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Climbing The Financial Wall of Worry

$BRK.A $BRK.B Bershire Hathaway Next Big Short #Warrenbuffett

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Warren Buffett has summoned the faithful to Omaha for the annual meeting or love fest. Berkshire Hathaway (NYSE:BRK.A)  What is he going to say this time? We know about the major acquisition. It was a railroad. We know about the elephant gun and itchy fingers but somehow he is not saying that so much anymore. We know about Lubrizol and Soskol. We know that Warren Buffett publicly stated no wrong doing occurred. We know many lawyers are investigating and legal action will be forthcoming shortly.

The legal actions may develop into a legal tar baby and Warren Buffett may spend the last few years of his life explaining a mistake and trying to salvage an enviable reputation. The lustre may wear off the Berkshire Warren Buffett brand.

Succession still seems to be a big problem. Warren Buffett will not or can not name the one individual or group of individuals who will replace him. You can start having an interesting discussion with a geriatric specialist about cognitive abilities and how they slowly slip away. Errors in judgment or difficulty in making decisions.

We also know that upon Warren Buffett’s death the bulk of his wealth will transfer over to the Gates foundation. Warren Buffett is nominally a Democrat (I think) so expect Republicans to rock the boat as most of the money goes for causes outside of the US of A. Why should the American tax payor cover that tab? This will create controversy and will be distracting to Berkshire from an operating point of view. Gates Foundation will also become embroiled in tax argumentation. Hey Bill Gates how is that Golf Membership in Atlanta working out.

One way or the other Warren Buffett’s dominant shareholder position will be sold off. Stock prices are determined by supply and demand. The biggest position will be for sale. All those billionaires Buffett and Gates have been soliciting will be watching closely and saying something like there but for the grace of God go I. Or some such culturally appropriate affirmation.

Disclosure: “George Gutowski” writes from a “Caveat Emptor Perspective” I hold no positions in stocks mentioned in this post. I have no plans to initate new positions within the next 72 hours.  

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April 29, 2011 Posted by | Investments, Investor Relations, Reg FD, Stocks | , , , | 2 Comments

$SNE Sony Reg FD Deficient About Play Station Hacker Attack #Playstation

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Sony (NYSE:SNE) has been faced with long-term service outages. The hackers have won this round and Sony is scrambling to pick up the pieces. This may become the text-book example of how a digital company can be brought to its knees. Sony is not talking about what it needs to do. They may claim the need for secrecy. I normally would subscribe to the logic but this time the bad guy’s seem to know everything they need to know. Of course once you have been kicked in the balls you may need a while before you can catch your breath.

When a product or service is not available for two weeks or more there are financial consequences. At the very least the brand is compromised. There may be lawsuits. Pricing may need to be adjusted. it goes on and on. Business as usual is not an option.

It took Sony a week to admit to its own customers that there was a problem. So far the investors have silence. Management has not warned that revenues , costs or profits are adversely affected. It has not occurred to management that they need to say something and silence is not golden. If investors continue receiving the mushroom treatment there will be a loss of confidence. When management eventually says something they will be greeted with financial skepticism and outright cynicism.

Investors deserve better. A problem of this scope will have financial ramifications. To pretend otherwise is reckless. When will the class action lawsuits start?

Disclosure: “George Gutowski” writes from a “Caveat Emptor Perspective”. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.

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April 28, 2011 Posted by | Investments, Investor Relations, Reg FD, Stocks | , , | 2 Comments

$MCO Does Moody’s Have Intellectual Capital

Moody’s (NYSE:MCO) announced some pretty good numbers just days before Warren Buffett’s love fest annual meeting in Omaha Nebraska. But enough about the 800 pound gorilla that is selling the stock. Here is what Moody’s is selling.

They increased the dividend by 22%. EPS has increased some 47%. So they raised guidance a bit just so investors could appreciate conservative stewardship. They do point out they have well over $1 Billion in debt which is almost covered by cash on hand. They also point out the big share repurchase program which in part is the secret teflon shield protecting them from Warren Buffett dispositions.

What they do not talk about is the intellectual property. In the end game a ratings agency is an intellectual exercise. We are paying them one way or the other for an informed opinion. Preferably unbiased, untainted and not influenced by market share targets. Nothing in the earnings release discusses what they are doing to perpetuate and enhance their position as providers of superior intellectual property.  

While they have bags of cash lying about Moody’s also has some heavy debt repayment coming up over the next six years or so. So a ratings agency will need to become adept at financial engineering. The classic guns or butter conundrum is slowly creeping onto the landscape. Moody’s intellectual capital leaves the premises every day. If Moody’s cannot maintain a dominant position and attract/develop superior intellectual capital the dividend will not be sustainable.

Disclosure: “George Gutowski” writes from a ”Caveat Emptor Perspective”. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours. 

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April 27, 2011 Posted by | Investments, Investor Relations, Reg FD, Stocks | , , , , , , | Comments Off

$ITW Grandiose Expectations Can It Get Better? Can It Get Worse?

Illinois Tool Works (NYSE:ITW) reported some eye-popping Q1 results. Even factoring out some one time tax events which they do point out the growth rates are stellar. So when a company catches an express ladder up do they caution you that this may not continue or do they play to market greed and urge investors to believe they are on a great ride.

Well if you communicate with investors and say we are on a great ride you need to explain why. So lets take a look at some of the quotes and watch the positioning.

David B. Speer, chairman and chief executive officer: “Our total revenue increase of 17 percent was driven by double-digit organic growth, underlying both the strength in many of our worldwide end markets and our ongoing market penetration gains. We believe that most of our end markets will remain relatively strong throughout the remainder of 2011.”

Thats it for analysis. No further comments or critical evaluation. Just hang onto your hat and hope it all works out.In the same earnings release the investor relations people added in this little clause.

“With nearly 100 years of history, Illinois Tool Works Inc. is a Fortune 200 global diversified industrial manufacturer. The Company’s value-added consumables, equipment and service businesses serve customers in developed as well as emerging markets around the globe. ITW’s key business platforms, including welding, automotive OEM, industrial packaging, food equipment, construction, polymers and fluids, test and measurement, electronics, decorative surfaces and automotive aftermarket…”

Usually broadly based companies operating in multiple products and multiple markets are able to parse and segment their operations and convince investors they are on the job everywhere. ITW does not play by the same rules.

Disclosure: “George Gutowski” operates from a “Caveat Emptor Perspective” I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.

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April 26, 2011 Posted by | Investments, Investor Relations, Reg FD, Stocks | | Comments Off

$RHI Robert Half Smokes Market With Reg FD Challenged Q1 Earnings Release

Robert Half (NYSE:RHI) issued Q1 results indicating improved results. The stock reacted positively on the skimpy information in the press release. There will be a conference call late today if you are interested. I may be old-fashioned but when you report earnings a full set of financials should be included. The press release had a summary. Astute investors would be hard pressed to rely on these numbers.

Checking the company’s website also fails to offer more meat. This management group needs to have a serious discussion with their legal counsel. Financial reporting is not a selected activity. Investors deserve to hear the whole story not just selected tidbits that suit senior management.

Harold M. Messmer, Jr., chairman and CEO of Robert Half International chimed in for the glory quote and said the following  “Companywide revenues grew 19 percent from the first quarter of last year, and income per share was up 248 percent from one year ago.”

Good work Harold. What will you do to continue? You must have some idea’s?

Disclosure: “George Gutowski” writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.

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April 25, 2011 Posted by | Investments, Investor Relations, Reg FD, Stocks | | Comments Off

Apple $AAPL Hyper Speed Risks

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Apple (NASDAQ:AAPL) reported some outstanding results and confirmed they are the leaders in anything they touch. Apple is in the enviable position of selling out all available inventory. Why do they have no inventory? Are they caught unawares of what the true demand for their product is? Not likely they are adept at branding and marketing. Do they have supply chain problems? Can they increase the capacity in their supply chain? Will competitors try to slow Apple by demanding the supply chains pay attention to non Apple products? Watch for lawsuits and back room blackmail. Will Apple see margins erode as a red-hot product experiences the inevitable consequences of the laws of supply and demand?

More importantly as Apple whips its supply chain will they be able to maintain quality and avoid brand damaging recalls in the very near future.

Then look at the other side of the coin. When the supply chain catches up to the demand and inventory is reasonably available will that mean demand has tapered off and Apple has a marketing problem.

Lots of risk when managing fever and the madness of crowds.

Disclosure: “George Gutowski” writes from a “Caveat Emptor Perspective”. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.

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April 21, 2011 Posted by | Investments, Investor Relations, Reg FD, Stocks | , | Comments Off

$AMR Reverse Oil Play Half Pregnant

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AMR (NYSE:AMR) the parent company for American Airlines announced results and what can you say. An airline that cannot cover its cost of capital and is constantly struggling with the price of jet fuel. Management discusses its hedge program and claims that approximately half the anticipated consumption for Q2 2011 is hedged. Can you be half pregnant?

The hedging program is similar to chasing a horse once it bolted from the barn. AMR is responding to the market price of oil and plays catch up. If they had a correct approach to cost management they would identify where they need oil costs to be to generate acceptable profits and manage to that level.

The big question becomes if AMR could manage oil costs would they still be viable. Management is curiously silent on this issue.

Disclosure: “George Gutowski” writes from a “Caveat Emptor Perspective” I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.

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April 20, 2011 Posted by | Investments, Investor Relations, Reg FD, Stocks | , , | Comments Off

Texas Instrument Japanese Supply Chain Risks $TXN

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Texas Instruments (NYSE:TXN) reported results and pointed to Tsunami and earthquake issues disrupting Japanese based production. They are hoping to get their facilities up to speed but point to the obvious issues of others in their supply chain who may continue to have prolonged disruption problems.

Good point. Lots of issues beyond their control. So in the interests of shareholder disclosure and transparency why not identify the key players and vulnerabilities. Let the sunshine in. What are the contingency plans? Can TI lose clients permanently to other suppliers? If not do they have enough control over the supply chain to increase prices? This is a business after all.

Just waiving your hand at the earthquake and absolving management is inadequate and unacceptable. If you want to assess the viability and sustainability of an investment you cannot just accept a shrug of the shoulders. You want to know that management has a plan. so far the earnings release does not indicate the need for a plan.

Disclosure: “George Gutowski” writes from a “Caveat Emptor Perspective”. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.

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April 19, 2011 Posted by | Investments, Investor Relations, Reg FD, Stocks | , | 1 Comment

S&P Revenge Bitch Slap Lets Blame Geithner $MHP #Debtlimit

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Standard and Poor owned by McGraw Hill (NYSE:MHP) triggered a stock market decline by declaring “The Emperor Wears No Clothes”. The market already knew the US Government had a huge debt problem. The market already knew that the debt limit ceiling needed to be raised. Secretary Geithner explained that one on weekend talk shows. We almost saw the Federal Government shut down a few weeks ago. Not a sign of good fiscal management.

The market knows rating agencies usually respond too slowly with ratings downgrades. The financial world watched a Democratic Congress and Democratic Administration beat up S&P for shoddy work on the sub prime markets. We have travelled full circle and bumped into our own derrieres on this one.

The suspect ratings agency is calling out a suspect debt issuer and down grading the long term outlook. The bizarre short term consequences are that investors sell wealth generating equities and are piling into the dollar and bonds which supposedly are in danger.

Have ratings agencies become politicized?

Disclosure: “George Gutowski” writes from a “Caveat Emptor Perspective”. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.

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April 18, 2011 Posted by | Investments, Investor Relations, Reg FD, Stocks | , , | Comments Off

Zipcar IPO Ripoff Did Underwriters Cheat New Investors or Old Investors $ZIP #Zipcar

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Zipcar Inc. (Nasdaq:ZIP) goes public and the share price nearly doubles starting with the first open trade. Who got screwed on this one? The valuation was clearly inaccurate as measured by the market.

What ever happened to underwriters trying to maximize the price at the offering? Existing shareholders are faced with unnecessary dilution. The market clearly would have paid more per share. The number of shares outstanding could have been less. EPS would have been way better on a going forward basis. Also you now have a horde of speculators trying to protect profits and waiting for the inevitable share buy back financial engineering as desperate CFO’s try to manage EPS growth.

The market is never wrong as they say except when it changes its mind. Underwriters rely on speculative fever to promote the stock. Investors are looking at increased share prices and believing they are richer than before. But no one is counting on the dilution issue. What we need is a good lawsuit from a pre-IPO investor who is not happy with dilution disguised in speculative fever.

Disclosure: “George Gutowski” writes from a “Caveat Emptor Perspective”. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.

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April 15, 2011 Posted by | Investments, Investor Relations, Reg FD, Stocks | , , | Comments Off

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