Annualgain

Forest Laboratories: Steady Growth in Sales and Earnings

It's hard to see how any analysis of FRX is complete without some discussion of Lexapro and Namenda patent expirations. The best endorsement of this stock I've ever seen was when it was at $20 earlier this year. The analysis showed that FRX should have roughly $18 per share in cash and no debt on the balance sheet by the time the two big drugs go off-patent in 2012-2013. Now THAT'S what I call value.

Wall Street Breakfast: Must-Know News

With BRK.B getting split, could Berkshire finally be added to the S&P 500?

Finding Opportunity in Buffett's Burlington Northern Buy

I agree with PON. Rail has its advantages, but only for certain kinds of goods. Rail has always been cheaper when measuring cost per mile, but its on-time performance has been lousy compared to trucks and airfreight. If a manufacturer has to idle its plant or a retailer has to leave shelves empty because of the poor service that rail has always provided, saving a few cents per mile is just not worth it.

Since 1910 market share has gone to the highway and away from the railway. Airfreight has also taken share as manufacturers get better at using just-in-time inventory.

However, the more commodity-like a good is, the more it make sense to use rail. That's why coal represents about 25% of rail volumes, and grains/ag are another large chunk. These goods will never leave the railways.

High value, high margin goods are just the opposite. You don't see many MacBooks delivered via rail.

Good luck with your market share play, Mr. Kaminis.

Black & Decker (BDK) up 21.2% AH as rival Stanley Works (SWK) says it will pay $4.5B to buy the company in a stock deal. Stanley would own just over 50% of the combined firm. [[SWK]] up 3.9% AH.

So much for SWK trying to reduce its exposure to Home Depot.

Blackstone (BX) CEO Steven Schwarzman says he's seeing "more than green shoots" in the economy, and that private equity is in a "radically different place" than a year ago. "We do not expect the U.S. economy to slip back into recession," he said this morning, but weak consumer spending and continued constraints on bank lending could dampen the recovery.

I hope that the RailAmerica (RA) deal shows BX and the rest of private equity that they may have to temper their expectations for the multiples at which they hope to exit some of their holdings.

Wall Street Breakfast: Must-Know News

Don't look at everything in a vacuum. RailAmerica's IPO was a flop, but not because the economy isn't recovering. It was a flop because it was priced at an EV/EBITDA multiple of 11.8x (EBITDA is $130 million derived from 1H09 x 2). I would pay maybe 7x for a rail company and sell at 10x. That would mean buying at $3.60 and selling at $11, but this dog priced at $15. I mean, sheesh, even a quality name like BNI trades at less than 7x. Private equity is deluded if they think the stock investors will fix their problems by buying their over-priced deals once again. It's a new world, baby.

Japanese Banks: It Ain't So If You Say It Ain't So

This proposal from the Japanese finance minister makes a mockery of the capitalist banking system. Who is this guy, Kamei? His lack of responsibility is astounding.

If this isn't a reason to short the yen, I don't know what is.

Doug McIntyre wonders if Costco's (COST +3.7%) FQ4 beat is good news for retail: "The company is known for offering value prices to customers who are willing to buy items in volume. There are not many firms in the industry that fall into that category."

McIntyre's analysis is too superficial for two reasons. 1) When he says "The company is known for offering value to customers who are willing to buy items in volume" he misses the point that Costco is also known for selling high priced items like flat screen TV's that have been particularly hard hit. Any good news from this store is still good news.
2) The report, in addition to reporting sales for the year and quarter ended August also indicates that September sales have accelerated to +3% in the U.S. (excluding gasoline) from -1% in the August quarter. So even if this is a store benefiting from customers seeking value, it is still doing better than it did in the prior period. That too is good news.

An Obituary for the Paper Industry

i second what windsun has to say. There is no "paper industry" per se, but rather there's a dozen sub industries making free sheet, corrugated, wall board, newsprint, etc. Each has its own set of dynamics - newsprint is by far the hardest hit by secular trends away from paper. Check out abwtq.pk.

Whole Foods Market (WFMI) CEO John Mackey stands behind his infamous healthcare op-ed that spawned a boycott, and speaks out against the Fed's "debauchery of the currency." Mackey thinks the bailouts were a travesty, and says no-one's too big to fail. "I believe in the dynamic creativity of capitalism, and it's self-correcting, if you just allow it to self-correct."

John Mackey just likes to write. He couldn't stop himself from writing under a pseudonym on WFMI's Yahoo chat board, and he can't stop himself now.

He's not a nut. His company may have outgrown his skillset, but he's not a nut.

Treasurys are rallying broadly ahead of more debt sales next week. The 30-year yield -0.09 to 3.97%; 10-year -0.1 to 3.2%; 5-year -0.11 to 2.2%; 2-year -0.07 to 0.88%. Euro -0.7% against dollar; pound -0.3%.

It looks like investors' risk appetite has left them with a stomach ache.

Bruce Berkowitz Adds to Hertz, Trims American Express Holding

On the 9/30/09 call last night, I got the impression that Charlie Hernandez thinks PFE is recreating itself in JNJ's image. Diversified, multiple platforms, decentralized management. Anyone else get that feeling?

EnerNOC, Comverge May Be Today's Best Alternative Energy Pure Plays

Bill Paul: have you looked under the cover at ENOC? It's impossible to tell if their contracts will ever be profitable. If a customer (maybe an office building owner or an industrial manufacturer) signs a contract, they have no obligation to ever act on a demand response event. Yet ENOC has to install equipment on their site nonetheless. The concept of demand response is highly appealing; I'm just not sure if ENOC has the right business model. If you have more insight, I'm the first one to listen.

With new home sales data comes an updated "distressing gap" (see chart) - the (recently large) difference in the ratio between new and existing home sales, showing distressed sales have a ways to go before moderating.

I don't think the chart in the article goes back far enough. It only goes back to 1994 and hence only shows one housing downturn. Did a similar gap show up in the downturn of the early 90's during the S&L crisis? Wouldn't such a gap show up whenever the housing market is working off its excesses?

China Natural Gas: Deeply Undervalued

I have to side with Diego on this debate. If a company can consistently get a 25% ROE, then reinvesting the cash it generates makes more sense than paying a dividend, whether it's a utility or anything else.

I like this pick.