U Dontknow Jack

Reviewing Our January 2009 Market Predictions

The really good returns were made by those people that didn't commit just 1/3 to equities when the prices were unbelievably cheap in Feb - March.

If you couldn't buy then, at those prices, you just didn't know what you were looking at.

Hillenbrand: 'Dead Money' That's Good for You

Paul's combination seems to offer 22% for less than half a year even if the shares do nothing. What's not appealing about that?

Carriage Services: A Stock to Die For

Nice pick.

Clusterstock starts to recap the moves that resulted in CIT (CIT) being denied further government help tonight - reportedly amid a struggle between Geithner and Bair over the issue. WSJ: Treasury thinks it will lose its entire $2.3B investment in CIT, which would be TARP's first loss.

The first ADMITTED loss. Many more to follow.

'Egg'-cellent Returns with Cal-Maine Foods

Cal-Maine Shares Are Ready to Take Flight - Barrons

TUESDAY, JULY 14, 2009
WEEKDAY TRADER

By NAUREEN S. MALIK - Barrons.com

Shares of the U.S.'s largest egg producer offers a plucky dividend and cheap valuation.

WHEN IT COMES TO STOCK PICKING in this volatile market, investors may want to head to the kitchen for a tip: Bad eggs float in water while fresh ones stay underwater.

The same can be said of shares of Cal-Maine Foods (ticker: CALM), the largest U.S. producer of fresh shell eggs. The company has remained undervalued during the recent market rally.

At $25.43, Cal-Maine shares are down 12% this year while the broader Dow Jones U.S. Food Products Index is up 2.5%.

The company's earnings have also fluctuated with volatile egg prices and feed costs. Cal-Maine's 2009 earnings, to be released at the end of July, are expected to come in at $4.11 a share, almost 40% lower than fiscal 2008.

Specialty eggs such as those produced by these cage-free chickens fetch premium prices.
Even so, "this could be their second-best year in history," says William Jones, a Singular Research analyst.

Cal-Maine continues to generate an eye-popping return on equity of 30% at a time when private competitors and other companies across the market are cracking in this recession.

It currently pays investors a whopping 6.9% dividend yield for a stock that is trading at just 5.5 times forward earnings estimates.

As value investor Scott Black, president of Delphi Management, puts it, Cal-Maine is trading at "a third of the market multiple for a pretty good company with a nice yield."

The dividend yield is hefty but the actual payout fluctuates with earnings. Cal-Maine's policy is to pay out a third of its net income.

This has disappointed many investors as earnings tumbled in fiscal 2009, but will now be a boon as earnings rise. Analysts surveyed by Thomson Reuters expect Cal-Maine to earn $4.75 in 2010 and $5.89 in 2011.

Cal-Maine earned a record $6.40 in fiscal 2008 as egg prices raced higher than feed costs, which rose as corn prices skyrocketed.

Chris Armbruster, senior research analyst at Al Frank Asset Management, says Cal-Maine shares are an attractive buy under $28 a share and could rise to $53 in the next five years.

"I think a lot of people are skeptical of the dividend," but Armbruster says Cal-Maine generates enough cash flow to continue expanding through acquisitions.

The stock has also been overlooked in the recent rally because its $600 million market capitalization is too small to gain the notice of major institutional investors. "It's hard to find companies with good sustainable earnings" that can also generate strong double-digit returns, Black says. "We are a deep value player and you get paid to wait."

At a Glance

Cal-Maine Foods (CALM)

Stock Price: $25.43
52-Wk High: $48.80
52-Wk Low: $17.01
Market Cap: $584.8 million
Est. FY 2010 EPS:* $4.11
FY 2010 P/E: 5.5x
Est. Long-Term EPS Growth: ** N/A
Est. (FY'10/FY'09) EPS Growth: 16%
Revenue (trailing 12 months): $604.95 million
Dividend Yield: 6.9%
Chief Executive Officer: Fred Adams Jr.
Headquarters: Jackson, Miss

.
*Cal-Maine's fiscal year ends in May.
**Based on analyst estimates looking ahead three to five years.
Sources: Thomson Reuters, Barrons.com Investors may not have to wait long for fundamentals to heat up in the egg industry.

This is a good time to pick up the stock ahead of the peak demand period for eggs stretching from the back-to-school season through Easter, says Jones.

Cal-Maine's share of the U.S. egg market is nearly 16%, and it is the only publicly traded pure play. Its flock of more than 26 million layers, pullets (young hens) and breeders is greater than the humans residing in Texas, the U.S.'s second-most populous state, according to the U.S. Census Bureau.

It sells eggs in 29 states stretching from California to the East Coast, with operations concentrated along the Sunbelt.

Cal-Maine expects to sell 782.2 million dozen of eggs in 2009 and 862.2 million in 2010, up from 673.5 million in 2008. The volume is driven by acquisitions.

Overall U.S. egg consumption has remained steady in this recession, though demand shifted more to Wal-Mart and supermarkets and away from restaurants. Wal-Mart Stores (WMT) is Cal-Maine's biggest customer, generating 36.5% of sales in the first three quarters of fiscal 2009. The top 10 customers accounted for more than two-thirds of sales.

While other egg producers have been struggling, Cal-Maine's business has remained profitable given the company's sheer scale boosted by acquisitions. Advanced technology keeps costs low through automating feeding and egg picking.

As an industry consolidator, Cal-Maine gains scale and control over the supply of eggs, says Jones. The barriers to entry are rising with greater regulation and litigation. This has created a "well-balanced market," he says.

Wholesale egg prices, which vary by region, have fallen about 30% for the industry from 2008's peak, while feed costs have now been slumping for three quarters.

Cal-Maine's average selling price per dozen eggs is a premium to market prices thanks to its growing division of specialty organic, free-range and low-cholesterol eggs sold under the Egg-Land's Best and Farmhouse brand. They make up 15% of eggs sold.

Gross margins have fallen to 15% from 25% in 2008, and should expand in a recovery.

"They can operate and still have strong margins with difficult egg pricing and difficult feed costs because they are the most efficient egg producer," Jones says.

So as investor confidence starts to hatch, Cal-Maine stock won't leave egg on your face.


----------------------...

Full Disclosure:

• Singular Research analyst William Jones has a Buy rating and $42 price target on Cal-Maine shares.

• Al Frank Asset Management held 16,228 Cal-Maine shares as of March 31, 2009, according to the Securities and Exchange Commission.

TARP for Small Businesses?

CIT is bankrupt because of making tons of bad small business loans.

Comrade Obama now wants to take $700 billion of our money to burn that up too. What insanity!

BBOX: Trading with a 'Black Box' Formula

You can write the calls with no margin requirement other than owning the shares.

You can write the puts against marginable securities already in your account such as shares of stock in other companies or marginable government or corporate bonds.

In the 'best case scenario' listed you will never have to lay out any additional money thus the cash-on-cash return would be exactly correct as long as the puts are never exercised.

You're right that you shouldn't be selling puts if you don't have cash reserves to use in case of exercise. That's a given.

If BBOX stays above the break-even point you could always sell immediately at a profit if you didn't want to hold for a rebound.

BGC Partners: An Appealing Speculative Play

BGCP hit $4 in pre-market trading today.

nice pick, thanks.

Target Total Return

Target reported improving margins despite negative SSS for June.

Shares are indicated up almost 5% tp $39 pre-matket.

There's Value in Value Line Shares

ValueLine shares hit $34.56 today with the DJIA down 130 points.

Kroger: Food for Thought

Kroger has about $850MM in underfunded pensions.

With about 650 million shares outstanding that equals about $1.31 per share pretax. That's not a crippling amount and, hopefully, it will decrease quite dramatically over time as the markets gradually recover.

6 Ways to Short the Obama Health Plan

Comrade Obama is the most dangerous man on the planet.

Unfortunately his main target for extinction is the American economy.
We need to stop his destructive policies before it is TOO LATE!

Home Depot, Lowe's for Portfolio Improvement

You only incur the extra cash outlay IF the puts get exercised.

In the 'best-case' examples above this could not take place as the share prices at expiration would make the put exercise unprofitable for the holders of the options.

Even if the puts do get exercised, an immediate liquidation of the shares held would result in profits as long as the share price at that time was above the 'break-even' price in my calculations.

It is impossible to calculate a specific ROI for these trades IN ADVANCE as you can't know whether the puts would be used or not. That is why i clearly identify the 'best-case' and 'break-even' so that you can evaluate the potential returns based on where you think the shares will be from inception through expiration date.

I've been doing these trades for 31 years with excellent results.

Home Depot, Lowe's for Portfolio Improvement

I'd rather have the 31% and 39% gains from today
just through Jan-Feb 2010.

Get Crackin' with Tesoro and Valero

BUSINESS JUNE 29, 2009 Valero Harnesses Wind Energy to Fuel Its Oil-Refining Process

By ANA CAMPOY

SUNRAY, Texas -- In this windswept corner of the high plains, a big oil refiner is embracing new green technology in order to make more money producing old-fashioned fossil fuels.

Valero's $115 million Texas wind farm, above, will pay for itself in about 10 years at current electricity prices.
Valero Energy Corp., which has the capacity to process more crude than any other U.S. refiner, recently installed 33 windmills to supply a refinery here with green electricity to produce gasoline and diesel.

The marriage is one of convenience, Valero executives say. "We didn't build the wind farm so we could get into the wind-energy business," notes Tom Shetina, the refinery's manager, who expresses awe at the windmills' size. "We built the wind farm so we could support the refinery and run it more economically."

The company hopes to lock in fluctuating electricity prices by developing its own source of power, rather than relying on the grid, and to cut the $1.4-million-a-month electricity bill at the seven-decade-old refinery. The $115 million wind farm, which will be ready to operate at full capacity in August, will pay for itself in about 10 years at current electricity prices, company officials said.

Valero, which is based in San Antonio, does have some environmental motives. It hopes to produce its petroleum-based fuels more cleanly, something it could be forced to do if Congress enacts legislation to curb greenhouse gases.

While the wind farm will make the refinery greener, it won't reduce the greenhouse gas emissions spewed by cars and trucks as they burn the fuels that Valero makes.

Transportation generates 33% of U.S. carbon emissions, with gasoline accounting for the bulk of them, government data show. Transforming crude oil into fuels accounts for less than 5% of U.S. emissions, according to industry trade groups.

Valero is experimenting with alternative fuels -- it bought several ethanol plants earlier this year -- but it and other refiners are betting that Americans will continue to fill their tanks mostly with gasoline and diesel for years to come.

And faced with increasing competition from refineries located in lower-cost areas overseas, it wants to make those fuels more cheaply.

According to Ken Starcher, director of the Alternative Energy Institute at West Texas A&M University, the cost of electricity from a typical wind farm in the area averages 4.5 cents per kilowatt hour during the project's lifetime, including the initial investment and maintenance. That's about 1.5 cents less than the current utility-company rate, he says.

After the Sunray wind farm is completed in August -- and when the wind is blowing -- Valero expects to generate 50 megawatts of electricity an hour, the full load required to run the refinery next door. That should cover the refinery's needs 40% to 45% of the time, it says, an estimate that experts say is reasonable for the area if the wind farm is well managed.

Valero says it will also receive tax credits from the project and could potentially sell the renewable-energy certificates from its wind power, which will displace electricity that is mostly generated by burning Wyoming coal.

The refinery, which was built here in the 1930s to take advantage of nearby oil wells, happens to be in one of the most desirable wind-power-producing regions in the U.S. Located some 40 miles north of Amarillo, the refinery has few neighbors aside from cattle and prairie dogs, which don't seem to mind the towering white windmills.

For the refinery's workers, the new wind farm, with its sleek towers and swooshing sound, is a lesson in contrasts between the old and new energy. It will take only about three local people to operate, compared with the 450 to 1,500 workers required to keep the refinery's noisy labyrinth of tanks and pipelines running in good shape.