Q3 2009 Earning Call

October 30, 2009 11:00 AM ET

Over the past few months, I have made several successful calls and have earned an 80%+ return on my simulated portfolio; not to mention, my real life portfolio. Back in March, I began buying into quality REITs that could be had for bargain-basement prices. I have continued to research more companies in the REIT sector, most recently writing about DCT Industrial Trust (DCT) in late July. I recommended buying into Discover Financial Service (DFS) under $7 in late April; it now trades near the $14 mark. I even argued that microcap boat and yacht dealer MarineMax (HZO) could be a great buy under $3.50. HZO now trades over $7.50.

Given the market’s run-up, however, my views have shifted a bit. Once we tipped over Dow 9000, I felt as if we were entering a “change of seasons” and that it was time to start shifting my portfolios a bit. Marine Max might’ve been attractive at $3.50 and Discover might’ve looked good at $7, but at the current prices, I believe risk exceeds reward potential, so they are not great buys any more. The market changes quickly and you have to stay ahead.

Equity REITs have made a strong move lately. We have expressed our doubts about the wisdom of that move (Are REITs Ahead of Themselves?), and wonder about the quality of the underlying trusts.

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• Fannie asks for cash after loss. Fannie Mae (FNM) posted a heavy Q2 loss of $14.8B (see details below), its eighth quarterly loss in a row, prompting the mortgage lender to ask the government for a $10.7B capital injection. Fannie's cumulative losses over the last two years now stand at $101.6B, and the company has drawn $44.9B from the Treasury since April. The company said "we do not expect to operate profitably in the foreseeable future. We expect that we will experience adverse financial effects" during the fight against foreclosures. Shares fell 12.7% in after hours trading. Shares -11.4% premarket (7:00 ET).
• Greenberg settles SEC charges. Hank Greenberg, former CEO and chairman of AIG (AIG), agreed to pay $15M to settle SEC charges accusing him of improper accounting transactions between 2000 and 2005. The SEC also charged former CFO Howard Smith, saying the two men 'were responsible for material misstatements' that created a 'false impression' of AIG's financial results. Smith settled with the SEC for $1.5M. (Read the SEC's statement)
• Broker admits lying in fraud case. Julian Tzolov, a former Credit Suisse (CS) broker, testified before a jury that he and former partner Eric Butler lied to clients and sent them inaccurate information to cover up risky investments. In one of the first criminal trials connected to the credit crunch, Tzolov said he and Butler told clients certain securities were backed by government-guaranteed student loans when this was not the case, and that they did so in part to receive higher commissions. Butler is on trial for fraud, and Tzolov was called as a witness after pleading guilty to securities fraud, wire fraud, conspiracy and bail jumping last month.
• NYT looking to sell Globe. The New York Times (NYT) confirmed for the first time that it has hired Goldman Sachs to help sell its Boston Globe and Worcester Telegram & Gazette newspapers, as well as their websites. In a regulatory filing, the company said the possible sale is part of a strategic restructuring in response to a heavy downturn in advertising and the migration of readers to the internet.
• RBS posts loss on bad loans. Royal Bank of Scotland (RBS) posted a loss of £1.04B in H1, falling far short of the £1.1B profit consensus, after setting aside £7.52B ($12.62B) to cover bad loans. The bank expects impairments to remain at 'elevated levels,' and "there is every sign that our financial performance over the next two years, at a group level, will be poor due to the severe economic downturn in 2008 and 2009 and consequent impact on impairments and funding costs." Shares -14% premarket (7:00 ET).
• FDIC chided for lax supervision. An agency watchdog found the FDIC failed to act in a timely manner to limit the commercial real estate losses that caused the collapse of two banks in Washington and Georgia. The watchdog's report said the FDIC could have exercised 'greater supervisory concern' after finding weaknesses in the banks' loan portfolios. (Read reports I and II (.pdf))
• Twitter falls silent. Twitter and Facebook suffered outages and delays yesterday after denial of service attacks, raising the possibility of 'a single, massively coordinated attack' on social networking sites. Both services have been restored. Google (GOOG) managed to fend off a similar attack yesterday.
• Exchanges back away from flash. The Nasdaq stock exchange and BATS exchange announced separately that they're both voluntarily ending the flash trading they started this year, effective September 1. The moves come amid an SEC investigation into the practice and ahead of a likely ban. Direct Edge, a fast growing rival that has used flash trading since 2006, continues to defend the practice.
• Morgan leaves TARP behind. Morgan Stanley (MS) paid $950M to repurchase the warrant it issued the government, bringing Morgan's total payment to the government, including dividends, to $1.268B. CEO John Mack struck a positive note, saying "we appreciate the critical role that the U.S. government played last fall in helping stabilize the banking industry and financial markets at a moment of unprecedented crisis."
• AmEx sees loan loss improvement. American Express (AXP) said write-offs tied to bad credit-card debt fell sharply for the second straight month, to 9.2% in July from 9.7% in June, and CEO Kenneth Chenault said he's seeing internal credit metrics improve for the first time in 18 months. Despite the positive improvements, analysts warned it's too soon to call a sector recovery, with many attributing the drop in charge-offs to a seasonal trend. In the specific case of American Express, Chenault was very clear that the improvements of the last two months are 'not seasonality.'
• Clunkers gets new funds. As expected, the Senate approved an additional $2B for the 'Cash for Clunkers' program. The measure passed 60-37.
• Jobless claims drop. Initial jobless claims came in at 550K, down 38K from a week ago (revised), and better than the 575K consensus. Continuing claims rose 69K to 6.31M.
• Same-store sales slide. Retailers reported monthly same-store sales yesterday, with most falling short of consensus estimates. July sales were hurt by the continued trend of shoppers cutting back and waiting for discounts, and by a later start to the back-to-school shopping season.

Earnings: Friday Before Open

• AIG (AIG): Q2 EPS of $2.57 vs. consensus of $1.67 (may not be comparable). Revenue of $29.5B (+48%) vs. $26B. Shares +3.6% premarket (7:10 ET). (PR)
• American Oriental Bioengineering (AOB): Q2 EPS of $0.17 misses by $0.01. Revenue of $71M (+21%) vs. $75M. (PR)
• ATP Oil & Gas (ATPG): Q2 EPS of -$0.10 beats by $0.09. Revenue of $81M (-58%) vs. $83M. (PR)
• Cimarex Energy Co (XEC): Q2 EPS of $0.46 vs. $0.41 consensus (may not be comparable). Revenue of $223M (-64%) vs. $219M. (PR)
• Magna International (MGA): Q2 EPS of -$1.29 misses by $0.28. Revenue of $3.7B (-45%) vs. $4.1M. (PR)
• Mirant Corp. (MIR): Q2 EPS of $1.12 vs. consensus of $0.49 (may not be comparable). Revenue of $496M vs. $546M.
• Senior Housing Properties Trust (SNH): Q2 FFO of $0.44 in-line. Revenue of $69M (+32%) vs. $68M. (PR)
• Warner Chilcott (WCRX): Q2 EPS of $0.44 beats by $0.04. Revenue of $251M (+7%) vs. $252M. (PR)

Earnings: Thursday After Close

• Alkermes (ALKS): FQ1 EPS of $0.01 beats by $0.09. Revenue of $47.5M (-41%) vs. $46.4M. (PR)
• Assured Guaranty (AGO): Q2 EPS of $0.46 beats by $0.10. Revenue of $115M (-3%). (PR)
• Beazer (BZH): FQ3 EPS of -$0.72 beats by $0.81. Revenue of $225M (-51%) vs. $226M. (PR)
• CBS (CBS): Q2 EPS of $0.08 beats by $0.01. Revenue of $3B (-11%) in-line. (PR)
• Chiquita (CQB): Q2 EPS of $1.95 beats by $1.13. Revenue of $955M (-4%) vs. $873M. (PR)
• Computer Sciences (CSC): FQ1 EPS of $0.85 beats by $0.34. Revenue of $3.9B (-12%) in-line. Raises full-year EPS guidance to $4.80-5.00 from $4.20-4.30, vs. $4.18. (PR)
• Crocs (CROX): Q2 EPS of -$0.06 beats by $0.15. Revenue of $198M (-11%) vs. $150M. Sees Q3 EPS of -$0.14 to -$0.16 vs. -$0.20. Sees Q3 sales of $150M-160M vs. $141M. (PR)
• DCT Industrial Trust (DCT): Q2 EPS of $0.12 misses by $0.01. Revenue of $60M (-3%) vs. $61M. (PR)
• Emulex (ELX): FQ4 EPS of $0.09 beats by $0.05. Revenue of $79M (-30%) vs. $78M. (PR)
• EOG Resources (EOG): Q2 EPS of $0.73 beats by $0.31. Revenue of $861M (-21%) vs. $966M. PR)
• Fannie Mae (FNM): Q2 EPS of -$2.67. Revenue of $5.6B (+41%). (.pdf)
• Hansen Natural (HANS): Q2 EPS of $0.60 in-line. Revenue of $300M (+6%) vs. $309M. (PR)
• Intrepid Potash (IPI): Q2 EPS of $0.19 misses by $0.04. Revenue of $73M (-30%) vs. $72M. (PR)
• Leap Wireless International (LEAP): Q2 EPS of -$0.89 misses by $0.59. Revenue of $597M (+26%) vs. $636M. Net customer additions of 203,000 (+19%). Churn of 4.4%. Reduces guidance on full-year net customer addition to 1.5M. (PR)
• Maxim Integrated Products (MXIM): FQ4 EPS of $0.11 beats by $0.10. Revenue of $395M (-21%) vs. $368M. Sees Q1 revenue of $415M-445M vs. $388M. (PR)
• Microchip Technology (MCHP): FQ1 EPS of $0.15 beats by $0.02. Revenue of $193M (-28%) vs. $190M. Gross margin in Q1 of 51.4%. Sees Q2 EPS of $0.18-0.20 vs. $0.17. Sees Q3 revenue of $206M-214M vs. $200M. (PR)
• Nvidia (NVDA): Q2 EPS of $0.07 beats by $0.09. Revenue of $777M (-13%) vs. $710M. Sees Q3 revenue up 5-7% over Q2. (PR)
• Pepco Holdings (POM): Q2 EPS of $0.11 misses by $0.13. Revenue of $2.1B (-18%) vs. $2.7B. (PR)
• Public Storage (PSA): Q2 FFO of $1.25 beats by $0.04. Revenue of $347M (-4%) vs. $394M. (PR)
• Rovi Corp. (ROVI): Q2 EPS of $0.38 beats by $0.10. Revenue of $120M (+64%) vs. $110M. (PR)
• Sapient (SAPE): Q2 EPS of $0.10 beats by $0.04. Revenue of $148M (-11%) vs. $144M. (PR)
• SandRidge Energy (SD): Q2 EPS of $0.25 beats by $0.12. EBITDA of $144M (-18%). (PR)
• Sequenom (SQNM): Q2 EPS of -$0.33 misses by $0.06. Revenue of $9M (-28%) vs. $8M. (PR)
• VeriSign (VRSN): Q2 EPS of $0.31 misses by $0.01. Revenue of $257M (+6%) vs. $255M. (PR)
• Westar Energy (WR): Q2 EPS of $0.35 in-line. Revenue of $468M (+4%) vs. $501M. (PR)

Today's Markets

Asian markets closed mostly down. European markets and U.S. futures are trending down too.

Back in March, I postulated the idea that several REITs on the market were potentially screaming buys. Here in July, most of the REITs have seen significant appreciations in price as the market seems to slowly being realizing it overreacted just a tad.

Despite the run-up, I still believe many REITs are strong buys and offer opportunities for “multi-bag" returns.

Q4 2008 Earnings Call

February 13, 2009 12:00 pm ET

In a recent report Standard and Poors predicted that dividend growth will slow in 2008 and probably become negative in 2009 as more industries are affected by the current economic slowdown. There were several dividend cuts and eliminations last week. Stocks that cut or eliminate their dividends tend to underperform the S&P 500 over time. It’s interesting to note that investors reacted differently about each occasion where a dividend cut or elimination occurred.

Carnival Corp (CCL) announced on October 31 that it will suspend its dividend for 2009. The company announced that the dividend suspension would result in annualized cash savings of approximately $1.3 billion. The significant liquidity provided by the dividend suspension gives the company the flexibility to fund its 2009 capacity growth without the need to access credit markets. The stock proceeded to lose 15% of its value by the end of the week, following the announcement.

Q3 2008 Earnings Call Transcript

November 5, 2008, 12:00 pm ET

Whenever we are in a bull market, investors use a trading technique called 'Buying Dividends,' which is the technique of buying stocks before the ex dividend date and selling the stock shortly after the ex date at approximately the same price, yet being entitled to the dividend. Please note: this usually only works in rising markets.

If you are interested in buying dividends, there are several stocks in several different sectors and industries to choose from. Remember that, in order to be entitled to the dividend, you have to buy the stock before the ex-dividend date, and you can't sell the stock until after the ex date. The actual dividend may not be paid for another month.

Q2 2008 Earnings Call

August 5, 2008 12:00 pm ET

DCT Industrial Trust Inc. (DCT)

Q1 2008 Earnings Call Transcript

Q4 2007 Earnings Call

February 15 2008 12:00 pm ET

All quotations are from the companies' most recent S-1 filings with links provided for each company. Source: IPOHome

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