Q3 2009 Earnings Call

October 30, 2009 11:00 AM ET

Wood is one of the first known sources of heat and energy. We seem to have come back a full circle to where it all started from. The company that takes us back to this primitive fuel, albeit with modern technology is We Energies, a subsidiary of Wisconsin Energy Corporation (NYSE: WEC).

Many of the institutional clients of The Applied Finance Group, Ltd. (AFG) tend to focus on large cap stocks and benchmark themselves against the S&P 500 Index, which is why many of the buy ideas from ValueExpectations.com usually come from the large cap index. For those investors who focus on small to mid cap stocks from the Russell 2000, we have provided a list of companies with the most attractive valuations within the index.

AFG's default valuation is a great place to start when looking for potential equity investments as our valuation techniques have proven successful through time at identifying mispriced securities and helping our clients identify investment opportunities resulting in outperforming their chosen benchmark.

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.

The third fund in our series is Seth Klarman's Baupost Group. Klarman started working for Baupost at age 25 after receiving his Harvard MBA and now runs the show. This solid value focused firm has seen an annual compounded return of 20% and its long-term timeframe and focus on equities makes it ideal for tracking and cloning. In fact, it is one of the few funds selected to be included in our MarketFolly custom portfolio. Baupost as a hedge fund was recently ranked 13th overall in Alpha's 2009 hedge fund rankings. We highly recommend reading up on Klarman and his investment methodology. He has detailed his investment process in a now out of print book, Margin of Safety where he provides a "how-to" on risk-averse value investing.

With the recent market rally, 2009 Q2 13F filings hold the allure of possibly yielding some indication as to what these respected managers may think of the rally.

You can view Seth Klarman and Baupost's hedge fund portfolio changes in spreadsheet form. As always, the caveat with Klarman's 13F filings is that Baupost plays in many different sandboxes (for instance, their recent participation in bailing out CIT Group). Thus, a lack of activity may not necessarily indicate a bearish slant -- the fund could just be pursuing better opportunities in other arenas than equities.

The market appears to have responded very favourably to an upgrade of Montreal-based pulp and paper maker Domtar Corp. (UFS). The stock jumped after Deutsche Bank analyst Mark Wilde moved his rating from Hold to Buy, while maintaining a $24 price target on expectations that the company’s financial performance is nearing an inflection point and that both EBITDA and net earnings should see meaningful improvement over the next three to four quarters.

The analyst also trimmed his 2009 EPS loss forecast from -$3.60 per share to -$2.68 and shifted his 2010 loss from -$1.20 to earnings of $.50.

As some investors may believe the market is starting to show "signs of recovery", many of the over 200 institutional firms The Applied Finance Group (AFG) works with can always take advantage of identifying mispriced securities. While some of AFG’s clients might have a specific focus on growth or value, most subscribe to the practice of buying growth at a discount (growth at a reasonable price GARP) and avoiding “value traps.”

In October 2008 AFG released the study, Then and Now, discussing the low expectations priced into the market

Bullish Calls:

ON Semiconductor (ONNN), Cadence Systems (CDNS), Brocade Communications (BRCD), Broadcom (BRCM): "I prefer all of these over Taiwan Semiconductor."

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 Baupost Group ran by Seth Klarman. Value investors will be familiar with this name as he is often one of the top names mentioned after the likes of Warren Buffett. Over the past 25 years, Baupost has seen an annual compound return of 20%. Such a pristine track record has landed Baupost in our custom Market Folly portfolio, where we have cloned a hedge fund portfolio with the Alphaclone software that is returning 17% annualized since mid-2002. Baupost's contributions to our portfolio are definitely a big reason for the solid numbers.

Q1 2009 Earnings Call

May 01, 2009 10:00 AM ET

• Chrysler goes bankrupt. It's official - Chrysler has filed for Chapter 11 bankruptcy protection, and announced a deal with Fiat giving the Italian carmaker an initial 20% stake. Obama thanked everyone from unions to executives for fighting to keep the automaker alive, and blamed 'a small group of speculators' for making bankruptcy inevitable. The plan now is for Chrysler to leave bankruptcy protection in a month or two with a lighter balance sheet, new management, fewer dealers, lower labor costs, a Fiat alliance and possibly even a new name.
• Cramdowns get voted down. The Senate rejected an amendment that would have given bankruptcy judges the ability to ease a homeowner's monthly payments and stave off foreclosure. Cramdown fans said the amendment would have helped keep millions of Americans in their homes, but critics argued the plan's arbitrary rules would scare off investors and prolong the housing slump. The defeat of the cramdown bill in the Senate came as the House voted to cap the fees credit card companies can charge.
• Citi's Nikko sale. Citigroup reached a deal to sell Nikko Cordial Securities to Sumitomo Mitsui Financial (SMFJY.PK) for around ¥774.5B ($7.9B), ending Citi's ambitions to create a full-service bank in Japan. The deal will turn Sumitomo Mitsui into a major player in Japan's securities industry. The deal will create an accounting loss for Citigroup, but will raise its tangible common equity, an important move in light of the capital shortfall identified by stress tests.
• Cuomo pension probe widens. New York Attorney General Andrew Cuomo is expanding his probe of pension-fund kickbacks, saying the probe has exposed "a national network of actors" whose schemes are ongoing, and has charged a money manager with making illegal payments to a political consultant in exchange for investment business. The charge is at least the fifth since Cuomo's investigation began.
• BoA board wants Lewis to stay. Bank of America (BAC) directors showed continued support of CEO Ken Lewis despite outside pressure to accelerate a search for his replacement. The subject of succession didn't come up during a board meeting Wednesday, or during recent conversations with regulators. However, the board's continued public support for Lewis will likely raise tensions with angry shareholders who already voted Lewis out of the chairman position. Separately, lawmakers will likely call for hearings on the involvement of the Treasury and Federal Reserve in Bank of America's acquisition of Merrill Lynch.
• Stress test results delayed. The Federal Reserve postponed the release of banks' stress test results while bank executives argue with regulators over the tests' preliminary findings. Originally scheduled for publication May 4, the results likely won't be published until the end of next week.
• UBS demurs on tax case disclosures. Responding to the U.S. lawsuit on tax evasion, UBS said revealing the names of 52,000 U.S. customers would violate Swiss criminal law prohibiting such disclosures and trample on Swiss sovereignty. According to UBS' filing, the disclosure request also violates tax treaties between the U.S. and Switzerland, and is "fundamentally an issue for diplomats, not litigators."
• Fed eyes TALF terms. The Federal Reserve is reportedly preparing to announce new terms for TALF to help revive the commercial real estate market. The Fed will likely roll out new loans with five-year terms to better match the need of investors in commercial mortgage-backed securities, up from the current three-year loan terms.
• AmEx cut to junk. S&P downgraded American Express' (AXP) credit rating amid concerns about the company's long term liquidity. Its counterparty credit rating was cut by two notches to BBB+, while its preferred stock rating was cut to junk territory with a three-notch drop to BB. Further downgrades are possible.
• Disney does the Hulu. Disney (DIS) joined up with video site Hulu (GE, NWS) and will distribute films from Walt Disney Studios and programs from ABC and the Disney Channel through the site. The deal marks a shift in strategy for Disney, which will cede some control over the distribution of its programming in exchange for an equity stake, and brings together three of the biggest broadcast and cable network owners under the same banner. GE's NBC Universal, News. Corp and Disney will each hold roughly a 27.5% stake in the venture.
• Hasbro, Discovery build kids' network. Hasbro (HAS) and Discovery Communications (DISCA) have teamed up to launch a children's entertainment network in 2010. The new network will replace the Discovery Kids network in around 60M homes, and will help Hasbro transform itself into an entertainment company as toys face increased competition from videogames, the internet, movies and TV.
• Personal income falls. U.S. consumer spending fell in April together with incomes. Personal Income fell 0.3% ($34.4B) in March, while disposable income decreased less than 0.1% ($1.8B). Personal consumption expenditures (PCE) declined 0.2% ($24.2B).
• Employment costs rise. Employment costs rose a record low 0.3% in Q1, in-line with consensus. Over the past year, employment costs have risen a record low 2.1%.
• Jobless claims better than consensus. Initial jobless claims were 631K, down from last week's 645K (revised) and better than consensus of 640K. Continuing claims rose 133K to 6.27M.
• Business conditions improve (.pdf). Business conditions in the Chicago area surged to their best reading in seven months, according to the NAPM Chicago Business Barometer. Varied "general comments" included "Record setting Federal debt will harm economic recovery," and "Small business lending is picking up..."

Earnings: Friday Before Open

• American Axle & Manufacturing (AXL): Q1 EPS of -$0.37 beats by $0.18. Revenue of $402M (-31.5%) vs. $427M. (PR)
• Aon (AOC): Q1 EPS of $0.76 misses by $0.12. Revenue of $1.85B (-2.7%) vs. $2.08B. (PR)
• Apartment Investment and Management Company (AIV): Q1 FFO of $0.42 beats by $0.08. Revenue of $349M (+0.4%) vs. $311M. Sees Q2 FFO of $0.37-0.43 vs. $0.44, and full-year FFO of $1.65-1.95 vs. $1.65. (PR)
• Brookfield Properties (BPO): Q1 EPS of $0.32 misses by $0.03. Revenue of $592M (-9.1%) vs. $533M. (PR)
• Chevron (CVX): Q1 EPS of $0.92 beats by $0.11. Revenue of $36.13M vs. $21.14M. Shares +0.4% premarket. (PR)
• Clorox (CLX): FQ3 EPS of $1.17 beats by $0.27. Revenue of $1.35B (-0.2%) in-line. Sees full-year EPS of $4.00-4.15 vs. $4.21, and sales growth of 3-4% vs. a previous 3-5%. Shares +1.6% premarket. (PR)
• Cott (COT): Q1 EPS of $0.28 vs. consensus of -$0.07. Revenue of $367M vs. $377M. (PR)
• Dean Foods (DF): Q1 EPS of $0.52 beats by $0.10. Revenue of $2.7B (-12.2%) vs. $2.9B. "We have significant momentum in our business with an exceptionally strong first quarter behind us and indications of a solid start to the second quarter." (PR)
• Domtar (UFS): Q1 EPS of -$0.07 misses by $0.03. Revenue of $1.39B (+1.3%) vs. $1.39B. "The rapid decline of paper volumes in recent months has been abating." (PR)
• DryShips (DRYS): Q1 EPS of $0.36 beats by $0.17. Revenue of $197M (-15.3%) in-line. Shares +15.3% premarket. (PR)
• FLIR Systems (FLIR): Q1 EPS of $0.35 beats by $0.05. Revenue of $272M (+14.8%) vs. $277M. Full-year guidance in-line. (PR)
• Fortune Brands (FO): Q1 EPS of $0.30 beats by $0.08. Revenue of $1.44B (-20.3%) in-line. (PR)
• James River Coal (JRCC): Q1 EPS of $1.03 beats by $0.22. Revenue of $192M (+39%) vs. $193M. (PR)
• MasterCard (MA): Q1 EPS of $2.80 beats by $0.19. Revenue of $1.16B (-2.2%) vs. $1.21B. Gross dollar volume and purchase volume up 0.3%. Transactions up 5.8%. Shares +1.9% premarket. (PR)
• NiSource (NI): Q1 EPS of $0.62 in-line. Revenue of $2.72B (-17.2%) vs. $2.66B. (PR)
• PPL Corp. (PPL): Q1 EPS of $0.60 beats by $0.14. Revenue of $2.36B (+54.6%) vs. $1.69B. (PR)
• Simon Property Group (SPG): Q1 FFO of $1.61 beats by $0.13. Revenue of $918.5M (+2.6%) vs. $886M. Says it raised $1.6B in Q1. Shares -0.2% AH. (PR)
• TECO Energy (TE): Q1 EPS of $0.16 beats by $0.01. Revenue of $824M vs. $764M. Shares (PR)

Earnings: Thursday After Close

• Ariba (ARBA): FQ2 EPS of $0.15 beats by $0.01. Revenue of $84.7M (+5.2%) vs. $85M. Shares +5.1% AH. (PR)
• Chiquita (CQB): Q1 EPS of $0.49 beats by $0.21. Revenue of $842M (-9.9%) vs. $910M. "While Q1 results were better than expected... the company's full-year expectations remain the same." Shares +14.4% AH. (PR)
• Curtiss-Wright (CW): Q1 EPS of $0.35 beats by $0.01. Revenue of $424M (-2.2%) vs. $420M. Reaffirms full-year guidance. (PR)
• DENTSPLY International (XRAY): Q1 EPS of $0.43 in-line. Revenue of $507M (-9.6%) vs. $524M. (PR)
• Evergreen Solar (ESLR): Q1 EPS of -$0.40 vs. consensus of -$0.08. Revenue of $55.8M (+26.2%) vs. $49.2M. Shares -14% AH. (PR)
• Hartford Financial (HIG): Q1 EPS of -$3.77 misses by $0.72. Sees full-year EPS of $0.05-0.45 vs. $0.98 consensus. Book value per share down 57% to $24.15. Net unrealized investment losses $6.9B, up from $6.8B in Q4. Shares -12.6% AH. (PR)
• Ingram Micro (IM): Q1 EPS of $0.23 beats by $0.10. Revenue of $6.75B (-21.4%) in-line. "With the recession now affecting all regions, we do not expect a pick-up in sales for several more months, perhaps for the remainder of the year. However, we don't feel the market getting worse at this stage..." Shares +3.3% AH. (PR)
• Manitowoc (MTW): Q1 EPS of $0.18 beats by $0.05. Revenue of $1.03B (+4%) in-line. Shares -2.5% AH. (PR)
• McAfee (MFE): Q1 EPS of $0.54 beats by $0.06. Revenue of $448M (+21.1%) in-line. Q2 guidance in-line. Shares +3.9% AH. (PR)
• MetLife (MET): Q1 EPS of $0.20 misses by $0.14. Revenue of $10.22B (-12.%) vs. $11.93B. Net realized investment losses of $618M. Shares -3.8% AH. (PR)
• Monster Worldwide (MWW): Q1 EPS of $0.00 beats by $0.11. Revenue of $254M (-30.6%) in-line. Shares -4% AH. (PR)
• PerkinElmer (PKI): Q1 EPS of $0.26 beats by $0.06. Revenue of $432M (-5.9%) vs. $411M. Shares flat AH. (PR)
• Republic Services (RSG): Q1 EPS of $0.35 beats by $0.05. Revenue of $2.06B (+164.4%) in-line. (PR)
• QLogic (QLGC): FQ4 EPS of $0.20 misses by $0.01. Revenue of $130.5M (-18.3%) vs. $135M. Shares -3.2% AH. (PR)

Today's Markets

Japan moved higher Friday. London was lower. Elsewhere markets were closed. Volume in overnight futures is unusually low.

By popular demand, here is the latest list of Phoenix candidates:

Brandywine Realty Trust (BDN), CapitalSource Inc (CSE), CBL & Associates Properties Inc (CBL), Century Aluminum Co (CENX), Citizens Republic Bancorp Inc (CRBC), Colonial Properties Trust (CLP), Complete Production Services Inc (CPX), Conseco Inc (CNO), Delta Petroleum Corp (DPTR), Developers Diversified Realty Corp (DDR), Domtar Corp (UFS), First Industrial Realty Trust Inc (FR), First Marblehead Corp/The (FMD), Furniture Brands International Inc (FBN), Gannett Co Inc (GCI), Genworth Financial Inc (GNW), Hercules Offshore Inc (HERO), Hovnanian Enterprises Inc (HOV), Huntsman Corp (HUN), ION Geophysical Corp (IO), iStar Financial Inc (SFI), Liz Claiborne Inc (LIZ), Manitowoc Co Inc/The (MTW), MCG Capital Corp (MCGC), MGIC Investment Corp (MTG), MGM Mirage (MGM), Pacific Sunwear Of California (PSUN), Patriot Coal Corp (PCX), Pennsylvania Real Estate Investment Trus (PEI), Petroquest Energy Inc (PQ), Popular Inc (BPOP), Quiksilver Inc (ZQK), Rex Energy Corp (REXX), Saks Inc (SKS), Sterling Financial Corp/WA (STSA), Sunstone Hotel Investors Inc (SHO), THQ Inc (THQI), Webster Financial Corp (WBS) and Zale Corp (ZLC).

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 Baupost Group run by Seth Klarman. Klarman received his MBA from Harvard Business School and started working at Baupost at age 25. Over the past 25 years, Baupost has seen an annual compound return of 20% and is ranked 49th in Alpha's hedge fund rankings. Klarman has always considered himself a value investor and has been patient through the market turmoil. The past few years they have had nearly half their $14 billion in assets in cash. But, with turmoil comes opportunity. And, as such, Baupost's cash has been gradually deployed by Klarman and Baupost's 100 employees, leaving them with around a fourth of assets left in cash. Klarman's investment process is detailed in his book Margin of Safety. In it, he lays out a "how-to" on risk-averse value investing. The book is no longer actively printed and is very hard to find. His take on recent market action can be viewed in his recent interview with Harvard Business School. Baupost was very active in filing numerous 13Gs in January, and again in February. They've also been buying more RHIE (RHI Entertainment).

Why follow Seth Klarman?

Seth Klarman, Founder and President of The Baupost Group, is the author of Security Analysis and one of the most widely respected value-oriented investors. From inception in February 1983 through December 2008, The Baupost Group has delivered an annual compounded return of approximately 20%.

Co-written by Patrick Kirts

At Portfolio Asset Management, we love a good fire sale. However, we don’t want to get stuck holding the bag for an industry that is going broke. Remember, you can’t live under a worthless stock certificate. Last week on CNBC we were asked about the casual dining sector. Our response was that the only thing on the dollar menu was the price of the stocks, some of which will go bankrupt. The same thing has already happened with the paper sector. On Friday the 13th, the American Forest & Paper Association showed an unprecedented decline of 25.3 percent in January 2009 from a year ago. Smurfit-Stone went belly up last month and others are on their way. International Paper (IP) and Domtar Corp (UFS) have been favorites of some deep value hedge fund players. Packaging Corp of America (PKG) is interesting because it doesn’t seem to be going broke this week and pays a decent dividend. The same was said about IP, but now the dividend looks like it will be bust before year-end. Our goal is to see if there is any paper stock worth investing in, or if we should avoid this car crash until next year.

Prices of Treasury coupon securities are registering modest gains in advance of the monthly labor report. I suspect that the buyers are anticipating an even more dire result than the consensus and believe that the recent surge in yield represents a buying opportunity.

I think that this is probably last-minute short covering and that with the enormity of issuance next week the Street will sell virtually any level following the labor report. These levels might end up being viewed as good levels to have established long positions but I believe that epiphany will not arrive without the experience of some financial pain first. Look for higher rates and especially a steeper yield curve.

Q4 2008 Earnings Call

February 05, 2009 10:00 AM ET

• Profits amiss, Swiss Re gets Buffett boost. Warren Buffett's Berkshire Hathaway (BRK.A) will invest around 3B Swiss francs ($2.6B) in Swiss Reinsurance (SWCEY.PK) to help the firm raise its capital levels and protect its AA credit rating. In return, Swiss Re will issue a bond with a coupon of 12% which can later be converted into shares, potentially giving Berkshire a stake of over 20% in the world's second-biggest reinsurer. Swiss Re, which has suffered heavy losses from its credit default swaps exposure and wrote down 6B Swiss francs in toxic assets, expects to post a net loss of around 1B Swiss francs for 2008 and may eventually seek another 2B Swiss francs in addition to Buffett's capital injection. The company will also cut its dividend and disband part of its asset-management unit. CEO Jacques Aigrain said the company was "disappointed with our overall results in 2008," but that Buffett's investment "is a testament to the strength of our franchise." Shares -16.6% in Switzerland (7:00 ET).
• Buy American, sort of. The Senate has softened the 'Buy American' plan in its $900B stimulus bill after Obama expressed concern that the original language could trigger a trade war. The new amendment requires the Buy American provision to be "applied in a manner consistent with U.S. obligations under international agreements," providing some relief to Canada, Mexico, the EU and other major trading partners. Some Senators went even further, trying to remove the Buy American provision altogether, but failed to garner the necessary votes. McCain, an opponent of the provision, warned it has "echoes of the disastrous Smoot-Hawley tariff act... It sends a message to the world that the United States is going back to protectionism." Meanwhile, many foreign firms, trying to win a piece of the stimulus package, are increasing their American presence.
• Watchdog calls for government investment strategy. According to a report issued today by a government watchdog, the U.S. needs to develop an investment strategy for its recently acquired holdings. To date, the U.S. government has collected over $271M in dividends from ownership stakes in American banks and holds $279.2B in preferred shares from 319 financial institutions, as well as common stock warrants from 230 institutions. The report also raised questions about potential fraud issues in the Fed's Term Asset-Backed Loan Facility (TALF).
• Parts suppliers want part of bailout. U.S. auto-parts makers are seeking up to $25.5B in federal aid as the auto industry gets slammed, forcing broad production cuts among automakers. Suppliers are asking for $8B in direct federal loans, $7B to flow through automakers so suppliers can be paid in ten days instead of the traditional 45, and $10.5B to guarantee receivables of suppliers whose customers have taken federal loans. Without immediate aid, industry representatives say hundreds of parts suppliers will close or file for bankruptcy.
• Revolving door for Volvo. Looking for cash to avoid a federal bailout, sources say Ford (F) is in talks to sell its Volvo unit to China's Geely Automobile Holdings. Ford has also approached two other Chinese automakers, and will likely recoup less than the $6.4B it paid for Volvo in 1999. The U.S. automaker has already received commitments from Export-Import Bank of China to provide the necessary financing for an acquisition. Ford creditors would likely receive some or all of the proceeds from a Volvo sale.
• P&G gamble on getting out of pharma. Procter & Gamble (PG) is looking to exit the pharmaceutical business, and has hired Goldman Sachs (GS) to identify possible buyers for its pharmaceutical brands. P&G's pharma unit accounts for global sales of over $2B. The company announced in December that it had stopped investing in new drug development, citing the need to create 'maximum value' for shareholders.
• Cisco profit chill. Cisco (CSCO) posted a 27% drop in FQ2 earnings on weaker sales and higher costs, though the firm still managed to report slightly better figures than Wall Street expected (see earnings details below). Cisco also issued a disappointing sales forecast for the current quarter, forecasting a 15-20% drop from last year, or roughly $7.8B-$8.3B less. Analysts had expected sales of about $8.7B. CEO John Chambers expressed optimism about the company, telling analysts "this downturn, in my opinion, is both the biggest challenge of our lifetime, but also represents the biggest opportunity to transform our company as well as our economy through a series of bold steps." (Read the earnings call transcript.)
• Overseas credit use lifts Visa. Profit rose 35% at Visa (V), thanks to a gain in non-U.S. consumers using credit and debit cards (see earnings details below). CEO Joe Saunders said Visa is 'steadfast' in its guidance that EPS will rise at least 20% this year, highlighting the company's "processed transaction growth, the strength of debit, and the global diversity of our business." Total volume rose 44% in Central Europe, the Middle East and Africa, 27% in Latin America and the Caribbean and 20% in the Asia-Pacific region vs. just 7.1% growth in the U.S.
• Congressional hearings on Madoff. Harry Markopolos testified before Congress yesterday, slamming the SEC for 'financial illiteracy' on the Madoff case and for 'an abject failure by the regulatory agencies we entrust as our watchdog.' Markopolos also lodged a serious accusation against the Wall Street Journal, saying "I believe that senior editors of the [Wall Street] Journal respected and feared Mr. Madoff" and wouldn't allow senior investigative reporter John Wilke to pursue the matter when contacted in December 2005. (Read Markopolos' full testimony - .pdf)
• Job cuts soar. According to Challenger, firing announcements rose an astounding 222% last month from January 2008, to 241,749. "Even if the stimulus package is successful, it could take months to make a noticeable impact on the employment picture. There is no light at the end of the tunnel." ADP reported nonfarm employment decreased 522,000 in January, a drop less than the 535K consensus. The goods-producing sector declined for the 24th consecutive month. Employment in the manufacturing sector fell for the 28th time over the last 29 months.
• Online recruiting weakens again. Monster's online employment index dipped 13 points in January to 118 as online recruiting slowed for the fourth straight month. It's down 26% from a year ago - a more negative pace than the previous three months, suggesting further deterioration in labor market conditions. Arts, entertainment, and recreation remains the weakest trending industry, indicating further softening in consumer leisure spending activity. "The fact that employers have chosen to begin recruiting in 2009 on a cautious note is not surprising given the uncertain nature of the global economy," it said.
• Non-mfg sector contracts. Economic activity in the non-manufacturing sector contracted in January, registering 42.9% on the ISM Index vs. December's 40.1%. This was the fourth month in a row of sector contraction, though the rate has slowed slightly.
• BoE rate cut. The Bank of England cut its key lending rate to 1% from 1.5%, as expected. BoE has brought its rate down from 5% in October as the world economy worsened and the U.K. slipped into recession.

Earnings: Thursday Before Open

• Alpha Natural Resources (ANR): Q4 EPS of -$0.07 misses by $0.29. Revenue of $594M (+16.3%) vs. $631M. (PR)
• Brookfield Properties (BPO): Q4 EPS of $0.49 beats by $0.12. Revenue of $717M (-12.9%) vs. $582M. (PR)
• Bunge (BG): Q4 EPS of -$1.89 misses by $1.60. Revenue of $10.9B (-12.3%) vs. $12.0B. (PR)
• Burger King (BKC): FQ2 EPS of $0.33 misses by $0.04. Revenue of $634M (+3.4%) vs. $659M. (PR)
• Cardinal Health (CAH): FQ2 EPS of $0.93 beats by $0.03. Revenue of $25.1B (+7.8%) vs. $24.5B. (PR)
• CIGNA (CI): Q4 EPS of $0.49 beats by $0.08. Revenue of $4.8B (+6.7%) vs. $4.75B. (PR)
• Cincinnati Bell (CBB): Q4 EPS of $0.10 in-line. Revenue of $356.8M (-0.9%) vs. $349.9M. (PR)
• Cincinnati Financial (CINF): Q4 EPS of $0.57 in-line. Revenue of $1.0B (+4.2%) vs. $915M. (PR)
• Deutsche Bank (DB): Q4 net loss of €4.8B - its first in more than 50 years - including a €5.8B trading loss. Net interest income rose to €3.76B from €2.69B a year ago. But January revenue rose "significantly" to €2.8B, giving CEO Josef Ackermann "confidence" for 2009. Shares -3.4% premarket. (Bloomberg)
• Diamond Offshore Drilling (DO): Q4 EPS of $2.11 misses by $0.23. Revenue of $903M (+45.3%) vs. $912M. (PR)
• Domtar Corp (UFS): Q4 EPS of -$0.04 misses by $0.10. Revenue of $1.5B (-11.4%) in-line. (PR)
• Duke Energy (DUK): Q4 EPS of $0.27 beats by $0.02. Revenue of $3.1B (+3.4%) in-line. (PR)
• EarthLink (ELNK): Q4 EPS of $0.25 misses by $0.13. Revenue of $216M (-23.4%) in-line. (PR)
• Estee Lauder Companies (EL): FQ2 EPS of $0.80 beats by $0.03. Revenue of $2.0B (-11.6%) in-line. (PR)
• FLIR Systems (FLIR): Q4 EPS of $0.41 beats by $0.03. Revenue of $302M (+24.6%) vs. $315M. (PR)
• Flowers Foods (FLO): Q4 EPS of $0.34 beats by $0.03. Revenue of $621.6M (+31.2%) vs. $620.3M. (PR)
• IMS Health (RX): Q4 EPS of $0.50 in-line. Revenue of $580.9M (-4.1%) vs. $609.3M. (PR)
• Kellogg (K): Q4 EPS of $0.53 beats by $0.03. Revenue of $2.93B (+5%) vs. $3.05B. Peanut-related recall will cost it $0.06/share. (PR)
• Kimco Realty (KIM): Q4 EPS of $0.04 misses by $0.03. Revenue of $197M (+10.7%) vs. $190M. (PR)
• MasterCard (MA): Q4 EPS of $1.87 beats by $0.26. Revenue of $1.23B (+14.2%) in-line. Gross dollar volume up 3.4% to $605B. Shares +4.9% premarket. (PR)
• MF Global (MF): FQ3 EPS of $0.13 in-line. Revenue of $422M (+0.9%) vs. $368M. (PR)
• Moody's (MCO): Q4 EPS of $0.37 beats by $0.09. Revenue of $403.7M (-20%) vs. $387.1M. (PR)
• NCR (NCR): Q4 EPS of $0.58 beats by $0.04. Revenue of $1.42B (-6.6%) vs. $1.5B. (PR)
• Sally Beauty (SBH): FQ1 EPS of $0.10 misses by $0.03. Revenue of $645.6M (-1.6%) vs. $689.8M. (PR)
• Spectra Energy (SE): Q4 EPS of $0.32 beats by $0.02. Revenue of $1.3B (-9.1%) in-line. (PR)
• Spirit AeroSystems (SPR): Q4 EPS of $0.14 misses by $0.21. Revenue of $646.1M vs. $730.2M. (PR)
• Western Union (WU): Q4 EPS of $0.37 beats by $0.03. Revenue of $1.29B (-1.3%) vs. $1.37B. (PR)

Earnings: Wednesday After Close

• 99 Cents Only Stores (NDN): FQ3 EPS of $0.18 misses by $0.01. Revenue of $351M (+8%) vs. $327M. Shares +0.1% AH. (PR)
• Akamai Technologies (AKAM): Q4 EPS of $0.44 beats by $0.04. Revenue of $213M vs. $205M. Shares +7.1% AH. (PR)(earnings transcript)
• Assurant (AIZ): Q4 EPS of $1.31 misses by $0.23. Revenue of $2.22B (+1.7%) vs. $2.32B. (PR)
• Atmel (ATML): Q4 EPS of $0.01 beats by $0.04. Revenue of $335M vs. $339M. Won't provide Q1 guidance due to uncertain economic environment. Shares -3.7% AH. (PR)(earnings transcript)
• AvalonBay Communities (AVB): Q4 FFO of $0.30 misses by $0.01. Sees 2009 FFO of $4.50-4.80 vs. $4.82. (PR)
• BMC Software (BMC): FQ3 EPS of $0.64 beats by $0.05. Revenue of $488M (+6.4%) in-line. Sees 2009 EPS of $2.20-2.30 vs. $2.19. Shares +4.7% AH. (PR)(earnings transcript)
• Cadence (CDNS): Q4 EPS of -$0.04 misses by $0.02. Revenue of $227M vs. $218M. Shares flat AH. (PR)(earnings transcript)
• CBL & Associates Properties (CBL): Q4 FFO of $0.80 vs. consensus of $0.96. Revenue of $299M vs. $295M. Sees 2009 FFO of $3.10-3.25 vs. $3.21. Shares +16% AH. (PR)
• Cisco Systems (CSCO): FQ2 EPS of $0.32 beats by $0.02. Revenue of $9.09B vs. $9B. Remains comfortable with long-term vision. Shares -4.4% AH. (PR)(earnings transcript)
• EOG Resources (EOG): Q4 EPS of $0.74 vs. consensus of $1.04. Revenue of $1.63B (+27%) vs. $1.28B. Shares +0.6% AH. (PR)
• Equifax (EFX): Q4 EPS of $0.61 beats by $0.02. Revenue of $447M (-9%) vs. $453M. Sees Q1 EPS of $0.52-0.57 vs. $0.59. (PR)
• Equity Residential (EQR): Q4 FFO of -$0.13 misses by $0.02. Revenue of $530M (+5.4%) vs. $538M. Sees 2009 FFO of $2.00-2.30 vs. $2.37. Shares -2% AH. (PR)
• Harman (HAR): FQ2 EPS of $0.18 misses by $0.35. Revenue of $756M (-29.1%) vs. $798M. Plans to shave another 1,100 bringing total to 2,000. Shares -10.6% AH. (PR)(earnings transcript)
• Harris (HRS): FQ2 EPS of $1.08 beats by $0.06. Revenue of $1.52B vs. $1.47B. Sees 2009 EPS of $3.93-4.03 vs. $4.10. Shares -4.5% AH. (PR)(earnings transcript)
• Novellus Systems (NVLS): Q4 EPS of -$0.21 misses by $0.04. Revenue of $188M in-line. Shares -6.4% AH. (PR)(earnings transcript)
• ON Semiconductor (ONNN): Q4 EPS of $0.15 beats by $0.06. Revenue of $489M (+19.8%) vs. $485M. Sees Q1 revenue of $340-380M vs. $411M. Shares -1.6% AH. (PR)(earnings transcript)
• Prudential Financial (PRU): Q4 EPS of -$2.04 vs. consensus of -$1.19. Revenue of $5.9B vs. $6.35B. Sees 2009 EPS of $5.25-5.65 vs. $5.56. Shares -1.5% AH. (PR)
• Pulte Homes (PHM): Q4 EPS of -$1.33 vs. consensus of -$0.71. Revenue of $1.65B (-43.1%) vs. $1.44B. New home orders down 61% to 1,763. Backlog of $631M vs. $2.5B a year ago. Ends quarter with $1.7B in cash, no debt. Shares -2.6% AH. (PR)
• Sunoco (SUN): Q4 EPS of $2.68 vs. consensus of $2.15. Revenue of $9.14B (-30.6%) vs. $12.46B. Record revenue from its non-refining business. Shares -2.1% AH. (PR)
• THQ (THQI): FQ3 EPS of -$0.14 misses by $0.21. Revenue of $386M (-24.3%) vs. $403M. Continues to experience a cautious retail and consumer environment. No FQ4 guidance. Shares -15% AH. (PR)(earnings transcript)
• Torchmark (TMK): Q4 EPS of $1.40 misses by $0.10. Revenue of $M in-line. Sees 2009 EPS of $6.05-6.25 vs. $6.24. Shares +1.5% AH. (PR)
• Visa (V): FQ1 EPS of $0.78 beats by $0.12. Revenue of $1.74B vs. $1.68B. Payments volume +12% to $701B. Total volume +16% to $1.1T. Shares +7.9% AH. (PR)(earnings transcript)

Today's Markets

• Asia markets closed mostly down. Nikkei -1.1% to 7,950. Hang Seng +0.9% to 13,179. Shanghai -0.5% to 2,098. BSE -1.2% to 9,091.
• In Europe at midday, London -0.2%. Paris -0.8%. Frankfurt -0.5%.
• U.S. futures: Dow +0.1%. S&P -0.1%. Nasdaq -1.5%. Crude +0.4% to $40.47. Gold +1.7% to $917.60.

Thursday's Economic Calendar

• Retail Same-Store Sales
  Monster Employment Index
  7:00 BoE Announcement
  7:45 ECB Announcement
  8:30 Jobless Claims
  8:30 Productivity and Costs
  9:00 RBC CASH Index
  10:00 Factory Orders
  10:30 EIA Natural Gas Report
  4:30 PM Money Supply
• Notable earnings before Thursday's open: ANR, BG, BKC, BPO, CAH, CBB, CI, CINF, DO, DUK, EL, ELNK, FLIR, FLO, K, KIM, MA, MCO, MF, NCR, RX, SBH, SE, SPR, UFS, WU
• Notable earnings after Thursday's close: ALKS, ESLR, HIG, JDSU, NFX, PBI, PWAV, SRCL, SWKS, THOR, VRSN

Seeking Alpha editor Eli Hoffmann contributed to this post.

This is the Third Quarter 2008 edition of our ongoing hedge fund tracking series. Before reading this update, make sure you check out the preface to the series we're doing on Hedge Fund 13F's here.

The other funds we've already covered include: