Apple Cash becomes a political target or corpgov issue? iCash solution soon or it’s dead money. $AAPL

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Apple (Nasdaq:AAPL) has an $81 Billion cash hoard. This amounts to 25% of its market cap. The stock does not pay a dividend. Everyone clearly agrees that they have enough for a robust R&D effort. This ensures that they can beat up any direct competitor and/or buy up smart ideas while they are still small.

The cash issue becomes a governance question. This is shareholder money with no clear purpose. Shareholders to date have been delighted with iPhones and iPads. But lets face it, the market is not going to let this dead money stick around on the balance sheet forever.

Apple executives have a big problem. They are good at technology but are they good at investing? Apple does not have a track record investing money. They have bought a few things here and there to augment their technology. But it stops there.

The question also becomes political. Apple is global. The cash most likely is spread out in bank accounts around the world. Uncle Sam has a perverse habit of taxing cash as it comes into the United States. So you will understand the reticence of some executives to repatriate profits. Democrats want and need to tax. Will politicians help hurt Apple.

Investors will be clamouring. IRS will be salivating. Politicians will be hiding. Apple executives will be confused. The public will read about the problem on their iPads thereby creating more profit.

Apple needs to pick a direction with the cash and develop a strategic plan. The problem is much more complex than just a little bit of dividend yield. So far they have no game.

George Gutowski writes from a caveat emptor perspective.

John Deere announces that it would like to congratulate itself $DE

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John Deere (NYSE:DE) recently announced some pretty good numbers. But would you listen to  Samuel R. Allen, chairman and chief executive officer.  Sounds like he is trying out for something. He opens with this insight ladden line:

“”John Deere has completed another year of exceptional achievement,”  he then moves on and fills in some of the blanks by saying “Our success reflects a continued pattern of strong customer response to our innovative lines of equipment coupled with the skillful execution of business plans aimed at expanding our global competitive position.”

I really liked it when he said: “These dollars are funding growth throughout the world and also are being shared directly with investors in the form of dividends and share repurchases.”

The dividend yield is approximately 2.23%. That’s not really fantastic. Dividend oriented investors are not looking for 2.23%.

After some of the hubris we get into a few nitty-gritty type comments in the earnings release. Investors should note:

  1. Increased raw-material costs, higher manufacturing-overhead costs related to new products, and higher research and development expenses. In addition, full-year results were impacted by higher selling, administrative and general expenses.
  2. Lower effective tax rate, affected both the quarterly and annual results.
  3. Financial services benefited from growth in the credit portfolio and a lower provision for credit losses, partially offset by narrower financing spreads and a higher effective tax rate. Included in 2010 fourth-quarter results was a write-down of wind-energy assets held for sale to fair value. So no real change but it looks like change.
  4. Lower credit losses are booked as the lease portfolio grew substantially. Chickens will be coming home to roost soon. Management is expecting a return to the mean for credit losses.
  5. Farmers in the world’s major markets are continuing to experience favorable incomes due to strong demand for agricultural commodities. You have to keep believing in the agricultural commodity boom.
  6. Construction and forestry are expected to grow 15% worldwide. That’s a really big number that needs to happen.

John Deere did deliver some excellent numbers. But the messaging borders on the promotional.

George Gutowski writes from a caveat emptor perspective.

Campbell’s Soup umm umm yuck. Black Swans straight ahead $CPB

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Campbell Soup came out with some watery numbers. Investors should note the following

  1. The EPS is exactly the same as last years quarter.
  2. The dividend has gone up.
  3. Long term debt has also gone up big time.
  4. The amount of shares outstanding has shrunk, so share buybacks are still a big factor. Read point three again.

Denise Morrison, Campbell’s President and CEO, said, “As we’ve previously stated, fiscal 2012 will be a year of investment as we establish the foundation for the next era of profitable growth at Campbell.

Campbell’s Soup is not establishing anything but higher debt loads which need to be worked off one day some how. Upfront they claim to be increasing prices and reducing marketing spend. Go to any professional marketer and listen to the howls of laughter. Eventually the products will implode. Usually sooner than later.

The earnings release did not address increases in long-term debt, reductions in outstanding shares.

Conclusion: Black Swan ahead.

George Gutowski writes from a caveat emptor perspective.

Tyson erratic chicken dance. Problems in the Hen House $TSN

Tyson Foods México Truck

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Tyson Foods (NYSE:TSN) posted ugly Q4 numbers because of problems in the hen-house. Commodity input costs soared and could not be passed on. Like that’s a negative spread.

Donnie Smith, Tyson’s president and chief executive officer after identifying $675 million in unexpected feed costs was quoted as saying

This is a testament to our quality, service and innovation and our focus on business fundamentals and operational efficiencies across all segments of our business.”

The same Donnie Smith is on the record in the last conference call identifying the Hen House as a problem. But it was profitable. Just profitable by a whisker. He also points out that in Q1 the hen-house is profitable as well.

OK so we know the hen-house is a tough business. It looks like they bit the bullet and had sudden unexpected costs. It looks like they shifted costs forward to get some of the problems behind them. It looks like they were awarding executive stock options and could use a lower price at year-end. They are openly hoping for higher protein prices this coming year. They claim the hen-house is already profitable in Q1.

That’s the set up. They are reminding investors  that this is still the second highest EPS, so it’s not so bad right. Commodity costs are volatile. Just try to follow the trading action in the pits in Chicago. If a few costs were shifted forward you will get a short-term pop and then the fundamentals start to catch up with you. Not to mention  how to get decent comparables going forward. The fox will be in the hen-house soon.

George Gutowski writes from caveat emptor perspective.

LuLuLemon confused mktg Crash/Burn client misread Black Swan ahead Where is John Galt $LULU #yoga

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LuLuLemon (Nasdaq:LULU) recently pulled their very wrong “Where is John Galt” shopping bags. Don’t get me wrong. I would like to find out where John Galt is and invest a few bucks myself. But in terms of the yoga sensitivity the bags backfired and Lululemon has probably pissed off way too many clients, while lossing money foolishly. 

So what does it all mean? LuluLemon wear is a statement. The majority of clients do not pine for John Galt. They would be very appalled if John Galt ever showed up in their lives. LuLuLemon executives did not understand this. The mis-read is fundamental. Which means the company does not understand their market. Not only is there a Black Swan in their future it might be a whole flock.

Not that long ago LuLuLemon was marketing a yoga top or T-shirt of some sort that promised to provide some form of trans-dermal nutrition. you know like a nocotine patch. Now if I remember the story correctly some of the fashion writers and editors at the New York Times found this curious (Yes it would be the New York Times). Apparently they purchased several said items and marched down to their colleagues in the Science and Technology who also found it curious.

Scientific testing was applied and corporate claims of nutrition were found to be laughably bogus. LuLuLemon was caught like a deer in the headlights. Executives were truly confused. LuLuLemon seems to be able to find every pothole on the road. Just like a lot of people suspected, NYT hates faux left-wing. they just will not tolerate it. The New York times is also publicly traded on NYSE (NYSE:NYT) LuluLemon only trades on Nasdaq (Nasdaq:LULU) So LuLuLemon has less class.

Don’t get me wrong. I have nothing against Yoga. Have attended a few classes and probably should sign up for some more. Maybe LuLuLemon exec’s should sign up for a few yoga classes themselves. Maybe LuLuLemon executives should get in touch with their market. Maybe LuLuLemon is going to become roadkill?

George Gutowski writes from a caveat emptor perspective.

TJ Max How did you do that? What replaced winter wear? CEO begs the question. $TJX #retail

The TJX Companies Inc (NYSE:TJX) came out with some very nice results. I was struck by a quote attributed to Carol Meyrowitz the Chief Executive Officer”

“…..We achieved these strong results despite unseasonably warm weather during the quarter in many key regions of the U.S. and Canada, which hindered demand for fall apparel…..”

OK Carol how did you do it then? If the expected items did not sell because of weather, what was selling? CEO’s should explain upon things like that.Winter wear is a more expensive item. Therefore the absolute margin is also bigger. What replaced it?

George Gutowski writes from a caveat emptor perspective.

NIRI holds Global Investor Relations Program in Miami Nov 16-18 #NIRI #ir #miami

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National Investors Relation Institute is holding a Global Investor Relations Program in Miami Nov 16-18. The program is targeting non US companies and assisting them navigate US investment markets. NIRI president  Jeff Morgan sees the program becoming a must do for non US-based IR practitioners.

Miami is usually sunny and warm. Miami is the business gateway to Latin America. Hopefully the outreach programs will also go to Asia and China so we can get investor relations onto one global page. Hong Kong or Shanghai?

George Gutowski writes from a caveat emptor perspective.

Warren Buffett $IBM and Bank of America. A study in contrast and timing $BAC $BRKA $BRKB #buffett

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So now we know the Oracle of Omaha aka Warren Buffett of Berkshire Hathaway (NYSE:BRK.A) likes both Bank of America (NYSE:BAC) and IBM (NYSE:IBM). Same value investment criteria. Same value investor I presume. Almost within the same time frame. Yet two radically different looking investments.

IBM went through its problems several years ago and presumably was a better buy. Still a good investment but Buffett is late to the party. Probably because its technology.

Bank of America has nothing but controversy. The investment is opportunistic as it’s a pref share deal. Get paid while you wait. IBM I assume is straight up common shares. Naked risk as they say.

The value investing school can have a big debate about the differences. The reality is the two stock picks are different and investors may be wondering what Berkshire is going to be all about. Solid blue chip or buy ugly deep value but we have to turn this around first investing.

George Gutowski writes from a caveat emptor perspective.

Dynegy Q3 results meaningless chapter 11 trumps fundamentals and common sense $DYN #chapter11

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Dynegy (NYSE:DYN) reported Q3 results just several days after starting chapter 11. Usually investors read results closely. But in this case the chapter 11 process will trump fundamentals and common sense. But then again investors have already been slaughtered.

Dynegy is a highly complex company. It’s difficult to understand and lots of moving changing parts. Even when it comes out of chapter 11 lots of more straight forward ways to play energy ideas.

This post was written from a caveat emptor perspective.

Lowes don’t look at me Q3 earnings. No game and CEO mumbo jumbo $LOW #corpgov

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Lowes issued their Q3 results and let the world know things are not so good. To be expected. Homebuilding not doing so good. US consumer is unemployed or in debt.

Lowes includes the comment from Robert A. Niblock, Lowe’s chairman, president and CEO ” “Our performance is not at the level we expect relative to the market,”  Well OK what are you going to do about it.

So the investor relations people throw in this bullet proof business strategy.

“We are making the changes necessary to right size the organization, improve speed to market and enhance the shopping experience. We are keenly focused on improving our core business while also developing new capabilities and services for the future. I am confident we are moving forward on a clear path that is not dependent on an unlikely near-term economic recovery.”

Really? What type of corporate mumbo jumbo is that. Sounds like you have no game. Whenever you need to depend on double negatives coming from the mouth of the CEO you know they are scrambling and the lawyers are adding more layers of teflon.

Given the state of the economy no one was expecting Lowes to be a super star. The stock is cyclical. But management wants to pretend otherwise. So when you climb the Wall of Worry management savvy does not shine very much.

This post was written from a caveat emptor perspective.