Archive for 2005

  • Tradesports Baseball
    , October 18th, 2005 at 6:06 am

    I’m a big fan of Tradesports. This is a Web site where you can buy futures on real world events. They currently have contracts on everything from the World Series and Super Bowl to the presidential election and capture of Osama Bin Laden.
    Here’s a chart of the futures contract for the Cardinals to win last night’s game. You can tell when Berkman hit his home run in the seventh and when Pujols crushed Lidge’s pitch over the railroad tracks in the ninth.
    Now if I had only loaded up on Cardinal contracts in the ninth….

  • WSJ: Medtronic Says Stent Trial Meets Secondary Goals
    , October 17th, 2005 at 10:51 pm

    CHICAGO — Medtronic Inc. (MDT) said its Endeavor III drug-eluting stent trial barely missed its main goal in a patient trial, and that secondary goals were met.
    On the whole, the company said, data from the trial put Medtronic’s Endeavor stent in the same safety and efficacy category with competitors Johnson & Johnson and Boston Scientific Corp., and will allow Medtronic to file next year for U.S. approval of its product, with final Food and Drug Administration approval coming sometime in 2007.
    Stents are tiny metal tubes designed to keep arteries propped open after angioplasty. Drugs added to the stents can help prevent renarrowing of the vessels.
    The main goal of the 436-patient trial was to compare Endeavor with J&J’s Cypher stent in the category of in-segment late loss. This refers to the difference in the width of a vessel just after stenting versus several months later. A small narrowing is almost always the case, and is considered relatively benign. But more advanced narrowing can eventually lead to blockage that must be retreated. “We narrowly missed,” said Scott Ward, president of Medtronic Vascular, referring to narrowing of the vessel width.
    Patients in the trial received either a Cypher or an Endeavor stent, with 323 of the 436 receiving Endeavor. The goal was to prove Medtronic’s stent to be non-inferior to Cypher.
    In other categories, however, Medtronic said its stent was clinically equivalent to J&J’s. For instance, in measuring the need for physicians to go back in and retreat the same lesion weeks or months after the original procedure due to complications, Medtronic’s stent had a 6.3% rate after nine months, compared with 3.5% for Cypher.
    In the category of major adverse coronary events, which can include everything from need for repeat procedures to heart attack to death, Endeavor’s rate was 7.6%, compared with 7.1% for Cypher. The rate of target vessel failure was 12% for Endeavor and 11.5% for Cypher.
    Cordis, J&J’s coronary company, issued a statement that said, “As with other drug-eluting stents, the real test will be how the Endeavor stent performs over time and whether it can perform well in complex lesions.” Boston Scientific didn’t have an immediate comment.

  • Today’s Market
    , October 17th, 2005 at 6:01 pm

    Varian Medical Systems (VAR) bailed us out today. The stock jumped 10%, but the rest of our Buy List was pretty soggy. The Buy List dropped -0.08% today, even though the S&P 500 added 0.30%. However, we’re still beating the market for the month.
    This was a strange day because we had such a wide divergence between the energy, utility and materials sector compared with everything else. Those three sectors each rose over 1% today, while many of the other sectors were vitually unchanged.
    Varian said that demand for its new radiation therapy products will increase net orders for the quarter by about 18% compared with the same period a year ago. The company also unveiled its new software, ARIA Oncology Information Management System, which can be used to manage cancer treatment centers, as well as radiation and oncology departments, without the use of film or paper. The company will report earnings next Wednesday, October 26.
    Commerce Bancorp (CBH) took a hit today even though I think its earnings report is just fine. Stephen D. Simpson at the Motley Fool has more.
    St. Jude Medical (STJ) rallied on its strong earnings, plus the news that it’s buying Advanced Neuromodulation Systems (ANSI). ANSI was up 30% today.
    Brown & Brown (BRO) reported earnings of 50 cents a share. That’s either inline or a penny off, depending on whom you follow. Last year, Brown & Brown earned 43 cents a share, so this is goodgrowth. Revenues were up 18.9%. The stock was weak today, but it just hit an all-time high on Friday.
    Progressive (PGR) was hit after it was downgraded by Legg Mason to a “hold.” The new price target is $117. Lincare, Frontline Airlines (FRNT) and CACI International (CAI) were also weak today.
    From our Buy List, Stryker (SYK) reports tomorrow. The current estimate is for 41 cents a share.

  • Citigroup’s Earnings
    , October 17th, 2005 at 2:40 pm

    Citigroup (C) reported third-quarter earnings today of $7.14 billion, but I’m not impressed by this earnings report. Don’t get me wrong: $7.14 billion impresses me, but not how Citi got it.
    First off, it includes $2.12 billion for the sale of Travelers Life & Annuity to MetLife (MET). When you take that out, Citigroup only made 97 cents a share. That’s just one penny a share better than last year. Also, the firm lost four cents a share due to Hurricane Katrina. I’m sorry, but that’s not a “special item.” Wall Street tends to overdue it on these “special non-recurring items.” Losses from a hurricane are simply a part of doing business. Hurricanes can recur. In fact, they will.
    The investment banking unit is strong, but we’ve already seen great results this year from other houses like Goldman (GS) and Lehman (LEH). It’s good that this part of the business is holding Citi up, but the core operations are sluggish. Charles Prince, the new CEO, is still working to de-Sandify the company. I think he’s doing a good job, but Citi has a long way to go.
    I think that the real problem is that “Citi” as it’s now constructed doesn’t work. Big doesn’t mean better. Commerce (CBH) is so much stronger than Citi right now even though it’s around 1/40th the size. With Sandy out of the way, Prince & Co. should break up the company. The Travelers Life & Annuity sale should be the first of many more sales. A breakup will be better for shareholders, customers and employees.
    Citigroup is a good example of a stock that looks cheap, but really isn’t. The firm is still on the Federal Reserve’s Double Secret Probation. Citigroup is barred from making any more acquisitions. Now that it looks like any new Fed chair will be raising rates next year, I’d stay far away from Citigroup.

  • Commerce Bancorp Earns 45 Cents a Share
    , October 17th, 2005 at 9:14 am

    In September, one of our favorite Buy List stocks, Commerce Bancorp (CBH), warned that the narrowing yield curve was hurting its earnings. The company said it was going to earn 45 cents a share, two cents below Wall Street’s forecast. The stock promptly dropped 7%. Today, the company reported that it did indeed earn 45 cents a share. The good news to look at is that deposits are up 27%. The company opened 16 branches in the third quarter, and plans to open 25 to 30 more by year end. It ended the quarter with 342 branches. This is still an excellent stock.

  • General Motors Posts Loss of $1.92 a Share
    , October 17th, 2005 at 8:52 am

    General Motors (GM) reported a third-quarter loss of $1.6 billion, or $1.92 a share. That’s simply staggering. The company doesn’t provide any guidance, but Wall Street expected a loss of 81 cents a share. GM still has over $20 billion in cash left, but it’s burning through it pretty quickly.
    The company also announced a major deal with the UAW to cut health care costs by 25%. The details haven’t been reported yet. This will help, but GM still has a long way to go. The company pays a dividend of $2.00 a share. If they ditch the dividend, GM will save about that same amount as this plan to cut health care costs. The company is also looking to sell a controlling interest in GMAC.

  • St. Jude’s Earnings
    , October 17th, 2005 at 8:29 am

    St. Jude Medical (STJ) reported that its earnings rose 28% for the third quarter. After charges, the company earned 40 cents a share, one cent more than Wall Street was expecting.

    Sales of implantable defibrillators—surgically implanted devices that correct an abnormal heartbeat with a jolt of electricity—rose 68 percent to $277 million from a year ago. Rival Guidant Corp. spent the third quarter dealing with a recall affecting thousands of similar devices. St. Jude pacemaker sales increased 6 percent, to $231 million from the year-ago quarter.

    The stock is trading higher in the pre-market.

  • St. Jude Medical to Acquire Competitor
    , October 16th, 2005 at 9:29 pm

    St. Jude Medical (STJ), one of our Buy List stocks, is buying Advanced Neuromodulation Systems or ANS (ANSI) for $1.3 billion in cash. I think this is a great move; ANS is an outstanding company. I’d put it on the Buy List if we didn’t already have St. Jude. Also, I love the “all cash” part. Stock-for-stock deals make me a little nervous. St. Jude is paying a 30% premium. This is their counter move to J&J (JNJ) gobbling up Guidant (GDT). St. Jude said it expects revenue growth of more than 20% next year as a result of the deal.

  • Apple Trademarks “Vingle”
    , October 16th, 2005 at 9:50 am

    Apple Computer (AAPL) has filed to trademark “Vingle.” What the hell is Vingle? AppleInsider is on the case:

    The first filing describes Vingle as: “Telecommunication services, namely, electronic transmission of streamed and downloadable audio and video files via computer and other communications networks; providing on-line chat rooms, bulletin boards and community forums for the transmission of messages among computer users concerning entertainment, music, concerts, videos, radio, television, film, news, sports, games and cultural events; web casting services; delivery of messages by electronic transmission; provision of connectivity services and access to electronic communications networks, for transmission or reception of audio, video or multimedia content;”
    A second filing describes Vingle as an audio entertainment service that may be available in its retail stores: “Retail store services in the field of entertainment, namely, musical, audio and audiovisual works and related merchandise, provided via the internet and other computer and electronic communication networks; data storage and retrieval services; computerized data storage services; electronic storage and retrieval of documents, data, images, audio, video and audiovisual works; information, advisory and consultancy services relating to all the aforesaid”
    A final filing is more vague, describing Vingle as “Computers; computer hardware; computer peripherals; hand held computers; computer terminals; personal digital assistants; electronic organizers; electronic notepads; apparatus for recording, transmission and reproduction of sounds, images, or other data; portable and handheld digital electronic devices for recording, organizing, transmitting, manipulating, and reviewing audio, video and still images files; magnetic data carriers; mobile digital electronic devices; telephones; computer gaming machines; monitors, displays, keyboards, cables, modems, printers, videophones, disk drives; cameras; computer software; computer software for use in authoring, downloading, transmitting, receiving, editing, extracting, encoding, decoding, playing, storing and organizing audio, video and still images; computer software for DVD authoring; prerecorded computer programs for personal information management; database management software; computer programs for accessing, browsing and searching online databases; blank computer and consumer electronic storage media; computer and electronic games; user manuals sold as a unit with the aforementioned goods”
    All three filings were made on October 7th.

    Sounds ambitious. I’ve read it several times now and I still don’t understand it. Anyway, sounds ambitious.

  • General Motors: The End Is Near
    , October 15th, 2005 at 8:34 pm

    Is this weekend’s Barron’s, Jay Palmer looks at General Motors (GM). It ain’t pretty.

    GM’s legacy obligations include over $60 billion for the company’s biggest millstone: health care. But “even if the unions and the retirees agreed to a 100% elimination of all pension and medical benefits,” says Ron Tadross, a Banc of America auto analyst, “GM would still not be especially competitive.” Ranked against rivals like Toyota (TM), GM operates at a $2,500 disadvantage per vehicle, losing money, on average, on every vehicle it sells, versus Toyota’s $1,700 profit. Legacy costs account for just $500 of this.
    Tadross has said that the chance of GM filing for bankruptcy now stands at 30%. And two other well-known auto analysts, who asked not to be identified, tell Barron’s that the odds are 50-50.

    I have no idea what Kirkorian was thinking. One of my rules is that eccentric billionaires are allowed to make one investment that defies all logic (Buffett and U.S. Air, Howard Hughes and RKO, Gordon Gecko and Bluestar), but I don’t think GM can be saved. Palmer disagrees:

    The basic problem, as Barron’s has noted on several occasions, is that the company hasn’t come up with enough vehicles that it can sell without giveaway incentives and hasn’t shrunk its capacity to match its reduced U.S. market share. The blow that high oil prices have dealt to sales of SUVs, on which GM depends heavily, is exacerbating the problems.
    To survive, let alone prosper, General Motors must close plants, lay off workers, deeply cut or temporarily eliminate its $2-a-share dividend, cut executive pay and bonuses, and redirect resources from its marginal brands. With revitalized Cadillac on a roll and Chevrolet more than holding its own, the Saab and Hummer operations are good candidates for a sale or closing. Saturn also might be a candidate for elimination, although GM executives insist all three brands are essential to bringing non-GM owners into showrooms. Some feel the company should also shutter Pontiac or Buick. It has to take at least some of these actions soon.