Standard & Poor's is performing some end-of-year cleanup on its benchmark index, the S&P 500 Index (SPX). My colleague Mark Fightmaster reported earlier that Visa (V) is set to replace Ciena Corp. (CIEN) on the widely watched market barometer, but that's not the only SPX development hitting Wall Street today. In fact, struggling insurance issue MBIA Inc. (MBI) is preparing to take its leave from the venerable index.

In a press release late Friday, Standard & Poor's explained that MBIA "currently ranks 500th in the index and is no longer representative of the S&P 500 index market cap space." The beaten-down insurance company will be replaced by Mead Johnson Nutrition (MJN), which is in the process of being spun off by Bristol-Myers Squibb (BMY).

Continue reading MBIA booted from S&P 500 Index

MBIA booted from S&P 500 Index originally appeared on BloggingStocks on Mon, 14 Dec 2009 12:45:00 EST. Please see our terms for use of feeds.

Almost two months have passed since I posted Serious Money: Tempting fate with 10 financials - the results of buying into the following pool of financial stocks at a time when the "hate 'em" factor was at a peak, or so I thought. Now things are even worse, much worse, and a new market bottom was reached only last week.

Trying to predict where this market will go is not possible, but there are many ways to play it. I chose to buy into a pool of financial stocks, believing the survivors would post gains that would overshadow the losers.

When I last updated this story, the pool of stocks was up 26%. Things have gotten worse, but the group is still up 13.89% plus the dividends. This is better than any of the indices, although it is much more speculative.

There was plenty of big news since the last report. While Lehman Brothers Holdings (OTC: LEHMQ) went bankrupt, MBIA Inc (NYSE: MBI) made up for it by more than doubling. Meanwhile, Merrill Lynch (NYSE: MER) is in survival mode supported by a Bank of America (NYSE: BAC) buyout offer. Seven stocks are up, two are down and one is gone (returns from July 29 prices):

Continue reading Chasing Value: Financial devastation? Still up but less

Chasing Value: Financial devastation? Still up but less originally appeared on BloggingStocks on Mon, 22 Sep 2008 12:40:00 EST. Please see our terms for use of feeds.

• Citigroup Inc. (NYSE: C) -- $18.45 down 63% from its 52 week high of $49.90; closed yesterday at $19.11, UP 3.57%
  
• Lehman Br Holdings (NYSE: LEH) -- $16.88 down 75% from its 52 week high of $67.73; closed yesterday at $16.13, down 4.44%
• Merrill Lynch (NYSE: MER) -- $26.25 down 67% from its 52 week high of $79.72; closed yesterday at $27.75, UP 5.7%.
• MBIA Inc (NYSE: MBI) -- $4.92 down 93% from its 52 week high of $68.98; closed yesterday at $16.14, UP 228%.
• E*TRADE (NASDAQ: ETFC) -- $3.06 down 84% from its 52 week high of $19.39; closed yesterday at $3.25, UP 6.2.
• East West Bancorp (NASDAQ: EWBC) -- $12.46 down 67% from its 52 week high of $20.88; closed yesterday at $13.01, UP 4.4%.
• Gramercy Capital (NYSE: GKK) -- $6.72 down 77% from its 52 week high of $29.45; closed yesterday at $6.80, UP 1.2%.
• Newcastle Investment (NYSE: NCT) -- $5.88 down 72% from its 52 week high of $20.88; closed yesterday at $6.89, UP 17.18%.
• Wachovia Corp. (NYSE: WB) -- $15.70 down 70% from its 52 week high of $53.10; closed yesterday at $16.65, UP 6%.
• Washington Mutual (NYSE: WM) -- $4.43 down 89% from its 52 week high of $39.48; closed yesterday at $4.24, down 4.29%

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 MBI, NCT & WM.

Chasing Value: Financials risky but up 26% originally appeared on BloggingStocks on Wed, 03 Sep 2008 14:15:00 EST. Please see our terms for use of feeds.

Reporting on the daily appreciation of MBIA Inc. (NYSE: MBI) over the last few weeks has made me feel like a play-by-play announcer. One comment in an earlier post on MBIA raked me over the coals for writing when the stock was up 26%, only a few days after I suggested readers take a look at some crushed financials in Serious Money: Tempting fate with 10 financials. He did this even though on the day he commented it was up by 74%.

I was just reporting the jump but the reader took me to task for bragging when nothing should be judged so quickly, and my previous financial calls were bad. Well, MBIA has now leaped from $4.92 three weeks ago to $11.22 at Friday's close for a gain of 126%. This is BIG news even if it happened quickly -- in particular because it happened quickly.

The reasons may be numerous. Perhaps it is a combination of company stock buybacks and short covering. Perhaps it is the periodic comments in Barron's about the value of the company based on its current book of business and the fact it needs no new business to be profitable. In its last earnings report, MBIA did suprise to the upside substantially. Last Friday was certainly related to the fact that it was taken off the watch-list for the next three months as the ratings agencies supported MBIA's rating of AA.

MBIA has a current price-to-book of 0.26, a P/S ratio of 0.76 and P/CF of 1.57, so maybe it is still worth a look.

Update: Final, closed up to $11.83, $0.61, (+ 5.44%). MBIA stands at $140% gain.

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 MBI.

Chasing Value: MBIA up over 120% - now what? originally appeared on BloggingStocks on Mon, 18 Aug 2008 12:48:00 EST. Please see our terms for use of feeds.

Continue reading Chasing Value: MBIA earnings, stock and litigation up

Chasing Value: MBIA earnings, stock and litigation up originally appeared on BloggingStocks on Mon, 11 Aug 2008 14:41:00 EST. Please see our terms for use of feeds.

Yesterday the Dow Jones Industrial Average was down 225, so I decided to peg the financial stocks I wrote about investing in as a pool. We are often accused of bragging on the good days and having memory loss on the bad so I wanted to be transparent and forthright on the downside.

The market is rebounding as I write so I expect the news is even better. Although, this pool of stocks beat the market so far in the short run, I hope to track this group for a year, or at least until Major League Baseball's spring training opens in 2009.

If you want to track the story with me the first post was Serious Money: 10 finance stocks as the market bounces. I remain stubbornly optimistic that this is a buying opportunity and investors will be sorry they did not have the courage to buy stocks when they were hated. The follow-up was Serious Money: Tempting fate with 10 financials

The initial prices are as of July 29, 2008.

Continue reading Serious Money: Wisdom or folly -- 10 financials updated

Serious Money: Wisdom or folly -- 10 financials updated originally appeared on BloggingStocks on Fri, 08 Aug 2008 13:12:00 EST. Please see our terms for use of feeds.

Today the Dow Jones Industrial Average bounced back from yesterday's poor showing. It ended the trading day at 11,397.56, that's plus 266.48 (+2.39%) returning more than it had lost only 24 hours ago.

There are plenty of prognosticators explaining why this happened and so I am not going to join the crowd this afternoon with my own version. Leave it to say we are in a period of uncertainty where investors and traders alike are a bit jumpy. We did have a 5.4 magnitude earthquake today in Southern California, only fitting for this type of market.

In the meantime I have been wondering how to take advantage of the lousy situation in the financial sector of the market. How can I maximize my gains and control risk at the same time? I guess we are all trying to do this, but few will appreciate my contrarian, 'no guts no glory' approach.

I think you have to be buying banks and investment companies and I have decided that ten is the right number. Sir John Templeton (RIP) is the catalyst for this notion. I am already on record (Serious Money: More signs the market has bottomed) that this is the time to be selectively buying and 'my pal Warren' said as much at the Berkshire Hathaway (NYSE: BRK.A) annual meeting when he suggested the financials have seen the worst of the storm.

Continue reading Serious Money: 10 finance stocks as the market bounces

Serious Money: 10 finance stocks as the market bounces originally appeared on BloggingStocks on Tue, 29 Jul 2008 18:02:00 EST. Please see our terms for use of feeds.

MAJOR PAPERS:

• After being downgraded by Moody's, The Wall Street Journal reported that MBIA Inc (NYSE: MBI) will have to make $2.9 billion in termination payments and put up an additional $4.5 billion in collateral on agreements called Guaranteed Investment Contracts. As a result the firm is selling municipal bonds to raise cash.
• Anheuser-Busch Companies Inc (NYSE: BUD) introduced a new business plan to help thwart a takeover by rival InBev. As part of its plan, The Wall Street Journal reported its intention to reduce headcount, raise prices and buy back more of its shares.
• In an attempt to withstand the economic slowdown, the Financial Times reported that Siemens AG (NYSE: SI) announced plans to cut 17,200 jobs worldwide. Approximately 6,400 job cuts will be in Germany with a third more, elsewhere in Europe.
• The Financial Times also reported that Citigroup Incorporated (NYSE: C) is planning to change its bonus system for hundreds of its top managers, in an attempt to increase cooperation and reduce competition within the company.

• John Varley, the CEO of Barclays Plc (NYSE: BCS), said the GBP4.5B rights issue answered naysayers, and said in an interview with The Sunday Telegraph that extra financing will not be necessary.

Newspaper wrap-up: Anheuser-Busch to cut jobs and raise prices originally appeared on BloggingStocks on Mon, 30 Jun 2008 08:00:00 EST. Please see our terms for use of feeds.

MAJOR PAPERS:

• According to Yahoo! Inc (NASDAQ: YHOO), the Wall Street Journal reported that a severance plan investor Carl Icahn said is "excessively expensive" would come into play if Icahn is successful in his plan to take control of the company's board; Yahoo! maintained that the plan is structured to prevent Yahoo! from altering or dismantling it while under a proxy challenge.
• The Financial Times reported that Lehman Brothers Holdings Inc (NYSE: LEH) almost reached a strategic deal with a group of Korean financial institutions as part of its recent capital raising initiative, and the investment bank may still sign an agreement with the Korean companies this year, inside sources said.
• According to the Financial Times, Merrill Lynch & Co Inc (NYSE: MER), UBS AG (NYSE: UBS) and Citigroup Incorporated (NYSE: C), which are most exposed to MBIA Inc (NYSE: MBI) and Ambac Financial Group Inc (NYSE: ABK), are facing further write downs of up to $10B after the bond insurers lost the battle to keep their triple A credit ratings in tact.
• A source familiar with the matter told dealReporter that Barnes & Noble Inc (NYSE: BKS) is conducting due diligence, but has not established whether it will competitively bid for Borders Group Inc (NYSE: BGP). Should Barnes & Noble indicate real interest, the biding process could be delayed, the source said.

• The Detroit News reported that Ford Motor Company (NYSE: F), in an effort to keep up with changing consumer demand in the U.S., is assembling a plan that will shift entire truck plants to car production.

Newspaper wrap-up: Lehman almost raised capital from Korean companies originally appeared on BloggingStocks on Wed, 11 Jun 2008 08:00:00 EST. Please see our terms for use of feeds.

Bloomberg News reports that Moody's (NYSE: MCO) may downgrade municipal bond insurer MBIA (NYSE: MBI) after it reported deepening losses from the mortgage-market slump. MBIA's insurance financial strength rating may fall to the Aa range, although a drop to the A category is possible. MBIA's stock is down 91% since the end of May 2007.

That's when I first suggested that investors consider selling MBIA shares short. William Ackman had already shorted MBIA because he thought it lacked the capital needed to support its obligations. Back then, MBIA traded at $66.59 a share -- today it's down to $5.88. His bet proved prescient.

Meanwhile, investors are wagering that MBIA won't make it. Credit-default swaps tied to MBIA's insurance unit rose to a record as investors hedged against the risk the company's guarantees will sour. Sellers of five-year contracts demanded 23% upfront and 5% a year. That's up from 18.5% initially and 5% a year yesterday.

Only $5.88 more to go.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in MBIA securities.

MBIA downgrade? How low can it go? originally appeared on BloggingStocks on Wed, 04 Jun 2008 14:48:00 EST. Please see our terms for use of feeds.

MAJOR PAPERS:

• The Wall Street Journal said the $19B privatization of Clear Channel Communications Inc (NYSE: CCU) was near collapse as the private-equity firms behind the deal and the banks financing it failed to resolve their differences over terms of the credit agreement, people familiar with the matter said.
• Comcast Corporation (NASDAQ: CMCSA) and Time Warner Inc (NYSE: TWX) are in talks to fund a new nationwide wireless company that would be operated by Sprint Nextel Corporation (NYSE: S) and Clearwire Corporation (NASDAQ: CLWR), and use WiMax technology, reported the Wall Street Journal. Intel Corporation (NASDAQ: INTC) and Google Inc (NASDAQ: GOOG) may also help with funding.
• The Wall Street Journal also reported federal regulators are handing out warnings to banks due to their exposure to development loans and commercial real-estate construction. Sources believe Corus Bankshares Incorporated (NASDAQ: CORS) is facing trouble in the near future due to increasing scrutiny by regulators and the fact that much of the fallout in the condo sector has yet to be felt by banks.
• Some banks in the government-sponsored Federal Home Loan Banking system want to guarantee municipal infrastructure projects, the Financial Times reported, thus fulfilling the role traditionally taken by monoline insurance groups such as MBIA Inc(NYSE: MBI).

Newspaper wrap-up: Sources say Clear Channel deal near collapse over loan term originally appeared on BloggingStocks on Wed, 26 Mar 2008 08:00:00 EST. Please see our terms for use of feeds.

MAJOR PAPERS:

• The Wall Street Journal reported that Berkshire Hathaway Inc (NYSE: BRK.A) chair Warren Buffett is in a position to help companies like Ambac Financial Group Inc (NYSE: ABK) and MBIA Inc (NYSE: MBI), possibly providing relief amid the credit market turmoil; sources speculate the company could also get into the bond-insurance business.
• Retailer Kohl's Corporation (NYSE: KSS) is today expected to announce an exclusive multi-year active wear licensing partnership with Fila Luxembourg S.a.r.l., a part of Fila Korea, according to the Wall Street Journal.
• According to a senior executive at Telefonica SA (NYSE: TEF), the company's efforts to obtain exclusive control of Vivo have stalled, the Financial Times reported.
• CEOs of CSX Corporation (NYSE: CSX), Union Pacific Corporation (NYSE: UNP) and Burlington Northern Santa Fe Corporation (NYSE: BNI) told the Financial Times that if any of the new four bills to regulate rates, that are currently being debated in congress, becomes law, accelerating investment in U.S. railroads' capacity could come to a halt.

• News Corp's (NYSE: NWS.A) Rupert Murdoch said the company plans to replace nearly one million paid subscribers of the online Wall Street Journal with 10-15 million "who wouldn't pay a thing." Murdoch's long-term plan is to penetrate developing markets, The Australian reported.

Newspaper wrap-up: Kohl's to announce partnership with Fila originally appeared on BloggingStocks on Tue, 13 Nov 2007 08:45:00 EST. Please see our terms for use of feeds.

• Jefferies downgraded shares of Trident Microsystems Inc (NASDAQ: TRID) to Hold from Buy and lowered their target to $9 from $20 following the company's mixed quarter as they expect TRID to lose share in the TV market and face increasing price pressure. Shares were also downgraded to Hold from Buy at Deutsche Bank. Oppenheimer lowered Trident to Neutral from Buy, citing disappointing December guidance, delay in TV ramp, and expectations that 2008 will be a peak year for TV chip ramp revenues.
• CIBC downgraded shares of Comcast Corporation (NASDAQ: CMCSA) to Sector Performer from Outperformer following the weak Q3 results to reflect increasing competition in telco video, slower broadband growth and the weakening economy.
• JP Morgan downgraded Level 3 Communications Inc (NASDAQ: LVLT) to Neutral from Outperform following disappointing Q3 results and guidance.
• Friedman Billings downgraded shares of Ambac Financial Group Inc (NYSE: ABK) and MBIA Inc (NYSE: MBI) to Market Perform from Outperform citing lack of near-term catalysts and uncertainty surrounding the credit markets.

• Banc of America lowered its rating on Eli Lilly and Company (NYSE: LLY) to Neutral from Buy.
• WestLB downgraded GlaxoSmithKline PLC (NYSE: GSK) to Sell from Add.
• Societe Generale downgraded France Telecom (NYSE: FTE) to Hold from Buy.
• Franklin Resources Inc (NYSE: BEN) was downgraded to Market Perform from Outperform at Friedman Billings and at Keefe Bruyette.

Analyst downgrades: TRID, CMCSA, LVLT, ABK and MBI originally appeared on BloggingStocks on Fri, 26 Oct 2007 10:30:00 EST. Please see our terms for use of feeds.

• Bill Miller, despite being wrong on this investment since 1999, believes Eastman Kodak Company (NYSE: EK) will turnaround and is worth $45 per. As we have blogged in the past, the new CEO is very close to getting this business model to work, meaning this company could turn into a free cash flow machine.
• Steve Mandel, formerly of Tiger Management and now running a fund at Lone Pine Capital, likes EMC Corporation (NYSE: EMC), which was up big last week. In addition, he likes other large cap stocks such as General Electric Company (NYSE: GE) and Goldman Sachs Group Inc (NYSE: GS). He also has has postive comments on Google Inc (NASDAQ: GOOG).
• Wilbur Ross is still pushing his commodities turnaround plays, in particular International Coal Group Inc (NYSE: ICO). Ross's thinking is as follows: Coal pricing should reach healthy levels as excess inventory is burned off. Coal will account for 57% of U.S. electricity generation, up from 50% today, in the next twenty five years. Appalachian coal, in which ICO is rich, has considerable pricing power since East Coast supply is limited and demand is strong.

A plethora of stock ideas originally appeared on BloggingStocks on Tue, 29 May 2007 15:20:00 EST. Please see our terms for use of feeds.