MOST NOTEWORTHY: Spirit Aerosystems, Genpact and SEI Investments were today's noteworthy initiations:
Friedman Billings believes Spirit Aerosystems (NYSE: SPR) is well-positioned on key aircraft platforms and has significant revenue visibility. The firm started shares with an Outperform rating and $33 target.
Baird is positive on Genpact's (NYSE: G) recurring, non-discretionary revenue, strong growth in Global Client revenue, market leading position; shares were assumed with an Outperform rating and $16 target.
SEI Investments (NASDAQ: SEIC) was initiated with a Market Perform rating and $27 target at Keefe Bruyette, as they are cautious in the near-term due to industry headwinds.
After three months it is time to face the facts: two of the three indices beat my picks handily. I have not made a good showing so far and unlike most investment idea sources, I feel obliged to air my dirty laundry for all to see.
My riskiest stock pick Newcastle Investment Corp (NYSE:NCT) is down almost 37% this year, and the energy stocks did almost as poorly even though fuel prices are near all-time highs. The downers were not offset by this months' repeat winners.
March was a seesaw battle, but in the end there was not much to show for it. However, unlike the last day of January (down 370 points in the Dow) and February's last trading day (down 315 points), March had a final day of plus 46.49, which is not very meaningful.
Most of my picks sagged a little more, while two remain in positive territory. Raytheon Co. (NYSE: RTN), the high tech defense contractor is up and Reliance Steel & Aluminum (NYSE: RS) is way up.
Tiffany & Co. (NYSE: TIF) is engaged in the design, manufacture, and retailing of fine jewelry, timepieces, sterling silverware, china, crystal, stationery, fragrances and personal accessories. The firm sells its goods exclusively through some 150 stores worldwide, a Web site and catalogs.
The company pleased investors earlier in the week, when it reported Q4 EPS of $1.27 and revenues of $1.05 billion. Analysts had been expecting $1.21 and $1.05 billion. Management also guided FY09 EPS to $2.75-$2.85 ($2.49 consensus) and FY09 revenues to about $3.23 billion ($3.18B consensus). Cowan and JMP Securities subsequently issued favorable comments about the company and Trian Fund Management revealed it had boosted its stake in the stock from 7.9% (1/16) to 8.44%.
eBay believes that it is Tiffany's responsibility to police the site for infringement of its trademarks, and the company's policy is that it will respond to claims by companies flagging possibly counterfeit merchandise. But eBay itself does not devote substantial resources to policing for counterfeiters. Rolex and Louis Vuitton have sued eBay on similar grounds.
According to the Wall Street Journal, "Tiffany argues that eBay knew it had a problem with counterfeit items being listed on its Web site and did little to clean it up."
In the "risk factors" section of its latest 10-K, eBay touches on the Tiffany lawsuit, saying that "Litigation and negative publicity has increased as our websites gain prominence in markets outside of the U.S., where the laws may be unsettled or less favorable to us. Such litigation is costly for us, could result in damage awards, injunctive relief, or increased costs of doing business through adverse judgment or settlement, could require us to change our business practices in expensive ways, or could otherwise harm our business."
It stands to reason that if eBay could take responsibility for counterfeit listings in a cost effective way, it would have avoided this litigation. eBay's business model could be in some pretty serious trouble if a judge rules that the company is responsible for copyright infringement by third party sellers -- it might have to just stop selling luxury goods altogether.
This will be an important case for any eBay investors to follow.
For the quarter, the company said that its profit slipped 16% to $118.3 million, or 89 cents per share, due to bad loans. These numbers are down from $140.5 million, or $1.02 per share, reported in the same period a year earlier. Included in the company's earnings figures were 22 cents per share related to a charge for loans made to Tahera Diamond Corp. Excluding that, Tiffany earnings numbers would have come to $1.27 a share. Analysts, on average, expected the company to show quarterly earnings of $1.21 per share.
The jewelry retailer posted growth of 10% for its fourth-quarter revenue, which climbed to $1.05 billion from $958.9 million a year earlier. Sales matched analysts' forecasts, according to Thomson Financial. U.S. retail sales showed a gain of only 4% to $527.9 million, following slowing same-store sales, while international sales surged 21% to $422.6 million.
Leading drug store chain Walgreen Co. (NYSE: WAG) and upscale specialty retailer Tiffany & Co. (NYSE: TIF) are scheduled to report earnings tomorrow. Here's a quick peek at them ahead of results.
Walgreen has beat earnings estimates in four of the past five quarters. When the company reported first-quarter results back in November, earnings came to 46 cents per share, two cents less than the consensus forecast of analysts polled by Thomson Financial, and up from the 43 cents in the same period of the previous year. For the current quarter, analysts expect 67 cents per share, compared to 65 cents in the year-ago quarter.
The company's earnings per share growth forecast for this year is 9.42%, which is better than the industry average but less than the 30.68% of rival CVS Caremark Corp. (NYSE: CVS). The analysts' consensus recommendation is to hold Walgreen, and has been for the past three months. Shares have risen since hitting a 52-week low of $32.50 in January, and closed Friday at $36.78.
For news about Walgreens that could influence the earnings results, see BloggingStocks' Walgreen coverage.
I'm sure the downtrodden stock market has brought sadness to many people. As someone looking long term I am trying to put the current market into perspective. 'My pal Warren' always says that truly astute investors should actually be happy when the market is down because they are able to buy things on sale. I agree, so what to buy?
Three of the stocks I have been following fall into very different arenas. One is being severely affected by the housing market and familiar to the average consumer. The second might be a familiar name but not a daily haunt by the average consumer. The third falls into the middle ground and is a solid company and favored by Warren Buffett who owns shares through Berkshire Hathaway (NYSE: BRK.A).
It's been a while since I wrote about The Home Depot, Inc. (NYSE: HD). My optimism last year about the company proved misguided as the stock tread water most of the year and then took a dive as earnings reports deteriorated. When I originally commented on HD 14 months ago it was trading at $39.73, finishing the year at $26.27 for a loss of 33.88%. It started with a 2.31% yield .
With luxury stocks off to a horrific start to the year -- Coach (NYSE: COH) and Tiffany (NYSE: TIF) already down in the neighborhood of 20% -- this might seem like a strange time for Prada, one of the world's top high-end fashion houses to take itself public.
But according to the Wall Street Journal, Prada's IPO is still scheduled [subscription required] for June. Miuccia Prada and her husband, Prada CEO Patrizio Bertelli, own 95% of the company, and had previously said that market conditions would be a factor in the timing of the IPO.
Assuming that Prada's IPO plans are indeed unfazed by the luxury market bloodshed, there are two possible scenarios:
Prada plans to go ahead with a June IPO because it believes the market will be kinder to luxury goods stocks by then, which would be bullish for the industry now.
Prada plans to do the IPO in June because raising money after that will only be more difficult.
Remember -- the insiders at Prada have a better read on this market than just about anyone, and the IPO schedule/details are an important barometer of the industry's health.
With economic worries sending luxury goods makers like Coach Inc. (NYSE: COH) and Tiffany & Co. (NYSE: TIF) well off their highs, at least one super-investor who isn't afraid to go against the conventional wisdom is taking notice.
Nelson Peltz and his Trian funds have upped their stake in Tiffany from 5.6% to 7.9% amid continued weakness in the company's share price -- the stock is already down 20% year to date.
According to the Wall Street Journal [subscription], Peltz has previously said he isn't seeking a seat on the company's board, but wouldn't rule out the possibility of taking an activist stance somewhere down the road. Another big drop could prod him to step in and try to make something happen.
Tiffany recently reported a weak holiday sales period, a strong indication that the economic malaise that started in subprime may be carrying over to more upscale consumers. In recent years, Tiffany's and other luxury goods makers have seen their markets expand to include more luxury aspirational customers. Dependence on less wealthy consumers for sales growth may be making the luxury goods sector less immune to economic woes than it has been historically.
I'm not sure why the story in today's New York Times seems like such a surprise to everyone, The Times headline screams, "Americans Cut Back Sharply on Spending." I've been expecting it ever since the subprime mortgage mess started to hit the news in the middle of last year. People have been using their houses like piggy banks, tapping rising equity each year as the price of their homes continued to climb. Well, the gravy train has since passed in many parts of the country as housing prices plummeted. People can no longer refinance their homes by rolling in their mounting credit card debt or getting yet another home equity loan. So they just don't have the money to spend and they must cut back.
The Times article highlights the cut in spending by wealthier folks, using the drop of 3% in spending by American Express's affluent consumers as a signal that even the well-to-do are hit hard. Saks Fifth Avenue reported slowing growth. Nordstrom (NYSE: JWN) saw a 4% drop in sales. Tiffany's (NYSE: TIF) also saw a drop in sales in December.
The money for spending has dried up as salaries have been flat in recent years while gas prices, home heating fuel and health care costs continue to rise dramatically. The fake it 'til you make it crowd, the kind that helped to boost rising sales in upscale stores, just can't fake it anymore.
Bloomberg published an article this morning about the state of the market. Recessionary talk is building and this article adds fuel to the fire in discussing how bad things are.
Some takeaways from the article:
U.S. stocks fell for a third straight week.
The S&P 500 Index fell 0.8 percent to 1,401.02 this week, bringing its year-to-date loss to 4.6 percent for the worst start since 1982.
The unemployment rate jumped to a two-year high in December and job growth was the slowest since August 2003.
We've witnessed the largest decline in manufacturing in five years.
Yields on Treasury securities sank -- the two-year note fell 0.19 point to 2.55 percent, the lowest since October 2004.
The financial industry may report a 69.3 percent decline in earnings.
Most of the article focuses this gloom-and-doom on the ailing consumer. American Express (NYSE: AXP) and Tiffany & Co. (NYSE: TIF) were two companies cited struggling under a perfect storm of subprime exposure, a real estate slump, and increasing unemployment.
Zack Miller is the Managing Editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.
The Wall Street Journal [subscription required] suggests that the 70% of economic growth that's driven by consumer spending is shifting into reverse. High, middle, and low income consumers are cutting back their spending. Lower and middle income consumers are selling their gold and using pawnshops to pay their bills as food and energy prices hit record levels. Investors should consider whether to sell their stocks or hold on and suffer.
High income consumers hit. Companies that serve higher income consumers are losing altitude, including:
Tiffany & Co. (NYSE: TIF) said that its U.S. sales slumped during the holiday period.
American Express Co. (NYSE: AXP) warned of rising delinquencies and slowing spending among its cardholders.
Lower and middle income spending down. Less surprisingly, retailers to lower and middle income people are also suffering. These include:
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MOST NOTEWORTHY: Spirit Aerosystems, Genpact and SEI Investments were today's noteworthy initiations:
After three months it is time to face the facts: two of the three indices beat my picks handily. I have not made a good showing so far and unlike most investment idea sources, I feel obliged to air my dirty laundry for all to see.
Shares of jewelry retailer 
Walgreen has 
I'm sure the downtrodden stock market has brought sadness to many people. As someone looking long term I am trying to put the current market into perspective. 'My pal Warren' always says that truly astute investors should actually be happy when the market is down because they are able to buy things on sale. I agree, so what to buy?
With luxury stocks off to a horrific start to the year -- 
With economic worries sending luxury goods makers like 
I'm not sure why the story in today's New York Times seems like such a surprise to everyone, The Times headline screams, "
Bloomberg published an article this morning about 
Oil hits record $127.43 on supply concerns, raised Goldman forecast
Icahn's 'shock and awe' on Yahoo -- a gutsy play
Housing starts surprisingly rise in April on apartment construction
