The stock market was down yesterday and it is down again today. Bearish sentiment is roaming through Wall Street right now, so I thought I would look back on another occasion when the market was going through similar turmoil and I wrote about the following eight stocks, which I thought would be "safe havens" in such a storm.
Six of the eight did well and two did not, and of course one of those two was a disaster. Among the losers, I do not think anyone is fretting about UPS, which is still one of the few triple-A rated companies along with Berkshire Hathaway. It has been well reported that the slowing economy and higher fuel prices have been the major culprits affecting UPS's earnings. In the case of WaMu, it's demise has also been well reported, but at the time I recommended it WaMu had a stellar reputation of growth and high yield for over two decades. There is no hiding, it turned out to be a lousy pick and an ANTI-SAFE Haven
Washington Mutual(NYSE: WM) closed Monday at $4.21 down from $45.50; a 98% loss.
Fortunately the remaining six picks have done very, very well. If you had bought the pool, the average gain over the last two years would have been 7.14%. Adding the dividends over the two years would have raised this to 13.14%.
For hungry Wall Street investment bankers, the $45 billion merger of InBev and Anheuser-Busch Cos. (NASDAQ: BUD) is a nice relief. Yes, it means lots of juicy fees.
Another big winner is Busch IV (the CEO of Anheuser). Apparently, he is negotiating a consulting agreement that may exceed $10 million (there will be a $120,000 monthly retainer through December 31, 2013).
But according to a piece in Reuters, the transaction may have a dark side. Simply put, it hasn't been easy to raise the debt financing. As a result, this may crowd out some of the financing of other M&A deals.
The high rates on the InBev financing is likely to push up other debt costs on other pending transactions. What's more, there will be a flood of bond issuances on the market, which will put further pressure on the debt markets.
In other words, we may see a slowdown in M&A activity for the rest of the year -- except for those buyers that have substantial balance sheets.
The credit crunch should be bad news for investment banks, right? Not necessarily. After all, strategic buyers have been aggressive lately, perhaps because there's not much competition from private equity operators.
One of the beneficiaries is Lazard (NYSE: LAZ), which reported its Q2 numbers. Eearnings came to $64.6 million, or 54 cents per share, which compares to $61.5 million, or 53 cents per share in the same period a year ago.
Simply put, Lazard has been snagging some choice client engagements. For example, Q2's revenues on merger assignments spiked 37% to $225.1 million.
In fact, the firm is an advisor on InBev's $52 billion deal to purchase Anheuser-Busch Cos. (NYSE: BUD). Another high-profile assignment is Gaz de France's 44.6 billion euro deal with Suez.
Keep in mind that Lazard has worked on about $100 billion in announced deals in July alone. This is certainly a nice momentum boost.
Besides, Lazard has a strong restructuring division. While the business is still fairly small – at $32.7 million – there should be lots of potential for growth. Just look at some of the major bankruptcies lately, such as Mervyn's, Steve & Barry's, Linen 'n Things and so on.
Stock futures were higher this morning, indicating stocks could have a positive start to the session as oil prices continued to decline, sinking below $127 a barrel. Weekly inventories numbers reported later today could have an impact on oil prices. Then there is continued optimism in the financial sector, which caused the rally Tuesday. Also, a bill aimed at helping the housing market will reach the House floor. But once again earnings will likely have investors' attention with Costco already giving a profit warning. Costco Wholesale Corp. (NASDAQ: COST) shares are plunging over 8% in premarket trading after the wholesale retailer warned its August-ending quarter's profit would miss analyst estimates. This is most surprising as Costco had been one of the retailer that seemed to have benefited from consumers trying to save and buy lower-cost items. But Costco blamed the lower profit on rising energy costs, saying it will earn less than $1 per share.
Washington Mutual Inc. (NYSE: WM) late Tuesday reported second-quarter results, posting a loss of $3.3 billion, was worse than analysts had anticipated. Excluding one-time items, WaMu lost $3.34 per share, much wider than the expected loss of $1.05 per share. Piper Jaffray downgraded WM shares from Neutral to Sell and Friedman Billings halved its target price on the shares from $8 to $4. Shares are off nearly 3% in premarket trading.
Yahoo Inc. (NASDAQ: YHOO) also reported profits and sales that came up short of estimates. Second-quarter profit fell 18% to $131 million, or 9 cents per share. Analysts had projected earnings of 11 cents per share in the most recent quarter, according to Thomson Financial. Revenue grew 6% to $1.8 billion, or $1.35 billion after subtracting commissions, also below estimates. Yahoo! shares, however, are up about 3% in premarket trading since investors were relieved the performance wasn't as bad as many had feared after Google (NASDAQ: GOOG) reported last week and disappointed investors. Also, Yahoo didn't dramatically lower its revenue outlook for the remainder of the year.
TheStreet.com's Jim Cramer says the biotechs look sweet in a bank-led slowdown.
Thank you, New York Times. Remember just a couple of weeks ago, when The New York Times wrote about how Genentech's (NYSE: DNA) (Cramer's Take) Avastin was too expensive and the stock got cracked down to $77? I know Roche did. I bet that was the last draw. The dramatic decline in the dollar plus a sentiment that has spawned a thousand articles -- that life-saving drugs cost too much -- gave the Swiss giant a chance to bolster its own anemic pipeline by buying what may be the greatest wonder drug of all time in its $43 billion bid, no doubt the beginning price for what will ultimately be a deal close to $100 a share. (I pushed DNA hard here and on "Mad Money" because I have been a huge believer in Avastin and I'm confident that people will pay anything -- or family members will pay anything -- for the hope of three or four months or more of life, or the chance of beating cancer altogether.)
I don't even know where to begin about the positives of this deal. First, it confirms the general trend: the dollar is so weak that it is worth buying anything that's name-brand if you are from Europe, including Anheuser-Busch (NYSE: BUD) (Cramer's Take), a total creature of the weak dollar.
This post is part of a series on celebrity spokespeople who ended up doing serious harm to the brands they were hired to promote, or vice versa. See how we rank the 20 top spokesperson fiascos.
In a confrontation between bombast and street cred, Fox mouth Bill O'Reilly managed to rip the Pepsi (NYSE:PEP) bottle from rapper Ludacris's live, warm fingers. In August of 2002, O'Reilly, upset with the musician's street language and what he perceived as glorification of crime and misogyny, called for a boycott of Pepsi. At the time, Ludacris was a featured representative of Pepsi, no doubt part of the companies attempt to reach out to the 18-34 demographic.
After the company dumped Ludacris in response to the boycott, Pepsi immediately stepped back into a pile of controversy by signing the rock and brain-damage icon Ozzy Osbourne, he of bat-head biting-off fame. (Nothing goes better with bat than an ice-cold Pepsi.)
O'Reilly's diatribe helped call attention to the brutality of Lucacris's lyrics, not atypical for the genre but fear-inspiring to the Fox nation. For example:
"Hollow laid hollow sprayed I'm the hollow man I get to my hollow point wit my hollow plan Hollow bullets I pull it I'm about to live in vain And then I drill em refill em make sure they feel the pain"
(BTW- Is this a shout-out to T.S. Eliot's The Hollow Men?)
While the controversy cost Ludacris his Pepsi deal, O'Reilly was to swallow his tongue for a second time two years later when the rapper was signed by Anheuser-Busch (NYSE:BUD).
I don't see Bill O'Reilly pulling in big endorsement contracts these days. So who's your daddy now, Bill?
Who is next to fail/fall? That seems to be the only question on investors' minds these days, and this morning is not different as concern about the health of the financial sector grows. With global markets plunging overnight, the dollar falling to yet another record low against the euro and ahead of a day full of economic data releases and earnings, as well as a testimony from Fed chairman Bernanke, U.S. stock futures dropped this morning, indicating the market is poised for a lower open.
On Monday, what seemed like might be a promising day with the government plan to bail out Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) and several large deals including the mega beer deal between Anheuser-Busch (NYSE: BUD) and InBev. But once again financials took front stage and after IndyMac was seized by federal regulators over the weekend Wall Street tumbled. The Dow industrials fell 45 points, or 0.41%, the S&P 500 dropped 11 points, or 0.9%, and the Nasdaq Composite lost 26 points, or 1.17%.
As the day go on, investors will have more to chew on though as several economic reports are due out today. June Producer Price Index, a measure of inflation at the wholesale level, is due before the market open, at 8:30 a.m. EDT. While economists expect a smaller increase in prices in June, an increase is expected for both PPI and core-PPI, which excludes food and energy prices. At the same time, June retail sales will be released, and may show a nice increase due to the government checks. July NY Empire State Index will also be released at that time and it's likely we'll see it decline further. Then, 10:00 a.m., a reading on business inventories for May is due.
Today would be described as being choppy disappointment at best. The markets started out strong on a government bailout proposal for GSE's but traders went right back to shorting financials on big gap ups. After today, we'll get major earnings reports coming on a non-stop basis and tomorrow we'll also start to see some key data around producer prices tomorrow morning. Here are today's unofficial closing bell levels: DJIA 11,052.10 (-48.44) S&P500 1,228.02 (-11.46) NASDAQ 2,212.87 (-26.21) 10YR T-Note 3.88% (-0.06%) 52-WEEK LOWS TOP ANALYST UPGRADES TOP ANALYST DOWNGRADES
Anheuser-Busch Companies, Inc. (NYSE: BUD) saw a gain as the company finally capitulated and agreed to be acquired now that InBev boosted its buyout offer price to $70.00 from $65.00.
The exchange rate between the dollar and Euro gives InBev a 30% to 35% discount making the acquisition price seem like a great deal for BUD shareholders but an even better one for InBev shareholders. And if the the currency exchange rates shift back over time then all the shareholders win.
This means that Americans will be answering to the Dutch Belgians. If the dollar had gained against the Euro instead of becoming weaker is it possible that Anheuser-Busch (BUD) would have bought out InBev (NV)? If the dollar stays down or drifts lower as seems likely right now look for more M&A activity from abroad.
In the mean time, since 'my pal Warren', is the largest shareholder of BUD through Berkshire Hathaway (NYSE: BRK.A) and supports the deal, will he remain a shareholder of the new company? No doubt this increases the value of Berkshire, but does this set the stage for Buffett to enter the European market in a big way?
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of BRK.B.
The credit crunch is not going away, and as a result, there has been a sharp fall-off in leveraged buyouts (LBOs). Basically, only relatively small LBOs -- between $1 billion to $2 billion -- are getting done.
But there is a bright spot: strategic acquisitions. If anything, we are seeing a variety of mega deals in this category. A survey from Dealogic shows that – as of June 25 – there were $597 billion in strategic M&A transactions, only 2% down from last year's total.
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U.S. stock futures were solidly higher Monday morning, indicating a similar start to U.S. markets, after a very interesting weekend in which a government plan was set in motion to rescue ailing mortgage giants Fannie Mae and Freddie Mac and Budweiser maker accepted a $52 billion buyout offer.
Last week, and Friday was no exception, stocks tumbled due to concerns over government-sponsored mortgage buyrs Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) and their possible insolvency. On Friday, the Dow industrials fell 128 points, or 1.14%, the Nasdaq Composite closed 18 points, or 0.83%, lower, and the S&P 500 dropped 13 points, or 1.11%.
But this morning, all that changed after Sunday the Federal Reserve and the Treasury Department announced steps to bolster the slumping mortgage giants Fannie Mae and Freddie Mac. The plan, "is intended to signal the government is prepared to take all necessary steps to prevent the credit market troubles that erupted last year with losses from subprime mortgages from engulfing financial markets." That includes granting Fed New York authority to lend the two as much as necessary. FNM shares are 28% higher and FRE shares are 29% in premarket trading.
It must have been a deeply emotional board meeting for Anheuser-Busch Cos. (NYSE: BUD). In family control for more than 150 years, the company has become a quintessential American icon.
Despite all this, Anheuser's had no choice in selling out to InBev NV, a giant beer company based in Leuven, Belgium.
Simply put, the offer was too rich: $49.91 billion. After all, over the past few years, Anheuser was a laggard. What's more, the plunging dollar has made it easier for foreign-based buyers to make plays for U.S. companies. It seems that no company is immune.
The Anheuser-InBev merger combination -- which will be called Anheuser-Busch InBev -- will result in the world's largest beer company (the #2 will be SABMiller PLC). In all, revenues will amount to roughly $36 billion.
For InBev the deal carries lots of risk. The valuation for Anheuser comes close to 15X EBITDA (earnings before interest, taxes, depreciation and amortization). Furthermore, the deal involves a huge slug of debt. Then again, over the years, InBev has demonstrated savvy M&A skills, wielding a strong cost-cutting knife.
In the end, it's the shareholders who are cheering, with Warren Buffett being particularly joyful. His company, Berkshire Hathaway (NYSE: BRK.A), owns 5% of Anheuser.
It's official -- a company that has stood for generations of Busch's as an icon of the American beer industry is no more. Reuters reports that Anheuser-Busch (NYSE: BUD) has accepted a $50 billion offer to be acquired by InBev. Reuters reports that the combined company will be called Anheuser-Busch InBev.
I have been watching advertisements from Anheuser-Busch for years and I think they have been the most entertaining around. InBev is known as an aggressive cost cutter and it's not clear whether these ads will continue into the future. One thing that would not surprise me in the least would be for the Busch family -- whose sons have run the place for generations -- to take their money and leave the business.
With Abu Dhabi buying Manhattan's Chrysler building last week, it will be interesting to see what other American icons get sold off to the highest global bidder before the next president takes office.
The stock market was down yesterday and it is down again today. Bearish sentiment is roaming through Wall Street right now, so I thought I would look back on another occasion when the market was going through similar turmoil and I wrote about the following eight stocks, which I thought would be "safe havens" in such a storm.
For hungry Wall Street investment bankers, the $45 billion merger of InBev and 
and 
. He also operates 
The credit crunch should be bad news for investment banks, right? Not necessarily. After all, strategic buyers have been aggressive lately, perhaps because there's not much competition from private equity operators.
Stock futures were higher this morning, indicating stocks could have a positive start to the session as oil prices continued to decline, sinking below $127 a barrel. Weekly inventories numbers reported later today could have an impact on oil prices. Then there is continued optimism in the financial sector, which caused the rally Tuesday. Also, a bill aimed at helping the housing market will reach the House floor. But once again earnings will likely have investors' attention with Costco already giving a profit warning.
In a confrontation between bombast and street cred, Fox mouth
Who is next to fail/fall? That seems to be the only question on investors' minds these days, and this morning is not different as concern about the health of the financial sector grows. With 
We have posted numerous articles about the acquisition of 
The credit crunch is not going away, and as a result, there has been a sharp fall-off in leveraged buyouts (LBOs). Basically, only relatively small LBOs -- between $1 billion to $2 billion -- are getting done.
It's official -- a company that has stood for generations of Busch's as an icon of the American beer industry is no more. 
Cramer on BloggingStocks: The SEC's waffling will be deadly
How Fannie and Freddie will fail
Before the bell: Stocks may rebound; HPQ, FRE, EBAY, AAPL, AUY, F
