Friday, February 12, 2010

Macdonalds Nostalgia for Chipotle

Chipotle Mexican(CMG) put up some great numbers and shareholders bid the shares up. The shares are trading at the 52 week high. The shares are trading over $100 @ share. Stock split maybe? Now lets look through the rear view mirror and just think about what this success story could have meant for Macdonalds (MCD). The logic of yesterday was to sell off the asset and focus on so called core activities. Yes Macdonalds shareholders were supposedly compensated. But did all the financial engineering really create long term shareholder value? For Macdonalds. Or were financial engineering fees generated. The spin off meant Macdonalds shareholders were thought to be stupid and could not value growing cash flows and revenues.

Beware of the unlock value story. It did not work out in the best interests of Macdonalds shareholders.

Thursday, February 11, 2010

Philip Morris Have Another Drag

Philip Morris (PMI) announced some great results and shareholders took the stock up. When reading the earnings release you realize that the purveyors of Marlborough are only talking about themselves and make no comment about competition. I know, I know they are huge. They are second only to China National Tobacco and probably will never be dominant in the largest most smoker friendly market on the planet. If global economies of scale matter, they will never reach that critical tipping point and may have difficulty maintaining their global reach.

Tobacco (read cigarettes) is one of the most prolific tax revenue generators known to man and bureaucrat. Addicts willingly pay up. Governments rely on smokes to feed their spending addictions. Smoking is a cultural manifestation as much as an addictive behaviour. Pax Americana may wane against China and India. As pride from being on the winning team develops the American Brands will lose their footings. Not today not tomorrow but it will happen. So long term dividend investors, you have something to think about.

Should Google buy Sprint

Sprint (S) again. Google (GOOG) announces a huge broadband deal that will challenge the US Telco’s, no make that Global Broadband providers. Google makes some businessmen quake and quiver. In the weird and wonderful world of regulators and enablers Google may need to sneak around the back door and call themselves a telephone company.

I should check first but I bet Sprint could be picked up for cheap. They are what the third largest.

Cheap platform for starts. Not that wild an idea.

Wednesday, February 10, 2010

Sprint Gambles on 4G No Safety Net

Sprint (S) reported earnings headlining highest annual Free Cash Flow in Sprint Nextel history. The stock still sold off. They also claim $6.6 Billion in liquidity which includes untapped lines of credit. They have lost customers in Q4 and the all important ARPU is down. They are betting/gambling on tomorrow and the 4G system. Here is the big quote

“Sprint 4G is now available in 27 markets serving more than 30 million people, and is expected to cover up to 120 million people by the end of 2010. Sprint 4G service is planned for deployment in many additional markets in 2010, including the following major metropolitan areas: Boston, Houston, New York, San Francisco, and Washington, D.C.”

But Sprint does not discuss the potential capital cost of this very rapid build out as coverage is increased some 400%. They do not discuss the potential ARPU implications.

Will consumers migrate to financially stronger competitors? No one wants bankruptcy turmoil from their cell phone. Many consumers stopped buying GM and Chrysler and swung over to Ford for that very reason.

Management is not sharing how they will execute. The press release was underwhelming. Time to start thinking about strategic objectives.

Tuesday, February 09, 2010

Apple Made Me Do It

Bless me father for I have sinned. Two weeks ago I bought an iPhone. My contract was up and it was time for something new. I waited till the last minute and resisted as much as I could. God help me but now I love it so.

Then Apple and Steve Jobs announce the iPad. I enjoy reading but do not like the clutter of books read and books waiting to be read. I can easily have five or six titles on deck, ready to go. The iPad looks so cool and ebook pricing beats bookstore pricing. I have made a thought decision and will follow through shortly.

But bless me father for it continues. This weekend I visited my sister and my very cool four nephews and nieces. The Apple computer is scoring three out of five and the trend is Apple. This morning I found myself surfing the Apple web site and checking out Mac lap tops. This I can resist for longer because the current non Mac laptop is OK for now. But the shopping has started. ( I usually have a three year replacement cycle. I believe this is the result of corporate conditioning from my early days)

I was raised Roman Catholic and I can identify guilt on sight. Therefore I must confess. But being a post-modern Catholic I will probably rebel against the pope.

Bill Gates I must warn Microsoft (MSFT) Steve Jobs of Apple (APPl)made me do it.

Church & Dwight Great Earnings Still No Dividend Increase

Church & Dwight (CHD) announced some rather attractive results. They also successfully closed down a plant and moved production to a new facility. James R. Craigie, Chairman and CEO announced EPS guidance to be in the range of $3.93 to $4.00in 2010, which is an increase of 13% to 15%.

Not that long ago I wrote about a confused dividend signal. EPS guidance increases of 13% to 15% should get more than a 0% dividend increase. The only positive is that the cash that is being generated is paying down debt. Look at the increase in short term debt, decrease in long term debt and increase in cash position which.

Why are dividends touted but not increased?

Coke's Shrinking Backyard

Coca Cola (KO) announced great global results and has created shareholder wealth. The North American market continues to be vexatious. It just continues to shrink and cost control, containment, reduction is the name of the game.

Are we seeing a cultural phenomena that started in the home market? Where are the Harvard B School studies about what went wrong.

Financially Coca Cola must reduce costs fast enough so that foreign growth is not cannibalized.

Usually you can shoot your losers. Close down a product line or retreat from a market. Coca Cola cannot leave North America. They cannot stop selling Cokeproducts at home. There is an interesting tipping point coming for Coke. You can only cut costs for so long.

Coke needs to figure out a way to start growing in their back yard.

Bombardier Geopolitical Problems Zhuzhou Hunting

Bombardier (BBD-Toronto) ran into some geo-political problems with CSR Zhuzhou Electric Locomotive Co. Ltd threatening legal action unless the new Montreal Metro contract was re-opened for bidding. They have promised to build locally in Montreal. As best we can determine Zhuzhou is owned by the Chinese Government and operates very similarly to a government owned corporation. They have significant manufacturing experience in China but the promised plant in Montreal would be brand new.

Bombardier has long been winning contracts in China and now the Chinese are becoming free traders and want to walk through the looking glass.

If Zhuzhou establishes a plant in Montreal will they be able to export to other parts of the world. Will the US tolerate a Chinese manufacturer in Montreal under the current free trade agreement. How is this different from Toyota establishing a world scale plant in Canada and exporting to the US? Which they do.

The end game deal will most require Bombardier to bring in Zhuzhou in the future. Bombardier is wounded financially and can use the capital that Chinese entities bring with them.

Monday, February 08, 2010

Answers Does Not Understand the Question

Answers (ANSW) reported decent looking black ink and wants investors to think they have the answers. Bob Rosenschein, Chairman and CEO did not offer any specific direction and would only point to competition and say they are being copied so look at the value proposition. Hey Bob did you ever consider that maybe the competition thinks they know they knock you off.

As Answers becomes more successful of course you will attract attention form competition. The trick is how do you carve out enough so that you are sustainable. Lets analyze your comment “Going forward, we intend to invest more in expanding our core business and creating new product extensions. We are looking forward to a great 2010.” This nugget of info is just too bland for investors to become engaged. The agenda becomes too secretive and creates an insider culture. Watch for surprises in this stock as management is playing it too close to the vest.

By the way I used your site and asked “Where to buy bagels in Manhattan” the one and only link answer that made sense was the one for kosher restaurants. The remainder were for travelling to NYC and Holiday Inn offering free internet. This is not a killer application.