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Frank J. Constantino
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Mr. Frank J. Constantino, of Beckley, W.Va., is an educated private investor with 15 years of experience. Constantino follows the financial markets closely and provides opinion through Seeking Alpha. He was recently named in the "Who's Who of Wall Street" by Wall Street Economists for... More
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  • A Letter To Congress Regarding The Fiscal Cliff

    This is a letter that I wrote to my congressional leaders regarding the fiscal cliff. It was also distributed to Speaker Boehner, Leader Pelosi and Leader McConnell.

    Today is December 30th and so far our congress of the United States of America has failed to come to terms on a deal to avert the so called "Fiscal Cliff". It appears as though this congress will fail the American people yet again. The fiscal cliff was a mechanism created by the congress in order to raise our debt ceiling and forestall a disastrous default on U.S. Government debt obligations in late 2011. The cliff was designed to inflict so much pain that it would be intolerable and unthinkable for any responsible leader to allow it to occur. Yet here we are, essentially one day from massive tax increases on all Americans and spending cuts so deep that, according to the Congressional Budget Office, we will enter an economic recession in early 2013. These mechanisms will inflict a great deal of harm to all Americans including your constituents. The time has long past to assign blame on any political party. In the eyes of the American people every congressional leader is to blame. Congress must take responsibility and both sides must agree to a compromise. In our everyday jobs there comes a time when we can no longer make excuses - We simply get the job done. That time for congress is now. The American people have lost faith in how congress operates. Our patience is worn thin. I urge you to work through all your disagreements and create a deal to avert this self-inflicted crisis.

    Regards,
    Frank J. Constantino

    Tags: Fiscal Cliff
    Dec 30 8:17 PM | Link | Comment!
  • Tweets From the Berkshire Hathaway Annual Meeting
    Below are a few key points that I tweeted from @investopia at the 2011 Berkshire Hathaway Annual Meeting

    $$ #BRK2011 Buffett: currently looking at a couple of purchases roughly around the same size as Lubrizol

    #BRK2011 Munger: it seems like the [political] parties compete with each other for who is the most stupid and they keep topping one another

    $$ #BRK2011 Buffett: "the United States is never going to have a debt crisis as long as we continue to print notes in our own currency"

    $$ #BRK2011 Buffett: Congress failing to raise the debt ceiling would be "the most asinine act"

    $$ #BRK2011 Buffett: in evaluating a company "you should look at return on tangible assets"

    $$ #BRK2011 Buffett: our rail business is an "excellent asset to own"

    $$ #BRK2011 Buffett "businesses like our utilities...are not going to do as well" in periods of high inflation

    $$ #BRK2011 Buffett: "we know we will not do remotely as well going forward as we have in the past" - because of size

    $$ #BRK2011 Buffett: Fannie and Freddie are "too big to 'figure out'"

    Buffett: Ending of QE2 is probably priced into the market $$

    Buffett: Sokol's actions "inexcusable" $$

    Click to follow me on Twitter http://twitter.com/#!/Investopia
    Tags: BRK.A, BRK.B
    Apr 30 6:47 PM | Link | Comment!
  • Is It Time To Stock Up On Kroger (KR)? - Our Analysis

    Kroger (NYSE:KR)     12/05/2010     Outperform

     

    • Price: $21.11
    • Market Cap: $13.5 bil
    • Book Value: $5.2 bil
    • Price to Book: 2.6x
    • Annual Sales: $79.8 bil
    • Profit: $16 mil (includes extraordinary one time items)
    • Profit/share: --
    • Expected Profit/share: $1.59
    • PE: --
    • Dividend: $0.4095
    • Yield: 1.94%
    • Debt: $7.8 bil

     

    Company Profile

    The Kroger Co., together with its subsidiaries, operates as a retailer in the United States. The company also manufactures and processes food for sale in its supermarkets. It operates supermarkets in various formats. The company’s combination food and drug stores (combo stores) that operate as food stores consist of natural food and organic sections, pharmacies, general merchandise, pet centers, and perishables, such as fresh seafood and organic produce. The Kroger Co.’s multi-department stores sell general merchandise items comprising apparel, home fashion and furnishings, electronics, automotive products, toys, and fine jewelry. The company’s marketplace stores offer full-service grocery and pharmacy departments, as well as general merchandise area that includes outdoor living products, electronics, home goods, and toys. Its price impact warehouse stores offer grocery, health, and beauty care items. These stores also offer meat, dairy, baked goods, and fresh produce items. In addition, the company operates fuel centers; and convenience stores that offer limited assortment of staple food items and general merchandise, as well as sell gasoline. As of March 9, 2010, it operated 2,468 supermarket and multi-department stores under two dozen banners, including Kroger, Ralphs, Fred Meyer, Food 4 Less, King Soopers, Smith's, Fry's, Fry's Marketplace, Dillons, QFC, and City Market, of which 893 had fuel centers, as well as operated 777 convenience stores and 374 fine jewelry stores. The Kroger Co. has a strategic alliance with U.S. Bank to offer a suite of payment products. The company was founded in 1883 and is headquartered in Cincinnati, Ohio.

     

    Reason for outperform Rating:

    Kroger reported per share earnings last week of 32 cents/share in line with analysts expectations.  The stock was subsequently crushed falling 10%.  Investor's were displeased with the company's cautious outlook.  Investors had been looking for KR to signal that the significant margin pressure the industry has been undergoing was over.  Instead KR indicated that several more quarters of depressed pricing power was likely.  The company did state that it is continuing to pass through price increases on branded items.  On the positive side same-store sales increased 2.4% ex fuel.  Revenue was slightly higher than expected at 18.7 billion vs. estimates of 18.53 billion.  Kroger narrowed its per share earnings guidance to $1.65 - $1.78 vs. earlier guidance of $1.60 - $1.80.  Although it slightly reduced the top-end guidance, we see this as a positive in raising the low-end guidance.  Overall we feel that investors punished the stock too much and are basing our rating on valuation.  Safeway (NYSE:SWY), Kroger's closest competitor, trades at a forward PE of 13.5.  If Kroger's earnings come in at the high end of expectations and the stock trades at a valuation of 13.5, a price of $24.05 would be justified.  This represents 13% upside potential.  We feel that as the economy begins to improve over the next several quarters the sector will experience some PE expansion as well as improved earnings.  Pricing power will come back, it may just take a little longer than some investors were hoping.  We are patient investors.

     

    Risks

    If the economy fails to improve or we enter into a second recession, Kroger may not be able to raise prices.  This would increase margin pressure and further depress the stock.  Kroger faces stiff competition from Wal-Mart (NYSE:WMT), Safeway (SWY), and others.  The depressed job market is a negative for Kroger.  This causes consumers to buy less and trade down; possibly even shop at lower-end stores.  We feel that Kroger has more limited downside risk than others in the sector due to its already low valuation and 1.94% dividend yield.

     

    Recent News

     

    • Supermarket trade goes stale at MarketWatch (Fri, Dec 3)

    http://www.marketwatch.com/story/supermarket-trade-goes-stale-2010-12-03?siteid=yhoof

     

    • Supermarket chains Kroger, Safeway downgraded at MarketWatch (Fri, Dec 3)

    http://www.marketwatch.com/story/supermarket-chains-kroger-safeway-downgraded-2010-12-03?siteid=yhoof2

     

    • Kroger Hits Profit Estimates, but Cuts Forecast at New York Times (Fri, Dec 3)

    http://www.nytimes.com/2010/12/03/business/03kroger.html?partner=yahoofinance

     

    About Investopia
    Operated by Frank J. Constantino

    Investopia uses social media to provide open commentary and discussion on financial markets, stocks, and other derivatives.  Investopia does not provide financial advice.  Any article, rating, or other commentary should not be considered as a recommendation to trade or hold any security.  Please consult your financial professional before making any investment decision.

    Our ratings represent personal opinions and should not be the basis for investment in any security.



    Disclosure: I am Long KR.
    Dec 05 9:21 PM | Link | Comment!
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