of the last proxy, Schulze owned almost 18% of the firm’s outstanding shares. He is responsible for the corporation’s demise

Kelly J. Higgins Victor will chair the search committee. According to the last Best Buy proxy, since 1994 she has been president of Centera Corporation, an executive development and leadership coaching firm that she founded. She has no experience to run the search. It is a wonder she did not coach Dunn, who desperately needed it. Centera Corporation employees a total of only five “coaches” which make the firm a joke.

Lisa Caputo is also a member of the search committee. She is executive vice president, marketing, and communications of The Travelers Companies (NYSE: TRV). Caputo’s role is little more than acting as the senior PR person for her employer.

Ronald James sits on the search committee. He is president and chief executive officer of the Center for Ethical Business Cultures in Minneapolis. He should not even be on the Best Buy board, let alone the search committee, based on his current job.

The final member of the committee is Sanjay Kholsa. He is an executive vice president and president for Kraft (NYSE: KFT) developing markets. Kholsa, because of his experience as a global executive at a large company, is the only person on the committee with even close to the appropriate qualifications.

Investors should be disappointed with the composition of the committee, even if it is unlikely to make a recommendation without Schulze’s blessing. The backgrounds of the members are an indication that Best Buy’s board is just going through the motions as it tries to find a new leader.

Douglas A. McIntyre

Filed under: Corporate Governance Tagged: BBY, KFT, TRV

What To Expect As Warren Buffett Battles Prostate Cancer (BRK-A, BRK-B, AXP, KO, KFT, PG, WFC)

Administrator — Tue, 17 Apr 2012 21:46:39 +0000

Warren Buffett is supposed to be invincible. Unfortunately the world is finding out that this is not the case. A disclosure letter came from Mr. Buffett and Berkshire Hathaway Inc. (NYSE: BRK-A) (NYSE: BRK-B) after the close on Tuesday that is certainly going to overtake many of the key earnings reports this week. Warren Buffett has prostate cancer.

Investors have every reason to be concerned here that the world’s greatest investor of decades past is going to find himself in a different situation than ever before. There are several things to consider here and they are not all dire for the company.

Stage 1 is the earliest stage and this was picked up because of a rising PSA rather than because of health problems. Prostate cancer, if caught early on and without having metastasized, is perhaps one of the most treatable forms of cancer for men. There is an old saying that many old men will die with prostate cancer but they won’t die from prostate cancer. Man men do not even get treated because the cancer is often so slow to grow. If one person can afford to get the best treatment in the world, isn’t it the wealthiest man in the world? It is still very likely that Buffett will be making media appearances to signal that he feels fine and up to his job AND now up to fighting for his life.

Will this make any difference to any of Berkshire Hathaway’s vast equity holdings? Almost certainly not. The core holdings of American Express Co. (NYSE: AXP), The Coca-Cola Company (NYSE: KO), Kraft Foods Inc. (NYSE: KFT), Procter & Gamble (NYSE: PG) and Wells Fargo & Co. (NYSE: WFC) are unlikely to be touched as they have been core holdings for so long. Here is a list of the Full Buffett Holdings For Berkshire Hathaway.

Then there is the flip-side. A daily radiation regimen is not an easy process on anyone, not even on Warren Buffett. Mr. Buffett noted that his travel schedule will be impacted and it is hard to imagine that he will not really change his daily routine after this treatment starts. Radiation is no walk in the park. As the treatment gets going, it is very possible that investors will wonder about this perpetual ‘Buffett replacement’ as they have for years. It is likely that many in the media and the investing community will challenge Mr. Buffett if he does not make better disclosures about his succession plan.

We wish the best to Mr. Buffett and anyone else fighting prostate cancer (and any other cancer)!

A letter to shareholders was released in the form of a personal letter. Buffett noted as follows:

This is to let you know that I have been diagnosed with stage I prostate cancer. The good news is that I’ve been told by my doctors that my condition is not remotely life-threatening or even debilitating in any meaningful way. I received my diagnosis last Wednesday. I then had a CAT scan and a bone scan on Thursday, followed by an MRI today. These tests showed no incidence of cancer elsewhere in my body.

My doctors and I have decided on a two-month treatment of daily radiation to begin in mid-July. This regimen will restrict my travel during that period, but will not otherwise change my daily routine.

I feel great – as if I were in my normal excellent health – and my energy level is 100 percent. I discovered the cancer because my PSA level (an indicator my doctors had regularly checked for many years) recently jumped beyond its normal elevation and a biopsy seemed warranted.

I will let shareholders know immediately should my health situation change. Eventually, of course, it will; but I believe that day is a long way off.

Berkshire Hathaway shares closed up almost 1.4% at $80.76 on the more liquid B-shares today. These shares rarely trade at all in the after-hours session and shares are down 1.34% at $79.68 in the after-hours session against a 52-week range of $65.35 to $83.72.

Again, best of luck to Mr. Buffett!

JON C. OGG

Filed under: Buffett, Conglomerates, Corporate Governance, Management Change, Private Equity, Shareholder Issues Tagged: AXP, BRK-A, BRK-B, KFT, KO, PG, WFC

Kraft Identifies New Names & Units (KFT)

Administrator — Wed, 21 Mar 2012 14:34:01 +0000

Kraft Foods Inc. (NYSE: KFT) today announced plans to change its corporate name to Mondelez International, Inc. Does this name sound silly? It does here, but you can decide for yourself at the end with the company’s explanation of the name.

Kraft Foods is dividing to create two public companies before the end of 2012. One is called “a high-growth global snacks business and a high-margin North American grocery business.”

The North American grocery company will become Kraft Foods Group, Inc., retaining the Kraft brand for its corporate identity and as the brand for many of its consumer products. The company noted that the global snacks company will require a new name when it launches later this year.

The company invited employees to suggest names for the new global snacks company and more than 1,000 employees participated with over 1,700 names submitted. Mondelez International was inspired by separate suggestions from two employees, one in Europe and another in North America.

Here is the explanation and will sound a bit like the old Altria name change from Philip Morris…. “Mondelez” is called “a newly coined word that evokes the idea of ‘delicious world.’ as “Monde” is from the Latin word for “world” and “delez” is a fanciful expression of “delicious.” In addition, “International” captures the global nature of the business. (Why do I keep thinking of the Menendez brothers?)

Kraft may be an international company, but Americans are probably going to have problems with the name in many cases when referring to the company. Our question is rather simple… After the split, will Kraft remain in the Dow Jones Industrial Average?

JON C. OGG

Filed under: Consumer Goods, Corporate Governance, Food Tagged: KFT