ValuePlays

MarketWatch reported Thursday:

Bank of America (BAC)downgraded four ethanol makers, giving three of the companies sell ratings, on concerns of a 70% slide in margins by 2009.

While record gasoline prices have led to a 30% increase in ethanol prices and a 180% jump in production margins so far this year, analysts at the bank said they expect producers “will face an extended period of deteriorating margins resulting from new ethanol capacity.”

Starting this quarter, 1 billion gallons of new capacity is scheduled to come online each quarter through at least the fourth quarter of 2008. The new supply could depress ethanol’s premium to gasoline, drive corn prices higher and pressure distillers’ grains values, Bank of America said. The Andersons (ANDE ), VeraSun Energy (VSE ), Pacific Ethanol (PEIX ) and Aventine Renewable (AVR ) were all downgraded.

Here is the mystifying part. For two years we have been hearing that ethanol is not the answer because we will never be able to replace enough gas to make a difference. Now we are talking about an ethanol glut? Let’s make up our mind here folks. If ethanol priced drop far below that of gas, demand will pick up immediately, especially with the increase in E85 vehicles coming online. Right now it is only blended in 3% to 4% of all gas, the goal is 10% so there is still plenty of room to grow. Wal-Mart has been talking about installing E85 pumps all over the place but supply problems currently prohibit it. A glut? WalMart (WMT) will gladly take it, they could use the good PR. If prices drop far enough, there will be an inevitable consolidation in the industry in which case the strongest players will pick up cheap production and make up for smaller margins with increased output.

Let’s talk politics. Does anyone really think anyone running for the White House is not going to woo Midwest voters by promising higher ethanol mandates and more support for producers? Don’t you think the battle cry will be “let’s spend the money here instead of Iraq”. Now whether you agree with the policy or ethanol or not is irrelevant, the reality of the situation is. This industry has the support of the American people and Lawmakers, it will be just fine.

First things first. I have no position and never have in Google (like most tech). I could care less what the stock does. Again, great company and great products and I use them everyday.

Now, am I the only one who could go the next 6 months without reading another Google article or post? Holy Christ, I am seeing 20 a day on the same topic. This stuff is not even original content, just the same news rehashed over and over and over… Enough is enough kids. There is such a thing as overkill and the Google (Goog) coverage hit that 6 months ago. Google taking search share stopped being news in 2006, I do not need to see it 15 times when they announce it EACH MONTH.

I am waiting for twenty posts tomorrow about what CEO Schmidt ate for breakfast and what color it turned his stool, where I can find the video on Youtube and how this is just another brilliant marketing ploy. Once again, Google originality on display

We all know what is going on. The stock has been stagnant for 8 months now while the DOW and the S&P have raced to record highs almost daily. You can’t understand why and feel the need to remind everyone how great the company is, DAY AFTER DAY AFTER DAY. Here is the problem, we all already know that. That is not the reason the stock is stagnant.

The law of large numbers is. As % growth declines as a company grows increasing larger (this is an undeniable trend), the multiple investors will pay for shares also decreases. That is what is happening to Google. That is it.

It is not that folks do not “understand” it or “hate” it. People are now at the “show me” stage of Google growth, not the “don’t worry, it will happen” stage. If Google performs, so will the stock, if not, it won’t. Period. No conspiracy, no short sellers, no confusion by the unwashed masses.

I need to go, there are 43 articles on “Google Gears” clogging my inbox. I need to get rid of them before Schmidt eats lunch and that coverage starts

The Wall St. Journal reports this morning that Coke (KO) and Cargill are trying to get FDA approval for a new sweetner called Reninia. It comes from an herb called Stevia which is native to Paraguay. The duo currently face stiff opposition to it’s as neither the European Union or the FDA have approved it and that process would most likely take several years. According to The Journal, a potentially damaging “1985 peer-reviewed study on rats published in Proceedings of the National Academy of Sciences concluded the herb could cause mutations in the liver. Some European food-safety officials have cited concerns about a lack of data on the herb’s safety, amid indications it could lead to fertility problems in men.

Cargill, who admittedly has already spent “significant amounts” of money on the project is hoping the herb will “shake up” the sweetener market. Word is that coke has no plans to tamper with it’s “Coke Classic” formula, learning from it’s 1980’s fiasco so I am left wondering if this will ever be more than just another aspertane, sucralose, saccharin niche product. Folks are very particular about their beverages and will resists any change so I am highly skeptical that it will replace or make a dent in HFCS demand anytime soon.

Perhaps the most immediate reason to be concerned about the product? The herb has become fashionable in Hollywood. On her blog, actress Mariel Hemingway has posted a recipe for a morning shake that recommends mixing in stevia for added sweetness. Correct me if I am wrong, but isn’t this the same actress that suffers (or suffered) from bulimia, anorexia, and depression? So, I am supposed to put anything she recommends into my body?

This stuff looks like it will make folks long for the days when their soft drink just made them fat.

In March I wrote a post about AIG (AIG) and that it’s profit picture was not a rosy as it looked due to some questionable tactics. Now a report comes that they are being forced to return “excess profits” to the state of Massachusetts. HMMMMMM.

AIG, who carried the workers compensation for the “Big Dig” in Boston, recently reached a settlement with AG Martha Coakley in which they agreed to return almost $60 million in “excess profits” and interest to the state. In the original agreement with the state, AIG was guaranteed a limit on it’s potential losses due to the “high-risk” nature of the work and in return, was required to return and excess funds to the state. The AG’s office that AIG never returned these funds to the state. According to AIG, the funds were recently paid.

For those interested in the Lead Paint trials, the City of Milwaukee’s suit against NL Industries (NL) has begun. For the single best day to day converage, there is only one place for you to go…

Visit Jane Genova’s blog Law and More. Jane live-blogged the RI Trial and will present us with the most accurate depiction of events in Milwaukee. I highly advise those interested check out her blog daily.

Here are the Top 10 percentage dividend increases last week

Lowe’s (LOW) = 60%
LMP Capital (SCD) = 40%
Clorox (CLX) = 29%
Monroe Muffler (MNRO) = 28.6%
ARK Restaurants (ARKR)= 25.7%
Omnicom (OMC) = 20%
Assurant (AIZ) = 20%
TansAtlantic Holding (TRH) = 18.5%
SEI Investments (SEIC) = 16.7%
Abington Bancorp (ABBC) = 16.7%

This past holiday weekend I was talking to my 4 year olds and they said that they wanted to get another bird feeder for the house. I asked them where they wanted to go and they both said “Lowe’s (LOW)”. Hmmmmm. “What about going to Home Depot (HD)?”, I asked. They replied that they did not want to go to Home Depot, they wanted to go to Lowe’s. “Why?”, I asked. “There is more light and people help us in Lowe’s” they replied. Now, if a four year old feels this way, I am going to guess millions of other folks out there do also.

This comes off news that Lowe’s recently increased it’s market share in 17 of 19 business categories last quarter. They also announced that they are increasing their dividend 60% and, here is a big one, adding $3 billion to their share buyback program. Last quarter Lowe’s repurchased $650 million of shares and could buy more. This is a company that produces over $2.1 billion from operations each quarter and after all it’s capital expenditures, share repurchases, debt reduction, still had a cool $250 million left to add to it’s piggy bank.

The new buyback announcement means they have a total of $3.8 billion worth of stock they are authorized to repurchase. At today’s prices that will take about 119 million shares of the 1.5 billion total or over 7% of off the market. That is a significant amount. The real beauty of this is that is can easily be done over the next year and a half with very little impact on operations or by adding any additional debt.

The dividend. At it’s new level, Lowe’s will yield about 1%. This is poor when you compare it to the over 2% yield from Home Depot. Lowe’s will spend about $450 million over the next 12 months on dividends (depending on the rate of the share buyback) at the new rate and while significantly higher than the $87 million it doled out in 2004, more is needed.

Now, the buyback will help and let’s look at why. Let’s assume for a minute that Lowe’s does not increase the dividend and keeps it at it’s 20 cent annual level. Currently that means they will return $300 million to shareholders at the current 1.5 billion shares outstanding. After the buyback, there will be about 1.38 billion. This means that all thing being equal, Lowe’s would only need to spend $276 million to keep the dividend at its’ current rate. It also means that at the new rate (32 cent a share) they will be spending $441 million vs the $480 million they would have spent without the share buyback. So buybacks help both us shareholders, buy allowing more of a companies profits to be available to us (higher EPS) and allow the company to increase the dividend without a direct dollar for dollar impact. A win -win.

The only thing stopping me from buying share now is the anemic dividend. In a rather mature industry, I would like to see more of a commitment to shareholders here. Lowe’s is kind of a “tweener” in this respect. It is not really a growth company anymore and it does not yield much for potential investors. But, were shares to get hit and dive under $30, they would be very tempting for me. Very tempting

From the site.

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Until now, customized market analysis has been available only at the institutional level — and at enormous costs. Bespoke has altered the landscape for customized research by allowing anyone — from large institutions to the most modest investor — to receive the specific in-depth analysis they need in a cost efficient and timely manner.Bespoke Investment Group, LLC applies this same “tailored” concept to financial research with MyBespoke.”

I have been receiving the daily emails from Bespoke for a few weeks now and they are good. I like the “Morning Lineup” email. It gives a very concise and informative capsule of the upcoming day and arrives about 8:30 am est. Now, eventually they will begin to charge for this service so the “value” of it will then be determined. I have no idea of any potential pricing so I will not even attempt a guess.

You can go the the site and request a “Sample” and they will email it to you in a pdf format. I suggest you do it as the information is detailed and different that the normal research out there. I specifically enjoy the work they do on sectors and the overall markets and the economy. It is “big picture” items and worth the look.