Starbucks The Next Warren Buffett Investment. $SBUX

Starbucks (Nasdaq:SBUX) may become more and more like the Warren Buffett classic.

How so.

Behold the smart phone Starbucks App. The app cleverly likes to a credit card and pulls down cash to your phone app is pre-loaded and keeps the consumer spending. Minimum down load triggers at $15. So if your account balance hit $15 or less another say $25 comes out of your credit card.

The balance now becomes an interest free loan to Starbucks. Much the same travellers cheques used to be or pre-paid credit cards or stored value cards offer now.

Lets look at some math. Starbucks will not disclose how many people use the App. But in March 2011 Mashable cogitated that 3 million people a day are using the App. Assume they can generate in time 100 million worldwide users with a minimum $15 average balance. Starbucks gets a free balance of $150 million. Increase with inflation and time the free balances work. Increase the offerings and maybe use the Starbuck`s App to buy other things the float, transaction and user fees just grow.

The Black Swan may waddle over if the Big Banks start to complain. But they will only attract attention to a good thing.

George Gutowski writes from a caveat emptor perspective. He was not drinking Starbucks as he wrote this piece. Nor does he understand why he was not drinking coffee at the time.

Jim Rogers did what with smallcap Fab Universal. Watch Black Swan. $FU $GOOG $YHOO $FB $AMZN $NFLX

Fab Universal (NYSE:FAB) announced that the very famous investor Jim Rogers long beloved by Financial TV has joined the Board of Directors. Fab is a small cap trading under $5. They are in the digital media space in China and creating lots of cash flow. So why would Jim Rogers accept a seat on the Board. He is rich and another buck may not be as exciting as it used to be. If he truly believes in the potential and no one doubts his integrity why not just buy a lot of shares, let the market know you are long and wait to cash in.

The Chinese market is seductive and enigmatic. Digital is a real play for the future. Jim Rogers is long recognized as an astute commodities investor and China is a huge commodities buyer. So he gets into China with a digital play. Google (Nasdaq:GOOG) has difficulties in China. Yahoo (Nasdaq:YHOO) has stubbed its toe in China and is still not sure if it was cheated outright or just diddled a little in the back seat of puppy love. But someone with deep pocketed books will most likely appreciate all the heavy lifting that`s been done and open up the cheque book. Amazon (Nasdaq:AMZN) Netflix (Nasdaq:NFLX) Facebook (Nasdaq:FB) are all looking for big bold plays and think nothing of billion dollar acquisitions. So on a current market cap of $72 million the numbers will work out rather well.

The communist party is still totalitarian if it got pushed strongly enough. But the China market is huge and enticing.

Fab Universal is still readily unknown. The Wall Street Journal at time of writing still says no news on Fab for the past two years. So this is what I think Jim Rogers is up to as he swings for the fences.

Buy in and arrange some preferably financing.

Expand services and get yourself on the map. Annual revenues are just in the tens of millions. With a compelling product and enough working capital the China market can be very kind to shareholders.

So as you are expanding and growing and creating cash flow and profits you will attract the attention of the big dogs who will want to buy a growing concern in the China Market. That’s when the take-over offer is made at huge multiples and Jim Rogers cashes in yet again. So far so good. I can just see investors hit the buy button very hard.

Oh look here comes the Black Swan. We may have to wring its neck. The China market is not a private property driven liberal democracy with enshrined rights of ownership. They play by their rules which they make up as time goes on. Fab Universal will need to keep the Chinese political and economic power élite engaged, warm and fuzzy. If Beijing decides it wants to crown another king it will do so. The Chinese consumer will be switched over to other choices and forget about Fab.

The risk is political. We are speaking about media which politicians will watch over carefully. If Jim Rogers understands the China Market he needs to ensure the political factors are well ties down and stay in favourable trends as time goes on.

George Gutowski writes from a caveat emptor perspective.

Top 40 Brands on Twitter. Wall Street is AWOL $TWIT $FB

WWW.tweet.grader.com maintains this list of most powerful brands on Twitter. Media ranks very high. But the only financial or Wall Street Brand is the Wall Street Journal which comes in at 14. Big banks, brokerages, mutual funds or other financial institutions are nowhere to be found.

Does that mean the social media revolution has not yet begun. Or does Wall Street not know how to walk the talk of social.

Social media is about engagement. Wall Street does not have an engagement culture. When you start to see a financial brand increase in followership probably a leading indicator that shareholder wealth is also being generated.

George Gutowski writes from a caveat emptor perspective.

Sears Retreats in Canada. Chop Chop the End is Near. $SHLD

Sears (Nasdaq:SHLD) announced their Canadian operation would vacate two major store leases in the Toronto area. For those of you who do not know Toronto is the largest and most diverse city in Canada. Closing these stores is like saying we have a presence in New York City except for Manhattan, Brooklyn and the Bronx.

Like a wolf knowing off a paw stuck in the trap Sears is self-amputating locations which should make money. What they need is good news like product launches or celebrity endorsements. Instead we get one depressing closure after another. In the mean time Target and Nordstrom are expanding into Canada. Wal-Mart has been there for a long-time. So has Costco and a lot of other retailers. Toronto has money. Basically the message is

`We have no game“

George Gutowski writes from a caveat emptor perspective. I have tried real hard to spend money at Sears several times in the past year and have failed.

Revlon Finally Pays SEC Fine 4 Years Late. Independent Directors Compromised or Piggish. $REV

Revlon (NYSE:REV) finally agreed to a $850 K SEC fine for misleading investors back in 2009. They have already settled with investors including Fidelity for about $36.9. You see the stock went from $5 to just north of $20. A lot of investors felt they were not properly informed of the true financial picture and were stampeded out of the stock.

The SEC alleged that the company mislead independent directors by ring fencing an independent advisors report. Not good. So for quite some time now the independent investors know they were bambozzled. Yet there are several directors who were on the board at the time of the bambozzlement who are still there.

Astounding

So you have known that you were misled but you chose to stick around. Management and Ron Perlman who were the guiding minds behind the events that lead to the SEC complaint are the majority control block. Very little that you can do; except once you know they can’t be trusted why hang about. You do not have the independent resources to ensure you are not fooled again.

Some of the  individuals who have curiously stayed on include:

Kathi P Seifert 63, Director of Revlon since Jan 2006. Employed by Kimberley-Clark since 1978 to 2004. Executive since 1999. Also sits on boards of Eli Lilly (audit committee no less) from 2006 to present on Lexmark and Supervalu.

Alan Bernikow 72 retired in may 2003 as deputy CEO of Deloitte Touche. The accounting guys no less. He certainly should be feeling sheepish and uncomfortable but he has stayed on.

Meyer Felding 70 was a senior advisor to Morgan Stanley. He was the dean of Columbia Business School from July 1989 to June 2004 and is Dean Emeritus and Professor of Leadership and Ethics at Columbia B School. somehow he is OK with staying on. Can’t figure it out. Currently he is also a director of Macy’s from 1992 and UBS Funds from 2001.

Tamara Mellon 45 has been a director since 2008. She helped create and build J Choo, was the accessories editor for British Vogue and has held positions at Mirabella and Phyllis Walters PR. Sounds just like the right person for Revlon. Probably not a financial type and needs someone to explain the numbers. In the meantime she can look like Catherine Zeta-Jones whenever she wants.

Debra Lee 58, Chairman and CEO of BET Networks a division of Viacom. so she brings a market perspective to Revlon. But she is a lawyer and should understand the ramifications of trust. She also sits on the boards of Marriott International and was on Eastman Kodak from 1999-2011.

In any event Revlon can afford $850,000. The event is not financially material. I guess they just put more lipstick on the pig and moved on.

George Gutowski writes from a caveat emptor perspective.

 

 

Lululemon Athletica Holds a Crucifixion. New Boss Wanted Needed. $LULU Is a Merger far off.

Lululemon Athletica (Nasdaq:LULU) held a public crucifixion and whacked the boss. Christine M Day. Ms. Day joined Lululemon in 2008 and quickly became the President.

Lululemon has had its history of controversy. An original guiding started as a scout in the oil business which is a very nice way of  describing a corporate spy. They had the Where is John Galt controversy. There were the trans-dermal claims that certain yoga wear was nutritious. Busted by New York Times is an unusual and brilliant collaboration between the fashion editor and the science and technology editor. They recently had the incredibly sheer yoga pant controversy. Manufacturer insists that they did not make substitutions. Product sold out after what everyone thought was a negative event.

Despite the rough edges the stock trades at a 36 PE ratio. The chairman Dennis Wilson, who also is synergistically involved in a surf board company, upon firing Christine M Day also sells at lot of stock under a pre-established program and makes out like a bandit. Lululemon insists nothing untoward. But the timing of the termination could have been reverse engineered to fit the timing of the plan which I’m sure was known to all involved.

The company has no debt and is growing. I am not a fashion guru but how large a moat can they have around them. Women look good in Lululemon wear but the design is easily copied. The company could use some good management and that means replacing the board as well as a new president.

But who wants to come on board. Stock options are big but when you look at a 36 PE where is the stock going to go. A sale might be in order after they decide all the possible presidents are not that interested. But who will want to trump a 36 PE and why would you do that.

So out swims the Black Swan. The Black Swan swims because it can. The company has been accidentally dropping hand grenade after hand grenade. The law of unintended consequences will eventually kick in and market value will drop. It’s like playing Russian Roulette eventually the bullet fires.

So why buy a stock at 36 PE. absolutely no reason. the chairman is selling big time. The next train stop on calamity railways will burn shareholder value as the stock drops. Black Swan reigns.  Then it makes sense to make an offer. In the meantime lighten the load a lot.

George Gutowski writes from a caveat emptor perspective. Lululemon makes women look good. No question.

Encana New Boss will Revamp Board of Directors. Picks and Spits $ECA

EnCana (NYSE:ECA) got a new boss today. Doug Shuttles formerly of BP got the nod after a six month search by the Board. Doug Shuttles was formerly chief operating officer for exploration and production, was named president and CEO. He fills the vacancy left by long-time President and Chief Executive Randall Eresman. Randal Eresman left after a 35 year career with EnCana after a poorly executed expansion within the gas business as prices declined. A cash cow in the oil business was sold off.

So the board that fired him is the same board that signed off on Randal Eresman’s strategic vision which did not work. Doug Shuttles is known as a fixit type will probably look at fixing the board before too long. she who he will pick and who he will spit out.

David O’Brien 71 Chairman obviously signed of on Doug Shuttles. But at 71 how much longer does he want to keep active in high stakes business. Watch for him to retire in dignity. David O’Brien will also probably become Chairman much to the chagrin of governance experts. David O’Brien also sits on the board of Royal Bank of Canada which is an important corporate hook up. So someone who is well connected with Royal Bank will probably get an EnCana seat.

Two other directors also hold seats on large Canadian financial institutions. Jane Peverett 54 sits on the Canadian Imperial Bank of Commerce board as well as BC Ferry Authority, Postmedia Network and Northwest Natural Gas. An important West Coast power broker will most likely stay. Brian Gordon Shaw 59 also sits on board of Patheon and Manulife Bank another large financial institution. An alumni of CIBC World Markets (Read Wood Gundy) A long-time Toronto based financial wheeler dealer. But you know what. So what. If you were so good with numbers how come you signed off on the last set of disasters. EnCana can get to capital markets without this guy.

Fred Fowler 66 sits on boards for Spectra Energy and Pacific Gas & Electric. EnCana needs access to political clout to punch through the pipelines. This is not the right guy.

Suzanne Nimocks 54 sits on the board for Arcelormittal who provides steel for pipelines. The vendors do not need to sit on the board unless they can bring financing to the table and very preferential terms. In the meantime she also sits on the board for Owen’s Corning, Valerus Compression Services and the Houston Zoo.  Probably a keeper for now. Younger female plays to her advantage. That pipe better be cheap.

Peter Dea 59 has no other corporate connections indicated on his profile. So what does he bring to the table.

Claire Scobbee Farley 54 sits on boards of FMC Technologies, Samson Resources and Sonic Industries. An energetic women with roots in the energy business. So unless she helped guide some of the more ill-considered ventures of recent past she will be pick and keeper.

On balance the board seems anemic. A strong management team had been able to run over them. Governance Karma says most will be good within a year. Next AGM late April 2014 isn’t it?

George Gutowski writes from a caveat emptor perspective.

Encana

Encana (Photo credit: Wikipedia)