Archive for August, 2006

• Is Google Following Oil?
  Eddy Elfenbein, August 22nd, 2006 at 5:01 pm

  I’m not sure, but you can judge for yourself. Here’s the Oil ETF (USO) against Google (GOOG) since May:
  

• Expeditors 8-K Gets a Bad Review
  Eddy Elfenbein, August 22nd, 2006 at 2:48 pm

  Every few months, the folks at Expeditors International (EXPD) answer investor questions in their 8-K report. It’s a great company but their answers sound like they’re written by bratty seventh graders.
  Soooo…one analyst took it upon himself to edit the Q&A session and send it back to the company. Expeditors was not amused:

  21. I have been a hands-on securities analyst on Wall Street since 1962 [44 years]. During that time, I have read many thousands of different Management Descriptions & Analysis in 10Ks and elsewhere. I must say that I am otherwise quite impressed with your management’s performance, and am considering investing in Expeditors. But —granted that some of the selected inquiries that you invited were not especially sophisticated or relevant — as a new reader of Expeditors’ CEO & CFO’s responses to investor questions I find your management’s tone to be astonishingly smug and condescending, and I find your wise-cracking style unnecessary and un-professional and insulting to me, an interested investor. Attached is my copy of your May 23 rd 8K, which I cleaned up to make it more focused and less disrespectful to those investors you invited to query management. If I had been one of the inquirers and read your wise-ass response to me, I would be quite offended. Contemplate cleaning up the inappropriate standup comedy act: it ain’t funny!

  (more…)

• Rising Oil Prices
  Eddy Elfenbein, August 22nd, 2006 at 11:43 am

  The real reasons from The Onion:

  Increased demand from oil collectors
  More people starting to realize how delicious it tastes
  Lack of dinosaurs dying en masse
  Paris Hilton seen at red-carpet gala wearing nothing but crude petroleum
  Urban children opening oil hydrants to cool down
  Wife keeps driving to Kroger’s every day for some goddamn thing
  Oil paintings sold in Holiday Inn Express lobbies finally earning respect of art world
  Worldwide barrel shortage

• Wachovia Raises Dividend
  Eddy Elfenbein, August 22nd, 2006 at 11:02 am

  I haven’t talked much about Golden West Financial (GDW) since the merger announcement with Wachovia (WB). It’s sort of a dull company and doesn’t generate much excitement.
  At the end of this month, GDW shareholders will vote to approve the merger. Most of the criticism has come from WB shareholders who think the deal is worth too much. That stock has dropped about 6% since the deal was announced. Assuming all goes well, our GDW shares will soon be exchanged for 1.051 shares of WB, plus $18.65 in cash.
  For track record purposes, I’ll assume that all the cash was invested in Wachovia stock. Today, Wachovia announced a 10% increase to its quarterly dividend, from 51 cents a share to 56 cents a share.

• The Long Tail
  Eddy Elfenbein, August 22nd, 2006 at 10:54 am

  Here’s an interesting interview with Chris Anderson, the author of The Long Tail.

• One Wall Street Inc.
  Eddy Elfenbein, August 22nd, 2006 at 10:09 am

  I know this is cynical, but as soon as I read the beginning of this WSJ story, I knew where it was going:

  The SEC complaint, filed yesterday in U.S. District Court for the Eastern District of New York, accused One Wall Street Inc. and its chief executive, among others, of selling securities to at least 64 investors, falsely promising that the company would soon conduct an initial public offering and that it was preparing to merge with E*Trade Financial Corp.

  You know it’s coming.

  Instead, the SEC said, Chief Executive Donte Jarvis used the proceeds as “a personal piggy bank,”

  Not yet.

  paying for jewelry,

  Almost.

  gambling

  A little more.

  and “adult entertainment” services.

  Bingo!

  The 31-year-old also was accused of giving his wife, La Shondra Hatter, at least $166,000 in checks drawn on the One Wall Street account. One Wall Street allegedly raised money by issuing unregistered securities starting in March 2003.

  This further confirms the “Elfenbein Hypothesis,” which states that the securities and porn industry are slowly converging.

• David Phillips on Biomet
  Eddy Elfenbein, August 22nd, 2006 at 9:46 am

  David Phillips at 10-Q Detective looks at Biomet (BMET), one of our Buy List stocks:

  Biomet is in the midst of several major product launches and management anticipates that the Company will continue to be rolling out instruments at least early into fiscal 2007.
  Looking ahead, Biomet said it remains “comfortable” with analysts’ sales and earnings estimates of $513 million to $530 million and 43 cents to 45 cents per share for the first quarter of fiscal 2007, and $2.15 billion to $2.22 billion and $1.85 to $1.95 per share for fiscal 2007.
  The Company’s valuation looks attractive. The Common Stock’s valuations are priced at multi-year lows. For example, BMET’s P/E is only 17.5 times forward May 2007 consensus estimates of $1.87 per share [low end]. This is a 38.5% discount to its trailing five-year mean multiple of 28.5 times earnings. And with an estimated forward five-year EPS growth rate of 15.0%, the Company’s PEG multiple is an attractive 1.2 times [in line with its peer group multiple, which includes Stryker Corp., Zimmer Holdings, and Smith & Nephew].
  Value investors might also note the predictable 30% operating margins, and the 20.4% return on capital (compared to its cost of capital of 5.8%).
  Tempering these valuations, however, is the boring—in your face—thesis that there are few catalysts on the event horizon to expand valuation multiples (such as a turnaround in its EBI operations or margin improvement gains).
  Patient investors with a longer-term view might consider the current price as an entry point, but (with a dividend yield of 0.90%) we prefer to put our dollars to work elsewhere.
  In April 2006, the Company confirmed that it hired investment banker Morgan Stanley to help explore future strategies, including a possible move to put itself up for sale. Analysts have cited Medtronic and Smith & Nephew as potential buyers. The asking price for Biomet, should it decide to sell, could be more than $10 billion—or approximately $44.40 per share.

• Andy Young and Wal-Mart
  Eddy Elfenbein, August 21st, 2006 at 11:58 am

  Many of Wal-Mart‘s (WMT) critics overlook the fact that the company’s shares haven’t done particularly well over the past few years. Since the beginning of 2003, the stock is down 10% while the S&P 500 is up over 40%. Of course, that may please some of critics.
  The company has embarked on a much-needed PR compaign. As I said before, this may be the world’s first PR campaign that itself needs a PR campaign. Now Andrew Young has defended the company due to its bigotry:

  Young was asked whether he was concerned Wal-Mart causes smaller, mom-and-pop stores to close. “Well, I think they should; they ran the `mom and pop’ stores out of my neighborhood…But you see, those are the people who have been overcharging us, selling us stale bread and bad meat and wilted vegetables. And they sold out and moved to Florida. I think they’ve ripped off our communities enough. First it was Jews, then it was Koreans and now it’s Arabs; very few black people own these stores.”

  Charming. Young is a former UN ambassador and winner of the Congressional Medal of Freedom. (Hat tip: Ideoblog via DealBreaker).

• To the Beach
  Eddy Elfenbein, August 18th, 2006 at 6:56 am

  
  That’s enough for me. I heading to Newport.
  I’ll be back Monday. Have a great weekend!

• Dell’s Earnings
  Eddy Elfenbein, August 17th, 2006 at 4:13 pm

  Dell (DELL) just reported earnings of 22 cents a share, in line with its lowered (um, dramatically lowered) guidance. For last year’s second quarter, Dell earned 38 cents a share. Sales were up 4.9%, not much higher than inflation.
  The stock was briefly above $23 a share earlier today, but it will certainly open lower tomorrow. The stock may be a little cheap in the near-term, but I really underestimated the problems at Dell. Worst of all, I no longer find management credible. Their reassurances have all come to nothing.
  Here’s a thorough look at Dell I did when earnings came out last quarter.