SRG Seanergy Maritime Corp 9.41
SMTK Simtek Corp 2.25
SMSI Smith Micro Software Inc 7.57
SMMF Summit Financial Grou … 16.40
PBY The Pep Boys-Manny, M … 13.05
PAL North Amern Palladium Ltd 5.60
NYT New York Times Company 16.27
NVGN Novogen Limited 6.43
MTLK Metalink Ltd 4.98
MRVL Marvell Technology Gr … 14.98
KUB Kubota Corporation 34.78
KTV Corts Tr First Un Ins … 25.53
KDE 4 Kids Entertainment Inc 12.20
Mobile Web, Buybacks or Dividends, Iran, UK iPhone issues
– AT&T “Edge” network is disappointing iPhone users
– Interesting post about buybacks and dividends
– It must be weird being the party in which good news is bad for you.
– For $600, you’d expect to not see these issues.
People are seizing on Fed Vice Chairman Donald L. Kohn’s speech today as evidence a rate cut is a sure thing on 12/11. Not so fast.
Here is the sentence people are focused on:
“…such a repricing in the form of wider spreads and tighter credit standards at banks and other lenders would make some types of credit more expensive and discourage some spending, developments that would require offsetting policy actions, other things being equal.”
The key words? “other things being equal”
Simply put, if inflation were to jump, a cut is off the table. Should credit and financial institutions conditions improve (Citigroup’s (C) have), a rate cut is dead. Think about it. Kohn referred to “recent weeks” in the statement several times. So, essentially if things turn around or stabilize in the next couple weeks until the next meeting, Kohn’s entire speech is rendered moot.
The Dow and S&P were both up about 1% early today and I fear it is a matter of people hearing what they want to hear rather than listening to what Kohn said.
A careful read of Kohn’s speech really does not shine a new light on anything. His statements are discussion are really nothing that have not already been discussed and when you condition a statement on “things being equal” you are essentially saying “if we had to act today”. Since they do not, everything he said prior to that is rendered meaningless as tomorrow is not today and next month is definitely not today.
What to think? The last rate cut by the Fed was a close call. Bernanke has said repeatedly that inflation is his main concern. That is what we need to watch first. Growth second. If inflation remains stable or falls then he will act to cut rates should conditions warrant it. If it jumps, Bernanke will be more than happy to let the economy slow even more to stop it. Think Paul Volcker.
Be very careful investing based on Fed statements because once the day they are issued has passed, their relevance pases also.
Walmart.com (WMT) has almost double the online share of it nearest competitor in the brick and mortar retail space.
Through the week ending 11/17 (% equals share):
1. www.walmart.com (WMT) =7.2%
2. www.target.com (TGT) =4.86%
3. www.bestbuy.com (BBY) =2.91%
4. www.jcpenney.com (JCP) =2.48%
5. www.circuitcity.com (CC) =2.34%
6. www.toysrus.com (private) =2.32%
7. www.sears.com (SHLD)= 2.16%
8. www.kohls.com (KSS) =1.39%
9. www.lowes.com (LOW) =1.29%
10. www.homedepot.com (HD)= 1.29%
I have chronicled Wal-Mart’s online success before and these results only add to the proof. Wal-Mart is clearly the leader here and their “site to store” program has been a huge hit. I have used it myself and it is very easy to use and when you consider the shipping charges you save, it really adds up very quickly.
More bad news for Home Depot and Lowes as they tied for last on the list. To make matters worse, Sears is well ahead of them and with more visits to Sears.com, you can bet additional tool and appliance sales are going there rather than to either HD or Lowes.
Filed from Jane Genova. Through their attorneys, the three defendants in the Rhode Island Lead Paint Trial II – Sherwin-Williams (SHW), Millennium Holdings and NL Industries (NL) – filed a motion today in RI Superior Court.
The motion seeks to strike the plaintiff’s proposed lead-abatement plan [that is, the state Attorney General’s plan] in its entirety. Alternatively, defendants move the court to strike each part of the Attorney General’s plan that
*Constitutes improper equitable relief
*Exceeds the court’s jurisdiction and authority
*Affects the rights of persons not a party to this proceeding
*Is constitutionally improper
*And, is unsupported by the prior record in this proceedings.
This particular motion is separate from the defendants’ response to that abatement plan which is due December 15, 2007.
Specifically, here are more details on the defendants’ claim that the abatement plan is on its face defective for five basic reasons:
It seeks money damages that cannot be awarded in equity. The court is constitutionally precluded from awarding money damages, a form of relief exclusively reserved for the jury. Moreover, the plan confirms that an adequate remedy at law exists for the Attorney General through RI’s ability to bring future claims for money damages and because the relief sought is or was compensable in charges. As a matter of law, no remedy can now include the payment of money or the creation of a fund.
It is premised on abatement of individual properties. No remedy can include the inspection or abatement of individual properties because those properties were not part of the trial and verdict, and property owners were neither given notice nor permitted to participate in the proceedings. Ordering abatement of individual properties would exceed the court’s jurisdiction and authority, would be improper in a parens patriae action, and would violate property owners’ constitutional rights.
It includes a request for prospective injunctive relief to prevent future harm, but the RI AG filed to prove his right to such equitable relief. The jury never decided, as it was constitutionally required to do, the predicate facts for mandatory injunctive relief by clear and convincing evidence. Not did the RI AG prove under the proper standard of proof that any harm from properly maintained lead paint is practically certain to occur in the future. Therefore, there is no basis on which the court can enter a mandatory injunction.
It improperly seeks relief for properties and environmental conditions that were never part of the trial or verdict, ranging from playgrounds to public buildings. Similarly, no relief can include the abatement of intact, well-maintained lead paint because the AG conceded (and the legislature declared) that such paint does not present an immediate hazard.
It purports to supplant existing statutory and regulatory requirements for addressing lead-based paint hazards. This court cannot properly enter an order that conflicts with or is inconsistent with the General Assembly’s enactments. Any permissible remedy may only fill a gap in those requirements beyond that which can be achieved through compliance with, and enforcement of, existing laws and regulations.
You can receive a complimentary copy of this 38-page motion by contacting Mgenova981@aol.com.
More commentary an be found here.
The long and short of it is Lynch can file his motions that make a nice neat little press release and play well in the local papers while the defendants will eventually win with a little called the law.
UPGRADES
Citigroup C Punk, Ziegel & Co Mkt Perform » Buy
Semtech SMTC Caris & Company Below Average » Average
Affiliated Computer ACS Stifel Nicolaus Hold » Buy
American Science & Engineering ASEI Jefferies & Co Hold » Buy
Techtarget TTGT Oppenheimer Neutral » Buy
Cavium Networks CAVM Lehman Brothers Equal-weight » Overweight
BP BP Bear Stearns Peer Perform » Outperform
BB&T Corp BBT Punk, Ziegel & Co Mkt Perform » Buy
PNC Bank PNC Punk, Ziegel & Co Mkt Perform » Buy
Regions Fincl RF Punk, Ziegel & Co Mkt Perform » Buy
Washington Mutual WM Punk, Ziegel & Co Sell » Mkt Perform
KeyCorp KEY Punk, Ziegel & Co Sell » Mkt Perform
Marathon Oil MRO Bear Stearns Underperform » Peer Perform
Chevron CVX Bear Stearns Peer Perform » Outperform
AXA AXA Credit Suisse Neutral » Outperform
Emageon EMAG Friedman Billings Mkt Perform » Outperform
DOWNGRADES
Genlyte GLYT BB&T Capital Mkts Buy » Hold
Axcan Pharma AXCA BMO Capital Markets Market Perform » Underperform
Advanced Micro AMD AmTech Research Buy » Neutral
First American FAF Keefe Bruyette Outperform » Mkt Perform
Arbitron ARB Bear Stearns Outperform » Peer Perform
Equity Res EQR UBS Neutral » Sell
BRE Properties BRE UBS Neutral » Sell
AvalonBay AVB UBS Buy » Neutral
NovaGold Resources NG Bear Stearns Outperform » Peer Perform
Wednesday’s Picks
No “First Trade” Picks
Tuesday’s Results
Jeff Macke is buying S&P 500 Index “Spiders” (SPY) with a tight stop. If the S&P drops 1% to 1395 — sell. Open $140.95 Close $142.57 GAIN
Guy Adami preferred JetBlue (JBLU). Open $6.78 Close $6.77 LOSS
Karen Finerman recommended shorting Big Lots (BIG).Open $20.32 Close $19.82 LOSS
Pete Najarian said Arch Coal (ACI) is a buy. Open $36.18 Close $36.86 GAIN
Records: Since 6/21/2007
Guy Adami= 46-41 = 52%
John Najarian= 13-4 = 76%
Jeff Macke= 54-35 = 60%
Pete Najarian= 36-36 = 50%
Tim Seymore= 5-5 = 50%
Karen Finerman= 29-22 = 57%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
ZLC Zale Corporation 18.47
WOLF Great Wolf Resorts Inc 10.49
TWC Time Warner Cable Inc 23.74
TWB Tween Brands Inc 24.61
TSH Teche Holding Company 38.20
TSC Stephan Company , The 3.25
TRY Triarc Companies, Inc … 8.09
S Sprint Nextel Corporation 14.40
NBR Nabors Industries Ltd 26.32
NBBC Newbridge Bancorp 10.20
MXWL Maxwell Technologies Inc 8.10
LZB La-Z-Boy Incorporated 6.02
LYV Live Nation Inc 13.14
HD Home Depot, Inc 26.97
COO The Cooper Companies, Inc 41.39
COBR Cobra Electronics Cor … 5.15
COA Coachmen Industries, Inc 5.32
ADY American Dairy Inc 14.97
ACC American Campus Cmnty … 24.06
ACAT Arctic Cat Inc 11.17
Restoration Hardware (RSTO) answered Sears Holdings (SHLD) today only a day after Sears reminded it who was “it largest shareholder”.
The release below:
PRNewswire-FirstCall/ — “In response to media and other inquiries concerning the Schedule 13D amendment filed by Sears Holdings Corporation on Monday, November 26, 2007, the Independent Committee of Restoration Hardware’s Board of Directors stated if Sears will agree to execute the customary confidentiality and standstill agreement on substantially the same terms that other parties have signed, it would be pleased to provide Sears with the confidential information it requested.
“While Sears has announced its willingness to sign a confidentiality agreement, there is no agreement on terms and, to date, instead of agreeing to the standstill agreement to which other interested parties have agreed, Sears has proposed to reserve the right to launch a tender offer outside the process,” the Independent Committee said in a statement today.
The Committee stated that it is encouraged by Sears’ current proposal at $6.75 per share based upon publicly available information, which is a vast improvement over its prior proposal at $4.00 per share. At the same time, the Committee stated that it believes that stockholder value will be maximized if Sears participates inside the process with other interested parties.
“Sears is an American icon,” said Ray Hemmig, Chairman of the Independent Committee. “We are flattered that it is interested in learning more about our company. We welcome its participation in the process along with the other interested parties. However, the Committee is firmly committed to a fair process that will yield the best results for all stockholders and believes that process is best served through all parties agreeing to the proposed standstill terms without preferential treatment of one party over another.”
On November 8, 2007, Restoration Hardware announced a merger agreement with Catterton Partners. In that announcement, the Company said that under the terms of the agreement, the Independent Committee of the Company’s Board of Directors, consistent with its fiduciary duties, would be soliciting competing proposals from third parties during a 35 day period ending December 13, 2007. On November 19, 2007, Sears filed a Schedule 13D with the SEC indicating that it had accumulated shares equaling just under a 14% ownership position in the Company.”
The whole release is a bit self-serving at best. Why? The other “bidders” in this situation is management itself! What unfair advantage could Sears possibly get over the people currently running the company? Answer? None. Restoration is trying to save face.
Restoration got bitch slapped by Lampert & Co. the other day when they reminded them that as the “largest shareholder” they actually owned more of the company than the current bidders and the Board or Directors themselves and that as such, deserved consideration in the process in getting the information they wanted. It is no coincidence that this information was forthcoming immediately.
There is nothing to stop Lampert from acquiring more shares on the open market during this process, he just cannot launch an official tender offer for shares. Semantics.
Where do we go from here? Lampert gets what he wants (information) and either two things happen. He ends up buying the company OR management raises it offer above that of what Sears would be willing to pay and Lampert cashes out at a profit. Either way Sears shareholders win.
Sears, CDO’s, USG, Capitalism
– Like I was saying, this is true.
– They are all over the news. Now you can find out what they are.
– If you want to play a housing rebound, forget the homebuilders, go with this company.
– Here is a great piece on Capitalism
The key paragraph here in the letter filed today from Sears Holdings (SHLD) is the last one where it calls out management and the board of Restoration (RSTO) and states that “as your largest stockholder, we are concerned by certain aspects of the management and director-led buyout.”
Dear Mr. Hemmig:
We are disappointed that our numerous requests to receive confidential information have not yet been granted by the Special Committee of the Board of Directors (the “Special Committee”) of Restoration Hardware, Inc. (the “Company”). As you know, we have sought such information to enable us to determine whether to submit a binding proposal to acquire the Company on terms superior to the insider buyout contemplated by the Agreement and Plan of Merger (the “Current Merger Agreement”), dated as of November 8, 2007, among the Company, Home Holdings, LLC, and Home Merger Sub, Inc.
As you know we have been discussing the terms of a confidentiality agreement with you and your advisors and in this regard you have asked us to provide you with a proposal to acquire the Company. While we do not understand your requirement that we submit such a proposal prior to providing us with due diligence information during the “go shop” period, we are prepared to inform you that, based on the public information currently available to us, we would be prepared to enter into an agreement to offer your stockholders $6.75 per share in cash via tender offer. We would contemplate entering into a merger agreement on terms substantially similar to the Current Merger Agreement, modified as necessary to accommodate the tender offer structure and with a lower, more reasonable break-up fee than contained in the Current Merger Agreement.
We believe that this proposal, if agreed, would provide a compelling opportunity for your stockholders to realize significant value for their shares in an all cash transaction. The structure of our proposal would enable all of your stockholders to realize value for their shares sooner with less execution and other risk than the transaction contemplated by the Current Merger Agreement. Accordingly, we believe that the Special Committee should as soon as practicable designate Sears Holdings Corporation and its subsidiaries as “Excluded Parties,” as defined in the Current Merger Agreement and should exempt the transactions contemplated by our proposal, including the tender offer, from Section 203 of the Delaware General Corporation Law.
As noted above, our proposal is based solely on publicly available information (including the projections contained in your August 30 press release but not including the results of your most recent quarter, which we expect to be announced shortly), and would require access to the due diligence information we have been seeking. To that end, we again request that you allow us to enter into a confidentiality agreement with the Company on terms permissible under the Current Merger Agreement. Moreover, as you have requested we would be willing to agree to a customary “standstill” provision in such confidentiality agreement, subject to the exception we have discussed with you and your advisors which would enable us to commence a tender offer for all of the shares of the Company only at a price greater than that offered pursuant to the Current Merger Agreement.
We believe that providing us with information and the opportunity to offer all stockholders more consideration than they would receive pursuant to the Current Merger Agreement would be in their best interest. As your largest stockholder, we would similarly encourage you to provide this “superior tender offer” exception to other persons, if any, who might also be interested in receiving confidential information in order to submit a superior proposal, whether as part of a “process” or otherwise.
Additionally, as your largest stockholder, we are concerned by certain aspects of the management and director-led buyout. We note in this regard that you entered into a confidentiality agreement with the private equity leader of the insider group on July 20, 2007 and apparently have been focused exclusively on the insider deal since that time rather than exploring our known interest (first expressed to you in June of this year and repeatedly reiterated). Notwithstanding our known interest, you did not provide us with either guidance or information which could potentially have enabled us to submit a superior proposal to the insider deal in advance of its execution. Our concerns have been increased by the delays we’ve encountered during the “go shop” period which have served to further exacerbate the procedural, contractual advantages (including break-up fees, match rights, and new change of control benefits) and informational superiority which the insider group enjoys.
We hope that you will recognize the benefits of a transaction along the lines that we have proposed and quickly grant us access to the information we have requested as we believe that this would be in the best interests of the Company, its stockholders, customers and employees. We stand ready and willing to complete this transaction quickly, and look forward to doing so.
Sincerely,
/s/ William C. Crowley
Now, it should also be noted that Sears upped its offer from $4 an share to $6.75 a share. Sears, being the largest shareholder (double that of the next largest shareholder) here does have management in a precarious situation. I would bet Lampert has been buying more shares recently (or soon will be) and will up his ownership percentage. At that point, what management wants to do could become essentially irrelevant
One has to think management is stonewalling Sears in order to keep their jobs since they are the one trying to buy the company currently. If Lampert gets control of more shares, it will become a moot point. Currently share trade about 25 cents over Lampert’s offer price indicating folks feel Lampert will eventually pay more. That being said, Lampert could double his ownership to 27.4% for about $1.5 million more than he would pay if the offer price was accepted. It would be a rather cheap premium to pay to all but assure a deal.
Also, the letter twice refers to Sears as “your largest stockholder”. It is a veiled way of saying “hey, we own more of this sucker than you do, want to get ugly?
Go ahead.”
Now, Restoration management has done the right thing in waiting this out until now to get a higher price. However, there now comes a point where they will be viewed as obstructing the process rather than getting the best deal. This is especially apparent since the are the other bidder for the company and their offer is now inferior to the one Sears has made. Sears, being the “largest stockholder” does have the the upper hand should things get contentious.
Circuit City (CC) has now regressed into the guy in high school that dumps his girlfriend only to beg her to come back after he realizes what a huge mistake he made.
Circuit City Spokesman Bill Cimino said last week that Circuit City invited former U.S. workers to apply for jobs, a practice he said was not uncommon in retail, given the typically high turnover. It should be noted here that many of these folks are that same ones that in March, Circuit City let go. More than 3,000 workers were fired and replaced them with lower-paid staff. Cimino added that Circuit City would likely invite more ex-staffers to return next year.
“In a lot of cases, we’ve completely changed how our stores operate; the roles of our associates within the stores,” Cimino told Reuters. “We’ve got a better career path now for associates.” By career path do you mean you will not fired them unexpectedly?
Now, what does Circuit City really hope to accomplish? The good one they let go because the were “too expensive” will already have jobs and those who are still unemployed 6 months after they were let go, do they really want them back? The timing of this is terrible too. They now have themselves competing with the holiday hiring spree that happens every years in retailing.
This is just another in a long line of management failures that has shares snuggled comfortably at 4 year lows. There has been a lot of talk in the blogsphere about shares being a bargain and by most mathematical metrics, they are. Big problem though. In order for those metrics to translate into a retail turnaround and thus have shareholders reap the benefits of that value, management needs to do its job.
Circuit City could carve itself out a niche among the monsters out there like Best Buy (BBY) and Wal-Mart (WMT) much like Julian Day at RadioShack (RSH) has done. It would need to be done on service and a more professional shopping experience. Getting rid of the best folks you have to do that based on their pay scale was just inexplicably short-sighted.
If current management has shown anything, they are just not up to the job and until new management is there, Circuit City will continue to be a value-trap for investors that if it is not bought out soon (next 8 months), will most likely be driven into bankruptcy a sentiment I first expressed in June.
On a side note, why haven’t any of these electronics retailers with “help desks” inside like City’s “Firedog” or Best Buy’s “Geek Squad” jumped at the chance to associate somehow with the hit show “Chuck”? It is a natural association.
UPGRADES
Five Star Quality Care FVE Davenport Neutral » Buy
SI International SINT BB&T Capital Mkts Hold » Buy
Forest Labs FRX AmTech Research Neutral » Buy
Vaxgen VXGN Punk, Ziegel & Co Mkt Perform » Accumulate
ITT Industries ITT Credit Suisse Neutral » Outperform
Teradyne TER HSBC Securities Neutral » Overweight
Boeing BA Wachovia Mkt Perform » Outperform
Laboratory Corp LH Wachovia Mkt Perform » Outperform
Virgin Mobile USA VM Soleil Sell » Hold
Bankrate RATE Bear Stearns Peer Perform » Outperform
Celgene CELG Banc of America Sec Neutral » Buy
FEMSA FMX JP Morgan Neutral » Overweight
National Grid NGG Lehman Brothers Equal-weight » Overweight
Kimberly-Clark KMB Lehman Brothers Underweight » Equal-weight
Deere DE Banc of America Sec Neutral » Buy
Aetna AET JP Morgan Neutral » Overweight
DIRECTV DTV Bernstein Underperform » Mkt Perform
Grant Prideco GRP UBS Neutral » Buy
Air France KLM AKH Citigroup Hold » Buy
Royal Philips Electronics PHG Deutsche Securities Hold » Buy
Tidewater TDW Jefferies & Co Hold » Buy
OmniVision OVTI Robert W. Baird Underperform » Neutral
DOWNGRADES
Buckeye Partners BPL SMH Capital Buy » Sell
Sasol SSL Bear Stearns Outperform » Peer Perform
Public Storage PSA Wachovia Outperform » Mkt Perform
Amer. 1st Tax Exempt Inv. ATAXZ RBC Capital Mkts Outperform » Sector Perform
Intersil ISIL Jefferies & Co Buy » Hold
Casey’s General CASY Friedman Billings Outperform » Mkt Perform
Freddie Mac FRE UBS Buy » Neutral
Fannie Mae FNM UBS Buy » Neutral
Sierra Pacific SRP Deutsche Securities Buy » Hold
First Marblehead FMD Friedman Billings Mkt Perform » Underperform
Tuesday’s Picks
Jeff Macke is buying S&P 500 Index “Spiders” (SPY) with a tight stop. If the S&P drops 1% to 1395 — sell. Open $140.95
Guy Adami preferred JetBlue (JBLU). Open $6.78
Karen Finerman recommended shorting Big Lots (BIG).Open $20.32
Pete Najarian said Arch Coal (ACI) is a buy. Open $36.18
Records: Since 6/21/2007
Guy Adami= 46-40 = 60%
John Najarian= 13-4 = 76%
Jeff Macke= 53-35 = 62%
Pete Najarian= 35-36 = 48%
Tim Seymore= 5-5 = 50%
Karen Finerman= 29-21 = 59%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
