Except for the chosen ones -- CEOs and the like who have outrageous salary and benefit packages -- almost nobody has been able to escape the financial pain in the world today.
'My pal Warren,' Chairman of Berkshire Hathaway (NYSE: BRK.A and BRK.B), who only draws a $100,000 salary, has watched his net worth diminished by billions of dollars as his stock has unraveled like everything else. I last read Buffett had a 31% stake in Berkshire so he understands his shareholders angst, even if he does not feel their pain. The stock has dropped from a 52-week high of $151,650 to yesterday's close of $77,500 for a loss of 49%.
Once again in quarterly SEC filings Berkshire's holdings were released and I could not help but wonder if this great holding company had not become one more giant index fund. There are a lot of quality names in the mix including:
The above referenced stocks are all down with the market and there are still more that might be considered fallen angels or turn-around plays within Berkshire's holdings that include:
In addition to these publicly traded stocks Berkshire holdings include privately held Geico Insurance, See's Candies, Dairy Queen, Florsheim Shoes, and a multitude of others. Since so many stocks have been accumulated over the years I started to view BRK as a stock index and with that in mind did some comparisons between the Standard & Poors 500 and BRK.
The following is a three-year chart that illustrates that buying BRK instead of the index anytime in the last three years would have been beneficial by a 30% margin.
TheStreet.com's Jim Cramer says comparisons will be so easy that companies with strong pricing will outperform.
These year-over-year declines in energy costs along with the inability of the Chinese market to fall much further are the two bright spots that long-term investing can give us. The notion that there are consumer-products companies that have put in price increases that for the most part are sticking and that the developing world could come back with lower rates, makes me feel that the Unilever (NYSE: UN) (Cramer's Take)/Procter (NYSE: PG) (Cramer's Take)/Colgate (NYSE: CL) (Cramer's Take) cohort could have a remarkable rally.
But not until after this current quarter, because the price decreases have been incredibly slow to come in and the dollar is so strong.
I key on those because frankly, oil looks like it is going to struggle to hold $50, and while that is a sure sign of a terrible recession coming, it is, alas, good news for the companies like Kellogg (NYSE: K) (Cramer's Take) and General Mills (NYSE: GIS) (Cramer's Take) that use energy and whose product pricing has held.
Maybe it is one of the reasons that Google (NASDAQ: GOOG) and Procter & Gamble (NYSE: PG) are among the best managed companies in America. They will go to almost any legitimate lengths to improve their knowledge of businesses that will help them expand and prosper.
P&G would like to know more about how to sell its scores of products online. Google wants to know more about TV advertising. The search company has been trying to break into the television commercial brokerage business for over a year, with little success.
According toThe Wall Street Journal, "So far, about two-dozen staffers from the two companies have spent weeks dipping into each others staff training programs and sitting in on meetings where business plans get hammered out." That should worry other media that make money from P&G's $8 billion plus annual marketing budget. Google may not be sending people to learn about TV; it may simply trying to sell its own product.
While P&G may learn something about how to use search ads to get more people into stores, Google stands to pick up a decent piece of the packaged goods company's product sales budget. Magazine publishers, TV executives, and radio managements are not being brought in for similar gatherings. They do not have such an intimate platform for making their cases.
Google has always been remarkably clever. Now it is hurting the competition by climbing into the customer's tent.
Following the week we have just endured, many would find it hard to return to the stock market any time soon, despite so many pundits calling the market bottom on Thursday. Bad news just keeps amassing: the Euro-zone is officially in recession, unemployment in the U.S. and globally is on the rise, the housing market is far from any sustainable recovery, the auto sector is a mess and so on.
But it is always in these hard times, when things are cheap, that bargains can be found. While cheap can be meaningless during these times as Jim Cramer said this week and Joe Lazzaro seconded, perhaps some value could be found after all. What, then, did BloggingStocks contributors find worthwhile this week?
First, let me start, not by gloating, but by pointing out that on more than one occasion, more than one contributor has suggested to steer clear of Circuit City Stores Inc. (NYSE: CC). The electronics retailer has filed for bankruptcy Monday and the NYSE has suspended the company's common stock immediately. The stock is now traded over the market under CCTYQ.
Sirius XM Radio, Inc (NASDAQ: SIRI) reported a quarter that caused Steven Mallas to pause and think. The only way he sees Sirius is as a very -- very -- speculative and risky play. Since the stock has been beaten so much and is so cheap, if it doesn't disappear by the time the economy turns, it could be interesting. But only if one has the cash to burn. Jamie Dlugosch adds a reminder about SIRI's debt, hoping it would earn a reprieve from its debt holders as it tries to operate as one company. "Just imagine what this company could do in a normal economy. It would be truly tremendous."
McDonald's (NYSE:MCD) claims that there is no recession, at least as far as its business goes. According toReuters, the fast food company's CEO Jim Skinner said "Worldwide turbulence is barely affecting our business."
McDonald's same-store sales have been gaining 6% to 8% over the last few months and have been especially good in Asia and Europe.
The CEO's comments point out that some companies are nearly "recession proof" and their stocks may be the best investments during the downturn. McDonald's sells moderately good and modestly healthy food at remarkably low prices. For anyone who cannot eat at home or needs to get out for a little air, spending a few dollars for dinner is affordable even it tough times.
MCD joins a very limited number of elite firms that may actually do very well now. Certainly Wal-Mart (NYSE:WMT) is in that boat. People flock there to get low priced merchandise because they cannot afford what more expensive retailers charge. Some consumer products companies like P&G (NYSE:PG) are also likely to be relatively prosperous. Consumers will probably buy soap and razors no matter how badly off they are financially.
A tiny portion of corporate America may make it through a recession without suffering a great deal of harm. But, that list gets more tiny every day.
Douglas A. McIntyre is an editor at 247wallst.com.
Coffee is keeping Procter & Gamble (NYSE: PG) wired, even as it exits the home-brew business, finalizing the sale of Folgers to The J.M. Smucker Co (NYSE: SJM). The company raised its fiscal second-quarter and full-year 2009 forecasts due to better-than-expected proceeds from the sale of America's biggest-selling coffee brand. Previously, Procter & Gamble had expected a gain of 50 cents per share; now the company expects 63 cents per share in profit. The gain is partly due to the unusual method of sale called a "reverse Morris Trust" transaction; P&G will spin off Folgers to its shareholders, then simultaneously Folgers and J.M. Smucker will merge to form a new company.
As a result, earnings per share will be $1.63 for the quarter, the company said, and between $4.28 and $4.38 for fiscal 2009.
The sale of Folgers may have been timely for Procter & Gamble, as consumers who have been pressed financially have not yet returned to brewing coffee at home, instead downgrading from pricey independent coffeeshops and Starbucks (NASDAQ: SBUX) to better values for enormous cups of brewed coffee (with a side of deep-fried pastries) at Dunkin' Donuts and the like. If the economy continues to decline, perhaps Folgers will see a resurgence; for now, P&G is happily focusing on its core brands while Smucker works in a different customer base which values "iconic" comfort food brands.
Tyson Foods, Inc. (NYSE: TSN) reported, according to this source, a decent quarter in terms of bottom-line profit, but it wasn't enough to satisfy Wall Street. Sales rose almost 10% to $7.2 billion. And net income on an adjusted basis came in at $0.15 per share. That represented pretty good growth over last year's profit figure. But you know, it didn't really matter for two reasons. One, the call by the analyst community was for four more pennies. Two, guidance was not tasty at all. Management sees further pressures coming, and the aforementioned source mentions that the fulfillment of debt obligations is an issue.
A tough environment for chicken has been plaguing Tyson. Not only that, but a look at the company's press release shows that operational cash flow took a huge dive over the last twelve months, dropping roughly 58% to $288 million. There was no free cash for the year to support the dividend obligations. That isn't too encouraging.
The bottom line on Tyson, which competes with the also-struggling Pilgrim's Pride (NYSE: PPC), is that it isn't a buy, at least not from where I sit. I know there will be investors out there who will see some value in the situation, but I cannot, at least not at this time. No, I'm not saying that I think Tyson will disappear. However, there are better ideas out there if you're looking to play the supermarket game over a long-term basis. There's Procter & Gamble (NYSE: PG), Kraft (NYSE: KFT), and Campbell Soup (NYSE: CPB), to name some examples. As I write this, Tyson's stock is down over 11%. Might we see a bounce in the next few days? Sure. But I'm not brave enough to step in with this one.
Disclosure: I don't own any company mentioned; positions can change at any time.
TheStreet.com's Jim Cramer says tons of stocks look like good buys, and they go down all the time.
All weekend I heard it. Stocks have gotten too cheap. Put 'em away cheap. Don't worry about 'em cheap. To which I say, stocks are only cheap if the companies make it. Stocks are only cheap if the bondholders don't claim them.
Clorox (NYSE: CLX) greeted investors on Friday with a sparkling clean earnings report for the fiscal first quarter. According to the press release, sales rose 8% once the effect of the Burt's Bees acquisition was eliminated, and earnings per share came in at $0.91. Analysts were looking for $0.84 per share.
That's an awesome beat. For the most part, shareholders don't have much to complain about. Operational cash flow did decrease, but you can once again factor in Burt's Bees and its effect on working capital. I always like to see cash flow increase, but since this is the first quarter, and since Clorox is backed by a whole bunch of powerful brands, I can let it go for now. Going beyond the numbers, I think the big thing to think about when considering Clorox is that it is, like colleagues Procter & Gamble (NYSE: PG), Colgate-Palmolive (NYSE: CL), and Kimberly-Clark (NYSE: KMB), a pretty strong name in supermarket aisles. Who hasn't purchased some of the company's bleach or trash bags at one time or another? I know I've been attracted to Clorox's brand equity.
On a forward-looking basis, Clorox can be looked upon as a long-term dividend play. Right now, the stock has a decent yield and is comfortably away from the 52-week low. Of course, we've been hearing a lot lately about how currency rates may start to give global companies a hard time. That's something to consider with Clorox. My feeling is that long-term thinkers shouldn't sweat it too much. One thing about the management here is they seem to be very willing to aggressively protect their brand equity against no-name brand competition and to figure out exactly what marketing messages will work with consumers. That's my top priority when it comes to consumer-products businesses and retail. I always ask myself the following question: Does management get that it's all about the branding/marketing? From what I've read, I think Clorox gets it.
No, I don't think the stock is simply going to rise from here. But I do think it could be one of the better defensive plays out there (assuming there still is such a thing as defensive play these days, that is).
Disclosure: I don't own any company mentioned; positions can change at any time.
As October -- what has been one of the spookiest ever -- comes to an end today, many will go home this evening to face the ultimate challenge: Trick or Treat.
In the market in the past month, heck, in the past year, it seems that no matter what we did we always ended with a trickster. Even some of the most stable, beloved stocks found it fitting to lose half their value. If it was market darling Apple, or whole sectors like oil and commodities, stocks in general sank, often setting new 52-week lows, multi-year lows, or even all-time lows during October.
So now, with so many stocks beaten down so much, we have to find which could be the next treat, and which the tricks.
Wal-Mart Stores Inc. (NYSE: WMT) is the only Dow Jones Industrial company that is actually up this year. Investors have assumed that as the recession hits harder shoppers will turn to lower-cost venues such as Wal-Mart -- a trend that has already started. WMT shares are up 15% year-to-date and 21% over the past year, after tumbling 8% during the tough month of October. Wal-Mart -- definitely a treat.
General Electric (NYSE: GE) has exposure to the financial crisis through its financial arm and has been punished accordingly with shares down 20% over the past month alone. But is it time to buy GE? The big conglomerate is cutting costs and keeps reiterating guidance and has also maintained its triple-A rating. Could there be losses hidden in its operations? Maybe, but if it could continue growing as it did, it seems pretty cheap at under $20. Mind you, this one has never been a high-flying stock, and the uptick in the share price could take some time. Still, I'd categorize it a treat now.
TheStreet.com's Jim Cramer says this trade has worked all week, but it's a shaky play on the fundamentals.
It's a stubborn market. We sit here and marvel that Barclays (NYSE: BCS) (Cramer's Take) or Mitsubishi (NYSE: MTU) (Cramer's Take) need to raise money when three weeks ago we thought they were going to inherit the earth because they didn't lose money. We liked them because we stubbornly believed they were better.
We thought that Prudential (NYSE: PRU) (Cramer's Take) was The Rock; now it is The Rock like the guy who makes a lot of movies -- not all of them good. Lincoln National (NYSE: LNC) (Cramer's Take) was perceived to be much higher quality than MetLife (NYSE: MET) (Cramer's Take), but that's wrong. The idea that the Hartford (NYSE: HIG) (Cramer's Take) would be in trouble, as it has always been not in trouble, is amazing to us.
We stubbornly cling to the ones that we thought were good until we hear that they need a bailout. Then we turn on them like they were never good or like they are going to go bankrupt.
I wanted to further elaborate on some issues because of the position Johnson & Johnson holds in our hearts, and many of our portfolios. I should also point out that the downgrade did have a caveat, the analyst believes the stock may very well regain strength toward the end of 2009.
JPM believes Johnson & Johnson is expensive relative to it's peers. That should be expected from my point of view because it is considered the measure of a safe haven in our uncertain times. The tougher the economy becomes the more one should expect JNJ to separate itself from others.
Consumer goods giant Procter & Gamble (NYSE: PG) put up some impressive numbers this morning for its fiscal first quarter, reporting a 9% jump in profit. But the company did adjust its full year forecast slightly lower.
Going into this morning's earnings announcement, Wall Street analysts had been expecting the company to earn 99 cents per share, and the company reported an actual $1.03 EPS for its most recent quarter. This is a 12% jump year-over-year from its 92 cents earnings per share it reported for the same period last year.
Higher commodity costs continued to be a sore spot for the company, resulting in a decline in profit margins by 0.6% during the quarter to 50.5%. The volatility of the commodities market led the company to slightly lower its full year 2009 estimates, to a range of $4.15 to $4.25 a share, slightly lower on the low end from previous estimates of $4.18 to $4.25. Analysts estimates for the full year are $4.17 a share.
For the company's current second quarter, it expects to see earnings fall between $1.45 and $1.50 a share. Analysts were looking to see the company forecast $1.47 for its current quarter.
The stock is trading down slightly in the pre-market, currently down 0.3%, after posting a strong gain yesterday of 10.2% as it soared with the overall market.
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.
Except for the chosen ones -- CEOs and the like who have outrageous salary and benefit packages -- almost nobody has been able to escape the financial pain in the world today.
Following the week we have just endured, many would find it hard to return to the stock market any time soon, despite so many pundits calling the market bottom on Thursday. Bad news just keeps amassing: the Euro-zone is officially in recession, unemployment in the U.S. and globally is on the rise, the housing market is far from any sustainable recovery, the auto sector is a mess and so on. 
As October -- what has been one of the spookiest ever -- comes to an end today, many will go home this evening to face the ultimate challenge: Trick or Treat. 
Yesterday, 
Consumer goods giant 
Best & Worst in Money 2008: Most shocking financial collapse
Closing Bell: Stocks slump as AMD, AT&T, GM and Merck decline
Global Q&A: A rocky road, but profits ahead
