Upgrades:
Ingersoll-Rand (IR) =Outperform
PrivateBancorp (PVTB)= Strong Buy
Natl Instruments (NATI) = Overweight
Tektronix (TEK) = Overweight
Fairchild Semi (FCS) = Outperform
CheckFree (CKFR)= Sector Outperform
Downgrades:
Hercules Offshore (HERO) =Hold
Action Semi (ACTS) =Hold
Western Digital (WDC) =Neutral
ChoicePoint (CPS) =Sector Perform
“Why would I invest in a refinery when you’re trying to make 20 percent of the gasoline supply ethanol?” Sound familiar?
Just over a week ago an almost identical statement was made by the head of OPEC, Abdalla El-Badri. When asked about future refinery plans ge said, “If we are unable to see a security of demand…we may revisit investment in the long-term.” The first quote? None other than Chevron’s vice chairman Peter Robertson. Valero’s spokesman Bill Day apparently got his copy of the new playbook when he said “That’s not to say we’ve changed our plans, but it’s fair to say we’re taking a closer look at what the president is saying and what Congress is saying” about biofuels.
Okay… so we now have the US oil majors like Exxon (XOM), Chevron (CVX), Valero (VLO) and BP (BP) parroting the same sentiment as OPEC? This is just possibly one of the most simple minded acts I have seen in a long time. Just step back and look at it. Let’s put aside oil prices and resentment they always illicit towards big oil. Let’s also put aside whether of not gas prices are justified and assume they are. We also need to ignore the unfathomable profits oil companies make and just accept it is purely a function of scale and there is no market manipulation happening. Assuming all those things are true (they may or may not be, I am assuming they are for the point of the post). Why, why would any business ever align themselves philosophically with OPEC?
Are they just trying to make themselves hated even more than they are now? Is it some twisted masochistic urge the industry just cannot ignore? Why not put Bin Laden on their marketing materials? At a time when you have the Democrats, who hate oil companies only slightly more than they do Republican’s in charge in congress and the White House up for grabs, why would you give them more of a reason to vilify in the eyes of American’s?
Renewable fuels are being trumpeted as a national security issue. Whether or not you feel they are is irrelevant, the fact is that they are being market this way is what matters. The less we rely on OPEC for oil, the safer we are. Period.
So, now both OPEC and the US oil majors are going to take their ball and go home? After years of telling us biofuels were a pipe dream and would never amount to anything, they are suddenly so threatened that they are going to refuse to add refining capacity? This is their solution? To pout? Jesus, even my four year olds know that is not the way to get what you want.
This is a colossal mistake on the part of the oil companies and they are going to be doing some heavy damage control after this. Here is the question they will have to answer before congress, and yes they will end up there “Why are you and OPEC colluding to keep oil prices high by threatening to refuse to invest in more refining capacity, are you aware your actions are undermining the security of our nation?”
Can’t wait to hear the answer.
Lehman Brothers upgraded the chemicals giant last week and laid out three scenarios, a big purchase, significant sale or huge share repurchase, that could lift earnings next year. Do not buy DOW (DOW) shares because of this.
The analyst, Sergey Vasnetsov raised his recommendation on Dow Chemical’s shares to overweight from equal weight and lifted his price target to $55, or $15 higher than his previous projection.
He said the company’s large cash position and statements from executives over the past few months have made three outcomes possible that could add to earnings next
year. They include a big acquisition, such as the purchase of a company with sales topping $10 billion; a stock buyback worth up to $10 billion; and a $3 billion divesture of some of Dow’s commodity, or bulk, chemicals businesses.
Given the company’s strong free cash flow, Dow Chemical “could be quite an active
chemical company in M&A,” said Vasnetsov.
If not for those reasons, why buy Dow? Let’s put aside the stellar balance sheet, cash hoard and envious cash flow and look just at the business. Recently in an interview CEO Andrew Liveris said “The good news, though, is that volume is good, and I would tell you with the exception of housing, end-use markets are strong in North America, surprisingly strong, and the rest of the world is somewhere between dynamite and good,” said Liveris.
For proof of his statement? Look at recent pricing actions by the company.
Dow announced price increases for acrylic acid and esters, also known as acrylic monomers or acrylates, effective July 1, 2007, or as otherwise allowed by individual contract terms.
Dow will increase prices for glacial acrylic acid, butyl acrylate, ethyl acrylate, methyl acrylate and 2-ethylhexyl acrylate, as follows:
Butyl Acrylate/2-Ethylhexyl Acrylate
* In North America by US$0.05 per pound.
* In Asia Pacific by US$120.00 per metric ton.
* In Middle East/Africa by US$120.00 per metric ton.
* In Latin America by US$120.00 per metric ton.
* In Europe by 90 Euros per metric ton.
Ethyl Acrylate/Methyl Acrylate/Glacial Acrylic Acid
In North America by US$0.03 per pound. In Asia Pacific by US$70.00 per metric ton. In Middle East/Africa by US$70.00 per metric ton. In Latin America by US$70.00 per metric ton. In Europe by 50 Euros per metric ton.
“The need for these increases is driven by an industry-wide butanol and 2-ethylhexyl supply/demand imbalance,” explained Mark Bassett, global business director for the Acrylic Monomers business of The Dow Chemical Company. “This has reached such a critical point that production is not able to meet demand. This increase also attempts to recover increases in the cost of raw materials such as propylene and natural gas.”
They also announced recently they will raise list and off-list prices on a number of their Oxygenated Solvents products in North America effective June 1, 2007, or as contracts allow. This increase is primarily driven by the tight supply of butanol combined with the continued increased costs of propylene and natural gas.
“A tightening market for raw materials namely propylene and butanol are the primary drivers for this price increase,” says Martin Sutcliffe, global business director, Glycol Ethers. “The global butanol market has been steadily tightening this year, with supply now unable to keep up with demand.”
“Dow recognizes that we need to make exceptional efforts to meet the demand,” says Pat Gottschalk, global business director, Solvents & Intermediates. “However, when the industry is dealing with the need to maximize supply, we must raise our prices to continue to compete for raw materials and other resources.”
If you follow this link, you will see Dow’s 2007 pricing announcements. You will also notice that announcement after announcement has the words “price increase” in it. Demand and pricing are firming and that is never a bad thing.
Liveris said 2007 will be a good year for Dow, but it will definitely not outperform its 2006 earnings. He said earnings should be below $4.00 per share. The reason? Low cost production facilities are being built and Dow is still tied to the US energy market. That US dependence is being fixed but will take time and each year we will see a dramatic improvement.
In the meantime, Liveras does have Dow in a position to purchase more earnings and expand capacity without adding huge debt demonstrated by the recent announcement in five petrochemical projects in Thailand worth $2 billion… a win-win.
Okay, first 6 months almost finished. so, what are the best performing sectors to date?
Ranked by price performance of ALL stocks in the group.
Top 5
1- Chemicals / Fertilizers = 84% (13 stocks)
2- Trucks and Parts /Heavy = 48% (13 stocks)
3- Steel Producers = 30% (22 stocks)
4- Heavy construction= 36% (26 stocks)
5- Oil & Gas Machinery = 36% (31 stocks)
Bottom 5 (#5 in the worst)
1- Banks/Southeast = -8% (171 stocks)
2- Retail/Home furnishings = -4.6% (20 stocks)
3- Banks/Northeast= -9.4% (128 stocks)
4- Banks/Midwest= -10.2% (76 stocks)
5- Computer-Data Storage= -16% (20 stocks)
Peter Lynch once said, “there are a multitude of reasons insiders sell shares, but there is only one reason they buy, they think the stock is going up.” Here are the top 5 insider buys this week listed by size.
1- Celgene (CELG)= $5,582,000
2- Kapstone Paper (KPPC)= $4,022,000
3- Chesapeake Energy (CHK)= $3,605,000
4- Cardica (CRDC)= $2,530,000
5- General Growth Properties (GGP)= $1,925,000
The gang over at The StockMasters tell us why we should be picking Sears Holdings(SHLD), Yahoo! (YHOO), Ivanhoe Mines (IVN) and Hansen Naturals (HANS)
Please visit them and read the article here:
Here we go again.
The top month to date stories at Value Investing News
1. Remembering the Wisdom of Keynes and Twain– (via www.controlledgreed.com)
2. Finding Value With Joe Feshbach– (via www.fool.com)
3. Breakdown of HNR Financials- (via hcmthoughts.blogspot.com)
4. Sell Side Cliches (via marketprognosticator.blogspot.com)
5. CHEAP STOCKS: Value Investing Congress West 2007: ReCap(via stocksbelowncav.blogspot.com)
Enjoy the weekend!!
“Plaintiffs cannot state a cognizable claim consistent with the well-recognized parameters of the common-law tort of public nuisance. To find otherwise would be directly contrary to legislative pronouncements governing both lead paint abatement programs and products liability claims.” With that, the NJ Supreme court correctly ended the lead paint litigation in the Garden State. You can view the decision here.
The defendants, the deep pocketed crew of Sherwin Williams (SHW), Dupont (DD), NL Industries (NL) and others are savoring their second State Supreme Court victory in less than a week following Missouri’s earlier decision. It would appear Wall St. is finally catching on as shares of Sherwin rallied 2.3% during the day and another 1.4% after the close Friday.
Said defendant’s spokesperson Bonnie Campbell, “”With this long-awaited and significant ruling, the Supreme Court of New Jersey has taken an important step by joining Missouri, Illinois and other state courts in rejecting the distortion of public nuisance law.”
“Today the Court found that the plaintiffs’ nuisance claim is inconsistent with the well-recognized parameters of public nuisance law, and that to find otherwise would be directly contrary to the legislature’s pronouncements on both lead paint abatement programs and products liability law. These companies are not responsible for risks today from poorly maintained lead paint …”
So, what has to happen now to finally put this to bed? The Ohio Supremes are expected to rule soon on Senate Bill 117 that would have prohibited the use of public nuisance in lead paint litigation and by next summer. Expect them to rule in favor of the Senate that is bringing the case to block the veto. Next summer Rhode Island extricates itself from the near felonious behavior of AG Patrick Lynch and Judge Silverstein as it Supreme Court will now assuredly toss the verdict there on it’s ear. The only question in Rhode Island left to decide is whether or not Lynch or Silverstein are sanctioned for their actions during the trial.
So what were these cases really about? The court today summed it up when they said:
“less support exists for the notion that the Legislature intended to permit these plaintiffs to supplant an ordinary product liability claim with a separate cause of action as to which there are apparently no bounds. We cannot help but agree with the observation that,were we to find a cause of action here, “nuisance law” would become a monster that would devour in one gulp the entire law of tort.’”
Yes, money. Not poor folks, poisoned kids or “public good”. Just plain old money and another way the fleece business. Here is cheering the courts in NJ and MO this week. They got this one right. Maybe now the states can actually get around to stopping the onslaught of toys with lead paint that are being recalled almost daily?
I received an email about a site that that “ranks” the various stock market blogs out there, well, the “Top 100” anyway. They do it in a very democratic way also, which is always nice.
They are ranked by Technorati and Alexa rankings. The Technorati rankings I feel are more accurate because Alexa ranking do not take into account Firefox browser users as their software is not compatible with it and all browsers work with Technorati. This Alexa oddity causes a whole batch of visitors and page views on your site not to be recognized by it. Unless you have an Alexa toolbar downloaded to your computer, they do not see you.
So, according to the Instant Bull site, ValuePlays is the 29th ranked site (as of 6/15).After 5 months, I can live with that (for now) They update the rankings weekly so I guess on Monday we will have a different number.
It is a neat site in that they direct link to the blogs there and you can veiw them in the same window. Check it out.
Everyone probably knows my feelings (or ambivalence) about the upcoming iPhone. A poll was published today in the Wall St. Journal.
I will abstain from adding my two cents because I think the poll results speak for themselves.
It is a cell phone, price rules, not fancy features. Ok, just one cent.
You can read the whole article here
Here are the top individual stocks in term of money flow. A negative number means that as the stock rises, there is increased selling of shares, a positive number means that as shares sink, buyers come rushing in.
Inflows (buying on weakness):
Google (GOOG)= +$70 million
Citigroup (C) = +$66 million
CVS (CVS)= +$51 million
Ciena (CIEN) = +$35 million
Outflows (selling on strength):
Kraft (KFT) = -$137 million
Apple (AAPL) = -$119 million
AT&T (T) = -$99 million
Microsoft (MSFT) = -70 million
In early May I did a post about Wal-Mart (WMT) in which I mainly commented on two things, the lack of a substantial share repurchase program and stores that are old and dated. Wouldn’t you know what happened next? On June 1st at the annual meeting Wal-Mart announced they were enacting a $15 billion share buyback plan and slowing the store growth to better reinvest in existing locations. Well, if that don’t get you thinking, a hugely profitable company that seems to be fixing your biggest complaints about it.
Both Warren Buffett at Berkshire Hathaway (BRK.A) and Wally Weitz at the Weitz Value Funds bought shares in the summer of 2005 at levels virtually identical to today’s prices and still hold the shares today. Now, this is not to say they made a mistake buying shares 2 years ago that have been flat, it is to say that as two of the greatest value investors ever they saw value in shares then. That value, is enhanced today. How? Earnings since that summer have increased 20% and the dividend has increased the same, yet the price you have to pay for a share of those earnings and a larger dividend check has remained virtually constant. Again, I know I have been critical of Warren lately but I have never criticized one of his picks and I challenge anyone to find where I have, I have only criticized the size of his picks.
In April I wrote “There seems to be a trend recently in former high flyers like Wal-Mart (WMT), Starbucks (SBUX) and now Home Depot (HD) to not fully recognize that they cannot continue to just grow and grow to get results. There comes a point in time where you begin to just cannibalize your own customers. Rather than focusing on their current locations and improving them and their customers experience in them, they still have an almost myopic focus on more locations. All three are experiencing discontent among many of their core customers as they have felt “neglected” or taken for granted and are leaving for competitors like Target (TGT), Dunkin’ Donuts, McDonald’s (MCD) and Lowes (LOW) whom they feel more appreciated by, who have grown smarter, and have retained what made them popular. As a result, all three are experiencing difficulty and an onslaught of negative sentiment.”
Thursday I read a post at Seeking Alpha by Whitney Tilson who echoed this sentiment in a post, “Stop pretending you’re a high-growth growth business…You’re a slow-growth business. But a slow-growth business, managed properly, producing unbelievable amounts of capital and returning capital to shareholders can be a home-run investment.”
He continued by saying Wal-Mart today reminded him of “McDonald’s 4 1⁄2 years ago, when it, too, was everyone’s favorite whipping boy, responsible for the obesity epidemic, etc. McDonald’s has engineered a remarkable turnaround thanks to slowing down growth, reinvesting in its stores, focusing on delivering better products and service to customers, improving its corporate image, spinning off ancillary businesses, rationalizing its international operations and returning capital to shareholders – all of which Wal-Mart can and should do.”
This is one of the single best analogies I have ever seen. Just brilliant and I am pissed I did not say it first. McDonald’s turned it around by providing more quality items without losing what made then great, value and service, but, can Wal-Mart do it?
My original post ended: “…when you think “cheap”, you think Wal-Mart, when you think “value”, you think Target (TGT). Want the answer to the question in the last paragraph? Thursday at the office we were debating what to do with a new work station we will need. How should we go about setting it up for a computer and where could we get a good one quick and reasonably. The first words out of two people’s mouths were? Dell (DELL) computers at Wal-Mart. Now I do recognize they are stripped down Dell’s but, they are Dell’s none the less and Dell does have a reputation of making a good computer. The point is that we can pick these Dell’s up at Wal-Mart for $699, a good “value” and people are already beginning to recognize this. It would seem someone in Bentonville getting with the program. With Wal-Mart’s ability to price items for consumers, when they flick the switch from “cheap” to “value” in consumers minds, folks will come streaming in. Just like they have been for McDonald’s.
So, do you think that if you do not vote your shares when you receive those shareholder notices in the mail that those potential votes just do not get cast? Think again.
The Wall St. Journal reported Wednesday:
Investors who are growing increasingly vocal about the performance of executives and directors may soon get a boost, as the role of shareholder votes cast by brokers comes under closer scrutiny.
In routine matters at annual meetings, such as the election of uncontested directors, shares not voted by shareholders can instead be voted by the brokers who hold those shares, any way they want. That’s created controversy in some votes recently, and has gained the attention of regulators, some of which are pushing for a change.
ROCKING THE VOTE
• The Issue: Brokers can vote the shares held in client accounts on regular director elections if the client hasn’t told them how to vote.
• Twist: Some investors in CVS (CVS) Caremark say the “broker vote” unfairly swung the election of a director in a recent contest.
• What’s Next: The SEC is deciding whether to take on a NYSE rule change that would ban such voting.
This question arose most recently in the case of Minnesota businessman Roger Headrick, who was re-elected to the board of CVS Caremark Corp. last month after receiving 606 million votes, or 57.2% of the total cast. CtW Investment Group, an arm of Change to Win, a coalition of labor unions, says the contest was swung by 264 million “phantom” votes cast by brokers who hadn’t received specific instructions from their clients.
Exclude those votes, CtW says, and Mr. Headrick loses, having won only 43% of the votes.
Carolyn Castel, a spokeswoman for CVS Caremark, says the 264-million-vote figure is “potentially correct,” though she notes that CtW assumes all the broker votes went for Mr. Headrick. “This is pure conjecture,” she says, declining to be more specific.
Mr. Headrick didn’t return calls seeking comment.
Brokers generally vote for management, partly, they say, because if clients wanted them to oppose management they would let them know. Shareholder votes rarely mattered in the past since most proposals needed only a plurality to pass. In the U.S., as much as 80% of stocks are held in accounts at brokerage houses.
Complaints about the system go back for years. In 2003, the proxy advisory firm Institutional Shareholder Services said that the system was hurting investors’ ability to express dissatisfaction. At Tyco International Ltd.(TYC) and Sprint, now Sprint Nextel Corp. (S), ISS said, unhappiness with the companies’ boards was “watered down by broker votes.”
In 2004, the issue surfaced during the re-election vote of then-Walt Disney Co. (DIS) Chairman and CEO Michael Eisner, when 43% of voters opted to withhold support; he was then pressured to resign. The Council of Institutional Investors, which lobbies for major investors said excluding broker votes, more than 50% of the votes cast would have been withheld for Mr. Eisner.
NYSE’s Proposal
Already, NYSE Euronext’s New York Stock Exchange (NYX) has proposed amending the broker-vote rule. It would redefine director elections as “non routine,” no longer allowing brokers to vote shares without instruction. At the same time, the Securities and Exchange Commission is reviewing the entire voting system, from allowing companies to send proxies to shareholders over the Internet to allowing shareholders to nominate their own directors on corporate ballots. The NYSE rule change would require SEC approval.
Some business groups warn eliminating broker votes may raise election costs for companies, because of the extra effort needed to get shareholders to vote. Some firms say they will accept the change if they can communicate directly with these investors; currently, they have to go through brokerage houses.
Other groups have advocated other changes, such as having brokers vote uninstructed shares in proportion to those cast by individual or “retail” investors, generally matching the totals from their own individual clients who give instructions. In this year’s proxy season, Goldman Sachs Group Inc., Merrill Lynch & Co., and Morgan Stanley did just that. Charles Schwab Corp. has been following that practice since 2005.
‘Stuffing the Ballot Box’?
Now, the close CVS election has spurred investor groups, including the Council of Institutional Investors, to push for changes. In a letter to NYSE Regulation last year, the exchange’s regulatory arm, the council said counting broker votes is “akin to stuffing the ballot box.”
CVS Caremark says the 264 million shares voted by brokers were split for and against Mr. Headrick, but it won’t divulge further details. Companies aren’t required to calculate how the vote would have turned out if the broker votes didn’t count, nor are they required to break out that category into votes for and against. The treasurer for North Carolina, Richard Moore, the sole trustee of the state’s pension fund, which owns $2 million of CVS stock, wrote a letter last week to the chairman of CVS Caremark asking him to disclose how many uninstructed broker votes were included in Mr. Headrick’s ‘for’ category.
CtW, originally a Caremark investor, has been battling the new company for a while. This year it sought to rally shareholders to vote against CVS’s $27 billion acquisition of Caremark, saying the board should have negotiated with another company that made an offer.
CtW also opposes Mr. Headrick because he was on the Caremark board at the time of the merger. Union pension funds affiliated with CtW own an estimated 12 million shares in the new company, less than 1% of the total.
Article originally appeared Here.