Well I've been on Elite Trader for what feels like a very long time. I've seen many a compatriot vanquish into nothingness and a whole group of you may not of been around in the good old days when we played THE BARRONS GAME. For the uninitiated, THE BARRONS game is when we read Barron's together and as a community pick ONE idea out of the rag and ACTUALLY BUY IT! Now back when life seemed freer and the beer tasted better, this fun game yielded a winning percentage over 80%. Not only did we have a fun read together but we made money. Now of course with such hardship all around it may be much harder to win at the Barron's Game... or much easier, I'm not sure... so without further ado, your host for the festivities.... STONEY! Thank you Wink. Today folks since we have not played in so long we are going to skip Alan A and the usual upfront negativity and start with the market Week portion and work our way back. Lets begin. Dow tumbles 5% in Volatile week. tell me something I don't know... the only problem is we are in a rally and Barron's doesn't even know it. The charts all look the same, in fact my four year old has taken to drawing a line that falls off to the right and he holds it up and says " look daddy it's going down. " I know son, I know. Buried at the end of Kopin Tan's article Dow Tumbles article is the truth as I see it... " positive divergences " are mentioned... those who know me know I live for them... it's what makes the crystal ball less hazy... anyway the low oil price has resulted in the Transports holding far above their lows as we revisit stocks bottoms... interesting the way the mechanisms of the market work... Also the amount of new lows in CONTRACTING! 1/4 of what they were on Oct 10. The " massive " redemptions at Hedge Funds is also mentioned and their now huge cash reserve... so what if they over shoot and redemptions are not that bad? A trading range is mentioned S&P 820-1000, any break over a thousand will lure all the Hedge money back in... so that is the plan.... my eyes glaze over the bear argument. 1st stock mention* Oil-Dri Corp! (ODC)..WTF! Cat Litter, oh no things have gotten this bad, what did we all buy back in the day Chemed? or something for the same reason- yes in a recession people STILL CANT STAND THE SMELL OF CATS! It's been proven. It's up 230% since 2001, take that tech! Just 13 X earnings, stk at $17. Hum, we are off to an interesting start! Now into Charting the Market and my eyes immediately land on GREEN MOUNTAIN COFFEE ROASTERS, @ $29 it's held up rather well, especially when you consider Starbuck's fate... they should more be compared to PEET. Company reported strong qtr & offered upbeat guidance, stk joted $25 to $31Yikes. This is the problem with the way I work- I massage watch lists until they are down to a buyable amount of companies that share certain aspects of growth, value and momentum... while general scans that pick up everything can be more useful for the active trader because names you used to cover but gave up on like GMCR pop up on volume and thus make it back to the watch list faster.... This is stk #2. On to Insider Buys and woa doggy HERBALIFE! jah love this stock in the old days... what- 5 different buyers??? have they reported yet... oh I'm getting excited this could be it... 63,200 shares, not bad.. not great... Stk #3 and looky looky ISTAR FINACIAL! I've been waiting for this tel.... here's a story- a father in my preschool who I am friendly with comes from the family of one of the first hedge funds or mutual funds I can't remember BIG Midwest money, anyway he's in big on this ISTAR and he told me about it at $15 and it's CRASHED horribly but I watch it because I know his team of guys did pick it, there must be some inherent value there... well a few days ago I saw in the paper biggest gainers almost all IASTAR preferred shares and huge gains of 30 plus %... so I looked at the common and it wasn't up that much and I dropped it... now in refection some announcement must have juiced those prefferds, like hey we can make the yield payments and now we have 2 insiders buying 506,000 shares!!! Oh folks, I'm getting a good feeling about this Barron's Game. stk #4 Moving On, big profile AMERICAN EXPRESS , holy crap it's down to $20. Maybe the world IS ending, I keep going back and forth. Down 61%. The essence of the article is Amex nowhere near it's cash / credit limit people misunderstand the co, yada yada, Barron's says in a year the stk should hit $30. Who can argue with that? Another strong contender folks. stk #5 Next Up GILIAD POISED FOR GAINS... one of 16 stks to own in a glabol recession says JP Morgan, I tend to prefer smaller bio players because they often get taken out by larger players so I don't know about this one. Aids is their specialty unfortunately still with us but maybe not top of the medical problem pyramid now. There is a kicker, the Gov is yanking a competitors product off the market... Glaxo's, so pe of 18 GILD is on the list @$44.45. #6 Brief defense of Barrons bull call on Starbucks... SBUK... hate this because I've begun looking into their real estate holdings and applying that to their stk price and now I have two coffee roasters on the list which is typical stonedinvesting, it's easy to chose the wrong one... often the worse story rebounds faster!... Ugh. The stk is under $9! Oppenheimer uses a model that looks out 10 yewars and factors in real estate and cost cutting and sales in a way I cannot they come up with a 1 YEAR price target of $22. Hummmm. Stk #7 On To Colgate and I'm not even going to read the article. Yes A very good IRA stk, people have to have toothpaste... but I will note that careful analysis at the retail level shows cutbacks in some surprising areas like Paper Towels and socks! Frozen food way up! Speaking of food and this is not in Barrons but I read where the Main lobstermen are hurting big time and the price of the worlds best lobster has plunged to that of frozen chicken. $3 something a pound now go around NYC and order lobster and you will note NO PRICE REDUCTION My favorite Lobster Roll place Pearl On I think Corneila street they have like a $27 whopper, are they bringing their price down? Hell no and their imput cost is 100% cheaper... makes you wonder on the bigger scale about low cost dining option RED LOBSTER doesn't it? They may be part of Brinker I forget.... Anyway, Latin American sales up huge for Colgate 21% in the 3rd qtr. Stk #8 Next Up HONDA! Yes already bought by my mother. her top pick for the year. My mother is near perfect in picking round trips, they all do go up a lot and they all do go right back to where they started. One can enjoy the ride though and apparently one can enjoy the ride in a Honda. My mom likes all the battery Green angles and the low millage the cars get. PE of 9 operating income down 41% but this is the best of a bad bunch. With all the buzz about saving our car makers-- I wonder if japan might throw some money at Honda to keep their great company ahead? That theory is not in the article but I'm putting it out there. I like this pick. Stk #9 CHARLES SCHWAB... Ok folks lets stop right here. This is a great BARRONS GAME! I've been playing with myself for all these weekends and the issues have sucked... the editors have really gone out of their way here to bring us some good ideas and we must listen. ( I know you all are going to clip that playing with myself part- but it's true in every way!) I'm not going to read this article either, the name has been brought to me already by a few smart people. Not great growth 2008 PE 15.8 , 2009 PE of 14.3, I usually look for a bigger spread there. Stk #10 In Dividends, Pharmaceutical Product developed is mentioned and they point to a prior bullish piece on the name on Aug 12... This is a very well run outsourcing co for drug makers and a stock I have used in years past. With a raised dividend PPD could certainly be worth a look. Especiallly since it's trading as a 50% off sale. Stk #11 And that's it folks. What a game. What a time. What new ideas we have.... ok let's run through the list.... PPD SCHW HMC CL SBUK GILD AMX SFI GMCR HLF ODC >>> Wow ELEVEN new names... the art of the Barrons game folks is first you read the long winded and negative paper through my eyes and my twenty plus years of investing pulls out the more relevant names... but THEN YOU THE ELITE TRADERS each leave a post here on which of the eleven is the best choice for IMMEDIATE investment... and then we buy the winner and make some money. In these hard times folks it's hard to generate watch lists, you buy stocks and just assume they are going to be down the next day... the uselessness of the endeavor makes one tend to stop and then you allow one stk on your list (AMAG) to explode for 80% with you on the sidelines and you remember why we all play the market in the first place. Lets hear from you all... do the research and have the reasons, we will not use popularity as our ultimate decision maker but rather popularity combined with best argument. Thank You all for playing THE B*A*R*R*O*N*S GAME!~ stoney
Interesting tid bit re kitty litter. "Taborsky worked as undergraduate lab assistant on a sponsored research project and discovered a potential way to make kitty litter useful in cleaning human waste water. The sponsor, utility company Florida Progress Corp., had an exclusive option to get all inventions coming from the project when Taborsky stole the lab notebooks and attempted to patent the discoveries." http://patentbaristas.com/archives/...nner-accused-of-stealing-invention-from-yale/ Reading thru the cc transcripts they mention project "snow drop" I wonder what that is? I'm going to do some more digging.
IT'S ANOTHER WEEK! Getting a late start this morning, no sleep last night as usual. I was so full of optimism when I began this Barron's Game, so many good ideas it seemed surely we can make some money off this overpriced rag of a magazine.... Early research has me tossing PPDI, I gave you the wrong symbol above sorry. They warned about 08' in january so how can things be better now? Schwab the best they can say for themselves is that that have said no to the TARP funds... Green Mountain looks pretty good and it had a big 7% sell off Friday. What happened Friday? I wasn't around and all these stocks look a lot cheaper. Weird, oh well, I'll just pretend it never happened. Green Mountain is a strong possibility. Starbucks is not.... Honda motor is ok but Toyota got a ratings downgrade today, too close to home... all of this is bringing us closer to the answer- CAT LITTER! May 1 CLOROX says CAT LITTER BUSINESS IS DELIVERING " VERY STRONG RESULTS THANKS TO FRESH EXPRESSIONS BRAND! " ugh what a gross title for a brand... those expressions don't seem so fresh when they miss the box! Clorox 6th connsecutive year of volume growth for cat litter! Church & Dwight, this is who I was thinking above befor not Chemed, they are in the cat litter business too.... booming sales, they estimate private label is 15%.... which brings us to little family owned ODC! Lets start with some words by the CEO- I have recently spoke to over 700 of our Oil-Dri employees and we only have 800 of them so I literally hit almost 90% of them, to deliver the message of how well the business is doing, how financially strong we are. One of the analogies or examples that I pointed out to them was Lehman. Everyone in our plant, everywhere around the country has followed the Lehman mess and how a 158 year old business could pretty quickly be catered. There are probably many reasons why but one of the biggest reasons why was leverage. They were levered at 30 to 1. Their debt to equity leverage was 30 to 1. Oil-Driâs is at .3 to 1 so they were 100 times more leveraged than Oil-Dri. Those of you who are long time followers of Oil-Dri, this is going to blow your mind. You can just run the math, if we wanted to get levered to 30 to 1 weâd have to go out and borrow over $2 billion, little Oil-Dri. As absurd as that sounds and as crazy as that sounds, respectable companies were doing just that and nobody was blinking an eye until these respectable companies go to the government with their palms up and look to get bailed out. As I closed with the Oil-Dri employees I said, âUnless you get too comfortable that okay theyâre just a rouge outlier, the Lehman Brothers and the AIGs of the world and there really arenât many other companies, certainly there arenât any household names that look like those guys. The fact of the matter is that there arenât a lot of companies that look like those guys.â I did a little search just for the fun of it and GE is levered at 20 to 1. Weâd have to borrow over $1.5 billion to look like GE. I donât even need to put any more adjectives on that. The fact of the matter is we are very happy that we have the capital and financial structure that we have. Could we use a little more leverage? Maybe, and it if the right opportunity comes up, certainly. Weâve shown in the past weâre not debt adverse at reasonable levels but, the one lesson that my father taught me from a very early age was you always match the length of the opportunity with the length of the investment i.e., you donât borrow short and invest long in illiquid assets that when things hit the fan you canât get out of. On the business- We had a strong fourth quarter revenue growth in both the retail wholesale products group and the business-to-business products group. We had record sales of $59.5 million for the quarter up 10% from last yearâs $54.2 million. The increase was due to higher average selling prices and increased volume. We were disappointed in the 18.9% gross profit margin in the quarter down from last yearâs 22.2%. Margins were negatively impacted by higher fuel, packaging and transportation costs offset by a $300,000 reduction in cost of sales due to the sale of emission credits. Operating expenses were 13.4% of sales which was down from 18.2% as a percentage of sales in last yearâs fourth quarter. Net income was 4.1% of sales which was up from 3.8% in last yearâs fourth quarter. EPS in the quarter was $0.34 up 17% compared to $0.29 in last yearâs fourth quarter. Dividends paid for the year of $3.4 million were up 11% in comparison to the prior year. We finished the year with cash and investments of $27.8 million compared to last yearâs $30.0 million. Cash and investments exceeded notes payable by $684,000 at July 31, 2008. Itâs a great time to have such a strong balance sheet. Our stock price, at least last time I checked was up to about $12.25 from a low of about $11.60ish. At that range our PE now is under $10 and our dividend yield is over 4.5. Itâs an interesting valuation to say the least. In a conference call analysts debate the " all in " stratagy of the company- Our, what we call our 2008 all in initiative launched on time and on budget. Weâre just now getting it out to the marketplace, getting the necessary registrations, we have very high expectations for that. We are already investing in the 2009 all in initiative which will be launched sometime towards the end of this fiscal year. Additionally, and I think I mentioned these on prior conference calls, we did launch a couple of cat litter items, Catâs Pride Natural to go with the green movement and Catâs Pride Complete to go right after multi cat owners who want the best odor control. Those have been received very well and are doing well. Knock on wood, so far all new product launches are moving in the right direction. Robert Smith Dan, what is all in? Daniel S. Jaffee All in is just a term, obviously itâs a general term but for us it focuses us. When we were trying to do everything we tended to get nothing done and so we identify one real big opportunity every year that everybody can rally around, we can put our resources behind and we can make sure that we nail it. Both from a manufacturing standpoint but also from a support standpoint, a marketing standpoint and itâs clearly going to be in line with our mission of creating value from absorbent minerals. Robert Smith But you havenât said what it is or have you? Daniel S. Jaffee We havenât to you. Those internally all know what it is. Robert Smith So when can you do that? Daniel S. Jaffee Well, itâs like anything, you want us to maximize your investment so the earlier we start cheering before we get in to the end zone, the greater chance the defense is going to tackle us. Robert Smith No, all Iâm asking is when you think you might be able to tell us something? Daniel S. Jaffee I mean Charlie can answer that better than I can because it comes down to an SEC materiality. Charles P. Brissman Bob, as youâve heard us say in prior years, our general approach on these new product initiatives is we donât even think about talking to the investment community about them until the disclosure rules tell us itâs time to talk about them. We hope a lot of time doesnât pass because it will tell us weâre off schedule in how weâve envisioned these initiatives moving forward. But, youâve heard Dan say our 2008 initiative is off and running, weâre queued up with the 2009 initiative. As soon as we have to talk about them with you, we will and it will be a great day for Oil-Dri and its stockholders. Robert Smith It sounds very mysterious to me. Charles P. Brissman Bob, Iâll just say this, I think over the years most of you have picked up that part of the Oil-Dri personality is to not sort of beat our chest and say, âLook at us.â Very often Danâs remarks at the opening of the call today are about as far as youâre ever going to see us go and thatâs only because the way weâre running our business is so very different from the vast majority of American businesses that are currently in the news. Robert Smith But in the past when the product has come to the market, youâve shared what it was with us. Charles P. Brissman Iâm not sure Iâd agree with you. Jim Swartz Just curious, nationwide distribution that you guys have has that become a pretty sustainable advantage in this environment? And, who else that you compete against has the kind of nationwide distribution you have? Daniel S. Jaffee Are you referring specifically to cat litter? Jim Swartz To cat litter, yes. Daniel S. Jaffee Itâs a huge source of sustainable competitive advantage for us. The only other player that has a similar layout, although not the same would be nationally Purina and they focus on branded products as you would expect. So, from a private label cat litter standpoint we have by far the best geographic layout in an area, private label..... VERY INTERESTING STUFF... It's all about tonnage and although the amount of cat litter they formulate has remained constant yoy, the price received has gone up! ODC is turning out the same million tons but now they're getting $226 a ton instead of $150 per ton so the business has been able to grow accordingly.... If they can nail a new product (presumed by me to be Green-friendly) This stock could really soar and with a long long history of paying dividends this is a near perfect stock to own. Their notes payable minus cash and equivalents stands out. Youâll see they actually finished the fiscal year with more cash than debt,( $684,000). If you go back to fiscal 2000, they had $38.6 million of net debt... Under the radar stock for sure; certainly no one would be shorting the idea... So far ODC is our leading contender for the Barron's game. ~stoney
lets kick Istar around- from their conference call: Let's start with where we are. At the end of the third quarter, we reviewed every asset in the portfolio as we do every quarter. Of the $17 billion in assets we manage, $13 billion looked solid $1.3 billion were on our watch list and $2.5 billion are on our NPL list. Our increased NPLs, reserves and charge offs reflect the worsening reality in the economy and recognition the problems have now become so systemic that the range of possible outcomes has begun to narrow for many of our challenged assets. As a result, earnings in the third quarter were well below expectations. The EPS was negative $285 million or negative $2.15 per share. We continue to be hamstrung by the large number of non-performing loans that are still only part way through the resolution process. Until that logjam clears and we can start shrinking our NPL balances, earnings will remain under significant pressure. Aside from earnings, I think it's pretty clear the market is most focused on the two pivotal issues for all finance companies, liquidity and credit. In our case, the key questions have centered on the ability of borrowers to repay loans in sufficient quantity to meet our funding obligations and the potential losses embedded in the weaker portions of the portfolio. Both are fair questions in light of the severe disruptions in the credit market. So let me start with liquidity, we ended the third quarter with over $800 million in cash and available credit and still over $14 billion of unencumbered assets. In addition to funding both forward commitments and operating expenses, we've been judiciously reducing debt where possible. With repays as expected to slow from their projected pace, we will be continuing and increasing our focus on executing other ways to monetize our substantial unencumbered asset base, through asset sales, note sales, participations, joint ventures, portfolio financing, secured debt and all other feasible means to increase the capital available to meet our funding commitments and debt maturities. We continue to believe our moderate debt maturities and large pool of unencumbered assets will enable us to meet all obligations as they become due through the end of 2009.
A big portion of IStar's holdings appears to be in an acquisition called Freemont- On Freemont portfolio- On the Fremont assets, an additional $400 million was repaid this quarter with 70% of those repayments used to repay the Fremont A-note, taking it down from approximately $1.9 billion at the end of last quarter to just over $1.6 billion at the end of the third quarter. iStar's B-note position increased to $2.7 billion, with $275 million of additional funding and $120 million of repayments from our 30% portion total repays. Total remaining forward commitments that we believe will be funded by iStar stand at just under $700 million today. So let's just recap Fremont again, the original $10 billion portfolio is now down to right around $5 billion. With losses on assets sold and completely off our books totaling $27 million to date. As we mentioned on our last call, we bought the portfolio at a discount, and expected to recover $300 million less than face in our base case. In addition, we indicated on the last call that if the current credit crisis continued or worsened in the second half, we could potentially take up to $200 million of additional losses on the Fremont portfolio. And unfortunately that is what is happening. So right now on the remaining $5 billion, we have booked expected losses and specific reserves of $337 million. This is on top of the $27 million from above so the Fremont recognized losses or expected losses at the end of the third quarter now total right around $360 million. We continue to believe overall recovery on the portfolio could be down from the $0.97 on the dollar we underwrote at the time of closing to somewhere in the $0.95 on the dollar range if current market conditions continue for a period of time. >>> We are talking $500 million dollar loss on Freemont as I read it!- the scary thing is that amount reflects getting back 95 cents on the dollar which sounds great to me... but in huge numbers you see these dollars add up....
From CC- Let's turn to the portfolio and credit quality. At the end of the third quarter, our total portfolio on a managed basis was $17.4 billion. This was comprised of $13.1 billion of loans, $3.7 billion of diverse corporate tenant lease assets, as well as $548 million of other investments. 92% of our portfolio is first mortgages and senior loans and corporate tenant lease assets. The loan portfolio is comprised of $4.3 billion of Fremont loans and $8.8 billion of iStar loans. Total condo construction represented $3.5 billion at the end of the quarter. Condo conversion assets represented $400 million down approximately $100 million from last quarter. Our land portfolio is approximately $2.6 billion, our corporate loan and debt portfolio was $1.4 billion and our European portfolio totaled approximately $800 million. The average loan to value on our loan portfolio was 75% at the end of the quarter. In aggregate, the iStar NPLs consisted of 22 loans ranging in size from $4 million to $260 million. 97% or $1.6 billion of iStar's NPLs are first mortgage or senior loans and only 3%, or $54 million are mezzanine or junior loans. We continue to believe that being in a senior position gives us more control and the ability to recover maximum principle during the workout process. Five loans, representing $897 million, or 53% of the iStar NPLs are related to land. With respect to the aggregate iStar NPL list. Seven loans, representing $426 million, or 25% of the iStar NPLs were condo related. One loan was classified as entertainment leisure, which represented $211 million, or 12% of iStar NPLs. Five loans are $165 million represented the balance of our NPLs. These loans were secured by a variety of collateral types, including retail, corporate, and mixed use. Geographically, 23% of iStar's NPLs are located in Florida, 17% in Arizona, 15% in California, 13% in Las Vegas, 12% are in New York and 12% are in Washington DC.
THE BARRONS EFFECT ok open a half hour let's check- CL 9:53AM ET 62.76 0.70 1.13% 448,847 Chart, Messages, Key Stats, More HMC 9:53AM ET 21.891 0.241 1.11% 147,519 Chart, Messages, Key Stats, More SCHW 9:53AM ET 16.81 0.20 1.20% 756,140 Chart, Messages, Key Stats, More ODC 9:45AM ET 17.82 0.16 0.91% 300 Chart, Messages, Key Stats, More GMCR 9:53AM ET 30.86 1.61 5.50% 94,894 Chart, Messages, Key Stats, More PPDI 9:53AM ET 22.80 0.58 2.61% 143,401 Chart, Messages, Key Stats, More >>. Just as I suspected Green Mtn... 5% is the best mover.... alright lets go back and read what Barron's had to say because I've forgotten by now... all up though impressive heft for a weekend publication... ~ stoney
Whoops, I see. GMCR was just an astute chart read by me... no actual article so we will have to work the idea a little more today.... ODC trades a measily 300 shares this morning! What does that tell you? YUP USE THIS CO AS A BANK ACCOUNT... take the Div and rest comfortably at night in huge sell offs... eventually drift up for big total return as more and more cats pee... it's a no brainer... as such though I'm a little afraid to bring the idea to the hedge fund for the laughter it might bring... it's just so much easier to say buy Green Mountain.... ~ stoney
The company has a projected growth rate of 20%. Green Mountain Coffee Roasters, Inc is a prominent fixture in the specialty coffee industry. The company sells a wide variety of coffee blends commercially and direct to customers in addition to teas, hot cocoa, and Keurig brewing products. Green Mountain is a socially responsible company headquartered in Waterbury, Vermont and has a market cap of approximately $900 million. Net Income Up 67% in Third Quarter (This was August before everything but it shows a trend) This past earnings report was the third surprise in the last four quarters and the barron's chart alluded to good numbers last week... so they are at it again! Like the Ben&Jerry/socially responsible part... Sales driven by a sharp increase in Keurig brewers sold, up 61% year-over-year and a 49% increase in single serving packs sold. One Cup at a Time August 1st, the company announced that it will be opening a new manufacturing facility in Knox County, Tennessee. The 334,000 square foot facility will primarily produce K-Cups packs, the company's single serving package for the Keurig brewing systems. The centralized location should reduce distribution costs and help the company meet the growing demand for single-serving products. Award Winning Design The Keurig B3000 brewer won a Silver Excellence in Design from DESIGN magazine on July 21st. The single serving brewer that has replaced coffee pots in large offices has a unique look, is easy to use, and brews a cup of coffee in less than one minute. The Office Coffee Services channel accounts for 30% of the company's shipments by the pound. At the Top of the Industry Green Mountain has a projected growth rate of 20.0% over the next five years, easily above the industry average of 13.5%. The company also boasts a Net Profit Margin of 4.1%, about three times higher than the industry average. The company has been recognized by several business publications, including Forbes, for its corporate citizenship. >>> Sounds great doesn't it? Will have to a better chart look now, because the old summer channel was bracketed by $32 on the lower side and we are not that far beneath I don't believe, that may represent considerable resistance. I hope genworth financial was not in Barrons or I will have screwed up the game! ~ stoney
I agree re ODC, I saw that this morning. I'll probably use this as an economic indicator, something to watch for the time being.