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Dow Chemical Completes Acquisition

If Liveris says it will happen, it will.

Dow Chemical(DOW) announced on Monday it has completed the purchase German chemical maker Bayer AG’s (BAY) Wolff Walsrode cellulosics business for about $725 million including the assumption of debt and pension commitments. They also announced the launch of a new specialty business unit, Dow Wolff Cellulosics, a specialty business unit with over $1 billion in annual sales. It is a combination of the Wolff Walsrode business and Dow’s water-soluble polymers business.

The acquisition, which is expected to add to earnings within a year, is in-line with Midland, Michigan-based Dow’s strategy of growing its specialty chemicals business.

This is yet another move by CEO Andrew Liveis that is perfectly in keeping with his announced strategy for DOW. In April he said on CNBC to David Faber, “We have put the company back in charge of its own future which includes, acquisitions. Now, acquisitions of what companies or what businesses? You’ve read the strategy I am sure and you just implied it when you referred to GE plastics, we are looking for downstream businesses that provide earnings growth and earnings momentum that compliment our own businesses…..”

“…. I won’t comment on any specific deal (after being asked about his interest in GE Plastics) but with over 60 deals in the works, we are looking at everything. It is the deals we haven’t done that are the most instructive. This is a company that financial discipline and making sure that the deals we do do, fit our strategy and we are not just going to come around and buy whatever is available. Now, having said that, look at the profiles, look at the downstream businesses, we are not interested in more commodities, we are interested in technology rich downstream businesses.”

Liveris has also said the any acquisition Dow would make “must be immediately accredive to earnings” and this one again fits the bill perfectly.

Liveris has said he wants a coatings and a water business of $3 to $4 billions each. This only means one thing, more Dow acquisitions in the near future using it’s growing cash pile. How can I be so sure?

To date, everything Liveris has said has come to fruition, there is no reason to start doubting him now.

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Today’s Upgrades & Downgrades

Here is late yesterday’s and this mornings analyst calls

Upgrades:

Trump Entertainment TRMP Brean Murray Hold » Buy

Avon Products AVP Bernstein Underperform » Mkt Perform

Siemens AG SI Lehman Brothers Equal-weight » Overweight

Northstar Realty NRF Wachovia Mkt Perform » Outperform

Business Objects BOBJ UBS Neutral » Buy

Downgrades:

Toll Brothers TOL Citigroup- Buy » Hold

Ryland Group RYL Citigroup- Buy » Hold

Pulte Homes PHM Citigroup- Buy » Hold

Lennar LEN Citigroup- Buy » Hold

KB Home KBH Citigroup- Buy » Hold

DR Horton DHI Citigroup- Buy » Hold

Hovnanian Enterprises HOV Citigroup- Buy » Hold

Camden Property CPT UBS- Buy » Neutral

BRE Properties BRE UBS- Buy » Neutral

Cache CACH Sun Trust Rbsn Humphrey Buy » Neutral

HCR Manor Care HCR Wachovia Outperform » Mkt Perform

Caterpillar CAT UBS Neutral » Reduce

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Blockbuster Shareholders Now Have Hope

Finally, Blockbuster (BBI) gives investors a reason to smile. In a Carl Icahn lead revolt, John Antioco was finally fired as chief executive officer and chairman of Blockbuster on Monday, ending a tenure that was highly criticized from the billionaire investor who owns 9.6% of the outstanding shares. Antioco’s leadership was marked by company shares plummeting 82.9% over the past five years.

James Keyes, who will replace Antioco previously served as president and chief executive of 7-Eleven. Shares of the Blockbuster jumped 3.5%, or 15 cents, to close at $4.46 on the news. Said Icahn, “Jim is results-oriented, strategic and able to identify practical, yet highly creative solutions to complicated business problems,”

In an apparent change to Antioco’s reluctance to close stores, Keyes said “as the technology continues to evolve it will be my job to have Blockbuster front and center as a player in those areas of technology”.

Under Keyes’ leadership as president and CEO of 7-Eleven from 2000 to 2005, the company experienced record sales and profits and implemented new retail systems technology that improved product assortment decisions in every store. He also ushered in a new era for 7-Eleven through the introduction of a host of new electronic services, which helped the convenience-store chain become as well known for its cutting-edge use of technology as for Slurpees®. Additionally, he collaborated with manufacturers across all merchandise categories to develop new products, enabling the company to introduce as many as 50 new items each week in advance of the competition. When Keyes retired upon the sale of the company in 2005, 7-Eleven had produced 36 consecutive quarters of same-store sales increases and had some 6,000 franchised and company-owned stores in the U.S. and Canada with 30,000 stores worldwide.

This is a move that could really pay off for shareholders. If nothing else, he cannot screw things up there any more than they are now. For under $5 a share, it just might be worth taking a gander. I want to see what Keyes will do, I want to see more that 290 stores closed this year. Double it and I become a buyer.

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"Fast Money" 7/2

Here are today’s picks and results to date:

Jeff Macke likes McDoanld’s (MCD) Open $51.38.

Pete Najarian recommends Quiksilver (ZQK) because he thinks they’re a takeover target. Open $14.36

Guy Adami recommends Freeport-McMoRan (FCX). Open $84.68

Eric Bolling likes Synchronoss Technologies (SNCR) which he thinks is as a takeover target. Open $28.59


Here is how Friday’s picks fared Monday:

Jeff Macke recommended adding tech positions and says Hewlett Packard (HPQ), Open- $44.62 Close $45.19- Gain $.57, Dell (DELL) Open- $28.55 Close $28.93- Gain $.38 and Intel (INTC) Open- $23.74 Close $24.27-Gain $.53

Pete Najarian likes China through the Beijing Olympics. He recommends China Mobile (CHL) Open- $53.90 Close $55.27- Gain $1.37, China Unicom (CHU) Open- $17.23 Close $17.63- Gain $.40 and Baidu.com (BIDU) Open- 167.98 Close $186.41- Gain $18.43.

Guy Adami recommends Cisco (CSCO) Open $27.85 Close$37.89- Gain $.04

Jon Najarian liked Disney (DIS) Open $34.14 Close $34.52- Gain $.38

Records:

Since my tracking began on 6/21 (1-1 means one up pick and one down pick)

Adami= 4-4 Gain $29.28
Bolling= 4-3 Loss $1.73
John Najarian= 6-2 Gain $2.61
Macke= 8-5 Gain $6.72
Pete Najarian=3-0 Gain $20.20
Seymore= 1-0 Gain $.35
Finerman= 0-1 Loss $.18

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Today’s 52 Week Lows

Here are today’s cellar dwellers. It is a homebuilding deluxe…

Meritage Homes- MTH

Lennar- LEN

Hovnanaian- HOV

Beazer Homes- BZH

American Home Mtg.- AHM

New Century Bancorp- NCBC

Leesport Financial- LFPB

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DJIA Leaders & Laggards Year To Date

Here are the top and bottom five performers year to date on the DJIA

LEADERS:

1- Alcoa (AA)= 35.1%

2- Caterpillar (CAT)= 27.7%

3- Honeywell (HON)= 24.4%

4- General Motors (GM)= 23.1%

5- AT&T (T)= 16.1%

LAGGARDS:

1- Citigroup (C)= -7.9%

2- Johnson & Johnson (JNJ)= -6.7%

3- Proctor & Gamble (PG)= -4.8%

4- AIG (AIG)= -2.3%

5- Home Depot (HD)= -2%

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"Fast Money" : Monday’s Picks and Friday’s Results

Jeff Macke recommended adding tech positions and says Hewlett Packard (HPQ), Open- $44.62, Dell (DELL) Open- 28.55 and Intel (INTC) Open- 23.74

Pete Najarian likes China through the Beijing Olympics. He recommends China Mobile (CHL) Open- $53.90, China Unicom (CHU) Open- $17.23 and Baidu.com (BIDU) Open- 167.98.

Guy Adami recommends Cisco (CSCO) Open $27.85.

Jon Najarian like Disney (DIS) Open $34.14

FRIDAY’S RESULTS:

Macke- Ford (F) Open $9.49, Close $9.42= Loss $.07

Najarian- Immersion Corp (IMMR)Open $14.37, Close $14.98 = Gain $.61

Adami- Dell (DELL). Open $28.45, Close $28.55= Gain $.10

Bolling- Chevron (CVX). Open $84.14, Close $84.24= Gain $.10

Records:

Since my tracking began on 6/21 (1-1 means one up pick and one down pick)

Adami= 3-4 Gain $29.24
Bolling= 4-3 Loss $1.73
Najarian= 5-2 Gain $2.23
Macke= 5-5 Gain $6.23
Seymore= 1-0 Gain $.35
Finerman= 0-1 Loss $.18

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Today’s Upgrades and Downgrades

Here is this morning’s analyst action.

UPGRADES:

Archer-Daniels Midland- ADM Banc of America Sec Neutral » Buy

McClatchy- MNI Wachovia Mkt Perform » Outperform

American Financial Realty Trust- AFR UBS Neutral » Buy

Santarus- SNTS Susquehanna Financial Negative » Neutral

Commerce Bancorp- CBH RBC Capital Mkts Underperform » Sector Perform

Tribune- TRB Deutsche Securities Hold » Buy


DOWNGRADES:

Intlernational Paper- IP Credit Suisse Outperform » Neutral

Meruelo Maddux- MMPI UBS Buy » Neutral

SanDisk- SNDK CIBC Wrld Mkts Sector Outperform » Sector Perform

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Glycerin To Ethanol Details

Two weeks ago I posted about an ethanol production breakthrough at Rice University and I promised more info when I got it. I recently spoke with Ramon Gonzalez, the William Akers Assistant Professor in Chemical and Biomolecular Engineering about his breakthrough.

Here is the math. We have a 100 mgpy biodiesel plant. In our production of the biodiesel, one of the by products is glycerin. Currently, most producers must pay to have it disposed of. Now, using Mr. Gonzalez’s methods, they can convert it to ethanol.

100 mgpy of biodiesel produces roughly 75 million pound of glycerin. That glycerin can be converted into ethanol at a cost that is 40% cheaper than the current corn to ethanol cost (about 40 to 45 cents a gallon). How much ethanol? 75 million pounds of glycerin would produce about 9.3 mpgy of ethanol. Now, the ethanol production from glycerin would produces as a by-product “performance acids” that can used in then production of fuel cells.

We now have a process that takes the cost of disposing glycerin and turns it into a profit of roughly $13 million dollars for the biodiesel producer. This profit, it should be noted does not take into account the ancillary sales of the other by-products.

Currently the technology is in the hands of Houston VC’s and a production facility is expect to be operational next year as “several” companies have contact Professor Gonzalez about using the process.

The U.S. biodiesel industry is expected to produce an estimated 1.4 billion pounds of glycerin valued at $289 million between 2006 and 2015, according to an economic study by John Urbanchuk, director of LECG Inc. According to projections gleaned from NBB estimates, the industry could produce as much as 200 million pounds this year alone.

This 200 million pounds would produce an additional 17 million gallons of ethanol this year, not a huge number, but it does make biodiesel production dramatically more profitable which will invariably lead to more producers entering the market.

Crude glycerin that once fetched between 20 and 25 cents per pound is now edging closer to 5 cents and lower. This is down from the high of $1.08 in 1996. The glut and pricing pressure have led Dow Chemical (DOW) to close it’s 150 million pound per year facility in Freeport, Texas.

Ethanol giant Archer Daniel’s (ADM) had previously put glycerin facility plans on hold at the turn of the century as prices collapsed. ADM will produce an estimated 250 mmgpy of biodiesel in the US by the end of 2008 which equates to 188 million pounds of glycerin. ADM could convert that to an additional 16 million gallons of ethanol and other by products for sale that it either now pays to dispose of or received very little n return for. This is only US production numbers, ADM is also Europe’s largest biodiesel producer.

Every time we get an alternative source of ethanol production, we widen the possibilities and lessen our dependence on oil. Good

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Top Stories VIN – June

First, my apologies for dropping the ball last week and not getting to this. Here are the top five stories as voted on my readers at Value Investing News

1- Remembering the Wisdom of Keynes and Twain Controlled Greed

2- Chipotle Mispricing Persists: Berkshire Ruminations

3- Fly, Don’t Buy Airlines: Contrarian Edge

4- PBS Interview with Nassim Taleb PBS

5- Monish Pabrai Interview: MSN Video

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This Weeks Insider Buys

Here are the largest insiders buys for the past week. As Peter Lynch once said “There are multiple reasons insiders sell shares but there is only one reason they buy, they think the stock price is going up”.

Company and aggregate dollar amount of insider purchases:

1- Biofuel Energy (BIOF) = $45,000,000

2- Franklin Bankcorp (FBTX) = $4,000,000

3- Chesapeake Energy Corp (CHK) =$3,500,000

4- Micromet Inc (MITI) =$2,400,000

5- Occulogix Inc. (OCCX) =$2,000,000

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ValuePlays Most Read Posts For June

Here they are, the most read posts for the last 30 days.

1- Finally An Analyst Call That Makes Sense (SHLD)

2- Google: Overkill Reached 6 Months Ago

3- Lampert Buying More Sears Shares

4- Wal-Mart Getting Real Hard Not To Buy

5- Apple: iPhone Making All The Wrong Moves

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This Weeks Notable Dividend Hikes

Here are the notable dividend hikes for the week:

1- Neuberger Berman Real Estate(NRO)= 53%

2- Best Buy (BBY)= 30%

3- Felcor Lodging Trust (FCH)= 20%

4- Village Supermarket (VLGEA)= 16%

5- Peoples Financial Corp (PFBX)= 16%

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Today’s Upgrades / Downgrades

Here are the late Friday analyst calls:

Komag KOMG Caris & Company Below Average » Average

Apollo Group APOL BMO Capital Markets Market Perform » Outperform

Western Digital WDC Needham & Co Buy » Strong Buy

Heelys HLYS CIBC Wrld Mkts Sector Perform » Sector Outperform

Phillips-Van Heusen PVH Matrix Research Hold » Buy

Ralcorp Holdings RAH BB&T Capital Mkts Hold » Buy

Diodes DIOD UBS Neutral » Buy

Research In Motion RIMM Morgan Keegan Mkt Perform » Outperform

Solectron SLR RBC Capital Mkts Underperform » Sector Perform

Komag KOMG JP Morgan Underweight » Neutral

Ariba ARBA CIBC Wrld Mkts Sector Underperform » Sector Outperform

DOWNGRADES:

Packeteer PKTR JMP Securities Mkt Perform » Mkt Underperform

Cascade CAE DA Davidson Neutral » Underperform

Omega Protein OME DA Davidson Buy » Neutral

Topps TOPP Wedbush Morgan Strong Buy » Buy

Rural/Metro RURL B. Riley & Co Buy » Neutral

Guitar Center GTRC Dougherty & Company Buy » Neutral

Ceragon CRNT Ferris Baker Watts Buy » Neutral

Pinnacle West PNW BMO Capital Markets Market Perform » Underperform

Getty Images GYI Matrix Research Hold » Sell

Barnes & Noble BKS Matrix Research Buy » Hold

Endurance Specialty ENH Stifel Nicolaus Buy » Hold

Castle Brands ROX Oppenheimer Buy » Neutral

Corn Products CPO BB&T Capital Mkts Buy » Hold

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NetFlix Answers Blockbuster

On June 13th I wrote in response Blockbuster’s (BBI) announcement they were cutting rental fees, “What happens if today Netflix (NFLX)comes out today and matches these new prices? It did not take very long as Netflix announced yesterday they lowering their prices to match those at Blockbuster.

Netflix is now charging $13.99 a month to rent up to two DVDs at a time, down from $14.99 previously. The service mails another DVD after subscribers return one of their other discs in postage-paid envelopes. This matches the plan Blockbuster announced three months ago. Blockbuster did say it plans to close 282 stores in the U.S. this year to improve operating margins and expand domestic share, according to a SEC filing.

So were are right where we were 3 weeks ago at Blockbuster except they have now voluntarily decreased their revenue. Revenue is not the main problem at Blockbuster, costs are. What would have made more sense was to leave the pricing where it was and accelerate the store closings. 282 stores, while a good start is just a drop in the bucket. They cannot compete with Netflix on price because their cost structure is just too high, reduce it, and they may have a chance. They are going about this backwards.

What is Blockbuster going to do now? Pay us to rent DVD’s from them?