Q3 2009 Earnings Call

October 22, 2009 10:00 am ET

• U.S. AAA rating not guaranteed. The U.S. could lose its AAA rating if it fails to reduce its deficit over the next 3-4 years, Moody's says. Steven Hess, Moody's lead analyst for the U.S., acknowledges reducing the gap won't be easy: "Raising taxes is never popular and difficult politically, so we have to see if the government can do that or cut expenditures." Earlier this year, markets were spooked after S&P cut its outlook on Britain to Negative from Stable. Meanwhile, Moody's said today European countries' rising debt won't trigger across-the-board downgrades.
• Deep pay cuts coming to TARP recipients. In a plan to be made public within the next few days, the government will order deep pay cuts at the biggest bailout recipients - Citigroup (C), Bank of America (BAC), AIG (AIG), GM, Chrysler, GMAC and Chrysler Financial. The plan targets the 25 top earners at each company, who will see their compensation decline this year by about 50%, while bonus payments will be slashed by up to 90%, to be replaced by stock that they'll be restricted from immediately selling. The plan does not address firms that didn't receive bailout funds, or that have already repaid their loans.
• South Korea's $3.9B oil buy. State-owned Korea National Oil Corp. agreed to buy Canada's Harvest Energy (HTE) for $3.9B - $1.7B for its outstanding shares and the assumption of $2.2B in debt. Shareholders will receive $9.52/share - a 37% premium to Wednesday's close. The deal is South Korea's biggest outbound cross-border deal ever in the Oil & Gas sector, and ranks seventh in global Oil & Gas sector M&A transactions in 2009. Harvest produced 53K b/d in Q2, 70% of which was crude oil and 30% was natural gas. Shares +29.1% premarket to $9.05.
• Bove drops a bomb. Rochdale Securities analyst Richard Bove sent stocks into a tailspin late Wednesday after he downgraded shares of Wells Fargo (WFC) to Sell, despite a consensus-beating Q3. Bove is concerned by the positive impact mortgage hedges have had on Wells' recent results, which "keep coming through for the company whenever it needs to bolster earnings," but are a nightmare for investors who shouldn't look at such activity as generating predictable or repeatable profits. Bove also called the portfolio Wells acquired from Wachovia 'cancerous.' WFC -5.1% yesterday.
• eBay falters on gloomy outlook. eBay (EBAY) posted Q3 earnings that exceeded expectations, but shares traded lower after-hours after its guidance gave a gloomier vision of the near future than many expected (read eBay's Q3 earnings call transcript). eBay has struggled as online shopping habits have shifted away from auctions to fixed-price purchases on sites such as Amazon.com (AMZN).
• Beige Book sees signs of growth. The Fed said most regional economies are on the mend, as home sales rebound and manufacturers restart idled operations. "Reports of gains in economic activity generally outnumber declines, but virtually every reference to improvement was qualified as either small or scattered," the Fed said in its beige book tally. The report also highlighted how heavily businesses are relying on government spending: "There were several reports that the only 'sure' business will come from government stimulus projects, although funding for such projects has been slow to materialize," it said.
• Microsoft's big day. Microsoft's much-anticipated OS upgrade, Windows 7, goes on sale today. The company hopes Windows 7 will gain more traction among retail and corporate clients than its most predecessor, Vista, which was seen as slow and clunky. Analysts say the new OS isn't likely to cause a sudden spike in PC sales, a point conceded by Microsoft CEO Steve Ballmer, who said recently IT budgets "aren't going to rise just because we shipped a new version."
• Twin deals for Twitter. Twitter inked deals to sell the rights to mine its pipeline of 'tweets' with both Google (GOOG) and Microsoft (MSFT) Wednesday, underscoring the growing importance of real time search. Neither would say how much it's paying for the rights to index the millions of daily tweets, considered to be Twitter's most valuable asset. The deals could be the first meaningful revenue for Twitter since its 2006 inception, and begin to answer the much-explored question of "where's the beef?"
• A strong Q3 for China. China's Q3 GDP came in at 8.9%, just below the 9% economists forecast. Separate reports showed industrial production and retail sales also accelerated. China's return to robust growth continues to raise the question of when policy makers will withdraw record fiscal and monetary stimulus in order to avoid another bubble.
• Galleon wind down begins. Managers of Galleon Group's $500M Asia fund are considering buying the unit, sources say. On Wednesday, Galleon told employees and investors it would wind down the firm after its founder was charged with insider trading. Unless the government intervenes, investors likely won't get their money back until Jan. 1, 2010.

Earnings: Thur. Before Open

• 3M Company (MMM): Q3 EPS of $1.37 beats by $0.20. Revenue of $6.19B (-5.6%) vs. $5.77B. Shares +1.2% premarket. (PR)
• AT&T (T): Q3 EPS of $0.54 beats by $0.04. Revenue of $30.9B (-1.3%) in-line. Wireless subscribers +2M to 81.6M. Shares +2% premarket. (PR)
• AU Optronics (AUO): Q3 EPS of $0.26 beats by $0.01. Revenue of $3.5B (+8.4%) vs. $3.21B. Operating margin 6.8%. Shares -2.3% in Taiwan. (PR)
• Black & Decker (BDK): Q3 EPS of $0.91 beats by $0.09. Revenue of $1.21B (-23%) in-line. Sees Q4 EPS of $0.68-0.78 vs. $0.50 consensus. Shares +2.2% premarket. (PR)
• Bristol-Myers (BMY): Q3 EPS of $0.52 beats by $0.01. Revenue of $5.49B (+4.4%) in-line. (PR)
• Bunge (BG): Q3 EPS of $1.62 beats by $0.15. Revenue of $11.3B (-23.6%) vs. $12B. Sees full-year EPS of $3.10-$3.50 vs. consensus of $4.69. Says fertilizer business continues to be pressured by high-cost inventory and a weak pricing environment. (PR)
• Celgene (CELG): Q3 EPS of $0.56 beats by $0.02. Revenue of $692M (+16.8%) vs. $671M. Shares +5.4% premarket. (PR)
• Check Point Software (CHKP): Q3 EPS of $0.52 beats by $0.03. Revenue of $234M (+17%) vs. $231M. (PR)
• CONSOL Energy (CNX): Q3 EPS of $0.48 misses by $0.18. Revenue of $1.09B (-6.7%) in-line. Shares -3.1% premarket. (PR)
• Cooper Industries (CBE): Q3 EPS of $0.70 beats by $0.06. Revenue of $1.29B (-25.6%) in-line. "Revenue and orders for maintenance and repair items and product lines that declined rapidly at the beginning of the economic downturn are beginning to improve, while the longer cycle products appear to have now bottomed." Shares -0.3% premarket. (PR)
• Danaher (DHR): Q3 EPS of $0.89 beats by $0.03. Revenue of $2.75B (-14.2%) in-line. (PR)
• Delta Air Lines (DAL): Q3 EPS of $0.06 beats by $0.11. Revenue of $7.57B (+32.4%) in-line. (PR)
• Diamond Offshore Drilling (DO): Q3 EPS of $2.62 beats by $0.32. Revenue of $908M (+0.9%) vs. $874M. Declares special dividend of $1.875/share. (PR)
• Dow Chemical (DOW): Q3 EPS of $0.24 beats by $0.14. Revenue of $12.05B (+6.4%) vs. $11.85B. "The economic outlook for the rest of 2009 appears to be stabilizing with strong growth in Asia Pacific, especially China, and other emerging geographies. The global economy is now on firmer footing, and, in our view, the U.S. economy is beginning a slow and tenuous recovery, with unemployment continuing to be a drag on consumer spending." (PR)
• EMC (EMC): Q3 EPS of $0.23 beats by $0.02. Revenue of $3.52B (-5.3%) vs. $3.45B. Says customers are signaling more comfort spending their IT budgets. Shares +1.5% premarket. (PR)
• Ensco International (ESV): Q3 EPS of $1.05 beats by $0.01. Revenue of $425M (-31.3%) vs. $439M. (PR)
• Entergy (ETR): Q3 EPS of $2.40 misses by $0.08. Revenue of $2.94B (-25.9%) vs. $3.9B. "We continue to experience the negative effects of the slowed economic recovery." (PR)
• Ericsson (ERIC): Q3 EPS of 0.25kr misses by 0.61kr. Revenue of 46.4Bkr (-5.7%) vs. 49.46Bkr. "Sales of network equipment declined due to lower demand in the current tougher market environment. Despite lower volumes, Network margins remain stable." Shares -8.9% premarket. (PR)
• Fifth Third Bancorp (FITB): Q3 EPS of -$0.20 beats by $0.03. Revenue of $M in-line. "The credit environment remains challenging, and we continue to aggressively work to manage risk in the portfolio." Shares -2.1% premarket. (PR)
• Goodrich (GR): Q3 EPS of $1.12 beats by $0.09. Revenue of $1.65B (-7%) in-line. (PR)
• Hershey Foods (HSY): Q3 EPS of $0.73 beats by $0.06. Revenue of $1.48B (-0.3%) vs. $1.54B. "As we look to 2010, we assume the economic environment for consumers in the U.S. and international markets will continue to be challenging." Shares +2.5% premarket. (PR)
• Huntington Bancshares (HBAN): Q3 EPS of -$0.33 misses by $0.05. Revenue of $M in-line. Shares -2.1% premarket. (PR)
• IMS Health (RX): Q3 EPS of $0.40 beats by $0.04. Revenue of $541M (-5.7%) vs. $522M. (PR)
• Janus Capital Group (JNS): Q3 EPS of $0.05 misses by $0.10. Revenue of $228M (-17.4%) vs. $225M. (PR)
• JetBlue Airways (JBLU): Q3 EPS of $0.04 misses by $0.01. Revenue of $854M (-5.3%) vs. $847M. Shares +1.2% premarket. (PR)
• Kimberly-Clark (KMB): Q3 EPS of $1.40 beats by $0.27. Revenue of $4.91B (-1.7%) in-line. Sees full-year EPS of $4.50-$4.60 vs. consensus of $4.26, citing increased cost savings, better organic sales growth and a further recovery in currency exchange rates. Shares +5.5% premarket. (PR)
• Laboratory Corp. (LH): Q3 EPS of $1.22 beats by $0.07. Revenue of $1.19B (+4.4%) in-line. (PR)
• Legg Mason (LM): FQ2 EPS of $0.30 beats by $0.11. Revenue of $660M (-31.7%) vs. $652M. (PR)
• Logitech (LOGI): FQ2 EPS of $0.11 beats by $0.06. Revenue of $498M (-25.1%) vs. $474M. Sees FQ3 revenue of $575-595M vs. $623M. Shares +7.2% in Zurich. (PR)
• McDonald's (MCD): Q3 EPS of $1.15 beats by $0.04. Revenue of $6.05B (-3.5%) in-line. Comps +3.8%, with U.S. +2.5%, Europe +5.8% and the rest +2.2%. Shares +1.3% premarket. (PR)
• Mead Johnson (MJN): Q3 EPS of $0.53 misses by $0.02. Revenue of $700M (-5.8%) vs. $737M. Shares -8.4% premarket. (PR)
• Merck (MRK): Q3 EPS of $0.90 beats by $0.08. Revenue of $6.05B (+1.8%) in-line. (PR)
• NCR (NCR): Q3 EPS of $0.19 misses by $0.05. Revenue of $1.14B (-17.7%) vs. $1.22B. Sees full-year EPS of $0.45-0.55 vs. $0.67. "The willingness of customers to invest in Q2... did not spill over into Q3. That said, we were more encouraged by the conversations we were having with our customers about Q4 and 2010." Shares -5.9% premarket. (PR)
• New York Times (NYT): Q3 EPS of $0.16 beats by $0.17. Revenue of $571M (-16.9%) vs. $562M. Shares +2.7% premarket. (PR)
• NII Holdings (NIHD): Q3 EPS of $0.69 beats by $0.14. Revenue of $1.14B (-3.5%) in-line. (PR)
• Nucor (NUE): Q3 EPS of -$0.10 beats by $0.05. Revenue of $3.12B (-58.1%) vs. $2.98B. "Our view remains that there has been little improvement in real demand and the uncertainty in our economy is still very high. We also continue to believe that real demand is in for a long, slow recovery." Shares -0.6% premarket. (PR)
• Occidental Petroleum (OXY): Q3 EPS of $1.14 beats by $0.06. Revenue of $4.1B (-41.9%) in-line. Shares +1.2% premarket. (PR)
• Old Republic International (ORI): Q3 EPS of -$0.283 misses by $0.11. Revenue of $959M (+2.4%) vs. $910M. (PR)
• Philip Morris (PM): Q3 EPS of $0.93 beats by $0.02. Revenue of $6.59B (-5.3%) vs. $6.71B. "While we experienced lower organic volume in the quarter, this was largely anticipated given our pricing actions and the on-going impact of the economic crisis on total consumption levels." Shares +0.75% premarket. (PR)
• PNC Financial Services (PNC): Q3 EPS of $1.00 beats by $0.69. Revenue of $4.05B (+144.7%) vs. $3.8B. (PR)
• Potash (POT): Q3 EPS of $0.82 beats by $0.01. Revenue of $1.1B (-64.1%) in-line. Sees Q4 EPS of $0.65-0.85 vs. consensus of $1.18. "The uncertainty among fertilizer buyers has lasted far longer than we anticipated, but cannot continue indefinitely." Shares -2.9% premarket. (PR)
• ProLogis (PLD): Q3 EPS of $0.21 beats by $0.02. Revenue of $274M (-72.3%) vs. $228M. Shares +2.4% premarket. (PR)
• Raytheon (RTN): Q3 EPS of $1.25 beats by $0.09. Revenue of $6.21B (+5.8%) in-line. Shares +0.7% premarket. (PR)
• Reliance Steel & Aluminum (RS): Q3 EPS of $0.57 beats by $0.11. Revenue of $1.24B (-57.1%) vs. $1.34B. Declines Q4 guidance. "We believe that demand is fairly stable at low levels." (PR)
• Reynolds American (RAI): Q3 EPS of $1.24 beats by $0.07. Revenue of $2.15B (-5.3%) in-line. Shares -0.1% premarket. (PR)
• Ryder System (R): Q3 EPS of $0.50 beats by $0.05. Revenue of $1.26B (-20.3%) in-line. Anticipates the weak overall economic environment and protracted freight recession will continue to impact its performance. (PR)
• Schering-Plough (SGP): Q3 EPS of $0.40 in-line. Revenue of $4.5B (-1.7%) in-line. (PR)
• Starwood Hotels (HOT): Q3 EPS of $0.14 beats by $0.04. Revenue of $1.22B (-20.7%) vs. $1.16B. "It is very difficult at this time to provide any definitive point of view on 2010. While business conditions have clearly stabilized, it is very hard to forecast the pace of recovery, especially rate." (PR)
• SunTrust Banks (STI): Q3 EPS of -$0.60 misses by $0.05. Revenue of $1.94B (-21%) vs. $2.11B. Earnings include $131M writedown on debt. Allowance for loan losses +128M to $3.02B. (PR)
• Sybase (SY): Q3 EPS of $0.63 beats by $0.06. Revenue of $293M (+3.3%) vs. $281M. Shares +2.2% premarket. (PR)
• TASER International (TASR): Q3 EPS of -$0.05 misses by $0.02. Revenue of $26.8M vs. $20.9M. Shares -1.2% premarket. (PR)
• Temple-Inland (TIN): Q3 EPS of $0.24 beats by $0.06. Revenue of $885M (-9.3%) vs. $876M. "As we look forward, economic conditions, while still uncertain, have stabilized and appear to be on a slow path to recovery." (PR)
• Terra Industries (TRA): Q3 EPS of $0.45 misses by $0.07. Revenue of $347M (-56.1%) vs. $356M. Shares +0.8% premarket. (PR)
• Thermo Fisher (TMO): Q3 EPS of $0.78 beats by $0.02. Revenue of $2.53B (-2%) in-line. (PR)
• Travellers (TRV): Q3 EPS of $1.61 beats by $0.30. Revenue of $6.3B vs. $6B. Sees full-year EPS of $5.30-5.50 vs. consensus of $5.28. Raises quarterly dividend to $0.33 from $0.30. Authorizes an additional $6B share buyback. "We remain cautious about the magnitude of rate gains that are achievable in the near term given general economic conditions." (PR)
• Union Pacific (UNP): Q3 EPS of $1.02 beats by $0.02. Revenue of $3.67B (-24.2%) in-line. "Business volumes seem to have stabilized, but at very low levels." (PR)
• UPS (UPS): Q3 EPS of $0.55 beats by $0.03. Revenue of $11.15B in-line. Volume of 927M packages, -2.4%. "I'm encouraged by the signs of economic recovery that are becoming apparent, although we still have a long way to go," CEO Scott Davis said. Shares -1% premarket. (PR)
• US Airways (LCC): Q3 EPS of -$0.83 beats by $0.11. Revenue of $2.72B, including $110 from a la carte revenue initiatives, in-line. Shares +3.4% premarket. (PR)
• Xerox (XRX): Q3 EPS of $0.14 beats by $0.02. Revenue of $3.67B (-15.9%) in-line. Sees full-year EPS of $0.55-0.57 vs. consensus of $0.53. (8-K)
• Zimmer (ZMH): Q3 EPS of $0.88 beats by $0.02. Revenue of $976M (+2.5%) vs. $954M. Shares +1.8% premarket. (PR)

Earnings: Wed. After Close

• Alliance Data Systems (ADS): Q3 EPS of $0.83 misses by $0.51. Revenue of $483M (-5%) vs. $500M. Expects 2010 EPS of $6.00 vs. $6.10. Shares -6.3% AH. (PR)
• Amgen (AMGN): Q3 EPS of $1.49 beats by $0.22. Revenue of $3.8B (-2%) in-line. Raises full-year EPS guidance to $4.90-5.05 from $4.80-4.95, vs. $4.88. Shares -3% AH. (PR)
• Ameriprise Financial (AMP): Q3 EPS of $1.03 beats by $0.39. Revenue of $2B (+20%) vs. $2.1B. Debt-to-total-capital ratio of 18.7%. Shares +1.6% AH. (PR)
• Citrix Systems (CTXS): Q3 EPS of $0.43 beats by $0.02. Revenue of $401M (+1%) vs. $400M. Sees full-year revenue up 8-9% sequentially to $1.73B. Shares -3.6% AH. (PR)
• Covanta (CVA): Q3 EPS of $0.28 beats by $0.04. Revenue of $409M (-7%) vs. $388M. Shares +0.3% AH. (PR)
• eBay (EBAY): Q3 EPS of $0.38 beats by $0.01. Revenue of $2.2B (+6%) vs. $2.1B. Shares -4.9% AH. (PR)
• Equifax (EFX): Q3 EPS of $0.57 beats by $0.02. Revenue of $452M (-7%) in-line. Shares -3.2% AH. (PR)
• F5 Networks (FFIV): FQ4 EPS of $0.50 beats by $0.09. Revenue of $175M (+2%) vs. $164M. Shares +8.1% AH. (PR)
• Fidelity National Information Services (FIS): Q3 EPS of $0.46 misses by $0.01. Revenue of $851M (-4%) vs. $870M. Shares -0.4% AH. (PR)
• Fidelity National Financial (FNF): Q3 EPS of $0.32 misses by $0.02. Revenue of $1.5B (+52%) in-line. Shares +0.2% AH. (PR)
• Intersil (ISIL): Q3 EPS of $0.10 in-line. Revenue of $168M (-23%) vs. $162M. Sees Q4 EPS of $0.14-0.17 vs. $0.13. Shares -2.8% AH. (PR)
• Knight Transportation (KNX): Q3 EPS of $0.16 in-line. Revenue of $173M (-17%) vs. $165M. Shares +1.2% AH. (PR)
• Lam Research (LRCX): FQ1 EPS of $0.03 beats by $0.11. Revenue of $319M (+46%) vs. $288M. Shares +3.2% AH. (PR)
• Newfield Exploration (NFX): Q3 EPS of $1.58 beats by $0.24. Revenue of $375M (-45%) vs. $536M. Shares -0.1% AH. (PR)
• Noble (NE): Q3 EPS of $1.63 beats by $0.10. Revenue of $906M (+5%) in-line. Shares +1.1% AH. (PR)
• Novellus Systems (NVLS): Q3 EPS of -$0.03 beats by $0.01. Revenue of $177M (-29%) vs. $172M. Shares +0.9% AH. (PR)
• OSI Pharmaceuticals (OSIP): Q3 EPS of $0.81 beats by $0.49. Revenue of $111M (+18%) vs. $106M. Shares -1% AH. (PR)
• Pactiv (PTV): Q3 EPS of $0.54 beats by $0.03. Revenue of $839M (-9%) vs. $858M. Shares -0.2% AH. (PR)
• QLogic (QLGC): FQ2 EPS of $0.21 beats by $0.03. Revenue of $132M (-23%) vs. $126M. Shares -2.6% AH. (PR)
• Range Resources (RRC): Q3 EPS of $0.26 beats by $0.04. Revenue of $204M (-67%) vs. $261M. Shares -0.2% AH. (PR)
• Skechers (SKX): Q3 EPS of $0.52 beats by $0.17. Revenue of $405M (+1%) vs. $385M. Shares +5.2% AH. (PR)
• Terex (TEX): Q3 EPS of -$0.95 misses by $0.61. Revenue of $1.2B (-51%) vs. $1.3B. Shares -10.5% AH. (PR)
• TriQuint Semiconductor (TQNT): Q3 EPS of $0.10 in-line. Revenue of $173M (-7%) vs. $178M. Shares -19.9% AH. (PR)
• VMware (VMW): Q3 EPS of $0.24 beats by $0.04. Revenue of $490M (+4%) vs. $474M. Sees Q4 revenue of v$540M-560M vs. $523M. Shares +1.6% AH. (PR)

Today's Markets

Asian and European markets followed the U.S. into the red Thursday. Stock futures are marginally lower.

Sell-Side Loves Everything and Everybody

I Love you Man!

Keeping an eye on the big movers in the market does not help investors determine which stocks are poised to continue their upward or downward movement. To help our devoted readers identify the movers that still look fundamentally sound and those to walk away from, ValueExpectations.com has scored each of the top 10 Hot and Cold stocks of the month based on Valuation Attractiveness and Economic Margin Change.

If an investor should consider adding any of these stocks as a holding for a portfolio, one should look for companies with attractive valuations and expected improvements in a company’s Economic Margin (EM) which essentially is a measure of a company’s true economic profitability. As an additional level of analysis, we also recommend understanding the embedded expectations that are priced into each of these stocks.

I'm getting more and more company in worrying about a market peak. If you, like me, are

1. Interested in green investing, and

Looks like today is natural gas and coal stock day; I like the latter sector more, so I'll highlight some names there. Interesting behavior considering China is re-opening mines, [Aug 24, 2009: Bloomberg - Coal Rally Ending as China Shuns Imports, Opens Mines] thus reducing international demand, but with both natgas AND coal moving together, it is basically an investment call on the strength of the domestic economy (natural gas use is especially dependent on the local economy). Since you can see identical behavior, I assume some algorithm HAL9000 behavior i.e. if retail sales > X variable, buy coal and natural gas stocks.

Breakouts all over...

This is the second quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out our series preface on hedge fund 13F filings.

Next up is T. Boone Pickens' hedge fund, BP Capital Management. He runs an energy-centric set of funds out of Dallas, Texas and is a big advocate of Peak Oil Theory. On the positive side of things, he has landed himself on Forbes' billionaire list. Yet on the negative side of things, he also graced the list of top hedge fund manager losers of 2008.

This is the second quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out our series preface on hedge fund 13F filings.

Next up is Philip Falcone's Harbinger Capital Partners. Harbinger is a $6 billion hedge fund that started back in 2000 with $25 million in seed capital from Harbert Management. Recently, Falcone bought out Harbert to gain ownership of Harbinger. And, he is 'commemorating' his purchase by returning to his roots and launching a new Harbinger hedge fund focused on distressed assets. Harbinger returned 117% in 2007 when Falcone notoriously shorted subprime mortgages. His investment style focuses on intensive research on credit, bankruptcies and proxy fights. While he obviously holds equity positions, Falcone definitely is well versed in different asset classes.

BP Capital Management’s second quarter SEC filing shows that the hedge fund manager is focusing solely on energy companies these days. While the firm’s founder and Chief Investment Officer T. Boone Pickens has been publically supporting clean energy technologies, his stock portfolio suggests that he is still a strong believer in dirty energy. After selling-out of its basic materials sector holdings, the fund now holds 100% of its portfolio in the energy sector, specifically oil and natural gas companies.

BP Capital’s top holding, offshore oil drilling and exploration company Transocean Inc (RIG), was trimmed over the quarter by 125,000 shares / $9.2mm. Even after the share sales, the company still accounts for 22.6% of the hedge fund’s portfolio, representing $26.7mm or 360,000 shares. The firm’s other top 5 positions included:

At the rate things are going, the best way for investors to play the upcoming brawl in the U.S. Senate over cap-and-trade may be to buy shares of the very companies this carbon-busting legislation is intended to squeeze out of business.

We’re talking the big coal-mining companies: Peabody Energy Corp. (BTU), Arch Coal Inc. (ACI), Massey Energy Co. (MEE) and CONSOL Energy Inc. (CNX).

Having said that, it is often instructive to take a look at the changes made during Q2 to get a sense of what themes managers are focusing on. Of course, we cannot see their short portfolios so for many of these managers you really only get half the story. But on the long side, having the data from Q4 2008, Q1 2009 and Q2 2009 all together, it is sometimes possible to re-engineer a certain manager’s strategy.

After yesterday's strong showing, the market pushed higher today. In my article last night, I said,

"I think we'll need to see the commodity sectors push higher in order for the broader market to break above the recent resistance levels."

Q2 Earnings Call

July 30, 2009 10.00 AM ET

• Reactions to Microhoo. Reactions to the Microsoft (MSFT) and Yahoo (YHOO) search deal announced yesterday have been mixed. Some investors wondered why Yahoo agreed to a deal with no upfront fee, after previously saying any deal would be conditioned on 'a boatload of cash,' and doubts about the deal's benefits to Yahoo helped pull shares down 12% (Microsoft closed up 1.4%, and the deal may mark an important turning point for CEO Steve Ballmer). Still, others felt "dropping the dead weight of search isn’t a horrible idea" for a company that has no realistic chance of beating Google (GOOG). The deal could face antitrust concerns but will likely be approved.
• TARP exit for AmEx. American Express (AXP) has officially exited TARP after repurchasing warrants from the government for $340M. The company said the warrant buyback, along with $74.4M of dividend payments it made, provided taxpayers with an annualized 26% return. Analysts noted the repurchase price was in line with the $1.1B Goldman Sachs (GS) paid, indicating the Treasury has indeed taken a tougher negotiating stance on the warrant purchases in light of congressional pressure.
• FDIC to break up banks. In an effort to entice more buyers, the FDIC is poised to start breaking up failed banks into good and bad pieces. The goal is to sell the most distressed parts of failed banks to private equity firms and other investors that are willing to take a larger risk on bad assets. The 'good' pieces of failed banks, including deposits and branches, could then be sold to traditional banks.
• Sanofi buys out Merck's JV stake. Sanofi-Aventis (SNY) agreed to buy Merck's (MRK) half of their joint Merial animal-health venture for $4B in cash, and said the companies may work together again in the future to form the world’s largest maker of animal treatments. Sanofi and Merck had collaborated on Merial for over ten years, building it into a company with $2.6B in annual sales. The deal should help Merck allay antitrust concerns over its proposed purchase of Schering-Plough (SGP). Premarket: SNY -0.9% (7:00 ET).
• Mortgage fraud probe includes Goldman, Deutsche. A Senate panel reportedly subpoenaed financial firms including Goldman Sachs (GS) and Deutsche Bank (DB) in search of evidence of mortgage fraud during last year's market meltdown. The probe is focused on whether bankers had private doubts about the financial soundness of the mortgage-related securities they were publicly promoting. Washington Mutual, now largely owned by JPMorgan Chase (JPM), may also have been among the firms that received a subpoena.
• Citi advances asset sales. Citigroup (C) is 'moving extremely fast' on asset sales, said CEO Vikram Pandit. Citigroup announced today it had agreed to sell its stake in a Japanese asset management unit to Sumitomo Trust & Banking, Japan’s fifth-largest bank, for ¥112.4B ($1.18B).
• New help for homeowners. The White House is planning to announce new guidelines today to help homeowners struggling with Federal Housing Administration-insured mortgages. The guidelines will narrow the gap between the FHA's mortgage-modification program and the White House's foreclosure-prevention plan, and will "offer borrowers an opportunity to stay in their homes, make payments that are manageable and defer [payment of] the money owed to a later time when, hopefully, home values have improved."
• Fidelity signs IPO pact with Deutsche. Fidelity Investments struck a deal with Deutsche Bank (DB) allowing Fidelity's individual investors to participate in initial public offerings underwritten by Deutsche as of this week. Fidelity reached a similar deal last month with private equity group Kohlberg Kravis Roberts, but the Deutsche deal carries more weight because Deutsche is one of the 10 busiest underwriters of stock offerings in the U.S. For Deutsche, access to Fidelity's customers will broaden the range of IPOs it can land.
• Beige Book sees recession moderating. The Federal Reserve's Beige Book was released yesterday, and noted the recession seems to be growing less severe. Some regions said the downturn's pace has moderated, and others reported that activity is stabilizing. Retail sales are still sluggish, and wages and benefits are steady or falling in most districts. (Read the Fed's Beige Book summary)
• China seeks to reassure on monetary policy. In a volatile day of trading, Chinese stocks managed to close up 1.7% after China's central bank released a statement aimed at calming jittery investors. After the Chinese stock market fell 5% on Wednesday, its largest daily drop in eight months, the central bank pledged to maintain loose monetary policy in order to support an economic recovery and to ensure sustainable credit growth, seemingly without relying on a strict, central bank-directed quota system used in the past.
• Boeing gets squeezed. British Airways (BAIRY.PK) is pressuring Boeing (BA) to renegotiate installment payments on its 787 Dreamliner orders. Predelivery payments can total tens of millions of dollars per jetliner, and as airlines find it increasingly difficult to bankroll the payments, plane makers like Boeing are getting squeezed. In other bad news for Boeing, a contractor said yesterday that the Dreamliner's braking system is still incomplete because of a dispute over who should pay for the work, and S&P downgraded Boeing's credit rating by one notch over concerns of additional production cuts due to airline order deferrals and cancellations.
• PennyMac a few pennies short on IPO. PennyMac Mortgage Investment Trust, the distressed-mortgage investment company run by former Countrywide No. 2 Stanford Kurland and 10 other former Countrywide officials, raised $320M in its initial public offering, $80M less than planned. The company sold 16M shares at $20 each.

Earnings: Thursday Before Open

• AmerisourceBergen (ABC): FQ3 EPS of $0.42 beats by $0.03. Revenue of $18.39B (+2.2%) vs. $18.11B. (PR)
• Aon (AOC): Q2 EPS of $0.76 beats by $0.02. Revenue of $1.9B (-4%) in-line. (PR)
• Art Technology Group (ARTG): Q2 EPS of $0.06 beats by $0.02. Revenue of $44M (+6%) in-line. Shares +3.2% premarket (8:20 ET). (PR)
• AstraZeneca (AZN): Q2 EPS of $1.64 beats by $0.24. Revenue of $8B (+0%) vs. $7.8B. Shares +3.5% premarket (6:40 ET). (AstraZeneca's press release (.pdf))
• Automatic Data Processing (ADP): FQ4 EPS of $0.45 in-line. Revenue of $2.1B (-4.5%) in-line. Issues downside guidance for FY '10, sees EPS of $2.29-2.39 vs. $2.44 consensus, sees revenue down 1-4%, or to roughly $8.51-8.78B, vs. $8.94B consensus. (PR)
• Avon (AVP): Q2 EPS of $0.38 beats by $0.04. Revenue of $2.47B (-9.7%) in-line. (PR)
• Barrick Gold (ABX): Q2 EPS of $0.49 beats by $0.11. Revenue of $2B (+3%) vs. $1.9B. Shares +3.5% premarket (8:10 ET). (PR)
• Becton, Dickinson and Co. (BDX): FQ3 EPS of $1.30 beats by $0.06. Revenue of $1.8B (-2%) in-line. (PR)
• BioCryst Pharmaceuticals (BCRX): Q2 EPS of -$0.23 beats by $0.02. Revenue of $4.8M (+80%) vs. $4.1M. R&D expenses decreased to $11.2M from $13.4M a year ago. (PR)
• CIGNA (CI): Q2 EPS of $1.14 beats by $0.18. Revenue of $4.5B (-8%) vs. $4.8B. (PR)
• Cincinnati Financial (CINF): Q2 EPS of -$0.03 misses by $0.21. Revenue of $874M (-5%) vs. $912M. (PR)
• CMS Energy (CMS): Q2 EPS of $0.26 misses by $0.02. Reaffirms guidance for FY '09, sees EPS of $1.25 vs. $1.27 consensus. (PR)
• Colgate-Palmolive Company (CL): Q2 EPS of $1.07 beats by $0.02. Revenue of $3.75B (-5.5%) in-line. Gross margin increased 2 points to 58.8%, driven by easing raw and packaging material costs, and continued benefit from higher prices already implemented and its ongoing aggressive savings programs. (PR)
• CONSOL Energy (CNX): Q2 EPS of $0.62 misses by $0.19. Revenue of $1.1B (-12%) in-line. (PR)
• Covidien (COV): FQ3 EPS of $0.74 beats by $0.08. Revenue of $2.5B (-3%) in-line. (PR)
• Cummins (CMI): Q2 EPS of $0.30 beats by $0.04. Revenue of $24.3B (+525%) vs. $2.5B. (PR)
• Digital Realty Trust (DLR): Q2 FFO of $0.71 in-line. Revenue of $155M (+25.2%) vs. $161M. (PR)
• Dow Chemical (DOW): Q2 EPS of $0.05 beats by $0.14. Revenue of $11.3B (-40%) vs. $13B. (PR)
• Eastman Kodak (EK): Q2 EPS of -$0.71 misses by $0.34. Revenue of $1.77B (-28.9%) vs. $1.83B. Sees loss from continuing ops at the low end of its previous $200-400M range. Shares -0.9% premarket (8:00 ET). (PR)
• Endo Pharmaceuticals (ENDP): Q2 EPS of $0.73 beats by $0.06. Revenue of $373M (+22%) vs. $358M. (PR)
• ExxonMobil (XOM): Q2 EPS of $0.84 misses by $0.18. Revenue of $74.46B (-46.1%) vs. $71.29M. Production was down 3%. Lower margins reduced earnings by $1B. Shares -1.8% premarket (8:30 ET). (PR (.pdf))
• GrafTech International Ltd (GTI): Q2 EPS of $0.12 beats by $0.08. Revenue of $158M (-51%) vs. $143M. (PR)
• International Paper (IP): Q2 EPS of $0.20 beats by $0.20. Revenue of $5.8B (-0.1%) in-line. (PR)
• Iron Mountain (IRM): Q2 EPS of $0.25 beats by $0.02. Revenue of $746M (-3%) vs. $741M. (PR)
• KBR Inc. (KBR): Q2 EPS of $0.42 beats by $0.01. Revenue of $3.1B (+17%) vs. $2.9B. (PR)
• Kimco Realty (KIM): Q2 EPS of $0.31 misses by $0.01. Revenue of $189M (+3%) in-line. (PR)
• Mack-Cali Realty (CLI): Q2 EPS of $0.87 beats by $0.06. Revenue of $173M (-3%) vs. $167M.
• MasterCard (MA): Q2 EPS of $2.67 beats by $0.25. Revenue of $1.28B (+2.7%) in-line. Net revenue was up 7% on a constant currency basis. Gross dollar volume was down 0.6%; purchase volume was down 0.7%. Shares +7.2% premarket (8:30 ET). (PR)
• Motorola (MOT): Q2 EPS of -$0.01 beats by $0.03. Revenue of $5.5B (-32%) vs. $5.6B. Issues downside guidance for Q4 (Dec), sees EPS of -$0.01 to $0.01 vs. $0.05 consensus. Shares +7.3% premarket (7:45 ET). (PR)
• Mylan (MYL): Q2 EPS of $0.32 beats by $0.02. Revenue of $1.3B (+5%) vs. $1.2B. (PR)
• Newell Rubbermaid (NWL): Q2 EPS of $0.47 beats by $0.12. Revenue of $1.5B (-18%) in-line. (PR)
• Noble Energy (NBL): Q2 EPS of $0.66 beats by $0.11. Revenue of $491M (-59%) vs. $588M. (PR)
• NRG Energy (NRG): Q2 EPS of $1.56 vs. consensus of $0.74 (may not be comparable). Revenue of $2.2B (+70%) vs. $2.1B. (PR)
• NYSE Euronext (NYX): Q2 EPS of $0.51 beats by $0.06. Revenue of $1.1B (+9.5%) in-line. (PR)
• OfficeMax (OMX): Q2 EPS of $0.04 beats by $0.03. Revenue of $1.66B (-16.5%) in-line. "Given the projected weak economic climate and our anticipation of a soft Back-to-School season, OfficeMax remains very cautious in its expectations for the second half of 2009." (PR)
• Oshkosh Truck (OSK): FQ3 EPS of -$0.30 misses by $0.12. Revenue of $1.23B (-36.1%) vs. $1.38B. "For Q4, we expect solid performance from our defense and fire & emergency segments, while we expect that our access equipment and commercial segments will both continue to face tough market conditions." (PR)
• Parker-Hannifin (PH): FQ4 EPS of $0.31 beats by $0.09. Revenue of $2.2B (-34%) in-line. Shares -1% premarket (7:50 ET). (PR)
• Patterson-UTI Energy (PTEN): Q2 EPS of -$0.12 in-line. Revenue of $161M (-69%) vs. $167M. (PR)
• Regal Entertainment Group (RGC): Q2 EPS of $0.26 misses by $0.03. Revenue of $789M (+17%) vs. $769M. (PR)
• Rockwell Collins (COL): FQ3 EPS of $0.91 beats by $0.01. Revenue of $1.1B (-9%) in-line. (PR)
• Royal Dutch Shell (RDS.A): Q2 EPS of $0.62 vs. consensus of $0.93 (may not be comparable). Revenue of $63.9B (-51%) vs. $60.5B. Shares -0.65% premarket (6:50 ET). (PR)
• Sally Beauty (SBH): FQ3 EPS of $0.16 in-line. Revenue of $673M (-0.5%) vs. $684M. (PR)
• Sony (SNE): FQ1 net loss of ¥37.1B ($390M) vs. consensus of -¥110B and vs. a net profit of ¥35B a year ago. Still sees full-year loss of ¥120B. Revenue fell 19% to ¥1.6T. Shares +7.2% premarket (8:10 ET). (DJ)
• Spirit AeroSystems (SPR): Q2 EPS of $0.61 beats by $0.02. Revenue of $1.1B (-0.2%) in-line. Shares +2.3% premarket (8:00 ET). (PR)
• Taiwan Semiconductor (TSM): Q2 EPS of $0.14 beats by $0.01. Revenue of $2.2B (-23%) in-line. (PR)
• Travelers (TRV): Q2 EPS of $1.26 misses by $0.02. Revenue of $6.2B (-2%) in-line. (PR)
• Tyco International (TYC): FQ3 EPS of $0.58 beats by $0.13. Revenue of $4.2B (+0.6%) vs. $4.3B. (PR)
• Ventas (VTR): Q2 FFO of $0.68 beats by $0.06. "Our high-quality, diversified healthcare and seniors housing assets are performing very well due to demographic and need-driven demand." (PR)
• Waste Management (WMI): Q2 EPS of $0.52 misses by $0.02. Revenue of $2.95B (-15.5%) vs. $3B. Company is changing its ticker symbol to WM as of August 5, 2009. Issues downside guidance for FY '09, sees EPS of $1.95-1.99 vs. $2.02 consensus. (PR)
• Xcel Energy (XEL): Q2 EPS of $0.25 in-line. Revenue of $2B (-23%) vs. $2.6B. (PR)

Earnings: Wednesday After Close

• AFLAC (AFL): Q2 EPS of $1.20 beats by $0.06. Revenue of $4.3B (flat) vs. $4.7B. Announced planned acquisition of Continental American for $100M. (PR)
• Agnico-Eagle Mines (AEM): Q2 EPS of $0.01 misses by $0.11. Revenue of $139M (+58%) vs. $126M. EPS includes noncash currency loss of $0.12/share and stock option expense of $0.03/share. (PR)

• Akamai Technologies (AKAM): Q2 EPS of $0.40 misses by $0.01. Revenue of $205M (-2.7%) vs. $211M. (PR)

As oil sold off over 6% Tuesday, I was searching for some companies to buy on the dip. I decided to look at opening the position with the buy/write option strategy, as this would give me a return if oil rallies, as well as protect my position to the downside if oil continued to slide.

As recently stated on OptionMaestro.com, I believed oil would peak in early to mid July. However if we keep hearing of these "green shoots" and the stock market continues to rally, I believe oil could continue to rally as well, and as late as October in my opinion. I don't think $75 a barrel oil is out of the question, especially on the back of a weak dollar.

This is the 1st Quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings series preface.

Harbinger Capital Partners is a $6 billion firm ran by Philip Falcone. Harbinger was started in 2000 with seed capital from Harbert Management ($25 million). We've learned that Falcone is buying out Harbert to be the owner of the firm. Falcone made a name for himself in 2007 when he started shorting subprime mortgages and returned 117%. He focuses on intensive credit research, on bankruptcies and proxy fights, and was previously involved with high yield debt trading. Lately, he's been focused on equities it seems, but Harbinger's new fund will redirect his focus back to his roots.

This is the 1st Quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings series preface.

Next up is Soros Fund Management ran by George Soros. Soros (who photographs extremely well by the way) is famous for his stellar returns with partner Jim Rogers when they ran their Quantum fund. (We just covered Jim Rogers' portfolio today too). Now, he has carried his investment style over to his own firm. Whether it be equities, bonds, currencies, debt, or commodities, Soros is more of a global macro player, seeking investments in whatever market he can gain an edge. So, keep in mind that these equity positions only represent a portion of the fund's overall holdings. Soros is not required to disclose holdings outside of equities, notes, and stock options. 2008 was an interesting time to be investing, to say the least. Soros detailed his thoughts about his portfolio from 2008 and it makes for a good read. His fund finished 2008 up 8% as noted in our hedge fund year end performances post. His success in 2008 came from making correct bets on the U.S. dollar and betting that short term interest rates in the U.K. would decline. Interestingly enough, Soros was down for much of the year, until he fought his way back with overtrading.

Soros is good to track because of his excellent macro sense and formidable track record as an investor. His thoughts on the current financial landscape are detailed in his latest book, The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means. Soros sees a vast consolidation in the hedge fund space in the near future, as we noted when we recently checked in on Quantum Fund ex-partners Jim Rogers & George Soros. If you want to get a better sense as to how Soros formulates his investment theses, we highly recommend reading his first book, The Alchemy of Finance. This book is a staple in our recommended reading list and after you read it, you'll understand why.

This is the 1st Quarter 2009 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings series preface.

Next up, we have BP Capital. With all the commotion surrounding energy these days, it never hurts to track an energy focused hedge fund run by none other than Boone Pickens. If you are unfamiliar with Pickens, he is an energy maverick and his fund returned 300% in 2005. He is a big advocate of Peak Oil Theory and runs an energy-centric hedge fund based in Dallas, Texas. Although he typically holds numerous positions in oil, he is also big on alternative energy (except ethanol).

Sell-Side Stays Bullish for 13^th Week in a Row…but Still Continues Frugal Ways!