Torstar Confusion


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Torstar (TSE:TS.B) which trades on the Toronto Stock Exchange, is in a state of confusion. They recently sold off a big stake in CTV and enjoyed a very large liquidity event. Their fundamental problem is their legacy asset, a large circulation newspaper called Toronto Star. They have no vision for the future or how to use the internet.

Recently they launched a special Sunday insert which carries the New York Times Book reviews. This is supposed to be a major catalyst. iPad, Kindle, other readers and tablets and these guys come up with their A game and cut down some more trees.

Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post.

Penske Working Capital Clarity?

Penske Racing

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Penske Automotive Group (NYSE:PAG) reported Q3 earnings results. At first glance investors may be encouraged. Penske is very aware of the $150.6 million principal amount of convertible notes expected to be redeemed in April 2011.

Chairman Roger Penske said “We will continue to pursue opportunities to generate incremental revenue, while maintaining the financial discipline that has allowed us to pay down more than $210 million of long-term debt since the beginning of 2009.”

They keep mentioning they have enough unused lines of credit and working capital to reduce long-term debt and grow the business. What they fail to discuss is what the growth will need for working capital. As they become more reliant on short-term debt they become more interest rate sensitive. By buying out equity you have short-term engineering boosting EPS and long-term interest rate risk.

Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post.

Office Depot Guilty?

Office Depot’s corporate headquarters in Boca ...

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Office Depot (ODP) settled SEC charges regarding Reg FD violations. Stephen Odland and Patricia McKay will each pay $50,000 personally. However because of their incompetence (nicest thing we can say) in violating clear Reg FD policies Office Depot will have to pay out a $1 million fine. Why do the shareholders have to pay the fine for the inappropriate actions of the two executives. I would like to see the Board hold them accountable. After all they were the CEO and CFO not just junior staffers.

Can you imagine working for a boss who has violated  securities law and then watch them sign off on compliance sensitive issues. Will investors trust these two again. Stephen Odland is still the CEO and Chairman of the Board.

Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no position in stocks mentioned in this post. 

Campbell Soup Halal Problems

Campbell Soup Company

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Campbell Soup (CPB) seems to be spooked by right-wing bloggers. In Canada they launched a Halal soup line. The right-wing has pressured Campbell Soup into saying they have no plans to launch a similar line in the US of A. CNBC’s very own Erin Burnett on her afternoon show “Street Signs” identified the US Halal market to be well over $150 billion.

Investor’s want wealth maximized.  Participating in a $150 Billion market seems like the right thing to do to expand your sales. What if shareholder rights activists started to launch lawsuits against Campbell and the Board of Directors? How can a few politically motivated bloggers influence a company with over a $12 Billion market cap. The shareholder activists would be complaining about cowardly management which misses profit opportunities.

Is this a Denise Morrison faux pas? Denise is the head of the North American soup operations and has been anointed as the next CEO. Controversy on that one also. She will replace Doug Conant this coming July 31, 2011.

Disclosure: George Gutowski writes from a caveat emptor perspective. I have no positions in stocks mentioned in this post.

Northern Trust Confusion

Northern Trust Open

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Northern Trust (NTRS) report Q3 results and showed investors that they have slipped a notch or two. I am a simple guy. Northern Trust is 75% assets under administration and custodial services. Both those business grew by 8% and 10% respectively. They still laid an egg and managed to decrease EPS. Ergo the other business lines are not performing.

Frederick H. Waddell, Chairman and Chief Executive Officer refers to the assets under adminstration and custody services and just says the market is challenging. Not a fully transparent comment.

Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post.

Morgan Stanley Volckerized

Morgan Stanley's office on Times Square

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Morgan Stanley (MS) is being Volckerized. That’s the new buzz word that refers to the Volcker clause of the Barney Frank Financial Reform Bill. Morgan Stanley is shedding in-house hedge funds by Q4 2010 which means in around 60 days. Employees will be coming up  with billions to purchase equity and get Morgan off the hook.

Financial engineering reigns supreme. These guys were good but do they have a few extra billion kicking around? Watch for compliance and governance nightmares to make this one work. After the mortgage mess we will have the hedge fund mess.

The immediate secret benefit will be to reduce mega compensation off the books of Morgan Stanley and hide it on the books of a private entity. Morgan Stanley and copy cat financial institutions will achieve the necessary political optics.   

Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post.

Apple Hoards Cash

Image representing Steve Jobs as depicted in C...

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Apple (AAPL) announced Q4 results. The buzz over iPad, iPhone and product margins overwhelms a fundamental issue. Capital efficiency. Apple has some $50 billion on the balance sheet. That is roughly equal to 20% of its current north of $300 @ share market cap. When compared to either Citigroup (C),Wells Fargo (WFC) or Bank of America (BAC) their cash stash is approximately 40% of the relative market caps.

If banks get political heat for not lending why does Apple not get the same political heat for not investing. Perhaps politicians still have not figured it out yet.

Apple is reporting half the cash balance as long-term securities. No reporting on what the investment strategy is. For $50 billion in cash we need Steve Jobs to explain the cash strategy and not make guest appearances on his own conference call just to bash one specific competitor: Research in Motion (RIMM). By the way Apple cash balance is equal to twice the market cap for RIM. So what are you afraid of?

Disclosure: George Gutowski writes from a caveat emptor perspective. I hold no positions in stocks mentioned in this post.