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Steve Birenberg, CFA
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Steve Birenberg is founder and President of Northlake Capital Management, LLC. Northlake specializes in managing portfolios for high net worth individuals using a unique strategy combining monthly ETF rotation based on major market themes supplemented by carefully selected media and telecom... More
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  • AT&T Lagging

    AT&T has been lagging a bit the last few days, especially today.  Telecom in general has had a tough time.  I think worries over wireless competition amid slowing subscirber growth and tight consumer budgets is probably an issue.  For AT&T in particular, there is also the threat of a strike.  A contract with over 100,000 workers expired on Saturday night.  The bulk of the workers are in the wireline business where long-term secular decline is underway.  The company is likely to take a hard line given the secular issues so there is probalby some speculation that a strike is coming as no deal has been reached.  The strike will problaby worry analysts and investors who (1) anticipate an uptick in churn of wireless and wireline subs, and (2) fear loss of momentum of wireless sales.  The fact that cyclcial issues are already pressuring demand exacerbates the potential problem.  I think there is little to worry about from the strike and that AT&T will catch up to the market.  Assuming a decent market, I see the shares in the low $30s in the next three to six months.  With a dividend yield of over 5%, AT&T remains an attractive investment with offensive and defensive characteristics.

    Tags: T, VZ, telecom
    Apr 08 1:17 PM | Link | Comment!
  • Monsters vs. Aliens Not Enough for Dreamworks

    I've written catuious commentary since Monsters vs. Aliens opened to $59 million in North America, in line with analyst estimates.  The second weekend saw a drop of 45%, which is on the high side.  The film is tracking close to Ice Age 2 over the past week but is $10 million behind overall.  Ice Age 2 did $195 million so a figure around $180 million for MvA seems like a plausible estimate.  This is a decent figure but is not enough to drive DWA shares higher.

    Where the shortfall may be higher is in international box office.  Opening weekends around the globe are well behind Kung Fu Panda and Madagascar 2, andin the few markets such as Russia, where the film has been open for at least two weekends, the grosses look signficantly behind KFP and Mad 2.  KFP did $416 million outside of North America.  Madgascar 2 did $414 million abroad.  It looks to me like MvA will fall far short of these two films, potentially leaivng the global gross at less than $500 million.  For DWA shares, that is a disappointing figure.

    DWA was downgraded earlier this week by Rich Greenfield of Pali Research on concerns about the international numbers.  Rich also asked a good question: will the dominance of the 3-D version of the film hurt DVD sales since 3-D is not available in the home?  This is a critical question as DVD sales, even at recent lower tie ratios (ratio of DVD sales to box office), are the driver of EPS.

    I think DWA shares are without a catalyst for the next six months with risk to the downside if MvA box office continues to lag Wall Street expectations.  Downside risk exists to mid-teens if earnings fall to current low end estimates. In the very near-term, expect more cautious comments from analysts on the international box office numbers.

    Tags: DWA, media, movies
    Apr 08 10:12 AM | Link | Comment!
  • Emerson Bearish on Industrial Economy

    I am listening to EMR's 2009 guidance call.  The company lowered EPS guidance today but not below analyst estimates.  Questions concern why EMR is able to sustain margins and free cash flow so well in the face of double digit revenue declines.  On margins company is saying that worst hit comes early when production schedules take unexpected cuts.  Working through this negative operating leverage now.  On cash flow, it is just another move by this well managed company to bleed working capital.

    Biggest takeaway for me is CEO David Farr stating that industrial biz is "in freefall" with no signs of stabilization.  Expect downward trend to remain in place until late 2010 (for EMR that would be summer 2010 due to September fiscal year).  Consumer biz, which is not large for EMR, is showing signs of stabilizing.

    Tags: EMR, industrials
    Apr 07 1:34 PM | Link | Comment!
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