Toxic Times at Lumber Liquidators; Warren Buffett’s Rose-Colored Portfolio; Argentina Gets Back in Some Good Graces

End in sight?

Image courtesy of iosphere/FreeDigitalPhotos.net

Image courtesy of iosphere/FreeDigitalPhotos.net

Not that this comes as any great shock but Lumber Liquidators took another hit on Wall Street today, this time posting a bigger drop than expected for its third straight quarter. Instead of sales falling an expected 12%, the embattled company ate a much harsher 17% loss. It’s almost hard to believe that it was just last year when the company pulled in a $17.3 million profit with shares gaining 64 cents. But that was just days before the scathing “60 Minutes” report that found that Lumber Liquidators’ wood flooring from China contained excessively high levels of cancer-causing formaldehyde. Today, the company reported that it lost $19.8 million and saw 73 cents shaved off of its shares. The company took in a net loss of $56.4 million, a major 180 from the $63.4 million it reported in 2014. Shares fell 10% today and hit a 7 year low as the company decided not to issue a financial forecast for 2016 – a prudent decision since the company’s not sure if they will be left with any customers. Then there are all those legal and regulatory issues still plaguing the company, the $29 million in legal expenses and a $13.2 million settlement stemming from an entirely unrelated investigation. But at least Lumber Liquidators finally named a new COO, former Lowes exec Dennis Knowles. If he can turn the company around he just might be eligible for a Nobel prize. That’s a big “if.” Lumber Liquidators currently has over 370 stores in the U.S. and Canada and on Sunday, in what seemed like an incredible act of desperation, took out full page ads in Sunday newspapers across the country attempting to reassure customers that its other products are of the highest quality and made using the highest safety standards. Just stay away from their flooring products made in China which are three times as likely to give you cancer.

Everything’s coming up roses…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Warren Buffett addressed his ever faithful shareholders over the weekend and shared with them his thoughts and wisdom gleaned from a storied and insanely successful lifetime in finance. The 85 year old Oracle of Omaha stressed the importance of optimism – an outlook, he feels, our current group of candidates lack since they “can’t stop speaking about our country’s problems (which, of course, only they can solve).” He took some time to share his thoughts on the role of a good effective leader which he feels involves the ability “to define reality and give hope.” Apparently he thinks Hillary Clinton is capable of doing this since that is the candidate he is rumored to be backing. Mr. Buffett’s optimism extends to the U.S. economy – its long-term prospects, anyway – which he feels is only going to get better, especially for the babies being born today whom he calls, “the luckiest crop in history.” And why shouldn’t the world’s third richest man express his optimism? His company, Berskshire Hathaway, was up 21% and took in a record full-year profit of $24.08 billion. Incidentally, Warren Buffett was also rather optimistic about IBM, even though the company has lost a whopping $2.6 billion since the major investment he plunked into it. Go figure. What Mr. Buffett wasn’t optimistic about is the climate change which he calls a major problem for the planet. I guess you would have to agree with him on that. Especially since Leonardo DiCaprio had similar sentiments in his Oscar acceptance speech last night.

You debt-or believe it…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

It seems like only yesterday when hedge fund billionaire  Paul Singer sued Argentina – yes, the country – for full repayment of the biggest sovereign default. Ever. Actually, it was closer to thirteen years ago but at least the two sides settled. Finally. Besides the enormous legal fees that both sides ate, Argentina was often unable to dock its naval ships or fly its Presidential planes in certain cities, lest they get seized by Singer and company. But now the settlement frees up Argentina  to hit up other countries and financial entities for more cash to borrow. Which is probably not the kind of thing you want to hear about a country whose commodities-based economy is on the skids. Oh well. As for the terms of the settlement, Argentina will be forking over $4.65 billion in cash – 75% of the principal – to Singer’s Elliott Management, besides the three other largest remaining creditors, including Aurelius Capital Management, Davidson Kempner and Bracebridge Capital. The agreement still needs approval from the Congress of Argentina which will hopefully check its drama at the door.

Walmart Bums Out Wall Street; Puma Deals a Mighty Blow to Yeezy; Is IBM Back in the Game?

Fall-mart…

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Walmart announced earnings and, in the process, managed to put a damper on Wall Street’s day. The company posted .6% growth and while nobody argues that growth is bad , the company still missed expectations of 1% growth. It’s now expected that Walmart will post a very boring flat line to illustrate its net sales even though previous forecasts called for 3% to 4% growth. Profits for Walmart fell almost 8% to $4.57 billion and posted revenues of $129.7 billion. While that may seem like a nice beefy number, analysts still expected $131 billion in revenue. The numbers weren’t helped by Walmart’s decision to close 269 stores worldwide, including 154 just in the United States. Then there were those wage increases and investments into its digital commerce that ate a bit into those profits. But Walmart is banking on the fact that those investments will yield big returns, even if it does mean a little wait. After all, if it’s gonna compete with Amazon, it’s gotta put in the time and money. Of course, mother-nature gets some of the blame too, seeing as how warm weather put a crimp in sales of cold weather merchandise. But don’t rule out the strong dollar, which also deserves plenty of the blame. At least shares are up over 6% in the last three months and the retailer is raising its dividend by 4 cents to generous $2 per share. Woohoo.

Swift karma…

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Puma had a very good quarter and much of the credit for that can go to Rihanna. Yes, that Rihanna. As the brand’s creative director, the pop star is helping shape the female future, as Puma refers to this endeavor. The company had higher than expected sales growth for its fourth quarter, just as Rihanna launched her first full goth-inspred line for the athletic apparel retailer. Back in the fall, RiRi’s remake of Puma’s classic suede kicks sold out within hours of going on sale. Puma’s profits were up 2.6% to 10.9 million euros, easily beating forecasts of 6.5 million euros. Sales rose 11.5% to 979 million euros when analysts expected just 839 million euros in sales. And maybe Kanye West should take to Twitter to hit up his sister-in-law, Kylie Jenner, for some cash, instead of Facebook CEO Mark Zuckerberg. She’s been named as the company’s brand ambassador, contrary to his hopes that she would be on his Team Yeezy Adidas line.

Have patients…

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Image courtesy of Stuart Miles/FreeDigitalPhotos.net

IBM. Remember that name? The company just whipped out $2.6 billion for its latest acquisition, Truven Health Analytics. Under CEO Ginny Rometty, IBM has so far spent $4 billion in acquisitions in the last 12 months but this latest one is IBM’s biggest purchase in three years. Wall Street reacted kindly by giving shares of IBM their biggest jump since 2013, and sending them all the way up to $134. That’s especially reassuring for IBM since it posted 15 straight quarters of declining sales. Truven was acquired since IBM brass thought it would fit nicely into its Watson Health biz unit. FYI, Watson is IBM’s fabulous collection of artificial intelligence technologies that does all kinds of super fun stuff like taking data apart to analyze it, interpret it and see if any patterns can be predicted.  With this acquisition, IBM will have health info on 300 million patients and employ 5,000 people worldwide.

 

 

 

Icahn: A Man of Letters; IBM Looks to Weather Some Storms; Twitter Has Yet to Impress

Icahn. Therefore I am…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Carl Icahn took time out of his busy schedule of haranguing Congress and ousting CEO’s to write yet another letter, this time on his website, to insurance company AIG. Icahn now owns a sizable chink of the company, though exactly how much remains a mystery. He only tells us that it is very “large.” I, for one, believe him, just cause it’d be kind of weird to make something like that up. Besides, he usually goes big. In his advice letter to AIG, the activist investor writes, “There is no more need for procrastination.” He wants AIG split up into three separate divisions because he’s not digging the company’s “Systemically Important Financial Institution” status, or SIFI if you’re feeling funky.  If you find that term a bit too clunky, then, by all means, refer to it by its other more user-friendly term, “Too Big To Fail,” as in the 2008 fiscal crisis and the HBO movie of the same name (that starred Bill Pullman  as JP Morgan Chase’s Jamie Dimon and Ed Asner as Warren Buffet). Icahn believes that when a company gets SIFI status it’s bad. It’s like a tax. A tax of a bunch of regulators breathing down your fiscal back with heavy breaths of federal oversight. Companies that don’t get saddled with that status are more valuable to shareholders, in Mr. Icahn’s not-so-humble opinion. Icahn wants to divide AIG into a property and casualty coverage division, a life insurance division, and a mortgage backing division. Then he wants to throw in some cuts and have AIG buy back some stock. After that, he feels AIG will start trading closer to its book value at about $100 a share. Right now the stock is trading at just under $64 and trades for less than 80% of its book value (which, by the way measures assets minus liabilities). As for AIG CEO Peter Hancock, well, Icahn will probably find a way to kick him out of AIG if he doesn’t take his advice.

Super duper…

Image courtesy of  Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Today’s big shopper is IBM, who is getting set to acquire The Weather Co.’s digital assets. In case you were wondering (because I know you were), those digital assets are its websites and apps. The channel, however, stays put, as it doesn’t really fit into IBM’s master plan. That master plan involves IBM beefing up its Watson Internet of Things Unit, its artificial intelligence unit that puts the super in supercomputer. The data supplied by the deal will give Watson the ability to create accurate forecasts – is that an oxymoron? – and will be able to provide commercial clients, from airlines to insurance companies, and beyond, very precise information. While the exact terms of the purchase have yet to be disclosed, the deal is rumored to be valued at around $2 billion. Naturally, shares of IBM took a little ride on the uptown train because of the super news.

These are the not quite the Moments…

Image courtesy of bplanet/FreeDigitalPhotos.net

Image courtesy of bplanet/FreeDigitalPhotos.net

Twitter is down 13% for the year and another 11% just today, and yet the micro-blogging site still beat the street. The social media company pulled down $569 million in revenue adding ten cents per share. Analysts predicted that Twitter would score closer to $560 million and add only a nickel per share. In terms of last year at this time, Twitter was up 58%. But here’s where things start to go south. The company revised its fourth quarter profit outlook between $695 million and $710 million. That seems like a whole lot of cash except that analysts were expecting numbers closer to $740 million. Then we turn to growth. There wasn’t that much of it.  Twitter only managed to add about 4 million new active monthly users. A very unimpressive 11% increase over the same time last year. Analysts, however, are still optimistic that launches, including the much-hyped Moments, and its increasing ad revenues will help turn the company’s fiscal tide.

McDonald’s Turnaround Plan Needs Salt; Warren Buffet Likes His Sugar; Chevy Volt Wants to Electrify

Would you like to supersize that?

Image courtesy of pakorn/FreeDigitalPhotos.net

Image courtesy of pakorn/FreeDigitalPhotos.net

McDonald’s CEO Steve Easterbrook finally revealed to all who were maybe mildly interested about his big plan is to steer McDonald’s back towards fiscal awesomeness, all in the course of a 23 minute video. The world’s biggest burger chain wants to re-franchise 3,500 of its stores. Because franchising offers “stable and predictable cash flow” from collecting fees, it will supposedly save the company about $300 million a year.  And who doesn’t like saving $300 million. Then, Easterbrook wants to make the company’s corporate structure and bureaucracy less “cumbersome” by dividing the company up into four neat little parts. Well, maybe not little. But certainly neater.  The first part is all about U.S. stores. International markets like, Australia and the U.K make up part number two. The third part is labeled high growth markets  – think China and Russia. Then, all those other countries in the world make up the fourth group.  Of course, no master revival plan would be complete without incorporating a customer-focused approach and the ever-menacing prospect of…accountability. But hey whatever works. And something needs to after the company posted a 2.3% drop in sales and revenue that was way too short of its target. Despite detailing this new plan Mc Donald’s couldn’t get Wall Street excited enough to send shares up, even a little.

Enjoy a Coke with Warren Buffet…

Image courtesy of tiverylucky/FreeDigitalPhotos.net

Image courtesy of tiverylucky/FreeDigitalPhotos.net

In case you couldn’t make it to the the Berkshire Hathaway shareholders meeting this weekend, also known as Woodstock for Capitalists, here are but a few of the pearls from that auspicious event. Wells Fargo, Coke, IBM and AmEx rock, at least according to the Oracle of Omaha. Mr. Buffet clearly knows a thing or two of what he speaks since his company has a market value of a staggering $350 billion. When he discussed Coca Cola and the $16 billion stake his company owns in it, the debate about the adverse health effects of sugar didn’t seem to concern him. He feels that people enjoy Coke and thus, it apparently makes them happy. Unlike Whole Foods, which he said, “I don’t see smiles on the faces of people at Whole Foods.” No doubt Whole Foods was not happy about that comment. He was also asked about his involvement with 3G Capital with whom he is now buying Kraft Foods. People have taken issue with 3G over its practice of buying companies and then laying off many of its employees. Mr. Buffet, however, said, “I don’t know of any company that has a policy that says we’re going to have a lot more people than they need.”  How charming. As for naming a successor, well, he didn’t.

Low-voltage…

Image courtesy of Danilo Rizzuti/FreeDigitalPhotos.net

Image courtesy of Danilo Rizzuti/FreeDigitalPhotos.net

Even though gas prices are pretty low, making gas-guzzling SUV’s that much more appealing, that’s not stopping car companies, like GM, from parading out its latest eco-friendly models. The 2016 Chevy Volt model is making its debut and what is supposed to be so electrifying about it is that it’ll be around $1,500 less than the 2015 model. It’ll also get 30% more mileage from a single charge than the 2015 model. It’s a bit redesigned and there’s even a $7,500 federal income tax credit. But to be fair, it’s not a fully electric vehicle because if you find yourself coasting along  the highway – or any road, for that matter – and the battery juice runs out, the Volt becomes just another regular gas guzzler.  If that doesn’t bother you – and why should it – then consider that Chevy is offering 0% financing for 72 months for qualified buyers. Unqualified buyers should take the bus. California’s even offering a $1,500 rebate which pretty much means that GM doesn’t think there’s going to be a waiting list for this particular automobile. Because let’s face it, a Tesla it’s not.

Snapchat’s latest News it and Lose it Feature; American Airlines Earnings Soar; Dow’s Downer of Day

Snap to it…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Maybe Snapchat’s $10 billion valuation isn’t so crazy after all now that the disappearing messaging app has introduced its latest – and possibly greatest – feature, Discovery. This new feature is going to offer bite-sized bits of news giving the user  several options to get more on a story all with the convenient, effortless swipe of a finger. And then, true to Snapchat tradition (and technology), the stories will last for 24 hours before…you guessed it, they vanish into thin virtual air. A slew of media companies are already partnered with the app, including (but not limited to) CNN, ESPN and Yahoo News. The hope is that this little partnership will take that younger, hipper audience of 100 million monthly active users (and counting) and turn them into traditional news enthusiasts. Then there’s the ad revenue aspect. Gotta love those ads (and the revenue they hopefully bring in). Snapchats plans to post ads and then split the revenue with its media partners.

Things that make you go hmmm…

Image courtesy of vectorolie/FreeDigitalPhotos.net

Image courtesy of vectorolie/FreeDigitalPhotos.net

American Airlines had a very good year and I can assure you I had nothing to do with it. The company posted its fourth quarter earnings regaling us with the news that it scored $597 million in net income. That number was particularly impressive since last year at this time the company posted a $2 billion loss. To be fair, (and I hate it that I have to be fair to American Airlines) that loss was because of one-time costs from its merger with US Airways and from its bankruptcy case. American Airlines also hooked in $1.1 billion in earnings with $1.52 per share, beating Wall Street’s estimates by a single, solitary cent. American Airlines can thank dropping fuel prices for some of its impressive earnings and the company plans to take a chunk of its $2.9 billion profit to update its pre-historic fleet and raise salaries. But if you’re hoping for a drop in fares, don’t hold your breath. It’s not happening.

Dow and out…

Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

Image courtesy of David Castillo Dominici/FreeDigitalPhotos.net

Today’s blizzard/storm had nothing on the Dow’s performance today which looked particularly disastrous with no thanks to some of the world’s biggest companies taking huge hits. Microsoft takes the number one spot with more than a 9% hit on its stock price today, despite the fact that it beat earnings estimates by 4%. Investors just didn’t see the growth, sales and transitioning that they expect from the once powerful and mighty software company. Oh well. Caterpillar takes the number two spot with a 7% hit on its shares. The company missed earnings expectations by $0.20. As prices for copper, coal and iron ore come down, there is less demand for mining equipment, which is precisely what Caterpillar does. The fact that the dollar is stronger than most other currencies is also putting a crimp in the Dow today. Procter & Gamble, is among those companies whose lousy earnings took a nasty 3.8% hit in its stock price, in part, because of this strong dollar of ours.  Other companies that have seen better days on the Dow include: Intel, Cisco, IBM, Nike. But alas, the list does not end there.

IBuMmer; Icahn/Andreesen Billionaire Smackdown; Valeant/Allergan Smackdown

 Big Blue-boo…

Image courtesy of renjith krishnan/FreeDigitalPhotos.net

Image courtesy of renjith krishnan/FreeDigitalPhotos.net

Perhaps you recall IBM?  Perhaps you don’t. The once powerful company that sat at the forefront of technology is now at the forefront of…nothing as the company just released its very disappointing earnings. The once mighty maker of chips – and I don’t mean potato (though we might be seeing better earnings if the chips were indeed of the potato variety), has sold that portion of its business. Revenue was down 4% to $22.4 billion which might seem like a nice beefy number except that analysts were expecting $1 billion more than that. And the company’s revenue has been going down for a few years now.  Analysts expected  the company to at least pull in $4.32 per share. It didn’t. Instead, profits for IBM took a 10% dive earning $3.68 per share.  Oh well. There’s always next quarter.

Love doesn’t live here anymore…

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

Image courtesy of Stuart Miles/FreeDigitalPhotos.net

It’s official. Marc Andreesen and Carl Icahn are not friends. And I don’t think they ever can be. At least not anymore after Mr. Icahn said in an interview that Andreessen is “what’s wrong with corporate America” and Andreesen telling CNBC that Carl Icahn lies and “makes stuff up.” Where is the love gentlemen? In any case, the latest episode in the Icahn/Andreessen saga is that Marc Andreesen has bid a not-so-fond farewell to the board over at EBay. It seems the extremely prescient Silicon Valley billionaire, Andreesen, and activist investor, Icahn,  got themselves tangled in yet another kerfuffle which has probably something to do with the kerfuffle they had earlier where Mr. Icahn accused Mr. Andreesen and fellow board member, Scott Cook, of having conflicts of interests where PayPal and EBay are concerned. I shall spare you the lurid details. Mr. Andreesen and Mr. Cook vehemently disagreed with Mr. Icahn’s accusation. But alas, it matters not as PayPal is no longer one with EBay. As for hopes of Mr. Andreesen and Mr. Icahn burying the corporate hatchet (or whatever it is that insanely wealthy executives do), don’t hold your breath.

A wrinkle in plans…

Image courtesy of patpitchaya/FreeDigitalPhotos.net

Image courtesy of patpitchaya/FreeDigitalPhotos.net

Perhaps you may recall pharmaceutical giant Valeant? Perhaps you recall how this pharmaceutical giant wanted to take over another pharmaceutical giant by the name of Allergan, notable for perennial fan fave Botox? And perhaps you recall that Allergan would prefer if Valeant would just go away? Well, it looks like that’s not going to happen anytime soon as Valeant just released some very impressive earnings, easily trumping analysts’ expectations. Except that Valeant also had good earnings. But no matter because Valeant really wants very badly to scoop up Allergan even though Allergan very badly does not want that to happen. Activist investor Bill Ackman, and his Pershing Square Capital Management LP, who is gunning for an Allergan takeover, just might make that even likelier and hostile-r because of Valeant’s newly announced, financially robust numbers, since numbers like those will allow him, together with Valeant, to up the ante to buy out the fabulous Botox maker.