Friday, May 28, 2010

Obama & BP -- Hang em High

The oil addict junkie is trying to discipline the drug pusher.

BP (BP) may have choked off its errant Gulf of Mexico oil well. They will now become the whipping boy of the Obama administration. The politicians have to hang someone and satisfy the angry villagers. There is no question that BP fumbled the ball. The shareholders are paying with a significant decrease in wealth. There will be huge lawsuits and vexatious legal manoeuvring.

Obama’s administration is behind the curve in regulating off shore drilling. If they had real time information and knew what to do with it they would have shut the well down long before she blew.

Obama will make compelling speeches. The regulators are not in a position to follow through and back him up. The next major off shore drilling crisis will cost Obama big time.

In the meantime we continue to consume huge amounts of oil.

Disclosure: No position in this stock

Thursday, May 27, 2010

Lenovo -- Vexatious Earnings Release

Lenovo (LNVGY) issued a vexatious earnings release for their Q4 results. The release pounded the table about a 57% increase in shipments. The best gains where in China which saw almost a doubling in shipments. The Company also recorded its highest ever full-year market share and lowest year-end expense to revenue ratio. Management just could not explain why this did not result in comparable improved profitability.

Disclosure: No position in this stock

Wednesday, May 26, 2010

American Eagle Gambles on Inventory

American Eagle Outfitters (AEO) announced that they have taken the strategic step to increase inventories and always be in stock.

Big risks abound. Fashion is fickle. Consumer spending is fickle.

You invest valuable cash into inventory which sits around and does not turn as quickly. They are trying to increase margins. Can they report improved buying power with the increased inventory. Will they be stressed out and discount inventories to source cash and get the turns up.

Big risks. Not sure if the risk reward ratio is there.

Disclosure: No position in this stock

Tuesday, May 25, 2010

Medtronics Cranks Up Debt

Medtronics (MDT) issued Q4 numbers and let the world know they broke the $4 Billion revenue mark for an individual quarter. Of course that sounds good. What the earnings release misses out on is management commentary on results. We just have a lot of segmented information without qualitative remarks. Will it come out in the conference call?

In particular they are increasing both long and short term debt. This is always of concern. The market cap of some $45 Billion is resting on very real debt of some $10 Billion. Management is silent on this balance sheet issue

Disclosure: No position in this stock

Monday, May 24, 2010

Campbell Soup -- Strange Taste

Campbell Soup Company (CPB) released quarterly earnings headlining increased sales of 7%, increased margins and confirming EPS guidance for the year at the high end of 9-11%. Hey this sounds pretty good lets take a closer look.

Q3 net earnings after tax are down. Hey the story seems to be changing. Weighted average shares are down almost 4%, meaning the stock buyback is shrinking the share base. Consider comments about the company’s ongoing practice of buying back shares sufficient to offset those issued under incentive compensation plans. Starting to worry a little.

The earnings per share are the same as comparable quarter. You got to love a good financial engineer. The icing on the cake is the increased dividend.

So Douglas R. Conant, Campbell’s President and CEO, said, “We delivered another quarter of strong adjusted earnings growth."

The EPS growth is confirmed at the high side but Q3 results really are not impressive.

The soup tastes strange today.

Disclosure: No position in this stock