Diamonds and Dogs
January 1, 2009Wednesday, December 31st, 2008
Phew!! How bout' we recap Leigh Baldwin & Company's top ten stock picks of the year on this last day of 08'. This was the year of all-time low housing market and mortgage rates combined with job lost, auto lending, CEOs are taking commercial flights, loosen credit and nasty winter weather, let's say Good Riddance to 2008.
Lehman Brothers Holdings Inc (LEHMQ.PK), who filed for bankruptcy protection on September 15th, has asked for an "absolutely necessary" 6-mth extension to file its bankruptcy plan after it wiped out billions of dollars ($600 billion in assets). The case is large and complex and it needs more time. This is the largest U.S. bankruptcy filing in history.
American International Group (AIG) the New York based insurer bailed out by the U.S. government, may ask the Federal Reserve to relax the rules on how bidders pay for assets in its $60 billion disposals program, the Financial Times reported Wednesday. AIG wants to boost competition for the assets by allowing bidders to pay using a greater proportion of shares, or through installments, the newspaper reported, citing people close to the situation.
Bear Stearns Companies Inc (BSC) was one of the largest global investment banks and securities trading and brokerage firms (the "Most Admired" securities firm in Fortune's). BSC collapsed in March, largely due to its risky subprime mortgage investments. On March 17, 2008, JP Morgan Chase offered to acquire Bear Stearns at a price of $236 million, or $2 per share. On March 24, 2008, that offer was raised to $1.1 billion or $10 per share in an effort to pacify angry shareholders. JPMorgan Chase completed its acquisition of Bear Stearns on May 30, 2008 at the renegotiated price of $10 per share.
Countrywide Financial Corporation (CFC) On January 11, 2008, Bank of America announced it had agreed to buy Countrywide for $4 billion in an all-stock transaction. In September 2008, Countrywide sends letters to its mortgage customers to inform that one of their employees had stolen identity information that contained social security numbers and birth dates. Countrywide apologizes in the letter and offers free credit monitoring for 90 days. Bank of America announced on June 26, 2008 that the takeover of Countrywide Financial Corp. will result in the loss of 7,500 jobs over the next two years. The deal is a landmark in the housing crisis, given Countrywide's prominence as the nation's largest mortgage lender, at least until recently.
Annaly Capital Management Inc (NLY), who was predicted to be atop scorer, is a unique real estate investment trust focused on the government sponsored mortgage-backed securities market. On March 6th, three significant events put extreme downward pressure on Annaly's stock. After the dust had settled, Annaly closed the day down 18% to 15.81. It would fall an additional 7.8% over the next two days and close at 14.58 on March 10. In a matter of three days, the stock had given up all of the gains posted during the rate cuts of September-February. A perfect storm!
Citigroup Inc (C) which had huge losses during the global financial crisis of 2008, was rescued in November 2008 in a massive bailout by the U.S. government ($25 billion in federal TARP). On November 17, 2008 Citigroup announced plans for about 52,000 new job cuts, on top of 23,000 cuts already made during 2008 in a huge job cull resulting from four quarters of consecutive losses and reports that it was unlikely to be in profit again before 2010. Citigroup in late 2008 holds $20 billion of mortgage-linked securities, most of which have been marked down to between 21 cents and 41 cents on the dollar, and has billions of dollars of buyout and corporate loans. It faces potential massive losses on auto, mortgage and credit card loans if the economy worsens.
Chesapeake Energy Corp (CHK) is one of the largest independent natural gas companies in the U.S., with proven reserves of over 10.6 trillion cubic feet equivalent, over 90% of which is natural gas. The company is selling off some of its properties and rigs; the resulting cash could help the company grow without increasing its debt. By the end of 2009, Chesapeake wants to sell about $4 billion worth of assets (for cash); it has commenced its plan, selling 37 rigs in the third quarter for $235 million, as well as a volumetric production payment for some Appalachian holdings in early January to Deutsche Bank AG (DB) and UBS AG (UBS) affiliates for $1.1 billion.
Wal-Mart Stores Inc (WMT) is the world's largest retailer and grocery chain by sales, and in the U.S. Wal-Mart is so large that its 2008 sales were almost 50% more than its 7 closest competitors combined, including Target and Sears. Wal-Mart earned $374.5 billion in revenue in 2008, an 8.6% increase from 2007. The company operates 7,262 stores worldwide, with over 3,000 of them in international markets, where the company has grown its presence at an average annual rate of 30% between 2005 and 2008. That's a diamond.
Financial Select Sector SPRD (XLF) is an Exchange Traded Fund (ETF) that seeks to provide investment results that correspond to the price and yield performance of the Financial Select Sector of the S&P 500 Index. The XLF ETF has fallen from its 52-week high of $32.14 in December 2007 to a low of $ 8.67 in November 2008. While nearly all sectors have fallen in this period, some have fallen much more than others. XLF is down 57% for the year.
General Electric Company (GE) is a multinational American technology and services conglomerate incorporated in the State of New York. In May 2008, GE announced it was exploring options for divesting the bulk of its Consumer and Industrial business. It was also announced in May 2008 that General Electric would auction off its appliances business for an expected sale of $5-8 billion. On Dec 12, 2008, GE announced job cuts as well as a restructuring of its finance unit, warning that fourth quarter results will be at the low end of previous projections. CEO Jeffrey Immelt pledged that GE would fight to maintain a AAA credit rating as the cost of a downgrade has soared in recent months. The Short Term PowerRating for GE is 5.
The U.S. recession made us want to "stock-up" on aspirin but a New Year's cocktail might help take off the edge from this dreadful year for financial markets. As we prepare to close out the last trading hours of 2008, we would like to wish you a Happy New Years! Be safe and all the best in 2009.
Tuesday, December 30th, 2008
Headquartered in Framingham, MA, this diamond was quoted having a "strong cash position". Staples (SPLS) is among the few bright spots in the retail sector today. SPLS, who engages in office supplies retailing, reduced its line of credit to $2.75 billion from $3.0 billion. SPLS rose 1.19% or 21 cents to $17.92. Staples had used the slogan "You want it. We've got it"; they have now changed it to "That was Easy". It makes you wonder, is it really?!?
Shaking up the executive team! Dell Inc (DELL) announced president of global operations Mike Cannon will retire and Chief Marketing Officer Mark Jarvis will leave the company. Now, that's a turnaround plan. The big computer maker was in red today down -0.5% to $10.18.