• Liberty Global pays €3.5B for Germany's Unitymedia. Liberty Global (LBTYA) agreed to acquire Germany's #2 cable operator, Unitymedia, from its private-equity owners BC Partners and Apollo Management for a total of €3.5B including debt. Liberty said it's paying 7.4x 2010e Ebitda to acquire Unity, which will complement its "existing European footprint, and has significant untapped growth potential in one of the fastest-growing cable markets in Europe." Unity's competitors include Deutsche Telekom (DT) and Sky Deutschland (NWS). Liberty's global cable footprint including Unitymedia will exceed 40M homes.
• BA, Iberia to merge. British Airways (BAIRY.PK) and Iberia (IBRLF.PK) agreed to a complex, $7B "merger of equals." BA shareholders will own 55% of the new airline, which will be the world's third-biggest by revenue. Named TopCo, it will be led by BA CEO Willie Walsh, registered in Madrid, house its main offices in London, and will not be subject to U.K. takeover laws. The pair estimate €400M in synergies by the end of year-five, and expect to close the deal in late 2010. The merger will meld BA's web of U.S. routes with Iberia's Latin America services, extending its leading trans-Atlantic position and consolidating its #3 status in Europe. Shares of both were up 3-5% in early trading.
• Europe returns to growth, at a canter. The euro zone returned to growth in Q3, but quarterly GDP came in at a weaker than expected +0.4% (consensus: +0.6%), up from -0.2% in Q2. Year-on-year GDP contraction narrowed to -4.1% (consensus: -3.9%) from -4.8% in Q2. The consensus miss was expected after France and Germany announced Q3 growth that undershot estimates - +0.7% vs. +0.8% expected for Germany, and +0.3% vs. +0.7% expected for France. Economists were underwhelmed by the results, and warned growth could reverse in coming quarters once car scrapping and other stimulus schemes fade.
• Yuan will rise with time. A top Chinese central banker told Asia-Pacific officials Friday that Beijing wants to let the yuan move more freely, but that any change will be very gradual, and that China will not bow to external pressure. The APEC meetings have been noteworthy for their focus on the weak dollar, but officials - including Tim Geithner - have refrained from pressuring Beijing to unhitch the yuan from its informal dollar peg. "The U.S. and China depend too much on each other and this has to change," the banker said.
• Dell announces first smartphone. Dell (DELL) announced it will enter the smartphone business, sealing initial partnerships with two of the world's largest mobile operators - China Mobile (CHL) and Claro (AMX). The Mini 3 smartphones will be designed around the Android (GOOG) platform. "Our entry into the smart phone category is a logical extension of Dell's consumer product evolution over the past two years," Dell said. "We are developing smaller and smarter mobile products that enable our customers to take their internet experience out of the home and do the things they want to do whenever and wherever they want."
• AMD cashes in its chips. Archrivals Intel (INTC) and Advanced Micro Devices (AMD) announced a game-changing settlement to their antitrust and patent infringement dispute, including a $1.25B payment from Intel to AMD and a five-year cross-licensing agreement. Intel also agreed not to induce competitors to shun AMD, but Intel has denied ever doing so. Numerous government lawsuits and private class-action litigation against Intel will not go away as a result of the deal, but Intel did eliminate its exposure to AMD-related charges. Intel CEO Paul Otellini called the pact a good deal for Intel shareholders, a sentiment shared by analysts who believe a court ruling could have cost it more. AMD CEO Dirk Meyer said the agreement proves to its customers, once and for all, "that AMD will survive and continue to offer them a choice of suppliers."
• White House sure of debt increase. The Treasury is confident Congress will raise the U.S. debt limit by year-end, and not allow a showdown similar to one that shuttered parts of the government in 1995. Sources say the White House is looking for a $1-1.5T increase beyond its current $12.1T limit. The request is higher than a proposed increase already passed in the House, but would get the government through the November 2010 midterm congressional elections without needing another increase. Geithner has repeatedly stressed the need to bring deficits down to sustainable levels, but in the short-term he's more worried about the need to keep up spending until unemployment recedes.
• Barofsky bets on TARP losses. TARP will "almost certainly" result in a loss to taxpayers, Neil Barofsky, the special inspector general for the $700B U.S. financial-industry bailout, said Thursday. "We need to temper or be realistic about our expectations, a dollar-for-dollar return is just highly unrealistic." Barofsky also said he's conducting 65 investigations of possible TARP fraud.
• Boeing fixes one problem, finds another. Boeing (BA) finally finished fixing the problem that postponed the maiden flight of its long-delayed 787 Dreamliner, but in doing so discovered another issue with the plane's wings. Metal bolts inside the wings of one of the six test airplanes were found to have slightly cracked the surrounding material, which engineers cited as another reason to keep the plane grounded. Still, Boeing says it's "on track to fly by the end of the year."
• Iconix gets a read on Playboy. Iconix Brand Group (ICON), owner of London Fog, is reportedly in talks to buy Playboy Enterprises (PLA), and has looked at its books. Iconix CEO Neil Cole is thought to be looking to add more brands that it can license to retailers and manufacturers. 56-year-old Playboy, which was worth about $100M before yesterday, has been looking to sell itself since Scott Flanders replaced Christie Hefner as CEO in June. Her father, Hugh, owns 70% of Playboy's voting shares and 28% of the Class B shares.
• FHA's razor-thin reserves. The FHA's capital reserves are almost depleted, making it likely the goverment-controlled housing market lender will require a taxpayer bailout. The FHA has said for months that its reserves for unexpected loan losses would fall short of the required 2% level by this fall, but an audit released Thursday showed that reserves have been depleted much faster than expected; its capital-reserve fund fell to $3.6B as of Sept. 30, down 72% from a year earlier, leaving reserves at just 0.53% of the $685B in total loans insured by the FHA.
• FDIC orders banks to prepay $45B. The FDIC's board approved Thursday $45B of bank premium prepayments that it needs after its deposit insurance fund slipped into a deficit at the end of Q3. The prepayments - which equate to three years of dues - will satisfy the fund's "need for liquidity without imposing undue burden on the industry," FDIC Chairman Sheila Bair said. A surge in failures - 120 so far this year - has pushed the industry-supported fund into a deficit for the first time since 1991.

Earnings: Fri. Before Open

• Abercrombie & Fitch (ANF): Q3 EPS of $0.30 beats by $0.10. Revenue of $765M (-14.6%) in-line. Same-store sales -18%. Shares +7.5% premarket. (PR)
• Mizuho Financial Group (MFG): FH1 profit of ¥87.8B ($974M) vs. ¥56.3B expected and -7.1% from ¥94.6B a year ago. Revenue of ¥1.49T (-21.6%). Q2 net income of ¥92.3B vs. ¥69B expected and -¥38.4B a year ago. Bad loan charges -38% to ¥85.8B. (MW, Bloomberg)
• Yingli Green Energy (YGE): Q3 EPS of $0.18 beats by $0.01. Revenue of $326M (+1%) vs. $329M. Shares +1.3% premarket. (PR)

Earnings: Thur. After Close

• Blockbuster (BBI): Q3 EPS of -$0.20 misses by $0.09. Revenue of $910.5M (-21%) vs. $1B. Shares -13.2% AH. (PR)
• Disney (DIS): FQ4 EPS of $0.46 beats by $0.05. Revenue of $9.9B (+4%) vs. $9.3B. Shares +2.2% AH. (PR)
• Nordstrom (JWN): Q3 EPS of $0.38 misses by $0.01. Revenue of $2B (-5%) vs. $1.9B. Same-store sales -1.2%. Raises full-year EPS guidance to $1.83-1.88 from $1.50-1.65, vs. $1.81 and expects full-year same-store sales down 6-7%. Shares -4.8% AH. (PR)

Today's Markets

Asia and Europe stocks were mostly higher Friday, fueling modest gains in overnight futures trading.

Q3 2009 Earnings Call

November 5, 2009 11:00 am ET

Q2 2009 Earnings Call

August 4, 2009 11:00 am ET

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.

This week is 'global macro week' here at Market Folly and we'll be covering some of the equity positions of the major global macro strategy hedge funds. We want to start off this week with a slight disclaimer. Since global macro funds trade all different types of asset classes, they're not an ideal bunch to track or to clone a portfolio from. However, they are some of the smartest minds out there in terms of secular themes, trading, and market timing. As such, we monitor their movements in equities to get a sense as to what sectors they like, when they're moving out of long equity positions, and to see if we can see any secular themes they might be playing. So, this week is not so much about tracking as much as it is about taking a step back and observing the 'bigger picture.'

When newspaper people in the U.S. aren’t wishing they were the Wall Street Journal – “well, they can charge” – they aspire to be The Economist.

Dream on.

Normally when searching for buy ideas, AFG narrows its list of potential investment opportunities using several powerful proprietary variables including valuation, economic margin, management quality, earnings quality and others. Using AFG’s valuation variable (value score) as a stand-alone screen, ValueExpectations has shown portfolios that have gone on to earn outstanding returns. We first posted a blog “High Value Score Stocks: S&P 500” in December of 2008 using only AFG's valuation variable - Value Score. These companies (DDS, S, NOV, MTW, SII, WFR, CHK) were identified as having the highest value score within the entire index. Since release, that portfolio has outpaced the S&P 500 by over 71% as of May 26, 2009.

With the success of the first high value score stocks blog, we released a second portfolio in a blog posted on May 7, 2009. This portfolio consists of S&P 500 High Value Score stocks (as of May 7, 2009) and so far it has been outperforming the S&P 500 (performance results will be released in our next performance update blog in a few weeks).

Q1 2009 Earnings Call

May 11, 2009 11:00 am ET

I've been reading my annual reports and wanted to share the items I found interesting:

CME Group, Inc. (CME): this company generates revenues primarily from its clearing and transaction fees. (10K: page 31). In other words, it's a clearinghouse. "Many clearing firms [CME's major customers] have expressed the view that...clearing houses should be operated as utilities rather than part of for-profit enterprises." (10K: page 41). Read that again--CME's customers are trying to lower their costs and will pressure CME on its margins.

A recent Seeking Alpha post surveyed The Top 12 Brands Likely to Disappear. While we don't disagree with any of the selections on that list, we believe it might be useful for investors to consider a list of brands that are currently under fire but appear likely to survive -- and eventually thrive. Investors who successfully invest in undervalued companies that own valuable brands should do quite well over time.

1. Playboy adult entertainment: The brand is owned by Playboy Enterprises (NYSE: PLA), which also owns the Playboy Mansion, a unique real estate property in Bel Air, California. Playboy is much more than a publishing business, with future value likely to come primarily from brand licensing. The latter is already a significant and growing generator of operating income. The company needs to reposition itself as a lifestyle company rather than a publishing business.

This is the 4th Quarter 2008 edition of our ongoing hedge fund portfolio tracking series. Before reading this update, make sure you check out the Hedge Fund 13F filings preface.

Next up is Clarium Capital Management, LLC ran by Peter Thiel, the co-founder of PayPal. Clarium is a $2 billion global macro hedge fund that currently has the majority of its holdings in the debt and currency markets. Keep in mind that the equity portion of their portfolio has always been minimal, so the stocks below only represent a small sliver of their overall holdings. 2008 was a roller coaster year for Thiel and company, to say the least. Earlier in 2008, they were up over 45%. But, with a mistimed move into equities, they began to give back their gains and found themselves -4.5% for 2008 as we noted in our year end post of hedge fund performance numbers. The bulk of the losses were sustained in October, where they were down 18% for the month. Assets under management had recently ballooned to the highest amount in Clarium's history, but that didn't last long as redemption requests rolled in and markets continued to tank.

For any still employed bankers who aren't currently experiencing margin calls from their employer, and who plan on making a solid 20% on the bonanza that TBT will unlikely generate by the end of the year, here is the deal of a lifetime. For a paltry $60 million, you can buy Playboy Enterprises (PLA), which in a conference call Wednesday announced it is willing to sell itself for the right price... or the wrong price... or any price.

With the stock currently trading at $1.60, the company's $60 million market cap might seem like a bargain when considering the fringe benefits (of course you need to assume $90 million of net debt but with the high-yield market on fire this should be easily refinanceable - just hire Jefferies to do it).

Q4 2008 Earnings Call

February 18, 2009 11:00 am ET

Nearly two weeks after Christie Hefner announced plans to step down as CEO of Playboy Enterprises (PLA), insiders at the company are still puzzled by exactly what it means. But they do have some theories.

One rumor making the rounds is that Hefner's surprise departure heralds a major change of direction for the company -- one that will possibly include taking it private. Though it's hardly the ideal time to be seeking financing, Playboy's anemic stock price ($2.20 a share, down from above $9 a year ago) means the amount of cash needed would be manageable, especially as the Hefners already own 35 percent of the common stock. The company's current enterprise value is $158.1 million.

Q3 2008 Earnings Call

November 6, 2008 11:00 am ET

One industry that seems to be recession proof is the adult entertainment industry. This is a $20 billion industry, and some sources say that the industry has been growing by as much as 50% per year. Many of the publicly traded stocks in this business are low cap companies, so caution is urged when considering these.

Playboy (PLA) is a New York Stock Exchange company that is participating in practically all aspects of the industry, including magazines, DVD’s, television shows, documentaries, web entertainment, e-commerce sites, and various Playboy brand products. It also owns the Spice brand of TV shows and related products. The company recently decided to launch their Playboy Magazine in the Philippines. It is considered to be the largest adult entertainment conglomerate in the world, and last year, they started going after women as customers. It has a forward P/E of 14. This is a low cap stock and should therefore be considered speculative.

Q2 2008 Earnings Call

August 6, 2008 11:00 am ET

Q1 2008 Earnings Call

May 6, 2008 11:00 am ET

Baker Hughes (BHI), Halliburton (HAL) On Friday, crude neared $130 after Goldman’s estimate that the commodity would reach $141. Jeff Macke would buy oil on pullbacks, but Adami saya for those who are nervous about oil, service stocks such as HAL and BHI fit the bill.

Yahoo (YHOO), Microsoft (MSFT), Google (GOOG)

The war rages on for Yahoo and Karen Finerman thinks Icahn can win because shareholders are not behind Yahoo's board, which has disappointed them. Macke would be long Microsoft and thinks Yahoo will simply self-destruct. Najarian predicts Yahoo won’t fetch more than $29 a share and Guy Adami reiterated his recommendation to buy Google on the great Yahoo debate.