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Christopher M. Connor, Chairman and Chief Executive Officer, commented
Sherwin Williams (SHW) has taken a hit the past month due to it’s ties to the US housing market and the RI ruling. This ruling, while a short term negative is virtually meaningless when compared to the California Superior Court Ruling which will eventually lead to the RI case case being filed where it should be, the garbage can. This quarters numbers prove that management is adept at managing the company through these headwinds. Let’s not forget, these numbers are up against 2006 numbers that included a still booming residential housing and DIY (do it yourself) market. Two key factors contributed to offsetting the earnings decline:
The growth in the global group offset the decline in the US DIY and New Residential segment and the shares buybacks did the rest as SHW was able to avoid an earning decline of a strong 2006 comparison. It should not be lost on readers that this international segment will take on further prominence and do more to insulate SHW from the US housing market due to it’s recent purchase of India’s Nitco Paints. This gives SHW a huge footprint in an paint market growing at a near double digit rate. The effects of this should be seen in the second half of 2007 and is probably the reason that despite the predicted Q2 earnings miss by the company, they still back their full year estimates. Another note: This anticipated “earnings miss,” is a miss on the current estimates that analysts have for Q2. SHW’s estimate of $1.37 to $1.45 a share is still above last years $1.33 number. I can live with that given the drastic deterioration in housing since last year.
Let’s also not forget the stock buyback. Although they do not expect to use the bulk of the authorization this year, the number of shares they are still authorized to buy represent about 7% of outstanding shares, providing another buffer for us shareholders. Gotta love it.
Lead Paint
After a brief summary of current litigation statuses, the subject was not revisited. Not one analyst on the call ask a single question about this. This is very telling as during the Altria (MO) call this morning (yesterday), several questions referenced the litigation environment surrounding tobacco, despite this being the best that environment has been in almost a decade. This has to lead one to believe that the analysts on the call (as well as yours truly) are not very concerned about the possibility of an eventual negative outcome here. While it is having a restraining effect on the stock now, when this cloud eventually evaporates, away we go..
SHW CEO, Mr. Christopher O’Connor is another wonderful example of a CEO who takes his fiduciary responsibility to us shareholders very seriously. Everything he is doing at SHW (dividend increases, buybacks, overseas expansion) are all geared at rewarding us shareholders. Sherwin is going to be not just a national leader but a global one soon. I currently own shares and will look to pick up more on weakness.
— Adjusted for items, diluted earnings per share from continuing operations up 5.1% to $1.03 versus $0.98 in 2006
So, another great quarter for “Big Mo”. Now, going forward, what do we expect? We would like to see the international operations spun off from the PMU (Phillip Morris USA). In the earnings release CEO Camilleri said:
What will we have then? In PMU, we will have a slow growing cash machine that will most likely end up crushing the yield of every other DJIA stock. It’s cash position will allow it to buy back shares on a regular basis to enhance eps growth and reward shareholders.
In PMI (Phillip Morris International) you will have a fast growing company that will begin to gobble up more tobacco companies around the world. It will also be free from US regulation since it will be headquartered abroad and have no US operations. This is a point that cannot be overlooked. The regulations that currently hamper PMI operation and the US litigation threat always present are a damper on the valuation of this segment. Once these are removed, in the word of Ralph Kramden “to the moon Alice”. In Q1 2007 PMI:
“Here is the test: What you want to happen on a day like today is for your portfolio to drop less than the market. If you are a value investor this is a true test of it. Since we are buying “cheap” stocks, if they truly are, there will not be as much pain during sell-offs. The opposite is true also. During rallies, we should see percentage growth in excess of the market because our shares are so cheap others will rush to pick them up. That is how we should beat the S&P. Drop less during sell-off and jump more during rallies”
Time to put my words to the test. I am going to use my largest holding, Sears Holdings (SHLD) for this exercise since, the health of it determines the health of my portfolio as a whole (In Eddie I Trust). We are going to look at two three month charts. The first will be the S&P 500:
You will notice the huge drop on Feb 27 as all the averages plummeted. The S&P was down 3.5% on that day and eventually closed 5.5% down a couple trading days later. It took until yesterday to erase all the loses from that drop and currently stands about 1% over the pre-drop highs. As I said before, in order to check the strength of our picks we want to see a drop of less than the averages and a rise greater than them. Having picks like this will ensure that when all is said and done, we have beaten the S&P, our benchmark for the year. Now, lets look at a chart of SHLD for the same time span and see what happened:
After getting hammered along with the rest of the stock universe on Feb. 27, SHLD, like the S&P has steadily recovered. A few days after the drop, SHLD had not been hit as hard hit as hard as the S&P as it was down only 5%. The major difference is that while the S&P has realized an almost 1% gain, SHLD is sitting on an over 2% gain from its pre-drop high levels. It is important to note that the previous high prices were also 52 week highs for both the S&P and SHLD.
So, in less than 6 weeks SHLD took the hit the markets sell-off gave it and has recovered not only all of the losses from that drop, but added over 2% to the all time high set the week before the drop. Those of us who were patient and believed in our pick (and picked it for the right reasons) have been rewarded. Those who panicked (there were millions of shares dumped so a whole lotta folks did) and sold off their shares at the end of February or March are undoubtedly kicking themselves as they calculate the lost profits. They may have sold at a profit in February (if they had bought a while ago) but after the commissions they paid to sell, the taxes they will pay on the profits, and the missed appreciation of the shares since then, they are far behind us in total gains.
Sear Holdings proves, patience pays…
Recently I was asked for a response to an article titled “Getting The Lead Out” that ran in The Nation magazine. Jane Genova, who runs the blog Law And More asked for a response and you can read it on her blog below. She has done the most extensive work to date on the lead paint trials in Rhode Island and for those of you interested, she actually “live blogged” from the court room in the Rhode Island lead trial. I consider her blog to be the starting point for any details you want on this litigation. You can read the response here.
Also, the legal website Legal Newsline.com did an article on the California Superior Court ruling on the contingency fee issue and picked up my post on it for reference. The article can be viewed here
A Trade:
Last Thursday we had a trade in the ValuePlays Portfolio. We sold April $45 puts in BTU. We received $90 for each put we sold. This means that is BTU closes below $45 on or before this coming Friday, We will be forced to buy 100 shares of BTU for each put we sold. As long as BTU closes above $44.10 ($45 – $.90 ) the trade is in the positive. Either way, we are pleased with the trade as BTU is a security we would have been comfortable owning at the price it was selling for last week ($45.85). The put enables us, should we end up owning it to do so at a lower cost basis. Nothing wrong with that..
I am looking to create a comments page of readers thoughts and experiences with the blog. While I have received many of them from you up until this point, I do not feel right about publishing them unless you submit them knowing they may be. So, if you have already sent one, please re-submit it so I know it has been submitted under the assumption it may be published. That being said, please email me at valueplays@gmail.com and give me your thoughts.
Please Include (some ideas):
Should there be a reason that you may not want you name published, please let me know and I will oblige. I will need to verify the authenticity of your email but will honor any special requests.
Thank you
Todd
This is very different than the “covered call” strategy most people have heard of and use when it comes to options. In the covered call scenario, you sell someone the right to “buy” your shares at a predetermined price that is usually higher than your purchase price, guaranteeing you, the seller a small profit should they get “called” the shares. This strategy is popular because if the investor gets “called” their shares, they sell them at a profit and if they aren’t, they keep the option sales price (called a premium). I personally dislike this strategy for two reason.
I quite often engage in the selling of them though. Why? If I am selling a put in the way I usually do it, I transfer this time element risk to the buyer and by doing that, have very little risk in the transaction. Let me explain.
In the ValuePlays Portfolio I currently have sold puts on 2 companies we own stock in and one we will. Let me explain why I do it and how it helps our returns. I am going to use the Altria (MO) and Peabody (BTU) puts we have recently sold as examples. First Altria:
The main parameters I use in selling puts are:
The argument could be made that I assume the risk of not owning the shares at all if the price goes up. In that case, I keep the premium price from the buyer and just miss out on owning the stock. I am fine with this because it means the riskiest part of this strategy is only making a little money. I will take this risk every day.
Examples
On 4/5 I sold an April $70 MO put with Altria shares trading at $70.45. That means that if the price of MO falls below $70 before the option expires on 4/19, the buyer of the put can sell me 100 shares of MO at $70. If the price of MO ends up above $70 at the expiration date, the option expires worthless and I keep the money the buyer paid for it. In this case, the buyer paid me $70 (70 cents a share) for each put he bought from me.
Let’s say the price of MO finishes below $70 at the expiration date of 4/19 at $69.50. I now have to buy the 100 shares from the buyer at $70 each. Bad news? NO. Why? Because I have already received 70 cents per share for the puts. This means that if I am forced to buy the shares my actual cost is $70 – $ .70 = $69.30. This means that as long as the price of MO shares do not drop below $69.30, even if I have to buy them at $70, I have profited from the transaction. If the price of MO is above $70 on 4/19, then I keep the $70 as pure profit and probably sell more puts for next month.
Yesterday (4/12) I sold BTU April $45 puts for $90 for each put. I do not own BTU yet but want to. These puts expire next Friday, April 19 (all April puts and calls expire at the same time). When I sold them, BTU was trading at $45.85 a share. In this case, the price of BTU needs to fall below $44.10 ($45 – $.90) in order for this transaction to be negative if I am put the shares. In this scenario, I am put the shares but own them at a price below what I would have bought them at today anyway. If the price settles above $45, I keep the $90 per put as profit and sell more next month (currently these sell at $145 per put). Now, let’s say that BTU closes at $46 and I do not get put the shares. At expiration I will immediately sell more puts for May. For easy math, I get $100 per put ($1 a share). BTU now needs to close below $43.10 ($45 -$1 (May put) – $ .90 (April put)) for this to become a negative transaction. If BTU closes at $44 a share and I am put the shares, I in essence enter my ownership of BTU shares already up $.90 or 2%.
How can this help our overall returns? As of my writing this Thursday afternoon The ValuePlays Portfolio is up 8.5% YTD (since inception1/18). Without the put selling strategy, it would have been up 8% YTD so in 12 weeks this strategy has added .5%. Not a huge difference but when you consider we started the portfolio 1/18, doing this can add up over the course of the year. The big take away is that this is done with very little risk.
Options can be very confusing and dangerous if you are not sure what you are doing when you do it. There are no “do overs” here. Be sure you have a good grasp of what you are doing before you push the button. Feel free to email me at valueplays@gmail.com if you have questions.
Electricity demand has continued to increase since the 1970s. While we are more efficient in our use of energy, demand has grown largely due to the introduction of new technologies — such as the Internet — which consumes about 8 percent of U.S. energy. Between 1970 and 1999, electricity use grew by more than 130 percent, and will continue to climb: According to the U.S. Energy Information Administration (EIA), America’s energy demand is anticipated to grow over 45 percent in the next 20 years. What is the main fuel for all this electricity? Coal, it fuels about 40 percent of the world’s electricity and over half of America’s electricity (this amount continues to climb annually), which is more than all other sources combined.
Other than electricity, what are some additional uses of coal?
insulation with Owens Corning (OC) and paint and coatings with Sherwin Williams (SHW), investing in coal begins and ends with Peabody Energy (BTU) . Since their initial public offering on May 22, 2001, at $28 per share, or $7 per share on a split-adjusted basis following the March 2005 and February 2006 two-for-one stock split, shares hit a high of $75 in May of 2006. Since then, shares have fallen steadily (40%) to their current level of $45 despite growing earnings last year 60% . The world’s largest public coal company, their products fuel approximately 10 percent of America’s and 3 percent of the world’s electricity.
So, how much coal does Peabody have? If you converted their coal into each one of the following energy sources, Peabody’s reserves would provide :
BTU has not traded in a PE range this low since early 2003 when it’s stock traded for a split adjusted $9 a share. Since that period they have grown earnings from 25 cents a share to $1.92 last year (680%) and dividends have grown from 11 to 24 cents a share (118%). Since 2001, shipments of coal have grown from 194 million tons to 240 million tons in 2006 and in 2006, their worldwide coal sales were 38% greater than their closest competitor and in the US, Peabody’s shipments were 22% of all US coal shipments and 80% greater than the closest competitor. They clearly dominate the coal market both nationally and internationally.
The Future:
So, now that we know where we are, we need to figure out where coal and BTU is going. Let’s take a look at both worldwide demand and demand here at home in the US. The EIA estimates that 115 gigawatts of coal fueled electricity will come on line worldwide in the next 3 years and by 2030, an additional 156 gigawatts will come online in the US. These uses by themselves will require an additional 500 million tons of coal annually. This does not include additional coal demand for the other uses previously mentioned.
Currently BTU has a 1 billion ton backlog of orders with contract ranging from 1 to 19 years with the average being 5 years. All long term contract have “price re-opener” provisions in them which protects BTU from a profit squeeze should input costs rise unexpectedly.
BTU is currently is in the process of building 3,100 megawatts of electrical generation capabilities in two locations at BTU owned mining sites. This will enable BTU to become a “minimal cost” electrical producer at these locations as they would be using their own coal to produce the electricity they would then resell.
Debt grew by $1.7 billion in 2006 as this money was used to purchase Excel Coal in Australia and repay its debt. The acquisition makes BTU that largest coal producer in that country also and provides BTU a lower cost basis to export coal to Asia and China whose demand for it is surging. The Australian mines primarily produce “metallurgical coal” . This high BTU coal is primarily used for the production of steel and is highly sought after by China. Selling for about $100 a ton (vs approx. $26 a ton for all other coal), BTU estimates it will sell an additional 3 to 6 million tons of this in 2007 vs 2006 providing about $500 million in additional revenue with no added cost.
For 2007 BTU is predicting 265 to 285 million tons of coal shipments for a 10.4% to 18.7% increase over 2006.
Pricing.
From 1990 to 1999 the price of coal declined from $1.38 per million BTU’s to $ .91 per million BTU’s. Since 1999, that trend has reversed and prices have risen to $1.15 in 2005 and the EIA estimates this price will continue to rise to $1.84 by 2030.
Geopolitical Considerations
The news this week made reference to, but did a lousy job of covering the “summit” of natural gas producers. These nations are attempting to band together and create an OPEC like cartel for the sale of natural gas. The US is not one of these nations and the formation of an organization like this would only be done for one reason, to raise the price of natural gas. This event, should it come to fruition, would be monumental to the coal industry. It would create a huge demand for reliable, low cost fuel for the production of electricity and more plants and other industries would move from natural gas to coal as their main fuel source. I anticipate these nations will form this alliance and Peabody and its shareholders will be the main unintended beneficiary of it.
So, all this now has us considering buying shares of a company that is the world leader in its industry, with increasing demand and pricing power for its products selling at historically low levels….
ValuePlay anyone?
DOW Chemical CEO Andrew Liveris appeared on CNBC on Tuesday to attempt to “put to bed once and for all” the rumors of an LBO. Appearing on David Faber’s segment he reiterated the companies stance that they have had “no talks with any private equity group regarding an LBO”. If they had, he said “we would be the first to tell people”. He went on to state that the true value of DOW is in it integration of both upstream and downstream operations and that integration is “total.” This level of integration is shared by only two chemical companies in the world, DOW and BASF. An LBO, he said that would break up the pieces of DOW and sell them off would destroy that value for shareholders. In this instance, an LBO would lead to “value destruction, not creation”. Other notables from the conversation:
Liveris:
“We are currently involved in over 60 deals flows, one of which we announced this morning with Chevron Phillips Chemical”
From The Press Release:
In this joint venture, the refining capabilities of Chevron Phillips upstream operations (which Dow does not do), compliment perfectly the downstream plastics operations of DOW (which Chevron Phillips does not do). In essence, Dow is receiving guaranteed feedstock at more than competitive prices in exchange some of the profits from the sale of the final product. A win- win for both companies. This is a vital change in the business strategy of Dow.
When asked about using the growing cash balance at DOW and its now “de-levered” balance sheet for acquisitions, Liveris gave tremendous insight as to what DOW may be looking at. He said:
“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.”
In the past I have pleaded on this blog with CEO Liveris not to give in to the temptation of the easy LBO money. It would seem, based on this mornings interview that those fears should be put to rest. It is also apparent that Liveris is in this thing for the long term. When I reviewed his annual letter to shareholders last week I said a sale of the company was not in the works for 2007. So far so good on that one. Liveras did say that 2007 was going to be a “significant year”. As I have said before, nothing he has done up until this point has lead me to doubt anything he says, no reason to start now…
Eddie Lampert, Chairman of Sears Holdings has created $1.8 billion worth of securities based on the brand names Kenmore, Craftsman, and DieHard. What that means is he essentially transferred ownership of the brands to another entity, which it then pays for the right to use the brands. The deal, carried off last May, was the biggest “securitization” of intellectual property in history, according to Eric Hedman, an analyst at Standard & Poor’s. The story hasn’t gotten out until now because the bonds haven’t actually changed hands, Sears is holding them in its Bermuda-based insurance subsidiary and because Sears has never disclosed them, nor has it had to do so. That would change if Sears were to decide to sell them to outside investors and collect the cash.
How does It work?
Sears has disclosed that it has created a “separate, wholly owned, bankruptcy-remote subsidiary”. This is essentially a company within a company. It is called KCD IP (for Kenmore Craftsman DieHard intellectual property) and it has issued $1.8 billion worth of bonds backed by the intellectual property of Sears’ three biggest brands, according to filings with the Patent & Trademark Office.
Sears has in effect now created licensing income from it’s most known brands. First it transferred ownership of the brand names into KCD. Now, KCD charges Sears royalty fees to license those brands and uses the royalties to pay the interest on the bonds. It has sold the bonds to the insurance subsidiary, where, like any other security on an insurer’s books, it serves as protection against future loss. The insurer, meanwhile, protects Sears from financial trouble and because it’s a subsidiary of Sears, it does so at a lower cost than they could get from an outside party. Essentially, the deal at its current level allows SHLD to save money on insurance.
The question you are most likely asking is: Who is making money off the transaction? The answer? As it is set up, nobody. The payments net out to zero because Sears owns every piece.
Why Do It Then?
It seems like a whole lot of work to do for no profit. Why do it and how then can Sears turn these bonds into money?
1- Sell the bonds to outsiders. Then, Sears would be holding up to $1.8 billion in cash, and investors would be holding the bonds.
2- License the brands: Many people (me included) feel there is a huge revenue stream for Sears in the value of these brands. Allowing outside manufacturers to make products and use the Craftsman, Kenmore and Diehard brand names in return for royalty payments is an easy way to increase profits without any additional expense. These payments would be virtually 100% profit for Sears. More importantly, by licensing these brands they would be expanding the availability of them. I feel that especially with the Craftsman tool line, this could really have a compounding effect. Tool buyers are a brand conscious lot. If their favorite brand came out with a Craftsman line, given Craftsman’s reputation for quality, it would sell.
3- Swap bonds for debt. Lampert acquired K Mart through its debt. These new “brand” bonds allow him a vehicle to do a similar deal. How? Lampert could swap these bonds or a portion of them for the debt of another company. One morning shareholders of BJ’s could wake up and find that Sears Holdings owns all their debt. The beauty of this scenario is that it would require none of the cash Sears has in the bank ($4 billion) to be used. Having these bonds as leverage also allows for the possibility of a much larger acquisition.
4- Insurance. In the past I have speculated on the possibility of Sears getting into the insurance business. Now we have an insurance subsidiary of Sears sitting there holding $1.8 billion in bonds that could be used for an acquisition. As I stated in the past, I think there are few acquisitions that would make the stock price of SHLD explode to the upside than the purchasing of an insurer.
The creation of these bonds opens up a plethora of situations in which they can be used to add value to Sears Holdings for shareholders.
At the end of the day, what Lampert will do with this is a mystery. It is great fun for us to speculate though. If we do it enough, eventually one of us are going to be correct. What I do know is that given his past track record, we shareholders will benefit greatly.
Things are getting exciting here.
As I watched Curt Schilling’s opening day debacle for my beloved Boston Red Sox against the hapless Kansas City Royals, I immediately began thinking once again about Starbucks (SBUX) because the comparisons between the two are striking (baseball pun intended). Really they are, read on and I will explain. A note: I have penned (typed?) several pieces on Starbucks in the past and will not regurgitate them again. For those interested, you can read them here, here and here.
First a bit about Mr. Schilling.
He came to Boston in 2004 with a singular goal in mind: To win the World Series and by the time the 2004 season ended, he was a hero. Anybody who saw the blood filled sock (now in the Baseball Hall of Fame) and his gusty performance in the playoffs as he lead the Sox to their first World Series title in 86 years can understand why he was then elevated to royalty in Boston.
This spring Curt who, after an poor 2006 season, apparently took the off season so seriously that he showed up to spring training almost 30 pounds overweight. Now, at 20 that weight can be worked off in spring training. At 40? Not so much. To compound this he:
Now, Starbucks
The Starbucks concept as we know it today began with Howard Schultz in 1987. The singular premise was to mirror the Italian coffee houses he visited during a trip to Italy in 1984 and for the better part of two decades they did 
exactly that. They single handedly invented the coffee experience we enjoy today. Their growth exploded in the 90’s and made investors gobs of money all the while staying true to what made them great, their singular focus on great coffee in an intimate, relaxed setting. This growth lead to them needing to squeeze more sales from each location to finance new ones. The formerly intimate setting became cluttered with items for sale that covered the spectrum of coffee makers, coffee mugs to CD’s and almost everything in between. The rapidly expanding drink menu became complicated to both order and execute and led to longer, much longer, wait times at the counter. The peak of this came in the summer of 2006 when execution difficulties with a new frozen drink led to people choosing other options for coffee rather than waiting in line an obscene amount of time in the hot sun for one. In response to rising customer complaints and negative media reports Starbucks:
Greatness requires a singular focus on the intended outcome that is desired. In Schilling’s case it was being a great pitcher, a leader, and winning a World Series. In the case of Starbucks, it was the coffee, period. By focusing on those items and only those items, both accomplished those goals and received the accolades that accompany that success. Sadly, both have strayed far away from what have made them great in the past. It appears Red Sox fans will feel this pain this year again as Schilling seems to have picked up where he left off the second half of last year, focusing on everything but baseball. It also seems that Starbucks shareholders and customers will also feel the pain of distraction as Starbucks makes them wait longer in more and more crowded locations (not with people) for coffee while they try to sell them sandwiches, records and clothes.
Here is hoping Schilling at least gets his act together first….
PS. A note to Mr. Schilling: We Red Sox fans have no patience or sympathy to someone making $15 million a year who complains about not making more and then gets his head handed to him by the worst team in baseball. You have not pitched well in almost a year now. Do you want to feel our wrath? Keep it up because it is brewing out there. Just keep your mouth shut and win, you do that and we will do your talking for you.
Massachusetts Investor: Shareholder Lawsuit Needed Against Plaintiff Attorneys
BOSTON – Shareholders who own stock in the companies being sued under public nuisance law for producing lead paint and pigment should sue the plaintiff attorneys pursuing such litigation, a Massachusetts investor told Mealey Publications on March 29.
Todd Sullivan, a self-described value investor, said he is exploring the possibility of suing the plaintiff attorneys Motley Rice and the Rhode Island Attorney General’s Office in connection with the case brought on behalf of the State of Rhode Island (State of Rhode Island v. LIA, No. 99-5226, R.I. Super., Providence Co.).
Litigation ‘Wrong’
Sullivan said that the litigation against Sherwin-Williams and others is “wrong” and that the former makers of paint and pigment should be paid restitution for their defense costs.
The money being spent on litigation should be spent on growing the companies, Sullivan said.
Sullivan said that based on conversations with attorneys, he is confident that the Rhode Island lawsuit will move to the federal level as defense counsel file a case on constitutional grounds.
Once in federal court, Sullivan said, he is “sure it will be overturned.”
Should that happen, Sullivan said he would file a case on behalf of shareholders, alleging that the plaintiff attorneys’ actions devalued the defendants’ stock and that the companies should be compensated.
Furthermore, Sullivan said the combination of federal action and a shareholder lawsuit will have a chilling effect on other jurisdictions, such as Ohio.
Otherwise, Sullivan said, “we are looking at the next wave of corporate bankruptcies.”
Today is Good Friday and the US Markets are closed.
1-Why did Rhode Island AG Patrick Lynch give the $1 million Dupont Lead Paint “Settlement” money to Brown University rather than cleaning up lead paint with it?
2-Asking a question about a particular security?
In Ohio, in response to the possibility of Ohio Attorney General Marc Dann filing a lawsuit against former lead paint companies Senate President Bill Harris (R-Ashland) and OH House Speaker Jon Husted (R-Kettering) issued the following statement:
If that wasn’t enough good news for Sherwin-Williams (SHW):
Close on the heels of acquiring city-based Nitco Paints, Sherwin-Williams plans to acquire two more local firms. The $7.1-billion US-based company, the second-largest paint maker in the world, has allocated around Rs 600 crore for the two acquisitions this fiscal, according to company sources. The DNA reported
The acquisition of Nitco Paints is just the beginning of Sherwin-Williams’ journey in India, Christopher Connor, chairman and CEO of Sherwin-Williams, told DNA Money on Wednesday. “There is more to come soon,” he said on the sidelines of an event to announce the acquisition of Nitco Paints.
Sources further said that Sherwin-Williams has drawn up a huge spread for India, involving exclusive retail outlets across the country and entering into exclusive tie-ups with leading real estate developers and builders for exterior paints Sanjiv Batra, CEO, Sherwin-Williams India, though, said, “I can’t disclose any future acquisition plans or fund allocations at this moment, but the company will grow at a rapid speed in the next few quarters.”
“Save your frightened song for when there is really something wrong! Don’t cry ‘wolf’ when there is NO wolf!” The Boy Who Cried Wolf , Aesop’s Fables
In case you missed it today and I think you would have had to have had no contact with the outside world in order to, researchers once again predicted an above normal hurricane season. Excuse me while I yawn at this one. In order to fully understand the true depth of my ambivalence, one must take a walk down memory lane and look at past hurricane forecasts. I am only going to go back the last 5 seasons here just to make a point:
The real question here the talking heads on TV ought to be asking is: “when haven’t they predicted an active season”? The answer? I do not know because the NOAA archives only go back to 1999 and only 2001 predicted a benign forecast of “normal to slightly above normal” hurricane activity. Every other year has featured an apocalyptic forecast. What do we as investors do then? This answer is easy, nothing. Meteorologists cannot even tell me with any significant accuracy if it is going to rain or not this weekend yet we are supposed to believe they can now predict a certain number of storms are going to form off the coast of Africa over 3,000 miles away and hit the states during the next 6 months? No way…..It is a fools bet. One also has to notice as they read the forecasts: “Why are they all basically the same?” 12-15 storms, 6-8 hurricanes, 2-4 majors. If every forecast is for the same number of storms, isn’t that then, “normal”?
But, what if they are right you ask? Well, if they are, there is nothing you can do about it so getting all worked up and trying to adjust your holdings now to reflect that is a lesson in futility. If you own stock in construction related companies (OC ), (SHW ), (HD ), (LOW ), you will benefit as repairs will boost sales. If you own USO and a storm hits the gulf, the increase in oil prices will benefit you. If oil goes up, ethanol companies like ADM benefit. If you own stocks in entertainment companies, you will suffer as this discretionary income will go toward other uses.
The really ugly truth is that hurricanes, unless they are Cat. 4 or 5 and cause massive damage to a major city and port like Katrina did, are not bad for the economy and actually provide a stimulus. After the brief interruption during and immediately after the storm, the rebuilding increases economic activity. When you have a slowing housing market and laborers out of work, nothing will put them back to work faster than a CAT-3 hurricane that damages 100,000 homes. No, I am not rooting for hurricanes and no, I am not hoping to profit from them, (though the ValuePlays Portfolio will) I just need to interject a little reality here to help you wade through the barrage of inane hysteria you are being assaulted with today.
What happens in the aftermath of a hurricane? Homes and businesses are damaged and /or destroyed and cleanup and repair then begins. Immediately federal and state funds flow into the area to clean up the mess providing additional jobs and money. Then, insurance proceeds come pouring in to add even more stimulus and jobs as residents try to rebuild thousands of homes and businesses at once . Of course there are areas of suffering and that cannot be avoided, but in the aggregate, there is a significant economic stimulus to the area for years to come.
The bottom line is that it has become painfully apparent we are always going to get a forecast that is for “above normal” hurricane activity. Worrying about it or trying to adjust your portfolio for this presumed alleged event in April is a colossal waste of time.
The phrase “to cry wolf“, derived from the fable, refers to the act of persistently raising the alarm about a non-existent threat, with the implication that the person who cried wolf would not be taken seriously should a real emergency take place. It can also be used to describe an alarm system that regularly goes off falsely, causing it not to be believed when a real emergency occurs.
Forecasters beware…
