Friday, December 25, 2009

Apple Tablet Update

AAPL shares rose $6.99 to a new high of $209.09 Christmas Eve on news that Apple's tablet may be more finished than expected and could demo late January 2010.

Wednesday, December 16, 2009

Boeing 787 Takes its Maiden Flight

Boeing's first flight ready 787 Dreamliner took to the skies yesterday morning. While the four hour scheduled flight was cut slightly short due to bad weather, all test results were positive and a major hurdle for the 787 program has been cleared. This test plane is the first of six that Boeing plans to test around the clock, all over the world, for the next several months. Barring any other delays – which the 787 program has been notorious for – Boeing, expects to begin delivery of its 787 Dreamliner in the beginning of the fourth quarter 2010.

As discussed before, the 787 truly is a remarkable aircraft that Boeing has dubbed the “first aircraft of the 21st century.”

The link below provides a great deal of information on the innovative features of the 787 Dreamliner:

When markets closed yesterday, December 15th, shares of PCP were down a little over $1 (1%).

Wednesday, December 9, 2009

BF.B Q2 2010 Earnings 12/08/09 - (Christian LaBier)

Brown-Forman's two strongest brands (Jack Daniel's and el Jimador) have been driving the company to better than expected sales for the quarter. Management has feared that the consumer would trade down because of the difficult economic situation, but Jack Daniel's and the Pre Mix products have been producing strong sales globally. Effective cost cutting measures taken by the company have helped the company stay competitve in the current market.

Management increased FY2009 guidance to a range of $2.95-$3.15 per share from an original estimate of $2.60-%3.00 per share.

"This updated guidance reflects our better than expected sales performance in the first half of the year, our excellent management of operating expenses and our confidence about our ability to operate effectively in what remains a competitive and uncertain environment." - Don Berg (CFO)

The stock price moved up approximately 5% yesterday when earnings were released, however, the stock ended the day flat. BF.F is currently trading at $51.78 and the position in the portfolio is down 2.38%. I want to hold the position because the Jack Daniel's brand and the upcoming ready-to-drink segments are solid and have room for growth. I don't see the stock price ranging far from it current level. BF.F also pays a steady dividend. I will continue to monitor.


Monday, December 7, 2009

Precision Castparts Tops $110 Price Target

During the day Friday, December 4th, and early in the session today, December 7th, Precision Castparts has been trading at or above the twelve month price target of $110 that I had pitched the stock for during the November 6th conference call.

Fortunately, I feel that there is even more upside to Precision Castparts going forward. Due to the uncertainty of both the aerospace market and the Boeing 787 Dreamliner project, I feel that the projections I made in my model were relatively conservative, resulting in a price target in the lower range. Furthermore, good news over the past several weeks concerning Boeing’s 787 progress and strong backing from Boeing management to meet its goal of getting the first 787 off the ground by 2010 can only bolster the stock price of Precision Castparts.

Additonal good news regarding Precision Castparts was released last week at Credit Suisse’s 2009 Aerospace & Defense Conference as well. Precision Castparts announced a slowing of customer inventory destocking over the course of its third quarter FY10 and even started to experience some pull-ins of new orders. Precision Castparts also anticipates the gap to narrow between aircraft production schedules and actual build rates in its fourth quarter FY10 and even more in FY11.

Precision Castparts also presented their potential synergies with recently acquired Carlton Forge Works. This acquisition filled a significant hole in Precision Castparts’ portfolio of products and services and gives it greater access to a $1 billion market in seamless rolled rings for various turbine and industrial applications. Precision Castparts targets synergies with Carlton Forge Works to be between $15 and $20 million within the next 12 to 16 months and $35 to $40 million within the next 22 to 26 months.

All in all, Precision Castparts has been one of the top performers from the November 6th conference call and with all of this good news taken into consideration, I feel that Precision Castparts will continue to perform well in the near future and it is worth holding onto our position going forward.

Once finals and semester projects start to ease, I will attempt to revise my model given all the new information and see how it affects my previous price target of $110.

If you have any comments, suggestions or concerns, please do not hesitate to contact me.

-Matthew Opanowski

Friday, December 4, 2009

Eldorado-Sino Gold Merger Update

EGO is moving forward with its acquisition of Sino Gold. Sino shareholders approved the takeover on Thursday, 12/2 with almost unanimous consent. This deal creates a premier intermediate gold producerin China and Turkey with current production of 550,000 ounces/year from 4 different mines. Expected production growth by 2013 of beyond 1 million ounces. The transaction will increase EGO's share count from about 400 million shares to 535 million, which will increase its market cap almost 50%. Proven and probable reserves will go from 7,561 (000 oz Au) to 12,668 and revenue is expected to go from $518 million to $760 million.

This deal just increases the size and growth potential of EGO without having any adverse or beneficial effect on immediate EPS.

Gold got crushed today (12/4), down to $1,150 an ounce and EGO's price went down 3.45% to $13.43 with it. We're still positive on EGO and I am confident in owning it. If gold hits a temporary road block, UASBIG would have an opportunity to turn our EGO position into a full one at a much cheaper price.

Ecolab Raises Cash Dividend 11 Percent

The Board of Directors of Ecolab Inc. today increased the company’s quarterly cash dividend by 11% to $0.155 per common share, to be paid January 15, 2010, to shareholders of record at the close of business on December 15, 2009. This results in a new indicated annual cash dividend of a record $0.62 per share for 2010, and represents Ecolab’s 18th consecutive annual dividend rate increase.

“We continued our record of consecutive annual cash dividend increases, reflecting our expected attractive 2009 pro forma earnings performance, good cash flows and solid balance sheet. Ecolab remains a strong company with a strong future, and this action reflects our equally strong commitment to improving shareholder returns.”--quote from CEO Douglas Baker

The dividend increase was announced Thursday (12/3). Ecolab (ECL)--$45.24 is about 10% off my price target of $50.

Tuesday, December 1, 2009

Cyber Monday

This past Monday was Cyber Monday for all the shopping junkie, bargain hunters out there. If online shopping becomes even more dominant than store shopping, the electronic payment method systems stands to gain benefit from this.

This is part of my reasoning why Visa is still a strong hold in the portfolio, and I will be doing more work to see if it makes to buy more even at a current price of just about $83

-Richie Civello

Monday, November 23, 2009

Eldorado Gold Update

With gold sustaining its record highs in price of well over $1,100 an ounce, I have updated the EGO model.

I changed my income statement using a 2010 gold price of $1,100 instead of the $1,000 that was in my model. My valuation changed to $15.59 to get me at a new price target of $16, which is 17% upside from the closing price of $13.63 today. (11/23/09)

Going forward, we bought half a position in EGO at $12.91 and are up 5.5% already with another 17% upside for 22% total upside. The gold price may fall during this 4th quarter and EGO may fall with it. If this happens, we can turn EGO into a full position if we get in cheap enough. If the gold rally continues, EGO should hit my price target. For the time being, I think EGO is a hold.

Thursday, November 12, 2009

Good News for Boeing & Precision Castparts

Given the recent acquisition of Precision Castparts Corp. during the November 6th Conference Call some good news was released today.

Boeing has successfully addressed and fixed a structural flaw on their first 787 Dreamliner. Scott Francher, who is the vice president and general manager of the 787 program, had this to say, "Completing this work is a significant step toward first flight. We continue to be pleased with the progress of the team and remain confident the first flight of the 787 Dreamliner will occur before the end of the year."

Precision Castparts is heavily involved with the 787 program with a dollar content of $5.5 million per 787 Dreamliner built. There are currently 850 outstanding orders for Boeing 787's that are expected to begin passenger flight towards the end of 2010. Due to various reasons the Boeing 787 project has been delayed, however this positive news from Boeing only reinforces my stance on Precision Castparts Corp.

-Matthew Opanowski

Walmart 3Q FY 2010 Earnings- Andrew Helfont

Wal-Mart announced better than expected earnings today, November 12th. Estimates for 3Q EPS were .78-.82, and actual EPS was .84, indicating a 3.2% in overall earnings. EPS estimates were increased from 3.50-3.60 to 3.57-3.61.

Net sales rose 1.1% from last years 3Q to 98.667B and on a constant currency basis, would have been higher, but due to unfavorable currency rates, there was a 2.617B loss.

Operating Segments

Wal-Mart US operating income rose 6.8%, due to productivity initiatives and efficient inventory management, compared to a sales increase of 1.2%. Customer traffice rose 1.5%, however there was a comparable store sales down .4% due to decreased purchases per customer. Management still believes that continuous gains in market share will underscore the underlying strength of the company.

Sams Club posted higher than expected membership income which was driven by its eValues program. Sales for sams club was 5.6% higher than last years 3Q. Gross and operating margins increased as well as expense reductions.

International stores sales increased 12.1% percent and operating income increased 9.2% percent. Wal-marts recent aquisition of Distribucion y Servicio (D&S), Chile's largest grocery store chain, has had an enormous positive impact for Wal-marts sales. As long as Wal-mart can further prove its price leadership and strong performance in international markets, it will continue to gain market share and further successfully expand its operations.

Going foward, there is speculation to believe as we are moving out of the 'recession', consumers may start to change their spending habits shifting people away from Wal-mart. However, if unemployment rates stay at 10.2%, Wal-mart sales are not seen to be diminishing anytime soon.

For the upcoming qaurter, the holiday season does not look as promising as retailers would have hoped. Wal-mart has fourth qaurter EPS estimates from 1.08-1.12, which raises FY 2010 EPS guidance. Wal-mart has further pushed their prices down to where almost competitors cannot compete. "We believe Walmart is positioned better than any other retailer to succeed with customers this holiday season" says Mike Duke, CEO.

Tuesday, November 10, 2009

Rumors of $99 iPhone 3GS by the Holiday Season,news-5051.html

Wednesday, November 4, 2009

CHK Q309 Earnings (Dan Goldfarb)

Chesapeake Energy Corp. reported revenues in the third quarter of $1.81 billion, down from $7.49 billion a year ago. Net income for the third quarter was $186 million, down significantly from the $3.3 billion for the same period (primarily due to lower demand and lower natural gas prices) last year but still beating analysts’ expectations of $0.65 per share by 5 cents.

The company increased production by only 1 percent from the second quarter but by 7 percent from 3Q08. Natural gas still accounts for 92 percent of the company’s total production, but executives recently said the company would be open to growing its oil business. The company expects annual production growth of between 5 percent and 6 percent for 2009, and at least 8 percent and 12 percent in 2010 and 2011, respectively.

If you compare CHK's 7.50% projected EPS growth rate for the next five years with the projected EPS growth rate of 6.68% for the Independent Oil & Gas industry as a whole during that same time frame, you can see that analysts expect CHK to outperform the industry in the future, which is a good sign for the stock.

I feel Chesapeake is currently undervalued and is poised for solid gains for the rest of 2009 and into 2010. As natural gas prices remain high and the overall economy continues to improve, Chesapeake should see increased overall demand and profit. Management remains confident in their ability to combat poor market conditions and the fluctuations in the price of natural gas if they should arise. Currently, Chesapeake remains a Hold.

Tuesday, November 3, 2009

Novartis (NVS) Q3 Earnings

My apologies for posting so late, I accidentally created a new blog and posted this elsewhere on 10/24.

We are currently amid Q3 earnings season right now. A major pharmaceutical company that I have been following Novartis (NVS) reported their earnings on 10/22/09. They reported .89 given the street estimates of .84. The stock currently is sitting at $52. Catalysts for the better than expected earning include: large profits from break through drugs Diovan, Tekturna, and Gleevec, expansion in Japan and Singapore, and continued revenue growth from their OTC and generic branding products which were up a total of 6% from Q2. Both these divisions account for 32% of sales. Overall, Profits were up 1% and sales were up 3%. A major event to look for will be the sales and distribution of H1N1 vaccines in both the U.S and Europe. Management has projected Q4 sales to increase from a projection of $400 million to $700 million. Keep your eyes out on this stock as it has been slowly breaking down resistance of it's 52-week high.

Friday, October 30, 2009

Waste Managment Q3

Waste Management came out with earnings last Thursday which were better than expected. They posted earnings of $277 million compared to $310 million in Q3 2008. This represents a 9.5% decrease which management has attributed to lower prices for their recycled materials. To counteract the lower prices in recycled materials and lower volumes, management has enacted cost cutting measures which include freezing salaries, and cutting jobs which will save an excess of $120 million. This is on top of the restructuring of the company which I mentioned when I pitched it would save them $60 million per year. The cost cutting measures can be seen by WM’s drop of 14% in revenue, while only a 9.5% decrease in profits.

Management has said that they expect this is the bottom for the company, and they are optimistic about the future and an increase in recycling prices and volumes in garbage hauling. Recycling prices have improved every quarter and have risen 80% since their lows in January.

Moving forward I agree with management’s outlook. As we come out of the recession we should see a return of companies disposing of trash in the frequency before the crisis, and a further rise in recycling prices. Prices for collection and disposal rose 2.9% and it is expected the WM will keep prices up even though volumes are decreasing. Management has stated before they would rather keep prices steady and lose customers that go to cheaper trash haulers, than keep prices low and become less profitable. Management has taken successful steps in their cost-cutting measures, and I believe they will continue in the future.

Thursday, October 29, 2009

Corning 3Q09

Corning has reported net sales at $1,479 million, net income at $643 million, and EPS at $0.41. Earnings beat analyst’s expectations by $0.03.

Corning has reported sales in Display Technologies were $679 million and were slightly higher than the previous quarter. Telecommunication revenue was $450 million an increase of 3% from the previous quarter. This increase can be attributed to increased fiber sales in China and a continuously increasing demand for private networks throughout North America. Environmental Technologies revenue was reported at $167 million, an increase of 27%. This increase is can be attributed to high demand for automotive environmental products spurred through the “Cash for Clunkers” program. Specialty Materials revenues were reported at $90 million an increase of 27% attributed to high demand of “Gorilla Glass” used in notebooks and portable electronics. Life Sciences revenue was reported at $92 million, a $12 million increase from the second quarter. Corning’s Life Sciences segment has acquired Axygen Bioscience Inc.

Management expects Display Technology volume to be flat to slightly down in the fourth quarter. They expect a natural decline in Telecommunications and Environmental Technology due to normal seasonal trends. Demand for LCD televisions should remain high as retailers continue to compete for low pricing of television units.

I feel that the thesis originally created for Corning remains intact. LCD sales will continue to increase as more competitive pricing infiltrates the market and the economy begins to pick up. New environmental regulation on 2010 and 2011 car lines will continue to drive Corning’s Environmental sector. The acquisition of Axygen will continue to strengthen life sciences performance. However, there is an inherent risk of oversupply in the display technologies if LCD unit sales do not continue to grow as expected. I believe corning should continue to hold a BUY rating.

Chad Schneider

Tuesday, October 27, 2009

Valero Q309

Valero Energy, the worlds largest independent oil refiner, missed earnings as it posted a second consecutive quarterly loss amid shrinking margins and low demand. Valero reported a Q3 loss of $489M or $0.87 a share, versus a prior year loss of $1.5B or $2.18 a share. Excluding the asset impairment loss, created by the permanent shutdown of the gas supplier complex at the Delaware City refinery, the company reported a net loss of $219M or $0.39 a share. The main reason for this shutdown was to help simplify the refinery's operations, in an effort to make it more cost effective and to improve reliability.

Valero reported a third quarter 2009 operating loss of $579M versus $1.8B of operating income in the third quarter of 2008. Excluding the asset impairment loss, the operating loss for the quarter was $162M. Valero's balance sheet remains similar to last quarter, with total debt of $7.4B and a cash balance of $1.6B. They also have an additional $4.5B in liquidity. Daily throughput remains 208,000 barrels less a day than the third quarter of 2008.

Although Valero is being hurt by lower margins on diesel and jet fuel, its retail segment reported the highest income ever at $111M, due to lower selling expenses and strong business in the U.S. and Canada.

Looking forward Valero expects a fourth quarter loss of at least as large as the third quarter's, mainly due to weakened margins. With the loss incurred in the current quarter, and the expected loss in the fourth quarter, management has mentioned that it may have to reevaluate its dividend-to-payout level. "If industry conditions do not improve measurably, the dividend level will have to be reevaluated"

Although Valero is suffering from weakened margins, it still remains competitive and its business strategy has not been affected. They look to maintain their strong balance sheet and sufficient liquidity. Management has also stated that they will focus on matters within their control, by optimizing operations.

-Thomas Boeje

Visa Q4

Visa Inc,V, posted higher-than-expected quarterly earnings on Tuesday, as consumers used their debit cards more, and the company raised prices, sending shares up 2.4 percent.The world's largest payment network also authorized a $1 billion share repurchase plan, and said the decline in payment volume was easing in the United States, in the first sign of stabilization on its business since the financial crisis.

Net income was $514 million, or 69 cents a share, for the fourth quarter ended September 30, compared with a net loss of $356 million, or 45 cents, a year earlier.
Net operating revenue rose 10 percent to $1.9 billion, beating analysts estimates of $1.8 billion, helped by higher prices and higher transactions. On an adjusted basis, quarterly net income rose 23 percent to $552 million, or 74 cents per share.

The payment network reiterated net revenue growth at the lower end of the 11 percent to 15 percent range in its fiscal 2010 year, and annual diluted class A common stock earnings per share growth of more than 20 percent.

Visa forecast marketing expenses of less than $1 billion in 2010, and capital expenditures in the $200 million to $250 million range, up to one-third less than in 2009.The company also estimated earnings per share will rise more than 20 percent in its 2011 fiscal year.

Visa continues to be one of our most consistent performers in our portfolio. Increased debit transactions was the main focus of our thesis and this is proving to be the main driver of their operations, since they have the largest market share. Increasing transaction prices have also increased their incomes and the company is still finding ways to cut expenses down. The company is looking to increase EPS by 20% for 2010. They have one of the best management teams and management has done a great job keeping this company profitable and healthy. This company keeps getting stronger and I believe will perform better as the general payment method keeps shifting from paper to plastic methods, along with an increase in debit transactions for the upcoming holiday season.

-Richie Civello

Ensco International 3Q09

Ensco reported diluted eps from continuing operations of $1.05, compared to $2.06 last year. Earnings from discontinued operations was zero as opposed to a loss $.09 last year.

Revenues in third quarter 2009 declined to $425 million from $620 million a year ago. Average day rates increased year-to-year for the deepwater segment, but declined for the premium jackup fleet. Rig utilization in third quarter 2009 declined in all of the operating segments, compared to the prior year. Total third quarter 2009 operating expenses increased to $250 million from $247 million last year, primarily due to an increase in depreciation related to ENSCO 8500 commencing operations.

Ensco recently added an Ultra-deepwater semisubmersible rig to their fleet and they expect that their deepwater revenue will grow significantly in 2010 and 2011. Furthermore the company projects Jackup utlization rates to rise.


Deepwater segment revenues grew by 131% year-to-year to $63 million in third quarter 2009, mostly driven by commencement of ENSCO 8500 operations in early-June 2009. The average deepwater rig day rate increased to $387,000 from $362,000 a year ago, however, utilization declined to 64% from 87% in third quarter 2008.

Revenue from Jackup fleet totaled $363 million in third quarter 2009, down from $592 million a year ago. The decline was largely due to a decrease in utilization to 61% from 97% last year and an $8,000 decline in the average day rate to $148,000.

They still maintain a strong financial position with more than a billion dollars of cash and cash equivalents, $350 million in a revolving credit facility, LTD is $266 million and there contract backlog stands at $3.3 billion.

Some thoughts about 3Q09 and outlook going forward. If oil continues to maintain it current trend of increasing price or even stays around $80 dollars a barrel the company could see an increase in upstream spending. This will play an important role in the companies Jackup segment going forward. Currently there is an oversupply in the Jackup drilling market which is driving day and utilization rates down. This is something to be cautious about going forward given that the Jackup segment accounts for over 80% of the company revenue. Furthermore, I would be cautious of a pullback in oil prices given the current over supply. Currently the US oil inventories are 339.1 million, leaving stockpiles 9.4 percent above the five-year average for the period.

If anyone has any question please email me at

James Menicucci

Ecolab's Q3 profit boosted by cost cuts and H1N1 scare

Ecolab (ECL) reported 3rd quarter earnings this morning (10/27).

Ecolab's Net Income rose 15% to $145 million in the 3rd quarter ended 9/30/09 as compared to the 2nd quarter of $126 million. This raise in profit was mainly due to the demand of hand sanitizer spurred by the H1N1 flu outbreak and cost-cutting. Their EPS rose to $0.60 from last quarters EPS of $0.50 and were in line with analysts expectations and on the top end of management's guidance. Although profit increased, revenue fell 5% to $1.54 billion, which was also in line with analyst expectations.

Despite the decline in revenue for the quarter, Ecolab CEO, chairman and president Douglas Baker Jr. said in a press statement that the company saw “steady demand” in its food, beverage and health care markets. It’s also seen demand for its hand sanitizer products grow, due to the H1N1 virus.

Commenting on the quarter, Douglas M. Baker said, “We continue to make solid progress. The quarter was on track, reflecting our focus on new business growth, appropriate pricing and structural cost improvement to offset soft market conditions and yield the strong earnings gain. We’re very pleased with the work our team has done to deliver these strong results across all geographies in a difficult economy. We continue to build our business, invest in our future and deliver.

Ecolab has narrowed the range for its pro forma earnings per share forecast, which excludes special gains and charges and discrete tax items, for the full year ending December 31, 2009 to $1.98 to $2.01 from the previous forecast of $1.96 to $2.02.

ECL shares were trading down to $45.10 (-1.81%) as of 2 pm Tuesday.

I have updated the ECL model and increased the price target to $50.32, which represents 10% upside from the current price.

UASBIG feels very comfortable in continuing to hold Ecolab. With high demand for their diverse product lines, consistent buybacking of shares, and the H1N1 scare, we believe Ecolab shareholders will benefit.

~Nick Iuliucci

Monday, October 26, 2009

Ecolab Earns 2009 Tekne Green Company Award

Today Ecolab announced that they had received this award that honors businesses that practice environmental awareness/responsibility and incorporate sustainability into their overall business model.

Ecolab has achieved significant reductions in both energy and water usage in its plants worldwide. The company has committed to reducing its greenhouse gas emissions by 20 percent per dollar sales from 2006 to 2012 as part of the U.S. EPA Climate Leaders program, and has achieved LEED-EB Gold certification for its Research, Development and Engineering facilities in Eagan, Minn.

With sales of $6 billion and more than 26,000 associates, Ecolab Inc. (NYSE: ECL) is the global leader in cleaning, sanitizing, food safety and infection prevention products and services. Ecolab delivers comprehensive programs and services to foodservice, food and beverage processing, healthcare, and hospitality markets in more than 160 countries.

Ecolab (45.87) was flat (-0.23) in early morning trading. They report 3Q earnings tomorrow (10/27) before market open.

~Nick Iuliucci

Saturday, October 24, 2009

3Q 2009 Earnings for Illinois Tool Works Incorporate

Illinois Tool Works Inc. posted 3Q 2009 earnings this past Tuesday, October 20th.

The highly diversified industrial parts manufacturer announced a third-quarter profit of $0.66 per share, revenue of $3.580 billion, and net income of $302 million.

Year-over-year EPS declined 11 cents a share from $0.87 per share in 3Q 2008. However, ITW beat the estimates on the street, which were around $0.53 per share.

Overall revenue dropped nearly 20 percent from last year’s third quarter revenues of $4.464 billion and profits fell $151 million from $453.5 million in 3Q 2008. Management was able to offset these significant declines by implementing extremely effective cost measures as operating margins only decreased 1.5% from 15% in 3Q 2008 to 13.5% in 3Q 2009. In addition, operating margins increased by 360 basis points from 2Q 2009. Sales have dropped dramatically from the previous year as almost all of ITW’s end users have significantly reduced production and output, therefore decreasing the demand for ITW’s products. In addition, ITW sells a good chunk of their industrial productions through various distributors who have focused on using up inventory stock piles to fulfill orders instead of purchasing products through ITW in an effort to increase their own performance.

Management expects total revenue for 2009 to fall within $14.124 billion (-11% of 2008 revenue) to $15.075 billion (-5% of 2008 revenue). The 2009 profit outlook range is $1.74 to $1.80 per share. Current estimates on the street range from $1.64 to $1.87 per share. Management was also upbeat about the significant improvement in their auto related sales in North America. This improvement may be slightly illusionary as the auto market was at an incredible low last year and sales were boosted significantly in the 3Q by the temporary “cash for clunkers” program. Regardless, any improvement in the auto industry is a good one. In addition, management has seen a significant increase in the residential housing starts over the past 9 months and projects the housing market in North America to continue its slow creep.

As far as ITW going forward, it is hard to tell. Management does not give any profound or significant guidance and it is clear that their main focus has been on managing operating costs. One of our original catalysts regarding ITW was their strong acquisition history. However, there was an all time low in acquisitions during 3Q 2009, but management has stated that projected acquisitions in the fourth quarter could be as high as $200 million. There is no doubt that ITW is a tremendously diversified company with over 875 operations in 54 countries. It may be worthwhile to wait and see how ITW’s acquisition strategy pans out over the fourth quarter. It is a solid company that has performed well for us, but if management does not focus on increasing shareholder value relatively soon, it should be put up on the chopping block so we can take our gains and using them towards a more worthwhile investment.

-Matthew Opanowski

3Q 2009 Earnings for Caterpillar Incorporated

Caterpillar Inc. posted 3Q 2009 earnings this past Tuesday, October 20th.

The industrial machine giant announced a third-quarter profit of $0.64 per share, revenue of $7.298 billion, and net income of $404 million.

Year-over-year EPS declined 75 cents a share from $1.39 per share in 3Q 2008. However, CAT destroyed the estimates on the street, which ranged from $0.04 to $0.06 per share.

Overall revenue dropped 44 percent from last year’s third quarter revenues of $12.981 billion and profits fell $464 million from $868 million in 3Q 2008. Despite these significant declines, management is still very pleased with CAT’s performance in light of the economic environment and has implemented effective trough management. The drop in profit was primarily due to significantly lower sales volume worldwide. Instead of purchasing new equipment from CAT, dealers across the world focused on using up current inventory stock piles.

Management has tightened their expected 2009 revenue range to $32 to $33 billion which is slightly lower than the midpoint range of $35 billion they announced at the beginning of the year. However, the 2009 profit outlook range has improved to $1.85 to $2.05 per share, excluding redundancy costs, from the previous range of $1.15 to $2.25 per share. Current estimates on the street range from $1.88 to $2.15 per share. Management also expects revenues for 2010 to increase in the range of 10 to 25 percent of overall revenues in 2009.

On Friday, October 23rd we sold half of our current position in CAT. This was a wise choice as it allows us to capture some of the tremendous return we obtained by purchasing CAT, but also allows us to wait and see what will happen with CAT going forward. Our original thesis was not only that CAT was a recession pick, but that the proposed economic stimulus plans would benefit CAT tremendously. We still have not had a major infrastructure push here in America yet, but it has already begun in China. As a whole, revenues in CAT’s Asia/Pacific region declined the least compared to the other regions CAT operates in. Additionally, since dealers have relied on their inventory to fulfill orders, once the economy starts to pick up so will construction and mining operations and dealers will have to replenish inventories and fulfill orders by going through CAT.

-Matthew Opanowski

Friday, October 23, 2009

E.I du Pont De Nemour and Co.

DuPont Released third Quarter earnings on Tuesday, October 20th

Revenue declined 18% to $5.69 billion, missing estimates of $6.27 billion.
The sales drop was mostly due to 12% drop in sales and a 2% drop in prices.

Revened dropped 21% in the U.S, 27% in Europe, the middle East, and Africa.

Even with lower revenue, Dupont managed to increase net income by 11 percent year over year by cutting costs. Net income increased to 409 million, or 45 cents a share, which beat earnings by 12 cents. They decreased costs by about 700 million. In the upcoming quater, managment tends to further decrease costs by shutting plants and cutting jobs.

Full year EPS will be 1.95-2.05, which was narrows the gap from last estimates of 1.70-2.10. However, analysts had the EPS at around $1.83.

Coatings & Color Technologies and Electronic & Communication Technologies were down by single digit percentages, but but were positive. Performance Materials turned last year's $91 million pre-tax loss to a positive $230 million, however, last years loss was due to a hurricane. Finally, Safety & Protection dipped from $251 million to $93 million on lower demand and an impairment charge..

Overall, Dupont is a good company and there operations are truly unique. Going, foward, at this time we are no long holders of this position and possibly in the future we could reevaluate Dupont and determine any possible buybacks.

Thursday, October 22, 2009

Monday, October 12, 2009

25 Things the iPhone has Rendered Useless

Wednesday, October 7, 2009

Nike Earnings Report

Nike released 1st Qtr FY2010 earnings on September 29,2009.

Revenue was down 12% versus prior year to $4.8B.

Diluted EPS up 1% from prior year to $1.04.

Inventories down 7% versus prior year.

Net Income was basically flat at $513M.

On the close of Sept. 29th NKE traded at $60.09 and the next day Sept. 30th, they closed up 7.7% to $64.70.

As of 12:35 on Wednesday October 7, 2009, they were trading at $63.14.

Since June 30th to today, their share price is up nearly 22%.

Bloomberg 19 Analysts covering it. 9 Buys, 9 Holds, and 1 Sell.
Goldman Sachs has a Buy/Neutral recommendation and a target price of $75.

Will continue to monitor.

~Michael A. Williams

Wednesday, September 16, 2009

Apple Can Remain Great Without Jobs

Monday, September 14, 2009

Apple Could Benefit From Possible Accounting Rule Change

Saturday, September 12, 2009

Google Economist Sees Good Signs in Searches

Wednesday, August 12, 2009

AAPL: Why Apple Is More Valuable Than Google

Business Week Article:

Wednesday, August 5, 2009

CSCO F4Q09 Earnings 08/05/09-(Daren Pon)

*From Bloomberg

Aug. 5 (Bloomberg) -- Cisco Systems Inc., the largest maker of networking equipment, predicted that revenue will drop for a fourth straight quarter as the recession crimps orders of networking equipment.

Revenue will fall 15 percent to 17 percent in the fiscal first quarter, which ends in October, the company said today. That equates to between about $8.6 billion and $8.8 billion, down from $10.4 billion a year earlier.

Global sales of routers and switches, which account for almost half of Cisco’s sales, will fall about 20 percent this year, according to the research firm Dell’Oro Group. Chief Executive Officer John Chambers aims to revive growth by getting into markets such as video cameras and computer servers.

“It’s disturbing in the fact that you’d like to see them gaining momentum,” said Cisco investor Daniel Morgan, a portfolio manager for Synovus Securities Inc. in Atlanta. “But then you have to take a step back and realize what’s going on in the industry.”

Cisco, based in San Jose, California, fell 74 cents to $21.43 in late trading after giving the forecast. The shares, up 36 percent this year, closed at $22.17 today on the Nasdaq Stock Market.

Profit Margin

The company’s gross margin -- the percentage of sales remaining after production costs -- will be 64 percent this quarter, Cisco said. That compares with 65.3 percent last quarter. Less-profitable consumer products could be taking a toll, said Mark Demos, portfolio manager for Fifth Third Asset Management in Minneapolis.

“The big issue is profitability,” said Demos, who helps manage $19.8 billion in assets. His firm had about 3 million shares of Cisco as of March 31. “They’re saying there could be an issue because of a mix of products.”

Orders began to rebound in the fourth quarter, though it’s too early to tell if the recovery will last, Chambers, 59, said on a conference call.

Sales in the fourth quarter were typical for the season, unlike the previous three quarters, he said. “While it’s too soon to call a recovery, it’s the first positive trend we’ve seen,” Chambers said.

Fourth Quarter

Fourth-quarter net income fell 46 percent to $1.08 billion, or 19 cents a share, from $2.01 billion, or 33 cents, a year earlier, Cisco said today. Excluding costs such as stock compensation, profit was 31 cents. Analysts in a Bloomberg survey had estimated 29 cents on average.

Revenue fell 18 percent to $8.54 billion in the quarter, which ended July 25. Analysts had projected $8.51 billion.

To cope with the slump, Cisco just completed more than $1.5 billion in budget cuts. It eliminated more than 2,000 jobs, curtailed hiring and merged offices. Cisco had $35 billion in cash and equivalents at the end of last quarter, up from $26.2 billion a year earlier.

Investors view Cisco as a technology-industry bellwether because it dominates the market for routers and switches, products that direct the flow of data. Large companies account for most sales of switches, used to run their corporate networks. Phone carriers and Internet-service providers mostly purchase routers, which are costlier.

Economic Bellwether

Cisco’s results also serve as an indicator of the broader economy, said Jason Ader, an analyst with William Blair & Co. in Boston. He expects the shares to perform in line with the market and doesn’t own them.

“Switch sales are typically correlated with economic factors such as employment, new business starts and business expansion,” Ader said.

The U.S. economy shrank 1 percent last quarter, extending the longest recession since World War II. The country has lost 6.5 million jobs since the slump began in December 2007. Economists surveyed by Bloomberg forecast the jobless rate to exceed 10 percent by early 2010.

Cisco set out last year to cut at least $1 billion in annual costs by July. Cisco reduced travel expenses by using its own videoconferencing equipment to avoid business trips.

Tuesday, August 4, 2009

Chesapeake Energy Corporation (Dan Goldfarb)

For the quarter, Chesapeake's Revenue was $1.7 billion, compared with a revenue loss of $455 million a year ago. The company reported second quarter net income of $237 million, or 39 cents per share, compared with a loss of $1.6 billion, or $3.17 per share, one year ago. Excluding one-time costs, Chesapeake saw an adjusted profit of $377 million, or 62 cents per share, down from $479 million, or 89 cents a share, in the same quarter last year. On average, Wall Street analysts expected a lower adjusted profit of 52 cents per share, but on significantly higher revenue of $1.9 billion.

Chesapeake saw production of 223 billion cubic feet of natural gas equivalent (bcfe) for the quarter with an Average Daily Production Increases of 4% over 2009 First Quarter Production and 5% over 2008 Second Quarter Production
(the company’s daily production for the 2009 second quarter averaged 2.453 bcfe, an increase of 86 million cubic feet of natural gas equivalent (mmcfe), or 4%, over the 2.367 bcfe produced per day in the 2009 first quarter and an increase of 125 mmcfe, or 5%, over the 2.328 bcfe produced per day in the 2008 second quarter.) The company is not currently curtailing production, but may do so again later this summer or fall as market conditions dictate.

I feel Chesapeake is currently undervalued and is poised for solid gains for the rest of 2009. As oil prices remain high and the overall economy continues to improve, Chesapeake should see increased overall demand and profit. They have a very successful hedging strategy (resulting in a gain of $597 million in the second quarter) that will combat price fluctuations of natural gas. Management remains confident in their ability to combat poor market conditions if they should arise. Currently, Chesapeake remains a Hold.

Monday, August 3, 2009

VISA (Richie Civello)

Visa Inc (NYSE:V - News) reported better-than-expected quarterly earnings on Wednesday(7/29), as the world's largest credit card network cut expenses and credit-strapped consumers used their debit cards more. Larger than expected cuts in advertising were a major component to the cost cuts.

The company also forecast revenue would grow more than expected in the fourth quarter helped by a recovery in the number of transactions.

Net income rose 73 percent to $729 million, or 97 cents per diluted class A share, for the third quarter ended June 30.

On an adjusted basis, reflecting a normalized tax rate, restructuring and purchase amortizations, quarterly net income rose to $744 million, or 98 cents per diluted class A share. True earnings per share were $0.67 per share; the difference coming from a one-time Brazilian IPO.

Overall revenues were in the expected neighborhood, Payments volume fell 5% but processed transaction volume increased 8% to 10.3 billion.
Our thesis with Visa is still: that increased transactions due to a shift from paper payments to plastic would lead to increased business and the shift from debit to credit card payment during these hard times would be beneficial to Visa.( Debt processing went up 3.6% this quarter, Credit Card payment volume decreased 10.4%). With the economy showing more signs of life Visa looks to still be a hold.

Saturday, August 1, 2009

Waste Management Profits Fall 22%

Waste Management came out with earnings on Thursday. They posted a 22% drop in profits from the prior year. Revenue also fell from $3.49 billion to $2.95 billion. Management attributed the results to lower prices for recycled materials and lower volumes. EPS was .50 a share, while analyst were expecting .52 cents. The results from Q2 did improve from Q1 when EPS was .30 cents a share.

Thursday, July 30, 2009

Ecolab- Richie Civello

Ecolab came out with earnings on Tuesday.

Revenue of $1.44 billion for the quarter ended June 30 was down 8 percent from $1.57 billion in the same period last year. Excluding restructuring and other items, the St. Paul, Minn.-based company reported income of 50 cents per share; expected earnings were $0.48 cents per share. Reported earnings were $0.41 per share due to restructuring charges and currency exchange rates. Ecolab reduced its 2009 earnings-per-share outlook to a range of $1.96 to $2.02 from a previous forecast of $1.95 to $2.05, excluding anticipated restructuring charges of 21 cents per share to 23 cents per share.

As of today they were upgraded by JPMorgan to “Neutral” from “Underweight”

Ecolab credits new product sales, pricing, cost reduction, and new account gains as the reason for beating earnings. Gross margins increased to 49.7%, up from 49.1%

With the company held view that the markets, while stabilizing, are not going to be enough to make profits go any higher further cost-cutting initiatives are going to be implemented. Along with new product development and increasing efficiencies, this company is taking the right steps.

Management seems fully aware of the economic situation and is taking the right steps to create growth and remain profitable. I affirm this company as a hold for the portfolio as it has been one of the more stable names in the portfolio and should provide consistent and steady returns for us.

Tuesday, July 21, 2009

AAPL F3Q09 Earnings 07/21/09-(Daren Pon)

Apple (AAPL) this evening reported fiscal third-quarter results that beat analysts’ sales and profit estimates.

Apple revenue rose 12%, year over year, in the quarter to $8.34 billion, while net income came in at $1.23 billion, or $1.35 per share.

That compares to an average estimate for $8.2 billion in sales and $1.17 per share, or $1.31, excluding options expenses. The results were ahead of Apple’s own forecast for revenue of $7.6 billion to $8 billion and profit of 90 cents to $1 per share.

Gross profit was likely much higher than people’s grim expectations, 36.3%, up from 34.8% percent in the year-earlier quarter.

For the fourth quarter, Apple, as per usual, offered a rather restrained forecast, projecting revenue of $8.7 billion to $8.9 billion and EPS of $1.18 to $1.23, less than the $9.1 billion and $1.30 analysts have been projecting.

Apple shipped 5.2 million iPhones in the June quarter, 10.2 million iPods, and 2.6 million Macs, the company said.

The reported sales and profit don’t include some proceeds from iPhone that are recognized ratably over months that a phone is owned. Including those non-GAAP amounts, Apple generated $9.74 billlion of “adjusted sales” and $1.94 billion of “adjusted net income.” On a per share basis, using a diluted share count of 909.2 million shares, that comes to about $2.13 per share in adjusted EPS, I reckon.

Apple generated $2.3 billion in cash flow from operations in the quarter, the company said.

Apple will host a conference call with analysts at 5 pm, which you can listen to here.

Despite the restrained forecast, Apple shares rose $5.73, or 3.8%, to 157.24 in after-hours trading, after falling 1% during the regular session.


DD- Earnings(Richie Civello)

Wilmington-based DuPont on Tuesday reported earnings of $417 million, or 46 cents per share, in the three months ended June 30, down from $1.08 billion, or $1.18 per share a year earlier.Overall revenues tumbled 24 percent to $7 billion, from $9.3 billion a year ago.Excluding one-time items, adjusted earnings were 61 cents per share, beating the consensus estimate from analysts polled by Thomson Reuters of 53 cents a share on revenue of $7.1 billion.

Overall product volume is down 19%. Chemicals produced by the company are used in a wide variety of industries and are a main component of the decreased volume. Auto and housing products are also reasons for this decrease in business. On the positive side DuPont's agriculture segment saw positive growth due to increased prices.

Much of their profit is due to cost cutting which the company says the company can maintain at a 75% level. Also new product volume is up 20% to 316 products when compared to YoY numbers.

I am concerned that the company will stay within the same range unless there is some significant growth in either the housing/auto industries. Their agriculture segment, while strong, is too small a segment to keep the company up. In order for DD move out of the high $20 range either positive auto or housing news will hae to come out.

Monday, July 20, 2009

CAT - Recent News (Opanowski)

Caterpillar Incorporated was up 7.83% on July 20th, on the news that Bank of America-Merrill Lynch has upgraded CAT to a "buy."

Bank of America-Merrill Lynch stated that the end of the second quarter could possibly mark the bottom of the construction sector.

Also, CAT is up 8.73% as of 3:30 PM EST, July 21 on some recent news put out by management. Although CAT's second-quarter profits were down a dramatic $1.14 per share from Q2 2008 to Q2 2009 at $0.60 per share, management has updated their outlook for the remainder of 2009. Management says that it is very satisfied with the results of the various cost cutting strategies they have been implementing for the past several months and feels confident in the way they have steered the company through the recession and is optimistic going forward.

The updated sales and revenue range for 2009 is $32 billion to $36 billion and the profit per share range is $1.15 to $2.25.

Some concerns I have that still need to be addressed are whether demand for their products is going to increase anytime soon and how much the new cap-and-trade policy will affect CAT.

Thursday, May 7, 2009

CSCO F3Q09 Earnings 05/06/09-(Daren Pon)

Cisco Systems Inc. had a rough quarter with, but still managed to beat quarterly earnings expectations. Cisco earnings fell 21%, but still beat analysts with earnings of $0.23 per share, about $0.05 above the consensus estimate. Cisco shares rose $0.43 to $20.04, an increase of 2.2% after-market.

In F3Q09, Cisco increased cash reserves by $2 billion, totaling $33.5 billion. Revenue decreased by 17% year-over-year to $8.2 billion. Gross margins were up 0.10% year-over-year at 55.1% through lower manufacturing costs that helped offset low sales volume and discount pricing.

Moving forward, many companies are still feeling the impact of the recession and are going to hold off on any large-scale improvements to networking infrastructure. This will continue to hurt Cisco until the economy moves further along recovery. Optimistic business lines include Cisco's video conferencing service Telepresence and virtualization technologies. The former uses large televisions and high-speed network connections to simulate face-to-face conference table discussions with users dialing in across the globe, saving travel expenses. Telepresence sales rose 70%. Expansion of such systems would also increase sales of Cisco routers and switches. Virtualization is still a powerful, yet easily implemented cost-cutting tool that allows one computer to act as many.

Cisco is a strong company and I maintain a HOLD on it. Despite some interesting areas of growth, the core business will still continue to suffer. As more opportunities arise within Technology, the opportunity cost of holding Cisco could rise too high.

Monday, May 4, 2009

CHK posts loss of $5.75 billion for Q1 09 - shares down over 7% in extended trading

On Monday, May 4, CHK reports a net loos of $5.75 billion (-9.63 per fully diluted common share) due to a larger than expected impairment charge of $6 billion on oil and natural gas properties. This loss is a result of a 36% decrease in the NYMEX price of natural gas during the quarter. The poor performance of natural gas throughout the quarter was due primarily to slumping industrial demand for the commodity.

In order to counteract the continuing weak demand for natural gas, CHK announced on April, 16 that they will decreas daily production by another $400 mmcf (13%). Chesapeak's proven natural gas and oil reserves were 11.9 tcfe, a decline of 2% from the beginning of the year. The company also cut their capital expenditures by another $500 million. The company is currently documenting an agreement to sell certain Chesapeake-operated long-lived producing assets in South Texas in its fifth volumetric production payment transaction in order to help cover budgeted capex and reduced borrowing under their revolving credit facility.

Despite the current negative enviornemnt surrounding natural gas producers, I remain optimistic about the future of the commodity as an alternative to foreign oil. Prices have not been this low since 2002, and when demand turns around, CHK remains well positioned to capitalize. We maintain a hold on Chesapeake Energy.

Friday, May 1, 2009

Valero Q1 EPS of $0.59, beating street estimates.

Valero posted first quarter net income of $309 million, or $0.59 per share, compared to last year's 1Q net income of $261 million, or $0.48 per share. Management reported that the increase was mainly due to higher refining margins on gasoline and secondary products, such as fuel oil, asphalt, and petroleum coke. They also cited lower refinery operating expense as a contributing factor.

"We reported positive earnings despite weaker demand,” said Bill Klesse, Valero’s Chairman of the Board and Chief Executive Officer. “In fact, our first quarter 2009 earnings per share were 23% higher than the first quarter of 2008, and 64% higher if you exclude last year’s insurance recovery. In all our regions, gasoline margins were unseasonably strong and nearly double the level in the same quarter last year. Diesel and jet fuel margins were also good in the first quarter despite being down from last year’s high levels.

Also worth mentioning is Valero's acquisition of seven ethanol plants previously owned by now bankrupt VeraSun. This further vertically integrates their business, as ethanol is a neccessary additive in many of their products.

Going forward, management acknowledges continued volatility and difficulty in the energy business, but remains committed to finanacial strength and long term viability. Nothing has changed with this stock and in fact it has only become stronger in the past two months. Valero has improved upon many of the competitive advantages that make it so attractive as a refiner, as well as maintained the financial strength to see it through these tough times. Although we are up nearly 20% on Valero, it still remains undervalued and should hit the price target in due time.

Wednesday, April 29, 2009

Visa posts Q2 2009 Earnings of $.71 per share, beating the Street

Net Income for Q2 was $536 million or $.71 per diluted share. Net operating revenues increased 13% YoY to $1.6 billion despite negative growth in U.S. payments volume. Total cards carrying the Visa brand increased 8% over the prior year to $1.7 billion. Service revenues increased 2% versus the prior year to $804 million. As of March 31, 2009, Visa's cash, cash equivalents and investment securities were $5.8 billion. Furthemore, management maintains that they will be able to achieve an operating margin in the low 50% range for 2009 and the high 40% to low 50% for FY 2010.

Visa continues to show that despite recent economic trends, their business continues perform well. Street estimates for Q2 earnings were around $.63 and Visa beat these easily. The company continues to rely on their strength in debt cards and we believe this trend will continue as Visa's current marketing campaing encourages people to use their cards more frequently for everyday expenditures.

Tuesday, April 28, 2009

ECL Earnings in line w/ street

"Ecolab Inc (ECL.N), a provider of cleaning supplies and services for restaurants, hotels and other businesses, reported a 44 percent decline in quarterly profit on Tuesday, matching expectations, and affirmed its full-year profit forecast."
-see full article @:

Aside from the earnings report, this Swine Flu outbreak may be a positive catalyst for a provider of sanitation supplies and equipment. History has shown that food scares and public health emergencies such as the taco bell e.coli scare a few years ago or the SARS outbreak, have increased demand for the supplies and services that ECL provides. It's up 3% already today, while the market is about flat. I believe the movement is tied to a combination of the earnings report and swine flu concerns. I still like the stock and believe that $40 is a key resistance level that, if passed, may improve investor confidence in the stock as it has hovered in the mid 30's since we bought it at $35.


Sunday, April 26, 2009

AAPL F2Q09 Earnings 04/22/2009-(Daren Pon)

This past Wednesday Apple Inc. released their F2Q09 report. Revenues increased 8.7% to $8.16 billion and profits increased from $1.05 billion to $1.21 billion, or from $1.16 to $1.33 per share. Gross margins increased from 32.5% to 36.4%. Cash and marketable securities increased by about $800 million to $28.9 billion.

Profits came from strong iPhone sales at 3.8 million units, an increase of 128% year-over-year, and increasing margins. Margins were lifted due to decreasing commodity prices of key component materials, sales of higher margin products including software from the Apps Store, and lower warranty and freight costs. Although Mac products and Services declined about 3%, this number compares favorably to the overall market decline estimated at 7% for the quarter by the IDC.

Apple resisted the recession and posted an increase in quarterly profits of 15%. With CEO Steve Jobs sitting this quarter out, the strong financial results helps to affirm the idea that Apple has a deep bench and will only benefit from Job's intended return this June. A sudden change in Job's condition would nonetheless create strong negative pressure on Apple's stock price and now may be a time to reevaluate Apple and possibly take our gains.

Thursday, April 23, 2009


On Tuesday, April 21st, CAT released negative earnings for the first quater of 09, which is the first time in 17 years, but still beat analyst expectations. They also cut there EPS from 1.79 to 1.25, bringing down share price to a week low of $28.84. CAT's stock price increased to $34.72 because CEO James owens said in a conference call that Chinas stimulus bill will help growth towards the end of 2009 into 2010. Today, CAT closed at 32.45, bringing our position up to a gain of 23.2%.

Tuesday, April 21, 2009

IP down about 12% on 4/20

IP fell about 12% on 4/20 due to the overall market drop. With the DJIA off almost 300 points, material companies and industrials slid . The wall street journal cited that "Many industrial and material stocks slid as the recent bounce for commodity prices was interrupted." With the recent upgrade, and no material fundmentals changing, this is still a good stock and its back up almost 10% at 8.50 as of 10:45AM

DD Earnings

see above article for summary of DD's earnings release

DuPont beat street EPS estimates, however missed on revenue targets and lowered their full year guidance. The new CEO, Ellen Kullman said "strong performance in the agriculture and nutrition unit, along with cost-cutting measures, helped curb the impact of the largest decline in industrial demand in decades." We will update the model and see where the valuation comes out. This is a strong blue-chip company that has undoubtedly been driven down by historically low-demand in many of its key business areas. I still call this stock a HOLD. It has been updated to BUY recently by Jefferies & Co., with the analyst citing its strong dividend yield

Thursday, April 16, 2009

IP rallies 22% on 4/15....down 1/2 pct on 4/16

IP rallied 22% and was as high as 9.13 on 4/15. This significant rise was attributed to a lead analyst upgrade that was supported by belief that the worst is over for the paper industry. That Deutsche Bank analyst changed IP to a "BUY" with a price target of $11. IP Closed today at 8.75. I still think we should hold on to this for the same reasons I've cited over and over and I hope this upgrade is a game changer for investor confidence with regard to IP.

Thursday, April 9, 2009

CAT - Up Around 10%

Caterpillar Incorporated is up around 10% as of 2:45PM today on the good news that they will not be slashing dividend payments as analysts had previosuly expected. Other major industrial companies are up big today as well and the future is looking a little less bleak for construction companies as the light at the end of the tunnel draws near and hopes of an economic turnaround grow.

Tuesday, March 31, 2009

CAT - French Executives Held Hostage

In response to Caterpillar's plan to lay off 700 workers without room for negotiation, hundreds of workers at a Caterpillar plant in Grenoble, France are holding five executives, included the head of operations, hostage and protesting outside the facility. A spokesperson for the workers has commented that violence is not a motive and that the workers are trying to convince the executives to negotiate.

A statement by Caterpillar issued in response to the situation claims that the executives in Grenoble are communicating with the French Works Council and that their "... utmost priority is to find a solution that guarantees the sustainability of our presence in Grenoble."

Despite this news, CAT is up 3.12% as of 2:54 PM.

Monday, March 30, 2009

CAT - Down close to 10% Mid Day

CAT, along with others in the heavy machinery manufactures, were hit hard Monday as crane maker Manitowoc Co. cut its full-year guidance 50% below current Street estimates. Analyst within the industry also lowered Deere & Co. 2009 and 2010 estimates on "more cautious view of farm equipment demand globally." Crane making and farming equipment are not CAT's main lines of business and therefore I see today's events as an industry hit, not CAT specific.

Wednesday, March 25, 2009

IP down +10% on 3/25

I believe today's sell-off of IP reflected investor discontent with IP's CEO John Faraci's 2008 compensation, which although down 4%, topped $10mm. I do not think he should have earned that much as well, seeing as IP was down 64% in 08 against an S&P 500 down 39% in 08. The late rally helped a little bit, bringing losses to 10% on the day from 15-16% as it was during the day. We'll see what happens going forward...I still like the stock

Tuesday, March 24, 2009

IP Closes up 12%

"International Paper Co., which registered with the federal government as an alternative fuel mixer in the fourth quarter of 2008, has received a $71.6 million refund check from the Internal Revenue Service.The payment was related to the use of alternative fuels at 15 of the company’s mills from Nov. 14-Dec. 14, 2008. International Paper plans to continue submitting refund claims based on its production and use of fuel mixtures. The U.S. Internal Revenue Code allows a $0.50 per gallon excise tax credit for alternative fuel mixtures used by taxpayers for sale or trade in the taxpayer’s business.Investors responded positively to the news Tuesday, as IP’s stock price closed up 12%, to $9.15."

Taken from Memphis Business Journal...
See full story at

This stock has been rallying recently. While today represented a significant event that investors cheered, I believe the market is beginning to realize that this stock has been trading at a huge discount. Also, as a result of a lot of positive developments relating to the company, I think it will continue to be traded up to around the $10-12 level in the coming days/weeks. Our average cost is $8.36 and we've gone from being down 67% to a gain of 9.5% as of today (about a 2-3 week period).

Thursday, March 19, 2009

ORCL Q3 earnings-RM

Oracle's profits were slightly down to $1.33 billion (26 cents a share) from $1.34 billion. Excluding special items earnings would have been 35 cents a share compared to a 31 cent consensus estimate. A strong dollar hurt earnings by 5 cents per share as a considerable amount of Oracle's business takes place overseas. New software licenses decline of 6% was anticipated due to the weak economy. Cutting costs, increasing margins, and preexisting service contracts allowed Oracle to beat estimates. ORCL also announced a 5 cent/share dividend approximately 3.25% of yesterdays close.

ORCL was up 14% as of 1:30PM and it is reasonable to believe these gains with hold. New software licenses will continue to decrease into Q4. But a weakening dollar and service contracts should help their bottom line.

Wednesday, March 18, 2009

Nike 3rd Quarter Earnings

Nike reported earnings today for its fiscal third quarter. Net Income fell to $243.8m with an EPS of 50 cents a share down from 92 cents a share in the prior year’s third quarter for a year over year decrease of 47%. The reason for the significant decrease in EPS was due to a goodwill impairment charge from the Umbro acquisition of $241m. The reasons for the write down were a decrease in expected cash flows and the overall value of the company’s investment in Umbro declining largely due the fact that it is being hurt by the European recession. Excluding the write down Nike would have posted an EPS of 99 cents a share which would have been an 8% year over year growth rate. Revenues for the company declined 2% and on a currency neutral basis would have increased 2%. Gross Margin declined 120bp due primarily to higher input costs, the strengthening of the dollar and an increase in the amount of discounted items in an attempt to clear inventory due to current economic conditions.

While these results represented the obvious difficulties any consumer goods company will face due to the economic environment I still have confidence in Nikes opinion of themselves as a growth company and its ability to position its self in the current environment to become more competitive than ever. The company is making conscious efforts to cut costs and become more efficient as represented by its decline in SG&A expense. While Nike is suffering due to the current consumer environment it is still fairing better than its competitors and has been able to grow its market share in multiple business segments. I am still comfortable that the company can weather the economic downturn and continue to gain market share especially with its large cash position and manageable levels of debt and due to its brand innovation and aggressive marketing will be well positioned to benefit when the economy begins to recover and consumers are once again willing to spend a larger percentage of their income on discretionary items.

CAT - cut another 2,454 workers

On Tuesday, CAT announced plans to lay off more than 2,400 employees at five U.S. plants as the heavy equipment maker continues to cut costs amid the global economic downturn. In January, CAT announced job cuts that will ultimately eliminate 20,000 positions. It also said it would slash executive compensation by up to 50 percent and offer buyouts to about 25,000 U.S.-based employees

Among the affected workers are 1,726 people at plants in Illinois. They include 911 workers at a plant in East Peoria that makes track-type tractors and pipe layers and 815 at a factory in Aurora that produces hydraulic excavators and wheel loaders. Caterpillar notified the employees Tuesday of the layoffs expected to last at least six months starting in June.

This layoff was expected and already reflected in the stock price. During our pitch, we said that we believe CAT would mostly likely cut more jobs by the end of the quarter so this did not come as a surprise to us and still feel confident in holding our full position in CAT. On the day, CAT rose 41 cents.

Tuesday, March 17, 2009

International Paper Rallies almost 15%

International paper rallied 14.69% on 3/17. It rallied on monday as well, however the american express report brought about a massive selloff in the afternoon, erasing those gains. Management's refinancing of some of IP's debt has basically turned the sentiment on the stock positive and investors are betting on the stock appreciating in value. April and July 7.50 calls were heavily trafficked with investors taking on bullish positions. Closing at 7.26, our average cost for this stock is 8.36, and so our unrealized loss is a little more than 13%, compared to an unrealized loss of almost 65% when we doubled down when it was at the $4 level (2 weeks ago). The fundamentals of this stock have changed...for the better. I firmly believe this stock will be a tremendous gainer for us in the coming weeks/months.

Monday, March 16, 2009

SOLD Full Stake in NVDA for 23% Gain

On Friday, March 13, the portfolio's stake in Nvidia Corp. was sold off for a gain of 23%. The major factors influencing this decision were the increasing competition within the GPU market, leading to a continuation of the steep price cuts and inventory build up experienced when Nvidia was purchased for the portfolio. Combined with the market rally, this was a good opportunity to take some gains and potentially buy back at a later date under more favorable conditions.

Wednesday, March 11, 2009

GLW 12% Move to the upside

GLW was up over 12% yesterday mostly due to the general strength of the Nasdaq and retailers which this company follows very closely. Because GLW is held heavily by institutions it is often subject to more volatility than the general market. A possible justification of the large swing is the talk of reimplementation of the uptick rule which could have led to institutions closing short positions. Since GLW is a major institutional holding, both on the long and short end, the stock price would benefit positively from this; more so then the general market.

Tuesday, March 10, 2009

Brown Forman- 3rd quarter/management forecasts

Brown Forman reported an increase in sales of 1 percent but they were hit on the strengthening dollar and weak economy. The company reported sales of $784 million for the quarter down from $877 million although the company would have had an increase in sales of 1% if it weren’t for fluctuations in currency. The company reported an EPS of $.81 3rd quarter up 9 percent compared to the same quarter in the prior year. The street was expecting an EPS of $.80.

Management cut their estimates going forward with an EPS of $2.7-$2.9 compared to $3-$3.2 which would represent a decline in growth of 5% compared to an increase of 2%. Going forward management expects currency to negatively effect the quarter over quarter comparisons in the range of $.08-$.10 per share. Management is also concerned of the weak economy and consumers attitudes over the past 15 months. Distributors have also started to decrease their inventory levels, which will hurt sales going forward.

Tuesday, March 3, 2009

HUM down 15% to $20.00

"Managed-care stocks sank even deeper than the broader market Monday, as President Barack Obama introduced his choice for health chief and talked about his view of the need to change the system."

This massive selloff in the sector will eventually be prime for long term investors looking for deep discounts. The "Barak is worse than the bite" as most analyst believe the market is overreacting to the talks of reform.

CHK down 13.7% after cutting production

The energy sector as a whole sold off huge on the day while CHK suffered even more so due to news that the company will further curtail daily production by 240 million cubic feet equivalent/day. The company is also debating a further 10% reduction in drilling activity from their already reduced 110 rig count. These events are to be expected as the economic condition is contributing to reduced commercial demand for natural gas. I maintain my belief in this investment over the long term.

Monday, March 2, 2009

IP down 10% 3/2/09-Ed Warner{6892B955-05BD-4831-B1A2-DB5811324DAB}&siteid=yhoof

See above for full story of press releases from IP.

In addition to cutting their dividend, IP also said it would sell a large chunk of land assets in order help pay down debt and maintain their credit rating.

This news, coupled with an almost 5% drop in the S&P 500 today, contributed to this 10% drop.

IP Cuts Dividend to 2.5 cents/sh

"International Paper said Monday that its board of directors has reduced the company's quarterly dividend to 2.5 cents a share from 25 cents. International Paper said it will preserve $100 million every quarter. "While our cash balances and cash flows remain solid, we believe it is prudent to manage cash conservatively in this uncertain economic environment," said Chairman and Chief Executive John Faraci."

When I pitched this stock, the large dividend yield at the time was a plus, but not a primary reason wanting to purchase it. IP further noted in their press release: "This decision, which reflects our strong commitment to maintaining our current credit ratings, is a proactive step to maximize our financial flexibility, along with our earlier decisions to reduce capital investment, decrease overhead spending and headcount, and freeze salaries." I still believe that we should hold on to IP despite having to stare at it so deep in the red. This is undoubtedly a position that might take our full investment-horizon of 1.5-2 years to come to fruition. It was historically low at 12.49 when we bought it. The company will be well-positioned when demand picks back up and when the market comes back.

Sunday, March 1, 2009

ESV 4Q08 Earnings 2/26/09-James Fowler

Ensco International reported net income of $299M on revenues of $662M for the 4Q08. Revenues were up 12.8% Y/Y for the fourth quarter while net income was up 25.6% Y/Y for the same quarter. For FY08, ESV reported net income of $1.15B, up 16% Y/Y, on revenues of $2.45B, up 14.3% Y/Y. The average day rate for the jackup fleet increased 14% to $160,000 as compared to $140,000 in the prior year. Utilization was 95% in 4Q08 as compared to 88% for the 4Q07. The balance sheet continues to remain strong with $790M in cash and $292M of debt. Dan Rabun, President and CEO, said that ESV is beginning to be impacted by lower oil and gas prices, tight credit markets and the global recession. He said that some of their jackup rigs will be without contracts for a portion of 2009. Management remains optimistic and said that despite the challenging outlook, they believe their strong balance sheet, favorable contract backlog, conservative approach to internally finding new rigs and the growing contribution from the deepwater fleet will provide ESV a competitive advantage over the next several years.

At this point, I still remain bullish on oil and feel that oil prices are going to stabilize between $60 and $80 per barrel. ESV is a well run company with excellent management. ESV has a very strong balance sheet, which is essential in this environment. I have updated the model but still have some work to do seeing they changed the way they report their segments now. I still feel ESV is a hold and will blog again once I come up with a price target.

Thursday, February 26, 2009

Healthcare sector takes a beating after speeches by Obama and economic advisors.

Traders responded to Obama’s budget proposal cuts by selling of healthcare companies. Humana was down almost 20% today, dropping from 40 to 23.64 since Monday. While over the past week, shares of the S&P 500 Managed Health Care sector fell 21%, shares of Humana were hit the hardest because Medicare plans are a large portion of their business. The Centers for Medicare and Medicaid Services (CMS) has invited public comment on these preliminary rates before releasing final rates on April 6, 2009. Humana, as well as other companies in the industry will attempt to fight these newly proposed payment rates at the hearing. In my opinion little can be done considering the president and his economic leaders have targeted Medicare Advantage as a major cost cutting initiative. Jared Bernstein, the U.S. Economic Policy Adviser was on MSNBC yesterday and called out Medicare Advantage, saying it was inefficient and slashing payment rates would be a tremendous source of savings.

Wednesday, February 25, 2009

U.S. government proposes lower than expected Medicare rates. Humana downgraded by S&P, shares tumble.

HUM shares fell 25% on Monday after Medicare rate increases for 2010 were lower than analyst expected. As mentioned in the February 5th “Humana 4Q Earnings” post, Humana is particularly vulnerable to changes in government policy. Projections for Medicare Advantage, the company’s catalyst for long-term growth, will have to be altered to account for the lower rates. Should the preliminary payment rates become final, the company will be forced to either increase premiums or cut benefits to maintain projected profitability, which may cause customers to abandon the programs. Most analyst agree that the actual rates may be slightly more favorable, however it is important to consider Obama’s call for health-care reform.

"The cost of health care has weighed down our economy and our conscience long enough. So let there be no doubt, health-care reform cannot wait, it must not wait and it will not wait another year,"