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How does Radio Shack Stack Up Today?

Wed, 13 Feb 2008 22:11:25 EST

How does Radio Shack Stack Up Today? - by larryswinford

Radio Shack (RSH) has been on a long slide until recently. In the last 52-weeks, the price has been at a high of $35 (6/18/07) and a low of $13.31 (1/22/08). It recently closed at $16.34.

Why would anyone be interested in Radio Shack? For one thing, it has a $1.61 earnings per share, a price to earnings ratio therefore of about 10. The dividend, $0.25 may not be what one would expect from banks and utilities, but for retail sales the 1.5 percent yield it is a fair bit better than average.

You won’t find a great cheering section for Radio Shack as a stock. While it is part of the S&P 500, the three stars rating is only at "hold". Reuters calls it "underperform". Something that might be worth consideration, however, is akin to the "dogs of the Dow" phenomenon. At times, the companies that seem to be doing worse, in relation to others, has the potential for really good price appreciation. After a steady slide from poor earnings and a management shake up, Radio Shack just might be turning a corner.

What Impact with IMPAC?

Thu, 31 Jan 2008 21:31:43 EST

What Impact with IMPAC? - by larryswinford

One of the big recent movers is IMPAC Mortgage Holdings (IMH). It jumped 25 percent and is up 162 percent for the year. This is one of those cases where penny stocks does phenomenal gymnastics, but IMPAC hasn’t always been in the under-$5 crowd ("penny stocks" used to be under a dollar, inflation you know).

The September quarterly report said they blew through some $2.6 billion in cash. Their allowance for loan losses when from $3.6 million (restated) the year before to $979 million. Credit ratings are sinking like a brick. Owners equity is a negative number. So why, then, are people paying a premium price?

Kelly Capital just bought some 3.8 million shares. That is almost the same number as the 3.8 million shares that HBK Investments bought in 2002. William Ashmore, IMH president recently bought some of the company’s stock, but an inconsequential amount. Perhaps the idea that people are buying is making this cheap stock interesting.

Part of what I see is that despite the dismal results, the company still has some $18 billion in assets, still. The average loan is some $282 thousand. The delinquency rate has risen from 5.6 percent to just over 11 percent. Still, the yield on the mortgages is 5.56 percent. That is down from 6.12 percent the month before, but an enormous revenue body. Just as the banks that had been so terribly (but deservedly) punished have risen recently, so is this. (See Industry comparison chart)

I suspect this cash cow was being punished for not giving milk, but some are wondering if the cow is still giving some, just not as much, perhaps they have been too hard on IMH. Five percent of eighteen billion is still a lot of bucks. If things turn around, the $1.47 might still look cheap.

I’m not personally interested because the profit party IMH might be holding will be a long ways into the future, but then that is what the mortgage REIT business is for, the long run.

Making Green on JetBlue?

Thu, 31 Jan 2008 20:31:41 EST

Making Green on JetBlue? - by larryswinford

Looking through the industry lists, it seems that Transportation has moved the best, up some 2.96 percent. JetBlue Airways (JBLU) similarly bubbled to the top of that list, up some 8.65 percent. While it is uncertain how long this will continue, this wasn’t just for today, last Tuesday began the current spurt (see chart).

Of course the question is why. On the one hand there is the question for the whole industry sector, but in this case JetBlue in particular. As with Con-Way, most of JetBlue is institutionally owned, some 400 banks, insurance companies, and mutual funds hold some 94 percent of the shares. Incidentally, it might be interesting to fully scrutinize those statistics because Dow Jones also says that 7 percent is owned by insiders, which is a little over 100 percent.

Quantum Industrial Partners and Weston Presidio Capital are included in the "insiders" list. Quantum is an investment vehicle for George Soros. Michael Lazarus is the Weston Presidio Capital person. Soros and his people made something like $10.5 million today, and Lazarus’s company only made something like $3 million. Not bad for a days work.

What could spur that result? Well, it wasn’t the quarterly report for December. JetBlue had made 9 cents per share that quarter a year before, but was 2 cents in the hole this last quarter. It earned 12 cents, to the good the previous two quarters (and 12 cent loss last March). Earnings were down, revenues down, salaries up, fuel costs up, and maintenance costs up. Not exactly the news to hear in order to lead the parade for the big sector move.

Out of the 15 analysts the WSJ summarized, 3 said underperform, 8 said hold, and 2 each said buy or strong buy. Standard & Poors is one of those that said 4 stars (Buy) and Reuters was one of those that said Underperform. The recent news says that there are some new routes opening: Puerto Rico, and Chicago/New Orleans nonstops. Aer Lingus is now linking flights in their new partnership. International Stock Targets is pitching, for subscription, news of "new prospects." Perhaps it has something, in part, with Lufthansa’s earlier investments. Frankly, I think the biggest part has to do with the recent reductions in the price of oil.

Is Con-Way Going the Right Way?

Wed, 30 Jan 2008 22:48:32 EST

Is Con-Way Going the Right Way? - by larryswinford

Con-Way Trucking (CNW) is buying more trailers, about 1,270 from Wabash National. Whether that is related to news of the week before is related is kind of fuzzy, it seems that American truckers want to do business in China. One of Con-Way’s operations is logistic controls.

Earlier this month several transportation companies had a downturn in the stock market. Take a look at what Con-Way in the last couple weeks, not exactly down.

The company does some $4.3 billion in sales and has a market capitalization of closer to $2 billion. The sales did just shy of 4 percent higher, yet profits went the other way. From the quarterly earnings per share figures, December 2006 reported $1.65, March 2007 had $0.63-0.69 (extraordinary items), $1.02 in June, and $2.29 at the end of September. Unfortunately, this last December was only $0.72, a rather significant drop.

Before we start painting the picture of Con-Way as a loser, look at the comparison chart.

While Con-Way has performed below the industry average, it is about to intersect on its way up to the DJ Total Market index. Mirroring the fortunes of the industry average, Con-Way appears to be bucking the larger market’s trends.

Here is what makes it interesting to me. The Wall Street Journal indicates that 95 percent of the company is institutionally-owned. While the banks, insurance companies, and mutual funds (over 450 of them) are fully stocked up on this company, if others are interested in riding this uptick, we might have to pay a premium to get it. Currently the price to earnings is in the 15 percentile. With a dismal recent earnings report, if the price is rising for whatever reasons, the banks and such simply have to sit on their holdings while the rest of us squeeze the remaining share prices, improving their market value.

The profit margins are positive. The revenues are rising. The prospects just might be looking up. Director Peter Stott recently (November 2007) bought some 20,000 shares at $40.88. They are selling for $47. Someone is profiting with Con-Way, maybe they think there is more to come.

Has Circuit City Reached its Bottom?

Tue, 29 Jan 2008 21:59:34 EST

Has Circuit City Reached its Bottom? - by larryswinford

Closing at $5.26, Circuit City is some 50 percent above the 52-week low of $3.47 only a week before. Last February it was trading at $22.

Previous spikes in volume seem to represent selling opportunities for the most part. The question is if it is another temporary blip before another fall, or a change of direction.

What catches my attention, technically, is the increased volume being substantially larger in recent weeks compared to before. It appears as some resistance, or floor, has been met. The basic value has been met by the market.

The book value is $8.54 per share, the tangible book value is $7.59, so the intrinsic worth is higher than the market price. Still, the net profit margin is a negative number. The last quarterly report showed a loss of $1.26, compared to $0.12 loss that quarter the year before. So what changes?

While there may have been some hope for Christmas season profits, probably reported in late February, there might be still another potential. A change of bosses is taking place. John Harlow, previously of the A&P grocery chain, and Toys-R-Us before that is the new COO. Piles of stock options were doled out last week to others. Surely they aren’t being tapped for the extraordinary November loss report.

Things appear to be in position for yet better prospects. The question is, do you want a piece of it?

Gold Mining Company Above Many

Sun, 27 Jan 2008 23:32:02 EST

Gold Mining Company Above Many - by larryswinford

RandGold (GOLD) isn't just South Africa anymore, but it is still strongly about gold production. People interested in gold might want to look at this producer and look closely.

To play the gold price appreciation, one could buy the metal, or buy the commercial sources, such as jewelry retailers, but since there may be more demand for gold than there is gold being produced, gold mining companies might be exceptionally valuable. Whether you buy the monetary substitute aspect during times of financial uncertainty, the industrial and commercial demand is far from weak.

RandGold has had much success in comparatively calm countries like Mali and Ivory Coast (sorry, Cote de Ivoire, pardon my French, or lack of it, but they are kind of picky about that). They have more projects in development in Senegal, Burkina Faso, Ghana, and Tanzania as well.

In technical trading terms, the company was distinctly boring until around mid-August. Then the price has held an enviable upward slope except for a couple of cooling off weeks after Thanksgiving. If the upward march was good before Thanksgiving, then it was even better for the week before Christmas until the end of the second week of January. After a short and dramatic dip, it rose radically. For example, it closed at 45.33 on January 23^rd, then opened at 47.40 on the 24^th. It closed Friday a tad bit down at $48.54. If you are betting that it could rise higher, you could be forgiven for the optimism. On January 23^rd Wells Fargo filed the SEC papers showing they had upped their stake to a little shy of 9 percent of the common stock. (Perhaps they are feeling optimistic too, since they are essentially "buying high" but surely not so they can ‘sell lower’).

Fundamentally, the stock seems a bit pricey for its P/E ratio that is pushing close to 90. Yet GOLD has a profit margin over 14 percent, a gross margin at almost 60 percent. With $75 million in revenue and $11 million in profits, we could certainly do worse in a year where most companies were expecting losses during the said to be looming recession.

Frankly, I don’t really buy the ‘hide in gold’ thing these days, there seems to be too many points of separation in recent years, but I do like the idea of putting my money into companies that make profits. If more people had that perspective, then RandGold might be cheap.

Nearly Perfect? (NLY)

Sun, 27 Jan 2008 23:01:50 EST

Nearly Perfect? (NLY) - by larryswinford

Annaly Capital Management (NLY) is issuing some 51 million new shares, wanting to sell them at some $19.25 a share while the current shares are selling at more like $19. Is this excessive optimism? Perhaps not. On this last January 23^rd, it went to $20.22.

Currently the stock is at the end of a steady upward march. Back in August it got down to just above $12, while at this time last year the company was going for $13-14. There has been a little insider action, inconsequential additions, not like they are stocking up.

Annaly buys collateralize mortgages and practices hedging. Bear Stearns’ fiascos may have used Annaly as a model, but performed it differently. Annaly gets their mortgages from FHLMC, FNMA, and GNMA, so there are sets of real or implied promises associated, so Annaly gets to keep a good rating. As an REIT, Annaly has to pay out most of the earnings in dividends, so it currently pays a 34 cent quarterly dividend. At stock prices near the 52-week high, it still is a yield slightly above 7 percent.

Sounds pretty interesting, getting price appreciation, AND still getting a really good yield.

Hold a Holdrs for Pennies?

Thu, 24 Jan 2008 21:46:25 EST

Hold a Holdrs for Pennies? - by larryswinford

I ran across an ETF (Exchange Traded Fund) provider called Holdrs. I probably wouldn’t have noticed them except that one of their products, B2B Internet (BHH) has grown a bit in share price.

In some ways it was a bit of an oddity because it was essentially in the penny stock range but when it rose close to 10 percent in one day, it popped into view and interest. It seems that this Holdr has limited holdings: ARBA, ICGE, and VERT. This isn’t just a summary of top stocks, but, from what I can find, the whole list. The ETF had just recently taken a $2 nose-dive, so I thought I would look to see a cause.

Ariba (ARBA) started making a serious slide in early December, which continued until about last week. Revenues and expenses are surprisingly static for the stock price fluctuations. In the quarterly reports, the net income (both before and after taxes) showed some dismal losses, but they minimized, almost 20 percent of the loss from half-a-year before, before July, but then rose again for the end of September report. The earnings per share loss was 5 cents at the end of September, 15 cents a year before, 3 cents before July, and the other two quarters before show 6 and 7 cent losses. My guess is that the December slide was in anticipation of even worse results. The Wall Street Journal’s earnings estimates summary seem to indicate that Ariba is about to have a very positive experience.

The B2B Internet Holdr has a big piece of its otherwise minimal holdings in Ariba. Hmm.

Internet Capital Group (ICGE) would have been a nice one to short in early October, going from almost $14 to almost 8 and three-quarters. ICGE, unlike Ariba, has gone from profits to losses. Someone at Holdrs may have been reading ICGE’s press about their business prospects at more or less face value: http://www.internetcapital.com/investorinfo.asp

VerticalNet (VERT) really lived up to its name last year. A chart of stock prices resembles the tall buttes of Northwestern New Mexico. Looking at the earnings, my guess is that optimism was punctuated with quarterly reports that spoke with more pessimistic reality. Speaking of optimism, none of the normal bevy of analysts want to read VERT’s tea leaves. VerticalNet needs to use some of its supply management expertise to help it supply a profit. Good luck, I’m thinking.

Perhaps, B2B Internet might be worth a look. But you wouldn’t want to bet the ranch on it.

No Zzs about AZZ

Thu, 24 Jan 2008 20:49:02 EST

No Zzs about AZZ - by larryswinford

AZZ (AZZ: NYSE) is an interesting company. In part, I am interested in that it is one of few double-digit gainers this month. In another fashion, the company has an interesting business. I may not have much company in thinking something akin to sexy: switches, relays, specialty industrial lighting, power distribution equipment, air duct systems, galvanized metal works, tubular products, specialty processes for hire like centrifuging.

My first thought when looking up info on them was that they did galvanizing and had a plant in Tulsa. Since I used to live near there I wondered if they had bought out the old John Zink company, but the Tulsa operation builds the cases and enclosures for power distribution equipment like switches and transformers. Then I see that their tubular products are mostly accommodating the oil and gas industry, getting their piece of the profits of those high per barrel oil prices along with several other very profitable specialty services businesses. The compressed gas insulating transmission bus systems help some major utilities break out a bunch of electrical juice when normal cables and overhead hanging lines are too cumbersome. In short, a piece of what helps BC Hydro, Consolidated Edison, and Entergy, among others, make their bucks in turn makes AZZ a few.

Speaking of making a few bucks, consider the financials. The 2005 revenues, "net sales" rather, were $152 million. In 2006 it was $187 million. But in 2007 it was $260 million. Meanwhile, earnings per share ran from 44 cents in 2005, and about 70 cents in 2006, to $1.82-1.86 depending on which way you want to count it, in 2007.

It makes me wonder if the 20 percent gain so far this year is the fair present value of the company’s future earnings. Suppose it is worth a look?

http://www.azz.com/

One Caused a Crash?

Thu, 24 Jan 2008 20:16:11 EST

One Caused a Crash? - by larryswinford

Several reports indicate that for all the dire news and dreadful scenarios, the recent stock crash came from one trader, or rather trying to fix what that one did. Sample link: http://www.dailymail.co.uk/pages/live/articles/news/worldnews.html?in_article_id=510089&in_page_id=1811

Whether Jerome Kerviel, the "low level" trader for Societe General, built a house of cards in the same kind of panic as Nick Leeson did for Barings a decade ago remains to be seen. For that matter, last I heard, Kerviel remains to be seen, as in he has (perhaps wisely?) disappeared. Some of his bosses and their bosses at SocGen made a more public exit, appropriately sacked or canned, as your expression prefers.

Another scenario, one more of my musing than common reports, is that this bright bulb concocted his scheme of trades outside the normal range of Society General's fiscal control system as a revenge move, showing that he may have felt he deserved a higher standing. If that was the case, then the bosses who perhaps kept him restrained may have exercised better judgment than CEO Daniel Bouton gave them credit for.

Still, from various reports, it is being chalked up as a criminal investigation, a scheme costing Society General close to $8 billion or something like that. It would be interesting to see if this criminal was actually profiting from his nefarious efforts. Being a big thief has a distinctly different cache than being a big bungler. Americans seem to have a fondness for bad boys, but not so fond of the French. Still, I hope the French find their fraud, if that is what he is. Jail would be a good place for "protective custody" after all those who paniced and lost lots might be more interested in finding his neck between their fingers. Fright can be expensive.

MBIA: Flash or Sustainable?

Tue, 22 Jan 2008 23:01:12 EST

MBIA: Flash or Sustainable? - by larryswinford

MBIA (MBI: NYSE) was one of the privileged few big winners in the roller coaster that tanked most stocks Tuesday. But why?

On January 18 it hit the 52-week low of $6.75. The 52-week high was almost this time last year, some $76 last January. MBI closed at $12.53 Tuesday, a hefty profit for those in the right place in this otherwise wrong time. The first day of the trading year opens at $19 and fairly steadily drops. The better part of the recovery was done in one day.

Their business is complicated. Insurance and asset management services. Bond insurer Ambac is a competitor and it also jumped today, some 36 percent. A Dow Jones report by Alistair Barr suggests that these bond insurers are expecting regulatory capitalization help. Barr also suggests that Warren Buffet is shopping for a bond insurer. Suddenly Ambac and MBIA look valuable simply because Buffet may think them valuable.

Was this momentary optimism or something with some substance? MBIA has had fairly steady earnings, essentially runs at about $1.50-ish for much of recent history, the last quarter excepted. The last quarter is expected to be more like a $3 per share loss. On the flip side, if you go by future earnings, estimates run at slightly above $1 per share gain in the first quarter of this year. An 8-K filing last week suggests that MBIA secured an extra billion in capital. A report of the previous week was that Third Avenue Management upped its stake in MBIA to slightly over 10 percent of outstanding shares.

There appears to be more reason to believe that this upshot might have more substance than just a big Tuesday would satisfy. Still there could be a profit taking session. While S&P still calls it a Sell, others are more optimistic. Perhaps they have reason.