Here is a novel idea. Big Yahoo! (NASDAQ: YHOO) shareholder Legg Mason thinks more investors would support Carl Icahn's effort to control the portal company if the raider will not sell out to Microsoft or anyone else for under $33. At $32.99 it's no deal.
Legg Mason's Bill Miller toldReuters, "The difficulty with Icahn is he'd have more shareholder support if he would say he wouldn't sell the company for less than $33."
Fair enough. One of the problems with hooking up with raiders is that they often fail. Microsoft (NASDAQ: MSFT) has already indicated it would pay $33 for Yahoo!. Why should shareholder take less?
Miller may be thinking of Icahn's recent deals to pressure Motorola (NYSE: MOT) and Blockbuster (NYSE: BBI) to improve "shareholder value". Neither one of those have done well. Investors who followed Icahn in have lost plenty of money.
Legg Mason's comment makes sense. "Put up or shut up:"
Douglas A. McIntyre is an editor at 247wallst.com."
Investors are taking their money out of hedge funds more now that at any time over the past 10 years, according to the Wall Street Journal. Firms are bracing for the end of June when the next big wave will hit.
First it was a demand for management changes, and now shareholders, including one time director Eli Broad and fund managers Shelby Davis of Davis Selected Advisors and Bill Miller of Legg Mason Inc (NYSE: LM), are again upset with American International Group Inc (NYSE: AIG) and want changes in the boardroom as well, the Wall Street Journal reported.
Spotlight Capital is increasing pressure on Chico's FAS Inc (NYSE: CHS) and said it has been in touch with 25 major shareholders in order to oust CEO Scott Edmonds and unseat board member John Burden, who are accused of having a conflict of interest, the New York Post reported.
WEB SITES:
Advanced Micro Devices Inc (NYSE: AMD) denied reports certain of its new dual-core chip, code-named Kuma, have been canceled, according to CNet. A spokesman for the company said that the launch of Kuma, scheduled for the second half of 2008, remains on track.
The elbows are getting sharp in the corners and soon the battle lines over the Microsoft (NASDAQ: MSFT) fight for Yahoo! (NASDAQ: YHOO) will become more evident to the public. Legg Mason's big equity fund, lead by disgraced stock guru Bill Miller, is prepared to support an effort by Yahoo! to remain independent, should Microsoft lower its offer, according toThe Wall Street Journal.
Miller's performance has been so hideous over the last year that he should keep his opinions to himself.
What Miller is not acknowledging is that Microsoft may simply walk away if it cannot get the support of Yahoo!'s shareholders and board. The portal's stock was below $20 and many predict it could go back there if Microsoft withdraws its offer. The eventual price depends on Yahoo!'s first quarter performance, but at this point, Redmond thinks it has the best deal -- perhaps the only deal -- in town.
The conventional wisdom is that if Microsoft goes away, it may take years for Yahoo! to get its price back above $30, if it gets there at all. Yahoo! may be underestimating how bad the current recession could get. If so, it may look back at the current offer and rue the day that it decided to fight a takeover.
At the very least, with Miller's track record, he is hardly a bell-weather for what Yahoo! should do.
Douglas A. McIntyre is an editor at 247wallst.com.
MOST NOTEWORTHY: Legg Mason, Panacos Pharma and PepsiAmericas were today's noteworthy upgrades:
Wachovia upgraded Legg Mason (NYSE: LM) to Market Perform from Underperform citing valuation, new CEO change, and reduced Citigroup (NYSE: C) ownership.
Bear upgraded Panacos Pharma (NASDAQ: PANC) to Outperform from Peer Perform citing renewed confidence in Bevirimat, an HIV inhibitor, following analysis of Phase IIb data. The firm expects a partnership for Bevirmat to be the next catalyst.
Deutsche Bank raised PepsiAmericas (NYSE: PAS) to Buy from Hold shares on valuation, as they believe the recent weakness is overdone.
OTHER UPGRADES:
Fannie Mae (NYSE: FNM) was raised to Equal Weight from Underweight at Morgan Stanley.
Legendary money manager Bill Miller, who raised his Legg Mason Value Trust fund's stake in Countrywide to 15% and could buy as much as a 25% interest, said in a letter distributed to the press that he was "quite surprised by the decision to sell the company at close to a seven-year low in the stock price, and agreeing to a bid that amounts to only 30% of book value." Predictably, Bank of America disagrees with Miller. A company spokesman told Bloomberg News that "we believe it is fair for both companies."
MarketWatch was running a interview today with Will Nasgovitz, co-manager of the Heartland Select Value Fund (NASDAQ: HRSVX). The $332 billion fund has absolutely trounced the S&P 500 (AMEX: SPY) since 2000. Even with an extremely rocky 2007, the fund is up over 100% since 2000, where the S&P is actually (ugh) in the red for the same time period.
The secret sauce?
MarketWatch quotes manager Nasgovitz as saying that the team running Select Value has a background covering small- and micro-cap stocks, which don't get as much analyst research coverage, that they apply when delving into larger companies.
In August I posted on the danger that subprime mortgages pose to people who invest in money market funds. Today, the New York Times reports that several such funds have invested in commercial paper (CP) issued by Structured Investment Vehicles (SIVs) backed by subprime mortgage-backed securities (MBSs). I think all money market funds should start a public information campaign to let people know if they have the SIV virus and if so, what they're doing to protect their customers from it.
Earlier, I posted on all the new vocabulary words I've learned in the last year thanks to the subprime mortgage meltdown. This $1.3 trillion market consists of mortgages to people who can't afford to repay in many cases. Forty seven percent of the loans were made without documentation of the borrower's income -- these are known as liar loans. The subprime mortgages were packaged as MBSs and among the buyers were SIVs -- off-balance sheet entities that use a bank's good credit rating to issue CP to invest in MBSs.
Thanks to the subprime mortgage meltdown, the CP is not worth as much as before so the money market funds that bought it are now forced to break the $1 per share constant value or put money into the fund to make up for the lost value. So far, analysts say that most SIV securities are trading at 97 to 98 cents on the dollar. But if more SIVs are forced to unwind, the resulting fire sale would put pressure on prices.
If you follow growth and value investing gurus, you've probably heard of Legg Mason's Bill Miller. After 15 years of beating the S&P 500 index, the value investing champ is now in a two-year rut of trailing the index. What happened? All great things come to a change, so with another not-so-good trend under way, Mason is re-tooling some things to get back on track.
While I am a huge fan of growth investing and index funds, from international and emerging markets to REITs to small caps, I also pay attention to value funds and markets. With various industries and sectors, loading too much in one risks the potential for losing timing in another. Case in point: Miller's Legg Mason Value Trust (NASDAQ: LMVTX) was overweight in telecom and tech, and underweight in the energy sector in the last year or so, and that explains not beating the S&P 500.
How could such a seasoned manager miss the boat here? Like many of you, I've missed plenty of boats, and the man is only human. One of Miller's top 10 holdings is Amazon.com (NASDAQ: AMZN), which has seen a great rally this year, but still is overvalued once you consider the fundamentals of the company's financials.
The $62 billion Columbia Funds Series Trust Cash Reserves
According to the New York Times [registration required] these four funds own commercial paper -- short term corporate IOUs -- backed by residential mortgages which Standard & Poor's may downgrade. S&P specifically raised questions about four commercial paper issuers for possible downgrades:
As the stock shot up 14% the other day, it was revealed that the warm and fuzzy big bear hired Lehman Brothers to "explore strategic alternatives." Some analysts think an LBO is what will happen, and range the valuation at from $34 to $36. Very recently the company reduced its second quarter per share profit expectations to 7 cents to 10 cents, down from 15 cents to 19 cents, because of slow sales at stores that have been opened for at least a year. Here's a bear to be bullish on.
It's troubled times for the nation's largest mortgage lender. Earlier in the week the shares began to fall when it was revealed that they may be a part of a government investigation into subprime loans. It certainly doesn't help that three former company executives pleaded guilty to conducting insider trading in shares of Countrywide. The heat is on.
Two Texas investment groups, HBK Investments and Lone Star Funds, who between them own about 9.5% of the company, are said to be interested in digesting the whole dang thing. The 490 restaurant chain that has operations in 20 states just saw their most recent quarterly profit drop 30% from the previous year, as same store sales fell 4.7%. Gentlemen that they are though, they'll only pursue the sizzle if the board cooks it up with them.
Jana Partners and S.A.C. Capital Advisors, who have about an 8.4% combined ownership of AMTD, are keeping the pressure on for the firm to partner up with another brokerage firm, and have now formalized their demands.
BUZZ
DJO INCORPORATED (NYSE: DJO): MMI Investments purchased 9.4% of the company's shares. When they buy in, they usually see the company acquired...Pride International Inc (NYSE: PDE): Spin off of foreign assets, or a possible takeover, has attracted interest...Legg Mason Inc (NYSE: LM): Pershing Square Capital, whose activist leader William Ackman has tried to push around McDonald's Corporation (NYSE: MCD) and Wendy's, has taken a 1.5% share of the company.
The crème de la crème of portfolio managers met up in New York to exchange investment ideas at the Ira W. Sohn Investment Research Conference last week. Presenters included turnaround expert Wilbur Ross, Joe Rosenberg who has managed money at Loews Corporation (NYSE: LTR) forever, Bill Miller of Legg Mason Inc (NYSE: LM) and Mason Hawkins, Chairman of Southeastern Asset Management.
Some of the highlights:
General theme was favoring large cap over small cap
Technology is coming back into favor in addition to healthcare
Investors should avoid Asia
Mason Hawkins ended the conference not recommending individual stocks but focusing more on investment advisory prose: have the discipline to say no, be patient and wait for the right opportunity, be willing to stand on your own when no one agrees with you, and take advantage of other peoples fear and greed. That investment advice pretty much follows the thoughts of many of the presenters.
Poor Bill Miller. After seeing his Cal Ripken-esque 15-year streak of beating the market end in 2006, he's trailing the S&P 500 again in 2007. His investors at the $21 billion Legg Mason Value Trust were probably content to laugh off the end of his run, but another off-year in 2007 could raise some eyebrows. Is Bill Miller finished, some will ask? Or, can he make a comeback amid mounting pressure to deliver returns to shareholders?
When asked about whether his amazing run was just a fluke, Miller replied by pointing out that the odds of beating the market every year from 1991 to 2005 are about 1 in 2.3 million. "So there was probably some skill involved... On the other hand, something with odds of 1 in 2.3 million happens to about 130 people per day in the U.S., so you never know."
I wouldn't give up on Bill Miller just yet. He's one of the greatest investing minds ever, and I would look for him to regain his form. And if he doesn't? Well then he just be another member of the 90% of mutual fund managers who don't beat the market.
Bill Miller, the stock-picking wizard behind the Legg Mason Value Trust Fund that has outperformed the S&P 500 index for 15 -- yes, fifteen -- consecutive years, is finally eating a little exhaust. This year, the 500-stock index (which will likely finish up more than 14% year-to-date) will outdistance Miller's fund by a wide margin, thanks to the fund's precipitous summer swoon.
Concerns are mounting that Miller, whose fund's sheer size is limiting its flexibility, might have reached the end of the golden path. Investors can't help but overwhelm a good thing, and Miller's success with contrarian plays has garnered so much attention that whatever he does can convert contrarianism into mainstreamism. He made some bold moves in tech bellwethers Yahoo! Inc. (NASDAQ: YHOO), eBay Inc. (NASDAQ: EBAY), and Amazon.com Inc. (NASDAQ: AMZN) that didn't play out, and he placed a lot of faith in homebuilders when the softening housing market sent many to the cashier.
But most investors who've ridden this far with him are reluctant to jump off the gravy after one poor year (which, really, was only a poor four months). The fund has outperformed the S&P's torrid run since August, and many of Miller's current holdings -- such as UnitedHealth Group Inc. (NYSE: UNH), Aetna Inc. (NYSE: AET), KB Home (NYSE: KBH), and Pulte Homes Inc. (NYSE: PHM) -- seem poised to rebound from their lower valuations and enjoy a solid '07.
Too much is being made of the end of his 15-year streak. It's an abstract idea based on an arbitrary 12-month cycle. Miller has a basket of goodies and a boatload of momentum heading into the new year. Anyone who cashes out on him now is nuts.
How in the world is Amazon.com, Inc. (NASDAQ:AMZN) holding on to its stock price? Who is supporting these outrageous figures? Why is there no profit taking? Do investors think it's going higher still, without the profits to back it up? Are investors buying CEO Jeffrey P. Bezos's mystic ethos?
For starters the shares are controlled by surprisingly few entities. If I am reading the data correctly, Jeffrey Bezos owns 101,198,359 shares as of October 27, 2006. Legg Mason Inc. holds another 98,122,167shares and TCW, Inc. controls another 26,971,084 shares, both as of June 30, 2006. That means that approximately 60% of the shares are held by three entities.
Looking still further, insiders control 25.22% of the outstanding shares and institutions control 73.20% for a total of 98.42% which means individual investors own only 1.58% of the outstanding shares. For comparison Google Inc. (NASDAQ:GOOG) insiders and Institutions control 87.45%, leaving individual investors with 12.55%. Seems the small guy remains at the mercy of the big players and will likely be left without a seat when the music stops. With a price to earnings ratio hovering between 54 and 56 lately there is not much room for error (actually none) so the the true believers better be right.
Am I the only one bewildered at Amazon's stock price. I don't think so.
The latest from Business Week provides some insight into Jeff Bezos's gamble on becoming a platform player. Just because Bezos chooses to gamble does not mean the individual investor should. After all, he is gambling with your money -- especially when you consider the inflated stock price.
Someone once told me about a person new to the investment world who got a hot tip on a stock that was trading at a good price with strong market possibilities. He asked his broker to buy 500 shares. The stock went up, so he bought another 500 shares. It continued to rise in price and he felt he had really got a good tip and wanted to take full advantage of it before it made a major move so he bought 4,000 more shares. Sure enough the stock popped the very next day. His confidence beaming, he called his broker to buy another 5,000 shares -- doubling his position. His broker tried to discourage him telling him there were no sure things but he insisted and his broker reluctantly increased his position to 10,000 shares. By the end of the week he was up 200%. Not wanting to let his greed get the best of him he decided he had made enough so he called his broker and asked him to sell out his position. The broker replied, "to whom? You're the only one buying."
If so many Amazon shares are in the hands of Legg Mason and it decides to take some profits, who will they sell to? Jeff Bezos has often proven to be insightful and inspirational, but I would keep my eye on a seat just in case that music stops.
Interested in reading more? Check out my other posts for Bloggingstocks here.
Sheldon Liber is the CEO of a small private investment company and the vice president for Design and Research of an architecture & planning firm.
Late last week, the legendary mutual fund manager, Bill Miller, published his quarterly report to shareholders of Legg Mason Value Trust (LMVTX). For each of the past 15 years -- despite much tumult -- he has beaten the S&P 500.
Although, as for this year, his performance has been subpar (but, hey, there is still time left for him to make a comeback). Nonetheless he says he is "somewhere between bullish and very bullish."
OK, so what stocks is Miller focused on?
He only mentioned one: Amazon.com, Inc. (Nasdaq: AMZN). Keep in mind that Miller is a well-known intellectual, who routinely quotes obscure authors, scientists, and philosophers when describing his analysis of stocks. In other words, might he be interested in Amazon.com because he's a big-time customer?
Perhaps. But Miller thinks that Amazon.com has a powerful business model -- which is likely to see increased operating margins. If correct, he thinks investors will get an "excess return." Yes, with phrases like that, he is definitely the intellectual type.
Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.
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Late last week, the legendary mutual fund manager, Bill Miller, published his quarterly report to shareholders of 
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