Movado Nails It. But?

Movado (MOV) released earnings and delighted the street. The main factor seems to be an increase in margins resulting from favorable shifts in product mix. Shareholders have rewarded themselves by increasing the share valuation by approximately 14%. The rich get richer. Merry Christmas to all.

The company also announced a share buy back plan. Given the amount of cash on hand and reducing debt levels they can probably get away with it. No plans to increase the dividend were mentioned. Given the anemic 1% yield this is disappointing. The dividend was increased last March by 33% in a time when guidance estimates where being reduced and caution flags were flying.

Moving forward to Sep 6,2007 they issued annual guidance that was below market expectations. Then three months later they come out with a really great quarter. In listening to the conference call the analysts primarily focused on margin and product mix questions. You can just see the pencils and erasers working as they were adjusting models. I never got the sense that collectively they had it figured out.

Movado executives also pointed to uncertainty in the US economy as a potential contributing factor to potentially bad news. Yet at the same time they are pointing out growing international sales. While expansion is normally a good idea it would seem that Movado does not have a handle on it; as they would not offer any focused comments on markets or product lines.

Movado's policy of not making quarterly guidance announcements and sticking to annuals develops a little bit of stand offishness. The risk factor of getting it wrong is somewhat enhanced in this context. Today the market went up because of good news. Tomorrow is another story.

HealthSouth Is The Comeback Pump On?

HealthSouth (HLS)is receiving some media attention and banging the corporate drum to point out that there is substantial insider buying going on. The wink wink nudge nudge message is supposed to be when the senior guys start to buy its bullish; right?

Well maybe. HLS does seem to have made real progress with what they describe as legacy issues. thats good and a nice round of executive bonuses has probably been rightfully earned.

But listen up Health care is a politically volatile issue. It does not take much to move this topic to the front burner of the US psyche. 2008 will be a very political year; presidential elections and all that.

I would like to see what the potential winning candidate has in mind on this topic. I would also like to see how races for the Senate and House of Representatives turn out. While the White House will most likely lead the design or non design process the elected representatives will be coloring in the spaces.

HealthSouth you are more of a political bet at this point than an investment risk.

RH Donnelley Rolls The Dice

RH Donnelley (RHD) announced 2008 guidance and watched their stock get hammered from the get go. In the same press release they announced a $100 million dollar share buy back program. The stock is trading at the low end of its 52 week range. As at the end of Sep they only had approximately $19 million in the bank. Earnings are disappointing so if cash flow does not hold up they will be increasing their already high levels of indebtedness.

RHD's market cap is just a snick under $3 billion. They are carrying $10.2 billion of debt. Cash flow is squeaking and making all the wrong noises. The stock has dropped dramatically and most of the remaining trading is on the basis of tax loss selling.

The external board consists primarily of people in the direct marketing business or businesses closely allied to this business process. There does not seem to be a sufficient breath of outside experience. One has to wonder if they are not too close to the problem.
In any event this cannot continue for much longer before the basics of financial arithmetic come into play. There is much speculation of a takeover occurring which may be a blessed event. However the days of mega premiums for troubled assets may be over. Cheap credit for troubled asset buyouts are definitely over.

RHD is just rolling the dice and praying for some kind of "Beam Me Up Scotty" solution.

Morgan Stanley Goes Hollywood

Morgan Stanley (MS) is expected to announce that it will invest $200 million of its own funds into making movies according to this mornings Wall Street Journal. WSJ continued in the article to cover some other area's of Morgan Stanley's principal investments.

Patrik Edsparr Global Head of Principal Investments painted a picture of broad based diversification over a wide area. While at the same time saying that they were big but not as big as some other players in this arena. OK you do not want us to worry.

So why announce a relatively small move at this time. Morgan Stanley's market cap is approximately $55 Billion. So a $200 million investment is not significant. If they stay true to historical form and continue with debt products you will not achieve equity enhancing returns. Most banks know that if you invested unleveraged equity into debt the rate of return for an equity investor will most likely be inadequate.

If you are about to make equity investments in movies and entertainment than say so.

If you are just topping up some investments what was the point of getting all that ink.