Author Archive

  • The Subprime Fallout hits GM
    , May 3rd, 2007 at 9:14 am

    How’s this for subprime fallout? Profits at GM (GM) dropped 90% from last year due to bad loans at its GMAC unit.
    This is sad because GM was improving so nicely. Last year, the company only lost $2 billion compared with the $10 billion it lost in 2005.
    But now the subprime mess has caught up with GM. Last year, GMAC’s Residential Capital earned $201 million. This year, it lost $905 million. GM had recently sold 49% of its stake in GMAC to Cerberus Capital Management.
    Bloomberg noted that the yield on GM bonds due in 2033 fell to 9.2%.

  • Dual-Class Share Structure
    , May 2nd, 2007 at 1:09 pm

    Just a quick note on Murdoch’s bid for Dow Jones (DJ). I can’t think of a better argument against dual-class shares than the Bancroft family’s public rift over the offer.
    The family’s super shares have ten times the voting power of the Class A shares (by the way, the same thing exists at many other companies like Google). There are at least 35 family members with super shares.
    A Bancroft family representative said that “slightly more than 50%” of DJ’s voting power is against the deal. Breaking out the math, that means that about 80% of the family’s 64% is voting “No.” But still, we now know that some in family are for it, and “some” is all we need to make a point. The idea of super shares is so families can maintain control, but families don’t act as a single unit.
    The idea of family control is turning back on itself. Couldn’t it be said that the family members in favor of the deal are speaking in the family’s interest? I certainly think so. Dear lord, it’s a 67% premium for a stock that hasn’t moved in eons. Before the offer, the stock was lower than where it was 24 years before while the Dow is up more than 10-fold. How much more evidence do we need that something needs to be done.
    The family can’t hold back change forever. The company will have to be revamped, and hopefully it will happen before the Dow Jones Murdoch Industrial Average goes up another 10-fold.

  • “They were able to manage through that fantastically.”
    , May 1st, 2007 at 8:44 pm

    IBD looks at Amphenol (APH):

    It’s hard to avoid: If a firm’s costs go up, its profits go down.
    Amphenol (APH) has impressed investors by bucking this logic.
    The firm makes connectors, the thousands of different products that link electronic gizmos. Its connectors end up in cars, planes and almost any device that uses electric or fiber optic signals. It also makes cables.
    To manufacture all this, it needs raw materials. They include gold, aluminum, copper and oil-based resin. Prices of those commodities have skyrocketed.
    Yet with material costs rising, the firm managed to boost profits.
    Raw materials were a “big head wind,” Shawn Harrison of Longbow Research said. “They were able to manage through that fantastically.”

  • No Comment
    , May 1st, 2007 at 4:37 pm

  • The Portfolio Pile On
    , May 1st, 2007 at 10:54 am

    Conde Nast’s Portfolio has not gotten off to a great start. Now Dan Gross calls Tom Wolfe’s piece about hedge funders “astonishingly lame.”

    When Wolfe does give us a name, the piece reads like a clip job. He introduces us to Thomas Hudson’s Pirate Capital and Daniel Loeb’s acid pen—both nicely described in Steve Fishman’s New York piece three years ago. As BusinessWeek did four years ago, Wolfe describes Stevie Cohen’s mammoth house: “32,000-square-foot clubhouse and 14 acres of grounds! Next to Stevie’s art collection—which is nothing less than a world class museum!—Stevie’s indoor basketball court, year-round swimming pool under glass, his gym, his spa facility, his theatre for movies and every other electronic medium, his hair salon, two putting greens complete with sand traps and a fairway in between, and, as the piece de resistance, an ice rink the size of Rockefeller Center’s with a 36-by-24-foot rink house for the Zamboni!” This is like a Wolfe parody, a laundry list punctuated by exclamation points!!
    Indeed, there’s little evidence that Wolfe has any firsthand experience with these people. Yes, he attended the Robin Hood Foundation gala, and describes a scene at the wedding of Carl Icahn’s stepdaughter. But I don’t think he knows many of the young guys he so self-assuredly describes. (Maybe it’s because he doesn’t know where to look. At one point, he refers to “Merrill Lynch’s 41-story building in Times Square.” Perhaps he means Morgan Stanley‘s.)

  • Great Business, Bad Stock
    , May 1st, 2007 at 10:25 am

    Despite great business results, Google‘s (GOOG) stock hasn’t been such a winner. Since the beginning of last year, the stock is trailing the S&P 500, although there have been better entry points along the way.
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  • Chase Throws Away Customers’ Info
    , May 1st, 2007 at 9:50 am


    Scary.

  • Sysco’s Earnings
    , April 30th, 2007 at 11:49 pm

    The Dow was in the black for much of Monday, but after about 2:30, it slipped into negative territory and eventually finished 58 points lower. That ended the Dow’s chances of marking an historic first—20 of 22 up days.
    Before the bell, Sysco (SYY) reported earnings of 35 cents a share. That was a nice improvement over last year’s total of 30 cents, but it was a penny short of Wall Street’s forecast. The market wasn’t pleased and the shares tumbled 4.6% lower. That seems like an overreaction. Nothing seems to be going Sysco’s way this year. The stock is down nearly 11% for 2007. That’s unusual for a stock that’s historically been so stable.
    I also noticed that our favorite micro-cap, Nicholas Financial (NICK), seems to be waking up. The stock doesn’t normally move very much, but it rose 4% on Friday and another 2.6% today. That’s a lot for NICK. Both days had much higher-than-normal trading volume. The company should be reporting earnings soon, but it hasn’t said what day yet.

  • 20 of 22 Up Days for the Dow
    , April 30th, 2007 at 11:02 am

    The Dow is currently up 22 points. If this holds, it will be the first time in the Dow’s 111-year history that it rallied 20 times in 22 sessions.

  • Wanted: Berkshire CIO
    , April 30th, 2007 at 8:13 am

    Get your resumes in!
    Warren Buffett is hiring his replacement:

    With Mr. Munger’s help, Mr. Buffett will whittle down the current contenders to about 20 “real possibilities,” he says, adding that he’ll start reading the letters in earnest after Berkshire’s annual shareholders’ meeting next weekend. From those 20, he will ask for personal investment records going back at least 10 years. Then, after determining whether “the general attitude toward purchase and sale of securities is compatible” with Berkshire, he will fill the job with either one or two people. He plans to hand them up to $10 billion to manage until it is time for them to take over the entire portfolio.
    Mr. Buffett explains that the purpose of the trial run is “to see if their decision-making apparatus works out, hopefully while I’m still alive.”
    What it isn’t, however, is a mentorship program, something many applicants have misinterpreted. He says he isn’t looking for someone to teach, but “for someone who already knows how to do it.”
    The misunderstanding is reflected in dozens of letters from students, professional investors and a surprising number of engineers and lawyers hoping to be apprenticed to the master. “I assure you,” wrote one 20-year-old college student, “although I may be short on experience, I am very long on potential.” A lawyer in Oregon recommended his four-year-old son, characterizing the toddler as a “great negotiator” on issues such as “bedtime, chores, allowance, baths, etc.”