Archive for March 2nd, 2008
Filed under: Starbucks (SBUX), McDonald’s (MCD), Burger King Hldgs (BKC), Stocks to Buy
Nope, I’ve never been to a Starbucks (NASDAQ: SBUX) before, and I don’t plan on entering one soon; coffee doesn’t interest me in the least. That doesn’t mean I can’t see what’s going on with its stock, however. I’m always on the lookout for stocks of big brand names that have had incredible runs in the past but are currently experiencing a nice pullback in share price.
Over the past year, Starbucks has performed very poorly. As the company’s chart indicates, the stock is out of favor. But is it due to come back? The chart I just linked to shows that the stock is below its 50-day moving average, but not too far below. It also shows a couple of high-volume buying days, compared to one massive-volume day of selling. In addition, the stock is currently well below its 200-day moving average. At a forward-looking P/E of less than 20, and at a very reasonable PEG ratio, Starbucks is looking very attractive to me.
But, the company is experiencing a lot of competition from Dunkin’ Donuts, McDonald’s (NYSE: MCD), and Burger King (NYSE: BKC) — yep, fast-food joints are pushing coffee. Plus, the stock is flirting again with its 52-week low in an overall terrible equities market. Bottom line: Keep this one on the watch list, but be careful about putting money to work here just yet. In my opinion, I’d rather see some strength in the stock before stepping in with my portfolio’s capital.
Disclosure: I am looking at Starbucks as a potential buying opportunity, and could purchase shares of the stock sometime after this post.
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Filed under: Housing
Given that subprime lenders are getting a mostly deserved bad rap of late, I’ve been on the lookout for articles about people who are doing subprime right. Yesterday I wrote about Grameen Bank founder Muhammad Yunus’s crusade to provide credit to low-income entrepreneurs.
Now the latest issue of Forbes features a profile of Martin Eakes, called subprime’s Mr. Clean, who runs a South Carolina credit union and is also the founder of the Center for Responsible Lending. Forbes describes him as being “to mortgage lenders what Ralph Nader was to the auto industry.”
Mr. Eakes has led the legislative charge against payday lending (which I would argue is mostly a non-issue), mortgage prepayment penalties (which I think are evil), and mortgage-broker fees (which, in excess, are also evil). In Congress, he has convinced the House to pass a bill requiring that lenders be more demanding in search of documentation showing that home buyers can actually afford what they’re getting themselves into.
Mr. Eakes may be more extreme than most, but the Center for Responsible Lending’s website is a great research for anyone interested in researching these issues, including a state-by-state analysis of subprime losses.
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Filed under: International markets, Forecasts, Berkshire Hathaway (BRK.A), Personal finance, S and P 500, Federal Reserve
We’re reading monthly about numerous U.S. financial institutions needing to turn to foreign governments for money to stave off financial disaster. While some investors cry foul, alluding to nefarious plots to take over America, Bloomberg examines uber-investor Warren Buffett’s take on what’s occurring in the economic world today.
Instead of some global plot against the U.S., Buffett says that investments by foreign government-controlled firms are fueled by U.S. spending overseas, not political motives. These so-called sovereign wealth funds are merely responding to some to our own activities.
“This is our doing, not some nefarious plot by foreign governments,” said Buffett, chairman of Berkshire Hathaway Inc. (NYSE: BRK.A), in his annual letter to shareholders. “Our trade equation guarantees massive foreign investment in the U.S. When we force-feed $2 billion daily to the rest of the world, they must invest in something here.”
Bloomberg reports that countries like China, Russia, and Dubai have deployed record central bank reserves to set up funds to invest as much as $2.9 trillion. We’ve already seen a flurry of activity. Investment funds from Singapore, Korea, Kuwait, and Abu Dhabi bought stakes during the past four months in the largest U.S. bank in terms of assets, Citigroup (NYSE: C), and Merrill Lynch (NYSE: MER), the world’s biggest brokerage.
Zack Miller is the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.
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Filed under: Wal-Mart (WMT), Berkshire Hathaway (BRK.A), Columns
Forbes columnists M. Todd Henderson and Anup Malani make a compelling case for corporate philanthropy:
There is a tax efficiency to corporate giving. Both Pfizer and its shareholders lower their taxable income when the company donates Diflucan to Africa. If Pfizer instead maximized its profits, paid corporate income tax and then let shareholders make charitable donations to treat AIDS-related diseases out of their dividend checks, the money available for charity would be reduced, given the current 35% corporate income tax.
That’s certainly true. The tax code is, I would argue, one of the few compelling arguments for charitable giving on the part of public companies. Without the tax benefits, I would argue that companies should stick to their income-earning knitting, delivering strong returns to shareholders who can then use the money to support the causes important to them.
Until 2003, Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A) had an innovative giving program that I think was a model of good corporate governance: the company designated a chunk of earnings for philanthropy each year, and then allowed each shareholder to designate a charity for their prorated share.
I’m just concerned about companies donating money to causes that are objectionable to some of their shareholders. For instance, Wal-Mart (NYSE: WMT) is a leading supporter of the Salvation Army, which has a long track record of discriminatory treatment of the gay community.
The government should amend the tax code to make it more efficient for companies to give their shareholders a say in corporate philanthropy.
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Filed under: Deals, Industry, General Electric (GE), Boeing Co (BA), Politics, Northrop Grumman (NOC)
Despite the hue and cry that American interests were hurt when the U.S. military gave its new tanker order to Northrup Grumman Corp. (NYSE: NOC) and EADS, the parent of Boeing Co. (NYSE: BA) rival Airbus, one big company based in Connecticut did very well. That would be General Electric Co. (NYSE: GE).
According to the Business Courier, “the planes will be powered by GE’s CF6 jet engines.” Due to the large number of planes involved, GE will build 400 engines and bring in about $5 billion.
The news adds to the economic complexity surrounding the politics of the contract. A number of congressmen believe that a company based in France, EADS, should not be building planes for the U.S. military. Picking Boeing, based in Chicago, would have been a more patriotic decision.
But, the math may not be all that simple. Northrop Grumman is clearly a U.S. company, and GE is getting a huge contract. There is no saying that Boeing might not have used Rolls Royce engines and other significant components from other countries.
The military award may be better for U.S industrial interests than most people think
Douglas A. McIntyre is an editor at 247wallst.com
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Filed under: Housing
 Flamboyant licensing brand and fading reality television star — er … real estate mogul — Donald Trump has made a great name for himself in super-high-end real estate. Unfortunately, he hasn’t been as financially successful as he’d like you to think. For Trump, glitz and glamor have come at a price. But hey, he gets to go on TV and make fun of Rosie, and no price is too high to pay for that.
But other investors — including his father Fred Trump, by the way — have had far more success investing in lower-end properties. The latest issues of Forbes features a profile of 78-year old Milton Cooper, and his REIT, Kimco (NYSE: KIM). In the 40 years since he co-founded Kimco, Cooper has turned it into a strip-mall behemoth with over $9 billion in assets. Focusing on less than glamorous “neighborhood and community shopping centers,” Kimco has built built an empire anchored by stores like Bed Bath & Beyond, Old Navy, Michael’s, and Home Depot. So Fifth Avenue this is not. But Forbes suggests that Kimco’s retailers may be better-poised to weather a recession than more upscale locations.
With a strong shareholder return since going public in 1992, its been a consistent upward march that ended precisely at the beginning of 2007.
If you’re feeling contrarian and are in the market for REITs, check out Forbes’ REIT Gold List.
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Filed under: Forecasts, Starbucks (SBUX), Commodities
Starbucks (NASDAQ:SBUX) is already contending with rising milk prices and slow same-store sales in the US. But, the commodity which affects it the most is obviously coffee. According to The Wall Street Journal “The price of green coffee beans has risen 22% since the beginning of the year in trading on ICE Futures U.S.”
Much of the coffee that Starbucks buys in on long-term contracts with fixed prices. It may be the rising price will not hit the company for several quarters. That could be just about the time that the turnaround efforts of founder Howard Schultz begin to take hold.
Since the trend in commodities prices is still sharply upward, coffee prices may not have peaked. Starbucks is probably looking at a strain on its margins toward the latter part of the year. That may be combined with softness in business due to a slowdown in the economy and rising competition from other chains.
To put a point on it. Starbucks may not do much trading above $20 for another year or longer.
Douglas A. McIntyre is an editor at 247wallst.com.
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Filed under: Management
A new study from consulting firm Watson Wyatt Worldwide found that 71% of investment and pension fund managers believe that executive pay packages are overly influenced by company managements. Only 49% of directors serving on compensation committees feel that way.
Of the directors surveyed, 63% feel that executive pay structures are moving in a positive direction, but only 36% of investors felt that way.
According to Reuters, “The report found that 75 percent of both the directors and investors thought that companies’ executive compensation plans have hurt corporate America’s image. Also, 78 percent of investors thought executive pay has created resentment among the rank-and-file workers, compared with 60 percent of directors sharing that view.”
Interesting. Here’s what’s funny: Another survey found that two-thirds of CEOs feel that they are given high compensation compared to their performance. Only 2.2% thought they were underpaid.
So we have investors and even CEOs seemingly in agreement that there is a pretty serious executive compensation problem. The only ones who seem to disagree are the compensation committees — people who, with some exceptions, have little stake in the companies for which they’re setting pay packages.
If I didn’t know any better, I’d say that we have a serious corporate governance problem, and that institutional money managers aren’t doing enough to hold executives accountable. But wait: they have a fiduciary responsibility to do that, so surely they must be. Right? Right?
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Filed under: Earnings reports, Dell (DELL), Home Depot (HD), Sprint Nextel Corp (S), Sears Holdings (SHLD), Goldman Sachs Group (GS), Lowe’s Cos (LOW), Office Depot (ODP), Toll Brothers (TOL), RadioShack Corp (RSH), Nordstrom, Inc (JWN)
Here are a few highlights from this past week’s earnings coverage from BloggingStocks:
Also, analysts predict that bank losses will be the highest in 20 years. See Jim Cramer’s take on Lowe’s and Nordstrom results. Timothy Sykes recommends investors not become starstruck by superstar companies such as Apple Inc. (NASDAQ: AAPL) and Google Inc. (NASDAQ: GOOG).
Upcoming results to watch for include Staples Inc. (NASDAQ: SPLS), Costco Wholesale (NASDAQ: COST), and Blockbuster Inc. (NYSE: BBI).
Visit AOL Money & Finance for more earnings coverage.
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Filed under: Industry, Housing
With all the negative headlines that the subprime lending industry is getting lately — and deservedly so — it’s easy to forget about how important it is. Without question, the availability of credit can be an extremely potent force in the battle for upward mobility.
For 25 years, Muhammad Yunus’s Grameen Bank have been doing subprime lending right: making small loans to people in developing countries to give them a chance to start their own businesses and provide for their families — About 97% of Grameen’s borrowers are women.
This weekend’s Wall Street Journal reports that “Mr. Yunus has now brought Grameen to this borough of New York City. Since taking off in January, Grameen America has lent out a total of $145,000, with interest rates at around 15% on the declining loan balance. The money will be used for everything from taxi registrations to sewing machines.”
Reading Mr. Yunus’s interview with the Journal – where he opines on the American subprime mess — I can’t help but feel crotchety about how badly we have messed up lending in this country. Yunus has built an institution with an extremely low default rates based on loans to driven entrepreneurs.
Continue reading The sweeter side of subprime lending
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