Biomet Subpoenad by DOJ
Posted by Eddy Elfenbein on June 26th, 2006 at 8:51 am

From MarketWatch:

Biomet Inc. said Monday it’s received a federal grand jury subpoena from the anti-trust division of the Department of Justice. The company said the subpoena is related to possible violations of anti-trust laws involving the manufacturing and sale of orthopedic implant devices. Biomet, based in Warsaw, Ind., said the subpoena requests documents from Jan. 1, 2001 through the present, and it believes similar inquiries have been directed at other companies in the industry . The company plans to fully cooperate with the probe. The stock closed Friday at $34.98, down 21 cents.

The stock is down about 10% in the pre-market. Earnings are due on Wednesday.

Buffett to Give Away Fortune
Posted by Eddy Elfenbein on June 25th, 2006 at 8:52 pm

From Fortune:”

Buffett has pledged to gradually give 85% of his Berkshire stock to five foundations. A dominant five-sixths of the shares will go to the world’s largest philanthropic organization, the $30 billion Bill & Melinda Gates Foundation, whose principals are close friends of Buffett’s (a connection that began in 1991, when a mutual friend introduced Buffett and Bill Gates).
The Gateses credit Buffett, says Bill, with having “inspired” their thinking about giving money back to society. Their foundation’s activities, internationally famous, are focused on world health — fighting such diseases as malaria, HIV/AIDS, and tuberculosis — and on improving U.S. libraries and high schools.
Up to now, the two Gateses have been the only trustees of their foundation. But as his plan gets underway, Buffett will be joining them. Bill Gates says he and his wife are “thrilled” by that and by knowing that Buffett’s money will allow the foundation to “both deepen and accelerate” its work. “The generosity and trust Warren has shown,” Gates adds, “is incredible.” Beginning in July and continuing every year, Buffett will give a set, annually declining number of Berkshire B shares – starting with 602,500 in 2006 and then decreasing by 5% per year – to the five foundations. The gifts to the Gates foundation will be made either by Buffett or through his estate as long as at least one of the pair — Bill, now 50, or Melinda, 41 — is active in it.

Crossing Smith Island
Posted by Eddy Elfenbein on June 24th, 2006 at 7:40 pm

I spent last weekend on Smith Island which is a tiny island in the middle of the Chesapeake Bay. There are two ways to get to Smith Island, get born there or take the ferry. I chose the latter.
Smith Island is truly a place out of time. The island is absolutely beautiful (I took the picture above at dusk). It’s one of the few inhabited islands in the Chesapeake Bay that’s not connected to the mainland by a bridge. Its isolation has served it well.
The island was settled by English speakers over 300 years ago. I should use the phrase “English-speaking” rather delicately. Smith Islanders do indeed speak English, but their accent is…well, I’m not sure how to describe it. They beat their A’s and O’s into submission. I’m sure Professor Higgins would be appalled. And when the islanders talk to each other, they speak backward. No, seriously.
Smith Island, and it neighbor to south, Tangier Island, are often studied by linguists. Some believe that the resident’s speech is the closest to Elizabethan English.
The island is very small but very charming. Think of it as Gilligan’s Island meets Jamestown. Most men there are crabbers, like their fathers and grandfathers before them. There are about 380 inhabitants in three “cities.” I rented a small cottage in Ewell, which is, for lack of a better word, the capital.
Smith Island is a libertarian’s dream. There’s no government. No mayor or town council. No police. The people simply govern themselves. Many of the cars don’t bother with license plates. There are only two roads, and not much to crash into, perhaps a wayward crab. The highest point on the island is five feet. Strangely, the Maryland-Virginia border runs across the southern tip of the island (I’m told this is a sore subject). You can easily see across the entire island.
There are no banks or ATM’s. No McDonald’s. No hedge funds. No SEC. The entire island is cash-only. There are, however, three Methodist churches. There’s one elementary school. The high school kids take a boat to the mainland each day. The island cemetery has many of the same names: Evans, Tyler, Bradshaw, Marsh. (No Elfenbeins, I checked.)
Smith Islanders are unfailingly polite. I’m not exaggerating when I say that every single person I passed either waved or said hello. No exceptions.
The sad part is that Smith Island is slowing fading away. Crabbing is hard work, and there are more job opportunities on the mainland. One hundred years ago, Smith Island was home to nearly a thousand people. Steamers went straight from Ewell to Baltimore. Not anymore. Most of the young folks are moving away. For such a teeny place, I saw a surprising number of “for sale” signs.
If you’re ever in the mid-Atlantic and want to forget about your e-mail for a weekend, I highly recommend a visit to little Smith Island.

The Buy List So Far
Posted by Eddy Elfenbein on June 23rd, 2006 at 9:06 pm

The Buy List is down -0.20% for the year, and the S&P 500 is down -0.30% (not including dividends). The daily volatility of the Buy List is 7.15% greater than the S&P 500.
Here’s the graph based on a $1 million equally weighted in the 20 stocks at the beginning of the year.

By avoiding the heavy cyclicals, we avoided much of the pain of the correction.

From Oracle’s Conference Call
Posted by Eddy Elfenbein on June 23rd, 2006 at 8:50 pm

Courtesy of Seeking Alpha:

Kash Rangan – Merrill Lynch
Larry, since we have you on, could you elaborate on your comments in the press related to getting into the Linux operating systems business? How should we think about that?
Larry Ellison
Well, I’m thinking a general comment about Open Source. The interesting thing about Open Source — and I don’t want to spend a lot of time on it today — the interesting thing about Open Source is it’s free to everybody, even Oracle. So, Oracle could choose to just take a copy of anyone’s Open Source, and as long as we could support it better than an Open Source company, we could suddenly leap frog them and become the number one distributor.
It was just interesting. It is interesting to evaluate Open Source and understand that they don’t own any of their intellectual property. It is free for us to take and support, which we may in fact, do in the future.

Lunch With Warren
Posted by Eddy Elfenbein on June 23rd, 2006 at 10:04 am

Get your bids in now. On eBay, a charity is auctioning off a lunch with Warren Buffett. The current bid is $455,100.

Anadarko Buys Kerr-McGee and Western Gas
Posted by Eddy Elfenbein on June 23rd, 2006 at 9:41 am

This is a huge deal:

Anadarko Petroleum Corp., the second- biggest independent U.S. oil and gas producer, agreed to pay $21 billion in cash for Kerr-McGee Corp. and Western Gas Resources, an acquisition that would more than double its sales.
Anadarko said in a statement that it will pay $16.4 billion or $70.50 a share for Oklahoma City-based Kerr-McGee, which was forced by billionaire investor Carl Icahn to sell assets and buy back $4 billion of its stock last year. The price is a 40 percent above yesterday’s closing price. The company will pay $4.7 billion or $61 a share for Western Gas, 49 percent above yesterday’s close. Anadarko will assume $2.2 billion of debt.

Google Sells Its Baidu Stake
Posted by Eddy Elfenbein on June 22nd, 2006 at 5:06 pm

From TheStreet.com:

Shares of Baidu slumped after Google sold its 2.6% stake in the Chinese search engine.
Baidu fell $4.86, or 5.8%, to $79.54 after Bloomberg and CNBC reported the sale. A Google spokesman and a U.S.-based Baidu representative couldn’t immediately be reached for comment.
Google, which released a censored version of its service in China earlier this year, purchased a stake in Baidu in June 2004, before its public offering, according to Bloomberg. The news service estimates Google’s Baidu stake to be worth more than $63 million based on yesterday’s closing price.

Medtronic Raises Dividend
Posted by Eddy Elfenbein on June 22nd, 2006 at 3:39 pm

From 11 cents a share to 14.3 cents a share. Medtronic (MDT) has raised its dividend for 28 straight years.

Diworsify
Posted by Eddy Elfenbein on June 22nd, 2006 at 12:48 pm

Me running in slow motion.
With beer sales flat,
Waving my arms….
Busch ponders
“Noooo….”
taking shot at
“oooooooooo….”
liquor.
Why oh why do companies do this? Someone please tell me. Has this strategy ever worked? If people aren’t buying your crappy beer, what makes you think they’ll buy your crappy vodka? I really want to know who exactly is the target market for Budweiser Scotch? I don’t care if it’s just one guy, he needs to be severely beaten.
Let’s look at Anheuser-Busch’s (BUD) situation. Earnings are down and the stock hasn’t budged in a bull market. Even for a defensive stock, shares of BUD have been slackers.
The fact is that beer sales are flat. They’ve been flat for years. Brewers don’t sell more beer, they only steal market share. That’s why the advertising and branding is so intense (and moronic). In fact, a better way to think of Anheuser-Busch is not as a brew stock, but as a marketing and distributing company. That’s what they really do.
(On a side note, every year in Silicon Valley, some really smart engineers get together with some really smart ideas. They meet some other really smart people who give them really smart start-up capital. But being a really smart engineer doesn’t make you a really smart businessperson. The start-ups bomb and the troubles are often due to marketing and distribution. Engineers don’t think that way. It’s amazing how dumb really smart people can be.)
Selling the hard stuff won’t help any of Anheuser-Busch’s problems. It’ll probably make them worse. About 20 years ago, all the American car companies bought European luxury car companies. There was absolutely no reason for this. Within a few years, all three dumped them. Chrysler was eventually bought by a European car company.
I’ll give you a great example of a company knowing how to use its brand—Harley-Davidson (HDI). Harley only makes the big bikes. They have nothing to do with the rest of the motorcycle market. Every few years someone suggests that Harley should “LEVERAGE” its “BRAND NAME,” and move into the smaller-weight market. There are lots of smart folks at Harley, and this idea has crossed their mind, but still, they never do it. Why? Because it’s not their market. They could do it They’d probably even make some money at it. But Harley’s attitude is that they aren’t like everybody else. They don’t make bikes–they make Harley’s. Bear in mind that a surprisingly large percentage of their revenue comes from clothing. Harley isn’t about to start diluting that brand.
Harley knows exactly what business it’s in, and so do its customers. I have nothing against diversifying into good businesses. I’ll even look at other way at a brewer owning theme parks (that’s just marketing). But don’t fool anyone by thinking that you can brand your way out of troubles. Especially, don’t fool yourself.