Friday, March 05, 2010

GM Re-instates 700 Marginal Dealers

General Motors Corporation (MTLQQ) frequently known as Obama Motors announced that approximately 700 dealers are to be re-instated. Are sales really that good that we could use another 700 dealers?

Most of these dealers were culled from the herd because they for what ever reason they could not move enough cars. The re-instatement of 700 marginal sales outlets is not what will drive the new GM to success.

It will be interesting to see which dealers are put back on the list. Look for a lot of local politics. Hey do we have Congressional elections in just eight months? Yeah we do. Are we trying for an IPO soon and need to show that the sales potential is growing? Yeah we do.

This is not the rocket fuel that a revitalized GM really needs.

Thursday, March 04, 2010

Del Monte Dividend Speculation?

Del Monte Food (DLM) posted some very encouraging Q3 numbers. Investors took the stock up to around its 52 week high. The cash positions are very attractive. The question becomes will they increase the dividend as is becoming the fashion or will they pay down debts very quickly. They have a huge long term debt position and it would be nice to see that number knocked down.

They do have a stock buy back program in place but that seems so old school.

The company has not discussed what the program will be. They keep serving up rhetoric about investing their brands but there is room for more. The stock yields under 2% and they need something to break out over the 52 week range to make the market believe.

Wednesday, March 03, 2010

Brown Shoe Company Is It Fashion or Cheap Consumable

Brown Shoe Company (BWS) touted better than expected results. They made a profit and were surprised. The real concern is how they portray themselves. They claim to be a consumer company. They are presenting at the Bank of America Merrill Lynch 2010 Consumer Conference, held at the Palace Hotel in New York City on Thursday, March 11. Ron Fromm, Chairman and CEO, will host. They present their numbers with explanations of margins and overheads.

In reality they are a fashion company. Included in the quote attributable to Ron Fromm is the statement that they are selling “Fresh and On Trend” If they do not deliver the fashion items they will not get the margins and full price.

They do not explain a thing about design and development. Apple (AAPL) has great design and beats out competitors in most categories. If investors look forward yesterday’s margin means nothing. Tomorrow’s hot pair of shoes is everything.

A continuation of this thought is what type of marketing are they known for? The press release makes no substantive comment about marketing campaigns.

Monday, March 01, 2010

AIG & Prudential Said and Unsaid

AIG (AIG) sold is crown jewels to Prudential (PRU) Prudential needs to issue equity and debt. Prudential will now generate a majority of income from Asia specifically China. TARP funds will be paid down. Prudential needs to double its market cap to swallow the deal. Look for the silent hands of regulators stick handling this one through the markets.

Under any other circumstances if Prudential wanted to double its size overnight the regulators would have freaked. Under any circumstances if Prudential wanted to change its concentration from Europe to Asia overnight the regulators would have freaked.

The Chinese must have signed off on AIG selling to Prudential. Should be long term helpful for China’s foreign exchange position in US Dollars. Who will be the big buyers of Prudential equity? Why not China?

There is more unsaid about this deal than said.

Dillards So Now What?

Dillard’s (DDS) reported some excellent numbers for Q4 and the stock jumped dramatically, go figure. Good news from a retailer. Good news from Dillard’s. The market does not normally look to Dillard’s as a retail leader. But look at its balance sheet. Inventories are down. No short term debt. Cash positions are around $300 million. This is approximately 50% of their current long term debt position.

Dillard’s Chairman of the Board and Chief Executive Officer, William Dillard, II, commented “Moving ahead, we will maintain our disciplined approach to these areas while effecting continued merchandise mix improvements to further strengthen our appeal to the Dillard’s customer.”

Dullards is in a unique position. Will it pay down debt dramatically and have a bullet proof balance sheet? Will it increase the dividend and reward shareholders? Will it make acquisitions of some description? Will it expand and open new stores?

The bigger question becomes: Does Dillard’s know there is a question and how are they working on it?

Sunday, February 28, 2010

Berkshire Hathaway Achilles Heel

Berkshire Hathaway (BRK.A;BRK.B) is undoubtedly one of the most unique investment vehicles in the history of economics. Significant positions in both legacy investments such as Geico and Burlington Northern and then they have major stock positions which they can sell off.

The problem with the large legacy positions is that they are not saleable under any circumstances. If you are an investor you need to understand what your exit plan can be. Only Americans who have not experienced significant conflict on American soil think something can be forever.

What would the valuation be if the market realizes that Warren Buffet wants to sell something that he owns 100% of? Why would the smartest investor in the history of the world want to sell something? The only time Warren Buffet sells is when he has lost confidence.

This is probably the Achilles heel and will one day cause Berkshire shares to experience a toxic event.