Friday, April 16, 2010

Gannett Cost Cutting Pays Taxes Not Dividends

Gannett Co (GCI) reported improved earnings because they can cut expenses faster than revenues shrink. The TV side had the added boost of the Olympics which unfortunately was not enough to offset other losses. The bizarre aspect of Gannett’s income statement is their high tax rate in the face of declining revenues. They are cutting costs but 41% goes to the tax man. The cost cutting exercise is not tax effective. Paying the tax man does not generate cash.

Disclosure: No position in this stock

Thursday, April 15, 2010

Limited Brands Conflicting Messages

Limited Brands (LTD) has a few messages contradicting each other. Limited Brands owns Victoria’s Secrets and recently bought Montreal based La Senza for some C$ 710 million. Dow Jones Newswires reports that they are opening up a new unit in Montreal that will

“support all Limited Brands retail stores and strategic expansion in Canada, including La Senza, Bath and Body Works, Victoria's Secret Pink and Victoria's Secret, which is launching later this year.”

Joanne Nemeroff has been named president of the new unit

The Globe and Mail carried a Canadian Press Newswire story stating that Limited Brands is looking to move 50 creative and merchandising jobs from Montreal to its main office in Ohio.

“It is about pooling all of resources together in one place and being able to attract the best possible talent,” said Martin Waters, president of international for Limited Brands.

The messages obviously conflict and you have to wonder if Limited Brands knows what it is doing. By the way concentrating creative resources is a good idea. The head office is in Columbus Ohio which is not as sexy as Montreal. But wait; when you check the web site Limited Brands also has significant offices in New York. 1114 Ave of the America’s 24th floor if you were wondering. So if you are really good at creative and merchandising type of work do you want to live in Columbus Ohio?

So where are the resources really going and will they manage cost effectively? Will this be another creative driven venture with poor cost controls?

Disclosure: No position in this stock

Wednesday, April 14, 2010

JPMorgan Chase Huge Litigation Reserves Anemic Dividend

JPMorgan Chase (JPM) reported improved results. Or did it? The improvements come from the gunslinger side of the business investment banking and treasury & security services. The bread and butter lend money to an individual did not fare as well. Quite frankly they are still losing money in retail and card services.

JPMorgan slipped in a $2.3 billion in additional litigation reserves, including those for mortgage-related matters under corporate results. When you consider they made some $3.3 billion in the same quarter that’s a lot of money for arguing about something. That’s also a lot of money for something that is not a credit loss.

Money talks. B*LLSH*T walks. Financial institutions can twist their accounting around forever. The dividend yield says it all. It’s well below half of one percent. For a blue chip money center bank that still stinks.

Disclosure: No position in this stock

Tuesday, April 13, 2010

Infosys -- Naked Foreign Exchange Risk?

Infosys Technologies (INFY) announced earnings in a very bare bones earnings release. More questions are raised than answered. The corporate narrative is we are an outsourcing solution transferring expensive functions to inexpensive jurisdictions. OK Capitalism manifest in its raw form.

But consider this issue. For two years in a row Infosys trade receivables are exactly 16% of revenues. For a growing company operating in multiple currencies that is amazing. One of the reasons customers use Infosys is that trade finance is available. In the past customers had a payroll to meet constantly. Now you can drag your payments.

Keep thinking; multiple currencies and the customer decides when to pay. This cannot work out to Infosys’s advantage. Customers will pick the best scenario for themselves. Infosys becomes an inadvertent counter party to foreign exchange fluctuations.

Infosys Technologies is more of a commodities trading concern. The commodity is labour. What is it doing to protect itself? Currently is seems there is huge naked exchange risk.

Disclosure: No position in this stock

Monday, April 12, 2010

MasterCard -- New Boss -- Better Dividends?

MasterCard (MA) announced an new CEO. Richard Haythornthwaite, chairman, MasterCard Board of Directors anointed Ajay Banga as President and CEO effective July 1 replacing Robert W. Selander, who has been MasterCard’s chief executive officer since March 1997. The appointment was expected. Ajay Banga employment contract included a special multi-million dollar fee just in case he was not appointed by the Board. He also immediately becomes a member of the Board of Directors.

The real issue is what course will the new pilot plot for investors. CEO’s are similar to quarterbacks on NFL football teams. They make or break the team. There is precious little information about his intention or initiatives. There is precious little information about what the board sees as the future. We do know one thing the field is cut throat competitive. What does MasterCard have to offer that Visa, American Express and others are not already offering?

Trying to figure out MasterCard is like guessing what the Vatican will do. If you see too many consultants being hired for high level strategy look out. If you see a shoot for the moon expansion look out. If you see no change in dividends look out. MasterCard has a $33.9 billion market cap with an anaemic dividend yield of 0.23%. Weak and could use much improvement.

Disclosure: No position in this stock