ValuePlays – Page 741 – A value investing site launched in Jan 2007

Dow Chemical’s "White Paper": A Preview

Post author By ToddSullivan
Post date September 11, 2007

At the last earnings call Dow (DOW) spent quite a bit of time on results from its “JV Strategy” and then promised a white paper on it to give more detail to investors. Well, the time for it is nearly here..

Currently Dow is involved in about 80 joint ventures (JV’s) around the globe. A dozen of them account for 90% of the “equity earning” they produce. The upcoming paper that should be released electronically is expected to be ready by the end of September. It will be updated annually to reflect results for the prior year and give guidance for the upcoming one. I get the impression it will be release separately from the annual report but this may change. About a page will be dedicated to each of the dozen dominant JV’s and will answer questions like:

1- Why enter the specific JV and who are the partners
2- Principle products produced, volumes, markets
3- Equity Earnings
4- Future guidance

Notables:

1- The current JV strategy is “self funding” meaning that funds from operations fund startup costs and produce profits back to Dow.

2- The upcoming massive Kuwait 2 project is being funded by results from Kuwait 1 meaning there is no balance sheet impairment or current cash being used.

Neither myself nor does Dow expects the JV strategy to become the dominant earnings driver for Dow, but it will become very significant and it’s growth over the next 3-5 years should be spectacular as many of the recently announced ventures come online. The performance chemical unit, which is helping Dow relinquish itself from the cyclical businesses that have dominated it’s past will be the meat of Dow’s earnings (at least for the foreseeable future). That is clearly by design and in accordance with Liveris’s strategy to provide more predictability to Dow.

All in all I cannot wait to read it and will post on it very soon after it’s release. One has to suspect that the reason Dow is doing this is that it sees value in the JV’s that are not being fully realized by investors into Dow’s valuation. By providing clarity and guidance in the JV’s, they will enable large investor’s to have more confidence on Dow’s earnings profile.

Tags dow

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iPhone Sales Behind Schedule

Post author By ToddSullivan
Post date September 11, 2007

Apple (APPL) announced that it has sold 1 million iPhones. One problem, in order to sell the 10 million phones they want to by the end of 2008, they needed to make this announcement a month ago…

One million iPhones in 74 days works out to far less than 5 million iPhones per year. Apple sold 270,000 of them in the first two days it was on sale (way below the 500,000 estimates we were hearing at the time) as those who quite jobs to sleep outside for it gobbled them up. My calculator tells me it then took 72 more days to sell the other 730,000 phones. Another few clicks of my trusty calcuator tells me that the iPhone is currently on a 3.6 million unit annual rate, which would produce a total of 5.8 million by the end of 2008, woefully short of the 10,000,000 low ball “goal” Jobs set for the product.

Yes I know that they are selling into Europe and Asia next year but the iPhone already faces competition there and one has to anticipate the excitement for it overseas will not be near as great as it was here. I do not see another 270,000 two day total in either areas. That being said, it is now crystal clear as to the reason for the recent price drop now, even Apple is admitting through its actions they overpriced the phone and it just was not selling (ever heard that one before?)

Yes I also know that the holiday season is coming up and Apple will see a surge but I also realize they will see a sharp drop in the beginning of next year (it all levels out).

What will be interesting to watch now is how many people, given the events of the last week delay an iPhone purchase waiting for the “next generation” or another price drop, putting Apple further behind the pace it needs to be at.

Is $299 for the 8GB phone far away? We have gone from $599 to $399 in 2 and a half months. From day one I have thought this is where we would end up (FYI, the remaining 4GB phones can be had for $299 “while they last”)..

Wait…

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Tuesday’s Upgrades and Downgrades

Post author By ToddSullivan
Post date September 11, 2007

UPGRADES

OPNET OPNT Collins Stewart Market Perform » Buy
Goodrich Petroleum GDP BMO Capital Markets Market Perform » Outperform
Amylin Pharms AMLN Lazard Capital Hold » Buy
MarkWest Energy MWE Wachovia Mkt Perform » Outperform
Euronet EEFT AG Edwards Hold » Buy
Lamar Advertising LAMR CL King Accumulate » Strong Buy
Mylan Labs MYL Credit Suisse Underperform » Outperform
Isle of Capri ISLE Morgan Joseph Hold » Buy
LandAmerica Fin LFG Keefe Bruyette Mkt Perform » Outperform
Amerigroup AGP Credit Suisse Underperform » Outperform

DOWNGRADES

Tortoise Energy TYY Ferris Baker Watts Buy » Neutral
Tortoise Energy Infrastructure TYG Ferris Baker Watts Buy » Neutral
Medarex MEDX Susquehanna Financial Positive » Neutral
Qualcomm QCOM Am Tech/JSA Research Buy » Neutral
Cardica CRDC AG Edwards Buy » Sell
Seagate Tech STX Matrix Research Hold » Sell
Blue Coat BCSI Stifel Nicolaus Buy » Hold
Noble Corp NE Jefferies & Co Buy » Hold

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Never Forget

Post author By ToddSullivan
Post date September 11, 2007

Articles

"Fast Money" for Tuesday

Post author By ToddSullivan
Post date September 10, 2007

TUESDAY’S PICKS

Jeff Macke said short the Retail HOLDRS (RTH). Open $96.45

Guy Adami recommended buying NYMEX (NMX). Open $129.02

Karen Finerman preferred ConocoPhillips (COP). Open $82.19

Pete Najarian liked Dendreon (DNDN). Open $8.13

MONDAY’S RESULTS

Jeff Macke said The New York Times (NYT) is a raging sell. OPEN $21.26 CLOSE $20.72 GAIN $.54

For the 2nd day in a row, Guy Adami recommended the Short Dow30 ProShares (DOG). OPEN $60.67 CLOSE $60.67 WASH…

Pete Najarian liked Oilsands Quest (BQI). OPEN $4.92 CLOSE $4.94 GAIN $.02

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks)

Guy Adami= 21-13 Gain $40.24
Eric Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Jeff Macke= 23-19 Gain $4.59
Pete Najarian= 15-11 Gain $23.52
Tim Seymore= 3-2 Loss $.49
Karen Finerman= 5-3 Gain $2.06
Stacey Briere-Gilbert= 2-0 Gain $1.61
Constance Hunter= 1-0 Gain $1.84

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Monday’s 52 Week Lows

Post author By ToddSullivan
Post date September 10, 2007

Here is the list, again assume homebuilders…

WOS Wolseley Plc 19.13
WGO Winnebago Industries, Inc 24.45
UNFI United Natural Foods Inc 24.82
TUES Tuesday Morning Corp 9.87
TLB The Talbots, Inc 18.54
THRD TF Financial Corp 25.82
RT Ruby Tuesday, Inc. 20.82
QSII Quality Systems Inc 33.89
PSS Collective Brands Inc 21.24
PPS Post Properties, Inc 37.20
POOL Pool Corporation 29.85
OPLK Oplink Communications Inc 12.59
ODSY Odyssey Healthcare Inc 9.41
ODP Office Depot, Inc 18.84
OCR Omnicare, Inc 30.07
HOG Harley-Davidson, Inc 48.01
INSP Infospace Inc 12.92
IMN Imation Corp 27.10
FFDF FFD Financial Corporation 14.00
FBN Furniture Brands Inte 10.56
DDS Dillard Department St … 19.91
CWTR Coldwater Creek Inc 11.15
BC Brunswick Corporation 22.57
AVR Aventine Renewable Energy 12.87

Tags davidson

Articles

OPEC Needs an Economics Refresher

Post author By ToddSullivan
Post date September 10, 2007

The head of OPEC says that the oil supply is just fine. It is refining that is the problem. That would put the reason for higher oil prices squarely on the doorstep of the oil companies like Exxon (XOM), BP (BP), Chevron (CVX) and others. Right? Uh no..

Let’s just sit back and think about it. Let’s say what they claim is true and that the supply of oil is sufficient for the current demand. Why would oil companies drive up the price they have to pay for their product? What does the refining capacity of oil have to do with the price of a barrel of crude?

Now, if we are talking about the finished products like gasoline and heating oil, then I would agree that those prices are artificially high because we do not have adequate refining capacity. If anything, the lack of capacity should lead to a log jam effect of crude oil which, according to the laws of supply and demand, would cause the price of oil to drop. The jam would be caused by increasing demand and production being forced through the same refining funnel, the oil would have to back up into the cup of the funnel as it waited to be refined. If what the OPEC head said was true, this would undoubtedly happen, yet, the oil price just keeps marching higher and right now we have no additional wars or natural disasters on anyone minds. Hmmm.

It is kind of like egg producers saying that the price of eggs are high because not enough diner cooks make scrambled eggs it, no it is high because the demand is straining supply.

Just like oil… Econ 100..

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Monday’s Notable Links

Post author By ToddSullivan
Post date September 10, 2007

– One of the all-time greatest investors talks investing and “sub-prime” (video)

– A cheap way to get out of your cell phone contract

– You know what? as much as I like their product, this makes sense

– What stocks does Buffett own that are buying back shares?

Tags buffett

Articles

What Was Schultz Thinking?

Post author By ToddSullivan
Post date September 10, 2007

Just when I think Starbucks (SBUX) could not be any further off the mark than they are now, they prove me wrong.. sorry shareholders (again).

In Mexico, CEO Howard Schultz said “At the very top of the market where Starbucks plays, I do not believe that others will have access to the quality of coffee that we are buying because we have secured those sources,” Schultz said.

What Schultz did not say was that Starbucks’ size of 13,000 thousand plus locations prevent them from sourcing their beans from smaller, artisan growers capable of growing the highest quality coffee beans. Instead, they require a “best of the biggest” approach, where they deal solely with growers who can supply coffee beans in large enough quantities to meet their huge distribution needs.

Let’s put that obvious one aside. Let’s deal with the “super premium” comment. Has anyone ever seen an ad where McDonald’s (MCD) or Dunkin Donuts claimed “super premium”? Me either. What they do offer is “very good coffee and very good prices”. They call it “gourmet” but that could just mean “doesn’t suck” and based on the money pouring into both companies from coffee sales, any alleged shortage is not affecting them. Let’s assume they are buying the same beans (I will play along Howard). If you are a coffee grower and are approached by Starbucks and McDonalds, which dwarfs Starbucks in size, and both want to buy your beans, are you going to put all your eggs in just one basket? If you are, would it be the smaller guy?

Schultz, it seems, has fired a shot over the bow of, well, Starbucks since only they seem to think they require all the “super premium” beans. There may be a slew of small European cafe’s affected by this alleged shortage, but McDonald’s and Dunkin Donuts will not be. Also, whether Schultz or anyone else at Starbucks wants to admit it and clearly they do not, this IS their competition and it IS where their former customers are getting their coffee now.

“Starbucks is not an advertiser. If other companies are going to advertise and promote specialty coffee, Starbucks is going to benefit in the long term,” Schultz continued. Well, maybe he ought to be because they clearly are not in the short term. He needs his company’s products to be defined by something other than their high price which his “competition” has managed to do to them. Starbucks allowed their brand to become equatable to Mcdonalds (MCD) and Dunkin Donuts, now they need to spend money to change that or the comparisons will not end and they cannot compete on value with either of them. Just when I think things may begin to change…. nope

I can’t wait for the next one.

Tags mcd, sbux

Articles

What Is Verizon Up To?

Post author By ToddSullivan
Post date September 10, 2007

Rumors abounded before the iPhone launch that Verizon (VZ) was developing an “iPhone killer” and was the reason they turned down Apple’s (AAPL) overtures. Now, there are more rumors that the possibly upcoming GPhone from Google (GOOG) was shopped to Verizon and it also turned it down.

It all begs the question? What does Verizon have in the wings? Based on it’s history, any product from Google is going to be incredibly affordable (unlike the iPhone) and be easily adaptable to existing formats and outside programmers. Now, if that is true and they are going to several providers to shop it (again based on rumors) one must think that Verizon feels it has something very special in the works to turn down both phones.

Now that Apple finally got with the program and made the iPhone somewhat more affordable, sales will pick up. AT&T (T) stands to be the big winner as they will feel little of the pain of the price cut. Verizon needs to have an answer and will be under even more pressure if a Google phone does come to fruition. Perhaps they are working on it with Blackberry maker Research In Motion (RIMM)?

Personally, I love my Blackberry and have no interest in a $400 iPhone. I would be shocked if a GPhone was not priced at a fraction of that price and I would be tempted to take a gander at it if for no other reason I am sure it would be a great product, like everything else Google does. This is not to say the iPhone is not a great product, it is just way too much money.

Verizon needs to have a answer to this and soon or they risk falling behind in a big way in the smart phone race which, is the future of our telephonic communications.

Articles

Monday’s Upgrades / Downgrades

Post author By ToddSullivan
Post date September 10, 2007

UPGRADES

Harley-Davidson HOG Soleil Sell » Buy
RADVision RVSN Ferris Baker Watts Neutral » Buy
Northwest Airlines NWA Calyon Securities Add » Buy
U.S. Steel X Citigroup Hold » Buy
Fifth Third FITB Bernstein Underperform » Mkt Perform
Stone Energy SGY Friedman Billings Mkt Perform » Outperform
Tempur-Pedic TPX CIBC Wrld Mkts Sector Perform » Sector Outperform
Occidental Petro OXY Deutsche Securities Hold » Buy

DOWNGRADES

American Software AMSWA Davenport Buy » Neutral
Cascade CAE DA Davidson Neutral » Underperform
Techne TECH Leerink Swann Outperform » Mkt Perform
US Airways LCC Calyon Securities Buy » Add
Continental Air CAL Calyon Securities Buy » Add
Alaska Air ALK Calyon Securities Buy » Add CMC Citigroup Hold » Buy

Tags davidson

Articles

"Fast Money" for Monday

Post author By ToddSullivan
Post date September 9, 2007

MONDAY’S PICKS

Jeff Macke said The New York Times (NYT) is a raging sell. OPEN $21.26

For the 2nd day in a row, Guy Adami recommended the Short Dow30 ProShares (DOG). OPEN $60.67

Pete Najarian liked Oilsands Quest (BQI). OPEN $4.92

FRIDAY’S RESULTS

Guy Adami told the panel to short The Dow with Short Dow30 ProShares (DOG). Open $59.67 CLOSE $60.67 GAIN $1.00

Karen Finerman liked Under Armour (UA). open $63.38 CLOSE $63.85 GAIN $.47

Pete Najarian preferred Dick’s Sporting Goods (DKS). Open $67.27 CLOSE $65.26 LOSS $2.01

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks)

Guy Adami= 21-13 Gain $40.24
Eric Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Jeff Macke= 22-19 Gain $4.05
Pete Najarian= 14-11 Gain $23.50
Tim Seymore= 3-2 Loss $.49
Karen Finerman= 5-3 Gain $2.06
Stacey Briere-Gilbert= 2-0 Gain $1.61
Constance Hunter= 1-0 Gain $1.84

Articles

Dow Expects India Business To Grow 50% Annually

Post author By ToddSullivan
Post date September 8, 2007

I cannot think of anything to date that the Andrew Liveras lead Dow Chemical (DOW) has alluded to that has not happened. No reason to start doubting now.

“We expect our business in India to touch $1 billion by 2010 from the present $300 million. Dow looks at the proposed chemical hubs as an opportunity to scale up its manufacturing capabilities in the country,” Peter G Halloran, director-supply chain, Mumbai service center, Dow Chemical International, said last week. DOW also expects to see 50% of its R&D initiatives coming from India in the next 3-4 years, according to Halloran.

Dow Chemical (DOW), is betting big on the proposed Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIR) in the country to scale up its manufacturing capabilities in line with upcoming business opportunities much like they are doing in China, Russia, Iraq and Saudi Arabia.

Halloran said DOW was in talks with various government agencies to set up manufacturing facilities here.

India’s Commerce Minister Kamal Nath recently said that since DOW did not have a direct link to the Bhopal gas tragedy (it bought Union Carbide several years after the tragedy), its investments in India would not be adversely affected.

DOW is making huge bets overseas where inputs will be cheap for both raw materials and skilled labor. If you go back and review most of their releases, these project are scheduled to all come online around 2010. What about between now and then? DOW is becoming a cash producing machine and these new projects are being paid for with produced funds, not cash pout of pocket and that point cannot be emphasized enough. It means DOW can keep these projects coming, adding to earnings without any balance sheet weakening, risk to it’s near 4% (and growing) dividend or reduction in it’s stock repurchase plans. All these are very good things for investors.

The next big event, (aside from any additional almost weekly expansion plans) will be the upcoming “white paper” this fall. In it they will detail the expected results from Liveras’s strategy. I think shares are treading water currently because Wall St. is having trouble determining the value of all the recent joint ventures DOW has entered into. Without a clear understanding of their impact to earnings, people are not able to value DOW.

Personally I think the value of these in a year will be multiples of what they now the paper, when release will illustrate this. What it will also show is DOW is becoming less dependent on the US market and even more of a worldwide player is areas other that cyclical chemicals that their fortunes have been predominately tied to until as recently as last year.

Tags dow

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This Week’s Notable Dividend Hikes

Post author By ToddSullivan
Post date September 8, 2007
1 Comment on This Week’s Notable Dividend Hikes

Thin Week for hikes….

PSB Holdings (PSBH)= 16%

CBS Corp (CBS) = 13.6%

Verizon (VZE)= 6%

Susquehanna Bancshares (SUSQ)= 4%

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Book Review: The "Little Book" of Value Investing

Post author By ToddSullivan
Post date September 8, 2007

If you want to get started in value investing but are not sure what it is all about, here is the best book I have read to date on the subject.

CLICK LINK TO BUY BOOK

I honestly feel this book should be read by all those who are interested in value investing but are not sure where to begin to find out about it. It is not full of complicated discounted future cash flow formulas that will have most readers eyes glossing over in confusion. What it does have is a straight forward explanation of the theory of value investing. The author, Tweedy & Browne’s Christopher Browne illustrates how we try to buy everything we buy in life “on sale” (groceries, auto’s, clothing etc..) yet for some reason have the irresistible urge to buy stock in companies when they are priced most expensively. The book is an excellent primer on altering that thought process…

Advanced value investing readers may find the book a little basic but I enjoyed it because it is always good to remind yourself of the basics as without them the details are meaningless…

The best part of the book? Any reader can easily finish it in a weekend and be investing on Monday…

On a side note. I have been inundated with book review requests lately and will get to all of them as soon as I can. Thank you in adavnace for you patience..