Carl Icahn Now Mixing It Up With Dell
March 7, 2013
Late yesterday, it was reported that activist billionaire investor Carl Icahn has taken a 6% stake in shares of Dell (click ticker for report: ). Icahn has confirmed he has a position, and he sent Dell a letter describing what he thinks the company should do. Instead of going private, he wants Dell to execute a recapitalization, which includes $5.25 billion in new debt that will be used to leverage the company and pay out a dividend of $9 per share. Icahn Enterprises could provide the entire $5.25 billion in bridge financing. He also believes the $9 per share could be added to the existing price, unlocking additional value for shareholders. Icahn voiced his opinion on why the company should
Who’s Amazon’s Next Victim?
March 7, 2013
An interesting white paper was released recently, analyzing how Amazon (click ticker for report: ) is altering the retail landscape. The paper itself had some interesting insights, but our favorite takeaway of Placed’s work was the top ten companies at risk. 1. Bed Bath and Beyond (click ticker for report: ) 2. PetSmart (click ticker for report: ) 3. Toys ‘R Us 4. Best Buy (click ticker for report: ) 5. Sears (click ticker for report: ) 6. Barnes & Noble (BKS) 7. Kohl’s (click ticker for report: ) 8. Target (click ticker for report: ) 9. Costco (click ticker for report: ) 10. JC Penney (click ticker for report: ) For the most part, we agree with the list,
PetSmart Stumbles on Weak Guidance
March 7, 2013
Wednesday afternoon, former Best Ideas Newsletter put option position PetSmart (click ticker for report: ) reported solid fourth quarter results offset by lackluster 2013 guidance. Revenue rose 15% year-over-year to $1.7 billion, falling just shy of consensus estimates. Earnings per share rose 36% year-over-year to $1.24 per share, exceeding consensus expectations by a few cents. Same-store sales growth during the quarter was superb, rising 4.6%, though the growth rate was down sequentially from the 6.5% same-store sales growth rate in the third quarter. Management added some color on the cadence of the quarter, saying: So we don’t typically talk about the inter-quarter, but I think it was a little volatile over the quarter, so it’s worth speaking to for now.
Eddie Lampert’s Buying More Sears, Should You?
March 7, 2013
In addition to announcing improved fourth quarter results at Sears (click ticker for report: ), it was revealed earlier this week that Sears’ chairman and CEO Eddie Lampert purchased another $55 million worth of Sears for his personal ownership. The big question now is whether Lampert, a savvy hedge fund manager, is sinking his entire career into doubling and tripling and quadrupling down on Sears, or perhaps he is seeing what no one else can, and Sears is the bargain of the lifetime. We’ve been fairly critical of his tenure, but it is undeniable that Lampert has done a fantastic job focusing the company on becoming an omni-channel retailer. In his letter to shareholders, Lampert discusses the Shop Your Way
Smith & Wesson Rides the Gun Boom
March 7, 2013
Gun manufacturer Smith & Wesson (click ticker for report: ) announced fantastic third quarter results Tuesday afternoon, as demand outpaced supply. Revenue increased 39% year-over-year to $136 million, handily exceeding expectations. Earnings, adjusted to reflect continuing operations, more than tripled year-over-year to $0.26 per share, exceeding consensus estimates. We’re not surprised by the results, as other firms like Cabela’s (click ticker for report: ) and Big 5 (click ticker for report: ) reported that gun sales have surged in the wake of the Sandy Hook tragedy and fears of new gun regulation. The trend looks durable at this point, and with the general lack of compromise in Congress, we think it could take a while for any new national gun
Main Street Capital Boosts Its Dividend
March 7, 2013
We profiled Main Street Capital (MAIN) last week, and the firm subsequently raised its dividend 3% to $0.155 per share on a monthly basis. This boosts the annual yield to 5.7%, but it does not change our investment thesis. Still, as long as net income continues to grow, we anticipate seeing solid dividend growth.
iWatch? iTV? Apple’s Innovation Death a Media Construct
March 6, 2013
Although it remains very much a head-scratcher to us, shares of Apple (click ticker for report: ) have continued to fall towards Jeff Gundlach’s $425 price target. We’ve been mostly silent on the company’s share slide, because, frankly, we don’t think the fundamental story has changed at all. Recent news regarding the potential of the iWatch and the long-awaited iTV has piqued our interest, as we believe both could add upside to earnings. Apple’s design genius John Ive, known by some to be as integral to Apple’s design as the late Steve Jobs, has spent years dissecting Nike (click ticker for report: ) and other watches. We could speculate all day about the possibilities of an iWatch, but we find
Best Buy Showing Signs of Life
March 5, 2013
Big box retailer Best Buy (click ticker for report: ) posted solid results for its fiscal year 2013 fourth quarter. Thanks to an extra selling week, revenue was roughly flat year-over-year at $16.7 billion, exceeding consensus estimates. Earnings, adjusted to reflect operating expenses, declined 25% year-over-year to $1.64 per share, which was better than consensus expectations. Overall, sales slipped about 1%, but still totaled $49.6 billion for the year. The domestic segment is showing signs of life, with domestic same-store sales increasing 0.9% and online growth jumping 11.2% during the quarter. Overall sales fell 0.3% year-over-year as the firm shuttered 49 big box locations. The firm experienced a modest increase in SG&A costs, which were up 140 basis points as
Wisconsin Deteriorates But Chicago Stands Out at Roundy’s
March 5, 2013
Grocery store chain Roundy’s (click ticker for report: ), which operates under several banners in Wisconsin, Minnesota, and Illinois, reported solid fourth quarter results late last week. Sales increased 1.4% year-over-year to $982 million, roughly in line with consensus expectations. Earnings weren’t as strong, falling 37% year-over-year to $0.19 per share—a figure that excludes the impact of a few one-time events. The trend we saw at Roundy’s throughout 2012 continued in the fourth quarter: Chicago’s Mariano’s chain did fantastically well, “exceeding” sales and profit expectations while posting double digit same-store sales growth. On the other hand, the core business in Minnesota and Wisconsin continues to struggle, dragging total same-store sales down 2.1%. These markets, once underserved by Target (click
February Auto Roundup
March 5, 2013
Let’s take a look at February auto sales, which appear to have come in at a SAAR around 15.4 million units. Ford Best Ideas Newsletter holding Ford (click ticker for report: ) posted a solid February, selling 195,822 vehicles—a 9% increase compared to the same month a year ago. We think the number is even more impressive considering February 2012 had fairly good weather, while February 2013 was viciously cold and snowy for much of the United States. Strength was broad based, though utilities (up 21%) greatly outperformed both cars and trucks, which were up 6% and 4% year-over-year, respectively. Both the Edge (up 29%) and Explorer (up 59%) were hot sellers during February, possibly the result of a cold
