Archive for April, 2007

  • Citigroup Settles With Thomson
    , April 11th, 2007 at 10:54 am

    The Financial Times reports:

    Citigroup has agreed severance terms with Todd Thomson, who was sacked as head of its wealth management arm in January, as the group prepares to announce a shake-up plan involving the loss of more than 15,000 jobs.
    The agreement follows weeks of tough negotiations over the size of Mr Thomson’s settlement and restrictions on poaching staff.
    Mr Thomson said he was sacked without cause and the company has never publicly suggested otherwise. However, people familar with the situation said he was sacked partly for conspicuous spending including corporate sponsorship of events involving Maria Bartiromo, the CNBC correspondent.
    One person familiar with Citigroup’s negotiation said Mr Thomson “was paid for the time he worked for the company.”
    Mr Thomson, who previously served as Citigroup’s chief financial officer and was once seen as a potential successor to Mr Prince, said on Tuesday night: “I am very pleased with the settlement, happy to close this chapter, and excited to move on to some new opportunities.” Mr Thomson has set up an investment vehicle and has also received a number of approaches from other companies. Most of these have been from private equity firms, either to run portfolio companies or to join as a partner.

    I was really hoping for the headline, “Thomson Looking for New Partner,” but no such luck.

  • The Latest Housing Boom
    , April 11th, 2007 at 10:22 am

    Would you believe it’s in Northern Ireland?

    The average cost of a home rose 37 percent last year to 195,751 pounds ($383,183), according to the University of Ulster. That’s at least 5 percent more than the U.K. national average and nine times the gross local average salary. Only London and southern England are more expensive.
    House prices in Northern Ireland have quadrupled since 1994 after tracking consumer prices during the previous decade, said Alistair Adair, a professor at the University of Ulster.

  • Sin Stocks Do Better
    , April 11th, 2007 at 10:12 am

    Personally, I don’t see anything morally wrong with drinking, gambling or smoking, but much of society seems to frown on this. Since the beginning of the year, it’s been illegal to smoke in bars and restaurants in Washington. Now there’s some academic evidence that shows that “sin stocks” are pretty savvy investments.

    ”While sinful stocks aren’t necessarily good for the soul, they do deliver higher returns,” said Marcin Kacperczyk, a professor at the Sauder School of Business at UBC. “There is a societal norm against funding operations that promote human vice and that some investors, particularly institutions subject to public scrutiny and social norms, pay a financial price for not holding these stocks,” the study said on Tuesday.
    Sin stocks out perform their comparables by about 30 basis points a month, the study found. And they come cheap — the market-to-book ratios of sin stocks were on average about 15% lower than those of other companies between 1965 and 2004.

    Here’s the paper.

  • Danaher’s CEO Rakes In $46 Million
    , April 11th, 2007 at 9:42 am

    The Washington Post reports that H. Lawrence Culp Jr., Danaher’s CEO, made $46.2 million last year. Interestingly, this is in the ballpark of what Lloyd Blankfein and Stanley O’Neal made, but because Danaher tends to stay out of the spotlight, Culp’s pay isn’t attracting much attention. (Plus, the firm is based on Congress’ home turf.)
    Like many executive pay packages, most of Culp’s pay is in the form of stock options. The Post notes that at the stock’s present value, Culp’s options are worth more than $100 million. Of course, let’s look at the results:

    Last year, Danaher’s profit rose 25 percent, to $1.1 billion from $898 million in 2005. Revenue grew 20 percent to $9.6 billion. Culp said recently that his goal is to reach $25 billion in sales by 2012.
    Since taking over in May 2001, Culp has bought more than 30 companies and doubled Danaher’s market value. His purchases, which include dental products company Sybron Dental Specialties for about $2 billion, have expanded Danaher’s presence in the medical and dental industries.

    No one is complaining about his pay, and no one should.

  • Shareholders Fight Back
    , April 11th, 2007 at 9:38 am

    The private equity buyout of Clear Channel (CCU) isn’t going as smoothly as planned, and I’m happy about it. I don’t have a personal stake either way, but I’m glad to see shareholder activism, even in the form of large mutual funds, have an effect on buyouts.
    The Wall Street Journal reports that two of CCU’s largest shareholders, Fidelity Investments and Highfields Capital, aren’t pleased with the private equity offer of $37.60 a share. The deal on the table will be funded with $23 billion of debt.
    The private equity group, which is being led by Thomas H. Lee Partners and Bain Capital, may have to raise the bid to $40 a share in order to win two-thirds of the shareholders’ votes.
    This is good news because if this deal gets blocked, it will reverberate across Wall Street and many potential deals will be scrapped. Put yourself in the shoes of a member of a private equity syndicate; you want as little trouble as possible. The theoretical benefit of going private is that you don’t have to deal with shareholders, but now you’re in the midst of a big proxy battle. Who needs that? Even if you win, you may have to raise your bid.
    The reason the private equity deals have come is because they think it’s worth the effort. If shareholders are smart, they can change that.

  • The Hedge Fund Wives
    , April 10th, 2007 at 1:23 pm

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    Haven’t you always wondered about the wives and girlfriends of hedge fund managers? Gee, I know I have. Forunately, we have New York, the magazine, to fill us in:

    2. Anne Dias Griffin
    36, wife of Kenneth Griffin
    French-born Dias Griffin graduated summa cum laude from Harvard Business, and cut her teeth at Goldman Sachs in London before founding the $55 million Chicago-based Aragon Global Management, one of the largest hedge funds managed by a woman. She and her husband gave $19 million to the Art Institute of Chicago—the site of one of their first dates—for a modern-art wing designed by Renzo Piano.

    The FT’s Alphaville says that this comes “close to the boundaries of good taste.” Well, it’s not like they listed the boyfriends of top hedgettes.

  • NASDAQ lists most IPOs since 2000
    , April 10th, 2007 at 1:17 pm

    Interesting:

    The Nasdaq Stock Market, Inc. listed 42 initial public offerings in the first quarter, including National CineMedia Inc., the largest year-to-date U.S. IPO.
    NASDAQ recorded its strongest first-quarter performance for IPO listings since the beginning of 2000, the New York-based exchanged announced yesterday.
    In total, NASDAQ captured 73 new listings in the first quarter.

  • Seven Straight Up Days for the Dow
    , April 10th, 2007 at 11:34 am

    The Dow has risen for the last seven sessions. Today could be day #8, but we’re currently down 3.9 points.
    The Dow last had an eight-session win streak four years ago, at the beginning of the bull market. The Dow hasn’t had a nine-session win streak in over ten years.
    In1987 when the Dow rose for the first 13 trading days of the year. Of course, we know what happened later that year.
    The Dow rallied for 12 straight days twice, once in 1929 and again in 1970. The streak in 1929 came right after a six-day win streak for a combined 18-of-19 streak. Again, we know what happened later that year.
    The record is from 1897 when the Dow rose for 14 straight days.

  • Earnings Preview: Bed Bath & Beyond
    , April 10th, 2007 at 10:47 am

    Tomorrow, Bed Bath & Beyond (BBBY) reports its fourth-quarter earnings. Like many retailers, the company’s fourth-quarter ends in February so it can take in the entire holiday shopping season. That’s a big time for BBBY. Historically, more than one-third of their profits come during the fourth quarter.
    Sales have been growing in the low double-digit rate for the past few quarters, so I’m looking for a top-line number of about $1.9 billion. That works out to about 12.7% growth which should give the company a net earnings figure of about $222 million, or roughly 78 cents a share, which is exactly what the company told us to expect. It could be slightly higher or lower, but either way the company’s results are fairly easy to forecast. Despite what many people think, the slowdown in housing doesn’t affect BBBY that much.
    The company has also warned us of a $40 million charge, or about 14 cents a share, to help employees out with the tax consequences of options grants. This came about as the part of the company’s options review.
    I also expect BBBY to give us a peak at what they expect for this year. I think the company should be able to make about $2.40 a share this year. Barron’s mentioned earlier this year that if BBBY exceeds its conservative expectations, the stock can go to the upper-$40s, which certainly seems reasonable.
    On last quarter’s conference call, the company said that it’s targeting sales and EPS growth of 10% a year. I think they’re obviously low-balling, but that’s how they do things. The other thing to watch is BBBY’s number of outstanding shares. The company has been buying back its stock at a nice pace for the past few years.
    For some reason, $43 a share has been like Krypton for this stock. Let’s hope that changes in the next few weeks.
    The AP has more.

  • Wall Strip Looks at the Refiners
    , April 10th, 2007 at 9:41 am

    Here’s a trend I wish I had spotted early on. The oil refinery stocks have been spectacular for the past five years. In today’s Wall Strip, Lindsay looks at two in particularly, Valero Energy (VLO) and Tesoro (TSO).
    From its 2002 low, Valero’s stock is up more than tenfold. Tesoro’s rise has been ever more dramatic. In October of 2002, the stock closed as low as $1.33, and it’s currently over $107.
    The good times may be coming to an end. Earnings for both stocks are expected to slip this year and next. Also, the price of oil took a big hit yesterday.