Analyst upgrades:

• Baird upgraded Regal-Beloit (NYSE: RBC) to Outperform from Neutral based on valuation and growth expectations.
• Black & Decker (NYSE: BDK) and Lennar (NYSE: LEN) were upgraded to Buy from Neutral at UBS based on valuation.
• Kroger (NYSE: KR) and Public Storage (NYSE: PSA) were added to Goldman's Conviction Buy List.
• CIBC upgraded Biovail (NYSE: BVF) to Sector Performer from Sector Underperformer.
• Abercrombie & Fitch (NYSE: ANF) was raised to Neutral from Underperform at Cowen.

• Merrill downgraded Campbell Soup (NYSE: CPB) to Neutral from Buy and expects marketing and promotional spending to limit earnings growth in 2009 and 2010. The firm lowered their target to $35 from $42.
• Mechel Steel (NYSE: MTL) was cut to Underweight from Equal Weight at Morgan Stanley to reflect declining coal demand.
  
• Friedman Billings downgraded shares of Legg Mason (NYSE: LM) to Underperform from Market Perform on liquidity concerns given the Legg Mason's leveraged balance sheet and falling EBITDA. The firm lowered their target to $7 from $11.

Continue reading Analyst calls: RBC, BDK, KR, LEN, KR, CPB, MTL, LM, PIR, AAPL, AVP ...

Analyst calls: RBC, BDK, KR, LEN, KR, CPB, MTL, LM, PIR, AAPL, AVP ... originally appeared on BloggingStocks on Tue, 25 Nov 2008 11:41:00 EST. Please see our terms for use of feeds.

The shares of American International Group (NYSE: AIG) soared nearly 23% Monday and are rising fast again today on news that shareholders may band together to prevent the Federal Reserve from snapping up an 80% stake in the insurance firm. Apparently, major investors (which could include Bill Miller of Legg Mason) are hoping that the quick sale of assets will raise enough capital to pay off the Fed's $85 billion loan. However, AIG chief Edward Liddy seemed to put the kibosh on this speculation last night in a CNBC interview.

Liddy told the cable news channel he thinks the government's bailout plan is an "excellent idea," and added that he doesn't consider the Fed's intervention as a step toward nationalization. While the CEO believes that the government's loan will be fully repaid, he noted that a shareholder rescue isn't the most likely outcome. Instead, Liddy plans to prepare a list of assets for sale within seven to ten days, in hopes that the divestments will generate enough cash to stave off the feds at the door.

So, what's for sale at AIG? Well, Liddy made it clear that the firm's Asian operations are both "sacrosanct" and "unassailable." The chief executive also emphasized that he wants his company to emerge on the other side of this crisis as a leaner and more resilient version of itself. "It will look a lot like it did prior to 1998-1999, with less reliance on the financial services side," he told CNBC, noting that AIG will instead focus on its core business of property-casualty insurance.

Continue reading Can shareholders rescue American International Group?

Can shareholders rescue American International Group? originally appeared on BloggingStocks on Tue, 23 Sep 2008 12:40:00 EST. Please see our terms for use of feeds.

I am not sure that Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) will make it through the month as public companies. Barron's quoted an anonymous senior official -- who sounds an awful lot like Hank Paulson to me -- that unless Fannie and Freddie could raise at least $10 billion each, the government would bail them out while wiping out common shareholders and eliminating the preferred dividend. Since then, investors have been dumping shares of Fannie and Freddie like there's no tomorrow.

Who wins and who loses if Fannie and Freddie's shareholders are wiped out? As I said on CNBC's Power Lunch this afternoon, the winners are investors who shorted Fannie and Freddie years ago and are now reaping enormous profits. I also think that some Wall Street investment banks will win big as they get the job of selling off Fannie and Freddie's pieces. The losers are their biggest common and preferred shareholders -- including some well known mutual funds.

The winners are:

• Jim Rogers, Rogers Holdings - Rogers originally shorted Freddie and Fannie in March 2006 and appeared on Bloomberg on November 20, 2007 to discuss why he did it and where he thought their stocks would go.
• Doug Noland, Prudent Bear - As I posted, since the late 1990s, Noland's research has concluded that Freddie and Fannie would "shudder" when the US credit bubble eventually burst. Noland has profited from the short bets he made -- but he says it is emotionally painful to watch them fail.

Continue reading Fannie/Freddie Flameout: Winners and Losers

Fannie/Freddie Flameout: Winners and Losers originally appeared on BloggingStocks on Thu, 21 Aug 2008 10:17:00 EST. Please see our terms for use of feeds.

This phenomenon is quite common. It's called confirmation bias -- the tendency of decision-makers to seek out information that reinforces their views of the world and to reject information that challenges those views. This is particularly common among those who have been successful. They think that they have figured out a winning formula and when it stops working, they blame everyone but themselves.

This came to mind as I read a CNNMoney story on how Miller's fund has lost 34% of its value since last July. Miller had been famous for beating the S&P 500 every year between 1990 and 2005. But his methods have failed him since. And investors have yanked $2.4 billion from Legg Mason which CNNMoney notes, reported a second quarter loss last week.

Continue reading After 34% drop in Value Trust, Bill Miller needs to go

After 34% drop in Value Trust, Bill Miller needs to go originally appeared on BloggingStocks on Thu, 31 Jul 2008 13:55:00 EST. Please see our terms for use of feeds.

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 told Reuters, "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."

Yahoo! (YHOO) investor wants price guarantee from Icahn originally appeared on BloggingStocks on Wed, 09 Jul 2008 09:43:00 EST. Please see our terms for use of feeds.

MAJOR PAPERS:

• 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.
• The Wall Street Journal reported that Citigroup Incorporated (NYSE: C) will close Old Lane Partners, a hedge fund co-founded by CEO Vikram Pandit.

• 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.

• 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.

Newspaper wrap-up: Citigroup to shut Old Lane Partners hedge fund originally appeared on BloggingStocks on Thu, 12 Jun 2008 08:00:00 EST. Please see our terms for use of feeds.

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 to The 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.

Big Legg Mason fund may support Yahoo! independence originally appeared on BloggingStocks on Wed, 09 Apr 2008 09:45:00 EST. Please see our terms for use of feeds.

• 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.

• Fannie Mae (NYSE: FNM) was raised to Equal Weight from Underweight at Morgan Stanley.
  
• Friedman Billings added Great Atlantic & Pacific Tea (NYSE: GAP) to its FBR Top Picks List.
  
• Jabil Circuit (NYSE: JBL) was upgraded to Neutral from Sell at Merrill Lynch.

Analyst upgrades: Legg Mason, Panacos Pharma, PepsiAmericas originally appeared on BloggingStocks on Wed, 05 Mar 2008 11:46:00 EST. Please see our terms for use of feeds.

Bank of America Corp.'s

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."

Continue reading Countrywide's $4 billion sale to Bank of America displeases Legg Mason

Countrywide's $4 billion sale to Bank of America displeases Legg Mason originally appeared on BloggingStocks on Tue, 12 Feb 2008 16:10:00 EST. Please see our terms for use of feeds.

Continue reading Look in the Heartland for value (HRSVX)

Look in the Heartland for value (HRSVX) originally appeared on BloggingStocks on Fri, 25 Jan 2008 16:45:00 EST. Please see our terms for use of feeds.

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.

Continue reading Thought your money market fund was safe? Think again

Thought your money market fund was safe? Think again originally appeared on BloggingStocks on Wed, 14 Nov 2007 10:25:00 EST. Please see our terms for use of feeds.

Continue reading Legg Mason's Bill Miller reshapes his portfolio strategy

Legg Mason's Bill Miller reshapes his portfolio strategy originally appeared on BloggingStocks on Mon, 05 Nov 2007 14:28:00 EST. Please see our terms for use of feeds.

If you own one of the following money market funds, you might want to consider whether your money will be there when you want to withdraw it:

• The $16.6 billion Evergreen Institutional Money Market Fund
• The $4.5 billion Evergreen Prime Cash Management Money Market Fund
• Legg Mason Inc.'s (NYSE: LM) $52.5 billion Master Portfolio Trust Liquid Reserves Portfolio.
• 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:

Continue reading Why your money market fund might not be as safe as you think

Why your money market fund might not be as safe as you think originally appeared on BloggingStocks on Tue, 14 Aug 2007 21:20:00 EST. Please see our terms for use of feeds.

This week's rumor round-up: Build-a-Bear to 'explore strategic alternatives' originally appeared on BloggingStocks on Fri, 29 Jun 2007 15:00:00 EST. Please see our terms for use of feeds.

• General theme was favoring large cap over small cap
• Technology is coming back into favor in addition to healthcare
• Investors should avoid Asia

Top fund managers congregate originally appeared on BloggingStocks on Tue, 29 May 2007 14:50:00 EST. Please see our terms for use of feeds.

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's Mason Value Trust still trailing behind the markets originally appeared on BloggingStocks on Tue, 03 Apr 2007 16:23:00 EST. Please see our terms for use of feeds.

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.

Despite an off year, Legg Mason's Miller is still the man originally appeared on BloggingStocks on Fri, 29 Dec 2006 12:59:00 EST. Please see our terms for use of feeds.

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.

Another concern brewing: Are increasing marketing expenditures cutting into profits?

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.

Who's supporting Amazon? originally appeared on BloggingStocks on Tue, 07 Nov 2006 16:10:00 EST. Please see our terms for use of feeds.

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.

Legg Mason's Bill Miller doubles down on Amazon.com originally appeared on BloggingStocks on Sun, 29 Oct 2006 22:04:00 EST. Please see our terms for use of feeds.

MOST NOTEWORTHY: Broadcom (BRCM) and News Corp (NWS, NWS.A) top today's extensive list of downgrades.

• Broadcom Corp (NASDAQ: BRCM) was downgraded by JMP Securities to Market Underperform from Market Perform, citing valuation and the chance of cautious guidance for the December quarter.
• Soleil Securities downgraded News Corp Ltd. (NYSE: NWS, NWS.A) to Sell from Hold citing the company's deteriorating asset efficiency following the change in senior management compensation structure.

OTHER DOWNGRADES:

• Lower than expected September traffic and unit revenue estimates forced Calyon Securities to downgrade US Airways Group Inc. (NYSE: LCC) to Add from Buy.
• The negative pre-announcement from Legg Mason Inc. (NYSE: LM) triggered downgrades from Freidman Billings Ramsey, to Underperform from Market Perform, and Merrill Lynch, to Sell from Buy.
• And finally, Freescale Semiconductor Inc (NYSE: FSL, FSL.B) was downgraded to Hold from Buy at Citigroup after the consortium led by the BlackStone Group made the company an offer to take them private.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

Analyst downgrades 10-11-06: News Corp downgraded to Sell originally appeared on BloggingStocks on Wed, 11 Oct 2006 11:11:00 EST. Please see our terms for use of feeds.