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Sunday, 16 March 2008
Bear Stearns (BSC) To Be Sold at $2/share?

Hello Friends!  Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice!  As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

It has been reported that JPMorgan Chase & Co. will be purchasing Bear Stearns (BSC) in an all-stock transaction that works out to $2/share. 

"NEW YORK (Reuters) - JPMorgan Chase & Co said on Sunday it would buy stricken rival Bear Stearns for just $2 a share in an all-stock deal valuing the fifth largest investment bank at about $236 million.

Under the deal, the Federal Reserve will provide special financing and has agreed to fund up to $30 billion of Bear Stearns' less liquid assets.

In a statement, JPMorgan said it would exchange 0.05473 shares of its stock for one share of Bear Stearns' stock. It is guaranteeing the trading obligations of Bear Stearns and its subsidiaries."

Take a look at the chart for Bear Stearns from StockCharts.com:

 

It is enough to make you sick.

Let's just take a look at a few other financials:

The chart for Citigroup (C) from StockCharts.com:


Or the chart for Merrill Lynch:


Or Washington Mutual (WM):

 


How low can these go?

And if that's not enough, here is the dollar-yen chart:


Just something to think about as we await the markets 

An interesting footnote is the important role that JP Morgan has played in prior stock market melt-downs.  An excellent review is found in The Big Picture, as they reflected on the 1929 crash:

"Thursday Oct. 24, 1929: For so many months so many people had saved money and borrowed money and borrowed on their borrowings to possess themselves of the little pieces of paper by virtue of which they became partners in U. S. Industry. Now they were trying to get rid of them even more frantically than they had tried to get them. Stocks bought without reference to their earnings were being sold without reference to their dividends. At around noon there came the no-bid menace. Even in a panic-market, someone must buy the "dumped" shares, but stocks were dropping from 2 to 10 points between sales—losing from 2 to 10 points before a buyer could be found for them. Sound stocks at shrunk prices—and nobody to buy them. It looked as if U. S. Industries' little partners were in a fair way to bankrupt the firm.

Then at 1:30 p. m., a popular broker and huntsman named Richard F. Whitney strode through the mob of desperate traders, made swiftly for Post No. 2 where, under the supervision of specialists like that doughty warrior, General Oliver C. Bridgeman, the stock of the United States Steel Corp., most pivotal of all U. S. stocks, is traded in. Steel too, had been sinking fast. Having broken down through 200, it was now at 190. If it should sink further, Panic with its most awful leer, might surely take command. Loudly, confidently at Post No. 2, Broker Whitney made known that he offered $205 per share for 25,000 shares of Steel—an order for $5,000,000 worth of stock at 15 points above the market. Soon tickers were flashing the news: "Steel, 205 bid.'' More and more steel was bought, until 200,000 shares had been purchased against constantly rising quotations. Other buyers bought other pivotal stocks. In an hour General Electric was up 21 points, Montgomery Ward up 23, Radio up 16, A. T. & T. up 22. How far the market would have gone downward on its unchecked momentum is difficult to say. But brokers and traders alike agreed that the man who bid 205 for 25,000 shares of Steel had made himself a hero of a financially historic moment.

That hero, Richard Whitney, head of Richard Whitney & Co., was brother of George Whitney, Morgan Partner. Back of his action lay a noontime meeting held at No. 23 Wall St., Home of the House of Morgan. Although an excited Hearst reporter would have it that the Head of the House was present, actually, John Pierpont Morgan was in Europe. It was Partner Thomas W. Lament with whom conferred Charles E. Mitchell, National City Bank; William C. Potter, Guaranty Trust; Albert H. Wiggin, Chase National Bank; Seward Prosser, Bankers Trust. These men controlled resources of more than $6,000,000,000. They met briefly; they issued no formal statement. But to newsmen, Mr. Lamont remarked that brokerage houses were in excellent condition, that the liquidation appeared technical rather than fundamental. He also conveyed, without specifically committing himself, the impression that the banks were ready to support the market. And the meeting was hardly over before Hero Whitney had become Heroic.

Traders, talking over the Morgan meeting, failed to remember any previous occasion on which a stock market conference had been called while a trading session was still in progress. They did recall, however, that in 1907, with call money at 125%. Secretary of the Treasury Cortelyou conferred with J. P. Morgan, put $25,000,000 of Government funds into Manhattan banks, halted the Panic. They remembered too the Northern Pacific crash of 1901. when, after Northern Pacific stock had gone overnight from $150 to $1,000 a share, the House of Morgan, representing the late great James J. Hill and the House of Kuhn, Loeb, representing the late great Edward H. Harriman, compromised at $150 a share, saved from ruin many a short. Then there was the U. S.-England war scare of 1895 when, with money at 80%, J. P. Morgan offered money at 6%, averted a threatened crash.

Thus bankers have for a long time recognized their responsibilities as panic-preventers, and when the glass house of speculation has cracked and splintered, it has most often been the strong House of Morgan that has assumed the responsibility of fame and brought order out of confusion." (emphasis added)"

Anyhow, it may not be 1929, but then again, it is indeed JPMorgan Chase that is possibly (?) averting another crisis.

Yours in investing,

 

Bob  


Posted by bobsadviceforstocks at 8:26 PM CDT | Post Comment | Permalink
Krispy Kreme Doughnuts (KKD) "Long-Term Review #17"

 

 

Hello Friends!  Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice!  As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website. Seeing as I didn't have any stocks to review in my "Weekend Review", it seemed reasonable to take another 'long-term view' on this blog.  

These reviews and analyses have been done assuming a 'buy and hold' approach to investing.  In reality, I practice and advocate a disciplined investment strategy (a link to my podcast on this topic) that involves carefully screening stocks for inclusion into a trading portfolio and then managing those investments by limiting losses by quick sales on declines and preserving gains by selling portions of appreciating stocks at targeted appreciation levels.

Some months ago I decided that it would be helpful to start looking at the very earliest entries on this blog to find out how they all turned out.  Hopefully with these analyses we can identify reasons to be selecting stocks and identifying what were the best prognosticators for success.  And not all of these picks have been successful!  

Last weekend I reviewed Westcorp (WES) which was initially posted on May 27, 2003.  The very next day I wrote up Krispy Kreme Doughnuts (KKD) on Stock Picks Bob's Advice.  Let's review that entry and see how KKD is doing today. 

"May 28, 2003

Krispy Kreme Doughnuts (KKD)


The market paused this morning as if it wanted to correct as the bears came out growling....but the bulls resumed their push and the momentum on the upside continues. As I write (10:43 am CST) market up 45 points.

An old favorite of mine, Krispy Kreme Doughnuts, hit the list today. They had a GREAT earnings report today as they continue their explosive revenue and earnings growth....all on the back of a glazed doughnut! (so much for low carb dieting)....earnings reported today with earnings up a strong 47%, their sales rose 34% to $148.7 million from $111.1 million last year.

As reported by the CEO on CNBC this morning same store sales growth continued in the double digit area up about 11% year over year. (These are the stores that have been open at least a year).

On Morningstar we see sales growing from $80.9 million in 1999, $220.2 million in 2000, $300.7 million in 2001, $394.4 million in 2002, and now with a $148 million for the quarter we have about an extrapolated $600 mnillion level for the year 2003 if everything continues at the same rate.

Looking at cash flow we do see a NEGATIVE 34 million number but with all the rest of the figures so good, I guess we can look over this for a good doughnut or two. Maybe with a cup of their new coffee!

I do not at this time own any shares but have in the past and am not planning at this time to purchase new shares. Nobody in my family owns shares either.

Have a great day investing! Did anybody besides me snag some SYNO? Bob"

Krispy Kreme Doughnuts (KKD) closed at $2.85 on March 14, 2008.  Using Yahoo to get the historical price on Krispy Kreme we can see that KKD closed at $34.18 on May 28, 2003.  Thus, I had a loss on this pick of $(31.33) or (91.7)% on this unfortunate stock pick! I do not currently own any shares nor do I have any options on this stock.

Let's take a closer look at this company and see how we should rate this stock!

What exactly does this company do?

According to the Yahoo "Profile" on KKD, the company

"...operates as a branded retailer and wholesaler of doughnuts. It engages in the ownership and franchising of Krispy Kreme doughnut stores, which make and sell approximately 20 varieties of doughnuts. These stores also offer an array of coffees and other beverages. As of January 28, 2007, there were 395 Krispy Kreme stores operated system wide in 40 states in the United States, Australia, Canada, Hong Kong, Indonesia, Japan, Kuwait, Mexico, the Philippines, South Korea, and the United Kingdom, of which 113 were owned by the company and 282 were owned by franchisees. The company was founded in 1937 and is headquartered in Winston-Salem, North Carolina."

How did they do in the latest quarter? 

On December 6, 2007, KKD announced 3rd quarter 2008 results.  For the quarter ended October 28, 2007, sales declined (11.7)% to $103.4 million from $117.1 million in the third quarter of the prior year.   The net loss for the quarter was $(798,000) or $(.01) per diluted share, improved from a loss of $(7.2) million or $(.12)/diluted share the prior year.

There has been a lot of turmoil at this doughnut maker.  On January 7, 2008, the CEO was replaced by Chairman James Morgan. On the other hand, the underlying value in the company and the brand has not been ignored either; Kuwaiti contractor Mohamed Abdulmohsin Al Kharafi & Sons on February 5, 2008, increased its stake in the company up to a sizeable 13.8%.

What about longer-term results?

Examining the Morningstar.com "5-Yr Restated" financials, we can see that revenue actually increased along with earnings from 2003 to 2004 when revenue climbed to $649 million from $491 million and earnings jumped from $.52/share to $.78/share.  However, in 2005 these results diverged with revenue continuing to grow to $708 million but the company turning in a large loss of $(3.22)/share.  Since 2005 revenue has slipped sequentially down to $461 million in 2007 and $431 million in the trailing twelve months (TTM).  Earnings have shown consistent although decreasing losses with $(2.20)/share reported in 2006, $(.70)/share in 2007 and $(.90)/share in the TTM.

Free cash flow has fortunately been positive recently with $18 million in 2007 and $8 million in the TTM.  The balance sheet is also adequate with $23 million in cash and $54 million in other current assets reported.  This total of $77 million in total current assets yields a current ratio of 1.69, an 'acceptable' current ratio imho. The company is reported to have an additional $114.7 million in long-term liabilities.

What about some valuation numbers?

Reviewing the data on Yahoo "Key Statistics" we find that Krispy Kreme (KKD) is now a 'micro cap' stock with a market capitalization of only $186.77 million. Since the company is losing money there is no trailing p/e. However, there are estimates of a return to profitability allowing us to estimate a forward p/e (fye 28-Jan-09) of 40.71.  Again, no PEG ratio is possible.

Using the Fidelity.com eresearch website, we can see that valuation-wise, with a Price/Sales (TTM) ratio of only 0.43, compared to the industry average of 3.06, this represents an outstanding value.  Also, with all of the recent losses, the return on equity (TTM) amounts to a (65.03)% compared to the industry average of 19.03%.

Finishing up with Yahoo, we can see that there are 65.53 million shares outstanding with 55.83 milion that float.  Currently, there are 8.14 million shares out short representing 17.5 days of trading volume, a significant short-ratio imho using my own '3 day rule' of significance on short interest. 

No dividends are paid and the last stock split was a 2:1 split back on June 15, 2001.

What does the chart look like?

Looking at the StockCharts.com 'point & figure' chart on KKD, we can see that the stock actually moved higher from October, 2002, when it was at $28 until my 'pick' and then peaked at $49 in August, 2003.  The stock has had a dismal track record dipping first to $4.00 in October, 2005, rebounding up to $13.50 in January, 2007, only to dip down to a low of $2.25 in January, 2008.  The stock is struggling at its current price, but it appears that most (?) of the damage may already have been done. 


Summary:  What do I think about this stock now?

First of all, in a Peter Lynch sort of fashion, I really like Krispy Kreme Doughnuts....ok they are fattening and all, and I am on a diet, but they are a nice treat.  


The fundamentals on this stock are dismal.  The only good thing I can say is that they are losing less money, are free cash flow positive, and have an adequate balance sheet.  Revenue has been declining and the chart looks horrendous.  It is just that so much of the damage has been done and the value of the stock is starting to look compelling with the Price/Sales ratio under 0.5. 

Now if they could just turn profitable and start growing their revenue once again.

In general, I would like to say this is rated a "SELL" but with so much of the damage done, and the Kuwaiti investor starting to accumulate shares, I am forced to rate this differently:

KRISPY KREME DOUGHNUTS (KKD) IS RATED A HOLD

O.K. I hoped I didn't wimp out on this one.  Just cause I love thouse doughnuts and am still in mourning after our own local Krispy Kreme outlet closed up.  It has been easier to diet since then :).  It just seemed that it would be 'too late' to start advising a sale on a stock that is this beaten up already!

Thanks again for visiting!  If you get a chance, be sure and visit my Covestor.com website where my actual trading portfolio is reviewed, my SocialPicks Page where my stock picks from the past year or so are examined, and my Podcast Page where you can download mp3's of me discussing some of the many stocks I write about here on the blog.  Good-luck next week investing.  Be sure and maintain trading rules whatever you do!  Limit your losses and exercise caution; it is getting ugly outside.

Yours in investing,

 

Bob 


Posted by bobsadviceforstocks at 3:52 PM CDT | Post Comment | Permalink
"Looking Back One Year" A review of stock picks from the week of August 28, 2006

 

 

 

 

Hello Friends!  Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice!  As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

I try to review past stock picks on weekends going a week at a time.  Last weekend I examined the selections on this blog from the week of August 21, 2006.   Going a week ahead to August 28, 2006, I took a break on the blog, not posting any selections that week.  Thus, I am entitled to a break here with this review.  I shall move to the next week in the future.  Meanwhile, have a wonderful weekend and maybe a better week trading next week?

Yours in investing,

 

Bob 


Posted by bobsadviceforstocks at 10:50 AM CDT | Post Comment | Permalink
Updated: Sunday, 16 March 2008 10:51 AM CDT
Saturday, 15 March 2008
My Prosper.com Account: Update #2

Hello Friends!  Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice!  As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

Last month, on February 10, 2008, I discussed my Prosper.com account.  (If you do choose to sign up via these links, please know that there is a $25 incentive when you make your first loan and also a $25 fee that I receive for making that referral!)

It is difficult to read the financial news without reading about the ongoing credit crunch.  I have great concerns about person-to-person lending arrangements in the midst of this credit problem and economic slow-down.   

And yet Prosper.com CEO Chris Larsen sees opportunity in this 'credit crunch'.  As he recently related in an interview with the San Francisco Business Times:

"Prosper CEO Chris Larsen said Monday that the San Francisco company is benefiting from the credit crunch that's sending more lenders and borrowers to the person-to-person lending marketplace.

More people with good credit are coming to Prosper as home equity loans and credit cards become harder to obtain, Larsen told 350 people attending the company's Prosper Days in San Francisco.

"Banks are retrenching so aggressively," he said. Prosper lenders have also pulled back on loans made to subprime borrowers.

Larsen also anticipates more people might be willing to lend on Prosper as rates fall on other investments following the Fed's dramatic rate cuts."

However, I still am cautious about the safety of lending unsecured amounts to individuals in this set-up and would encourage all of you to exercise reasonable caution and care.  Certainly emphasizing higher quality borrowers and spreading out your loans to multiple borrowers is a reasonable approach to reduce some of the risk.   Meanwhile, I am committed to continuing to share with you my own experience on Prosper.com. 

A recent article on these type lending arrangements recently was published in the Wall Street Journal.  Pay special attention to the comments sections, especially to  ira01 who details some of his perceptions of the risks involved in lending on Prosper.  Especially useful is his link to LendingStats.com which summarizes the Prosper.com lending experience.

In fact, you can view my statistics on Prosper.com here

Reviewing my own Prosper.com information, I currently have 53 active loans vallued at $2,816.62.  I continue with my automatic $50 deposit into Prosper.com twice/month.  I have $15.37 in payments pending, $122.59 in current bids that are 'winning', yet still not concluded for an average interest rate of 18.62%.  I have had total loans of $2,960.69, with $248.63 in payments received.  My average interest rate on my loans is at 15.69% with a daily interest accrual of $1.20.

Right now 50 of my 53 loans are current.  I have one loan which is less than 15 days late on a payment (it is marked as having a pyament being processed); however, I have two loans which are more problematic.   One is between 15 days and 30 days late with a principal balance of $(47.87), and one which is greater than 30 days overdue and has been entered into collection.  That one has a balance of $(46.76).

My first loan was written September 20, 2007, and my latest loan was approved March 10, 2008. 

If you are interested in learning more about Prosper.com, you can click here to enroll.  Like I have noted, I do receive a $25 referral fee if you do decide to make a loan.  I have tried to emphasize the tremendous risks involved, risks that have grown as the credit crunch develops and the pressure on homeowners and others who may seek unsecured loans may increase.

Thanks so much for stopping by and visiting my blog!  If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.  If you get a chance, be sure and visit my Covestor Page where my actual Trading Portfolio is monitored and evaluated as well as my SocialPicks Page where my stock picks are followed and monitored.  If you are interested, consider dropping by my Podcast Page where you can download mp3's of me discussing some of the many stocks and issues I address in the blog!

Hoping next week brings all of us good health and financial success.  

Yours in investing!

 

Bob 

 


Posted by bobsadviceforstocks at 1:36 PM CDT | Post Comment | Permalink
Updated: Saturday, 15 March 2008 1:37 PM CDT
Wednesday, 12 March 2008
Esco Technologies (ESE)

Hello Friends!  Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice!   As always, please remember that I am an amateur investor, so please remember to consult with your professional investment adivisers prior to making any investment decisions based on information on this website.  I was rather excited about my new Seeking Alpha affiliation....o.k. it is just another website, but I really am an amateur, and this is big stuff :).  (This is really new, so they haven't even posted an article yet....I shall have to wait and see how this works out!)

And it is late (9:30 pm Wisconsin time) and I have to be up at 5:00 to get out and do my walk at the University.  I am a confirmed couch potato, but have been working at increasing my activity of late....besides the markets aren't open that hour anyhow.  I generally get into rather heated political discussions with my fellow walkers....but that is another story as well.

What I am trying to get at is I want to make this a brief entry and instead I am writing word after word trying to explain to you why I want this to be short.  Now does that make sense?

There wasn't any follow-through from yesterday's big rally as the market closed today (3/12/08) at 12,1110.24, down (46.57) and the Nasdaq closed down (11.89) at 2,243.87.  Oil charged ahead over the $100 level closing at $109.92, and gold continued to push the $1,000/ounce level closing at $4.70.  It really wasn't the kind of trading day to make an investor smile.

But back to my review.  (If those Seeking Alpha folks had read this before they certified me I might never had gotten that medal!)

Esco Technologies (ESE) made the list of top % gainers today, closing at $41.06, up $3.99 or 10.76% on the day.  I do not own any shares or options of this stock.

In a nutshell, this company that produces devices for the electric utility business,  reported an order for 88,000 electronic devices from PG&E and has a


 

potential for up to 4.1 million 'gas units' over the life of this contract.  With the price of natural gas going through the roof, the 'street' liked this report and I guess figured Esco was in the right business at the right time :).

O.K. keeping it simple, the last quarter reported on February 7, 2008, was solid. The Morningstar.com "5-Yr Restated" financials look great, and the point and figure chart from StockCharts.com, appears to show that the company is breaking through recent resistance on the upside and is far from over-extended!


With all of this in mind,

ESCO TECHNOLOGIES (ESE) IS RATED A BUY 

O.K. that was briefer than usual.  But did it make my point? 

Thanks so much for stopping by and visiting my blog.  If you have any comments or questions, please feel free to leave them on the website or email me at bobsadviceforstocks@lycos.com.

Yours in investing!

 

Bob 


Posted by bobsadviceforstocks at 9:56 PM CDT | Post Comment | Permalink
Participating in Seeking Alpha

It is with a great deal of pleasure to let all of you know that I shall be participating in Seeking Alpha.  You can visit my bio page here.  (You may notice that I have updated my picture as well.)

Seeking Alpha is the brainchild of David Jackson.  In his biography, it is noted:

"David Jackson worked for five years as a technology research analyst for Morgan Stanley in New York. He left in early 2003 to manage money (long/short) and explore new approaches to financial publishing, ultimately leading to the creation of Seeking Alpha. Prior to Morgan Stanley he worked in technology venture funding and macro-economics (HM Treasury in London and The Bank of Israel). He has a B.A from Oxford University and an MSc from The London School of Economics."

Kiplinger in 2007 listed Seeking Alpha as the best website for financial information. 

There is no monetary compensation for me involved in this association.  In fact Bill Rempel, a.k.a. NO DooDahs! wrote an interesting piece complaining about this failure to provide a share in the revenue with submissions.  As for me, at this point in my life, I am enjoying the greater exposure to readers who are interested in what I am writing about, and the opportunity of entering into larger disussions on the subjects I blog about.

It is estimated, unless I have it wrong, that Seeking Alpha had 535,658 unique visits in the month of February 2008.  I generally get about 200 visits a day here.  So you know I am smiling.

I am looking forward to this association.  In fact I am proud to share my Seeking Alpha 'medal of approval' on the blog!  O.K., I am just an amateur, and I get excited about these things :).

Thanks so much for dropping by and visiting!  I shall continue to strive to produce good content for all of you readers and now Seeking Alpha visitors.  If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.

Yours in investing,

 

Bob 


Posted by bobsadviceforstocks at 9:04 PM CDT | Post Comment | View Comments (1) | Permalink
Updated: Wednesday, 12 March 2008 9:08 PM CDT
Tuesday, 11 March 2008
Inter Parfums Inc. (IPAR) "Revisiting a Stock Pick"

Hello Friends!  Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice!  As always, please remember that I am an amateur so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

What a difference a day makes!  

The market took off to the upside after the Federal Reserve announced a "$200 billion Term Securities Lending Facility" which will assist banks and financial firms to "liquify" their mortgage-backed securities.  These securities have been one of the problems facing the financial world.  As reported yesterday:

"In recent days some large private funds that had bought mortgage-backed securities with borrowed money said their lenders were demanding that the funds put up more capital to cover the declining value of the securities. Such "margin calls" can force funds to dump securities they hold, in turn driving markets lower.

Carlyle Capital, a $21-billion-asset mortgage securities fund that was hit with margin calls last week, said Monday that it was continuing to talk to its lenders about forbearance.

After regular trading ended Monday, MFA Mortgage Investments, a New York-based fund, said it had sold $1 billion in mortgage-backed securities since Friday to pare back its use of borrowed money."

After the Fed move, markets responded and moved higher with the Dow closing at 12,156.81, up 416.66 and the Nasdaq up 86.42 to 2,255.76, and the S&P 500 closing at 1,320.65 (3/11/08).

With this broad-based rally, it wasn't hard to find a stock 'to like' today that fits my own investment philosophy.  In fact, I noticed that an 'old name' Inter Parfums (IPAR) had made the list of top % gainers on the Nasdaq today, closing at $19.65, up $3.37 or 20.70% on the day.  I do not own any shares or options on this equity.  However, I do write 'old name' because I first posted Inter Parfums (IPAR) on Stock Picks Bob's Advice back on October 6, 2003, about 4 1/2 years ago!  At that time, IPAR was trading at $10.98.  Based on today's closing price of $19.65, this represents an appreciation of $8.67 or 79.0% since posting.

Let's take a closer look at IPAR and I shall explain why

INTER PARFUMS (IPAR) IS RATED A BUY

First of all what exactly does this company do?

According to the Yahoo "Profile" on Inter Parfums, the company

"...along with its subsidiaries, manufactures, markets, and distributes fragrances and fragrance-related products in Europe and the United States. It produces and distributes prestige fragrance products under various brands, which include Burberry, Lanvin, Paul Smith, S.T. Dupont, Christian Lacroix, Quiksilver/Roxy, Van Cleef & Arpels, and Nickel. The company markets fragrance products, cosmetics, and skin care products primarily under license agreements with brand owners. It also produces and distributes fragrance, personal care, and home fragrance products under Banana Republic and Gap brand names; alternative designer fragrances and personal care products; mass market fragrances under proprietary brand names, as well as a license for the Jordache brand; Aziza line of eye shadow kits, mascara, and pencils for the young teen market; and health and beauty aids under Intimate brand name, including shampoos, hand lotions, conditioners, and baby oils for specialty retailers, mass market retailers, and discount chains in the United States and Canada."

How did they do in the latest quarter?

As is often the case with a sharp move in a stock, it was the earnings announcement after the close of trading yesterday that pushed IPAR stock sharply higher today.   Inter Parfums announced 4th quarter 2007 results.  Net sales increased 32% to $119.4 million, up from $90.2 million.  net income increased 57% to $8.6 million from $5.5 million.  Diluted earnings per share came in at $.41/share, up 52% from $.27/share during the period ended December 31, 2007.

The company beat expectations with these results as analysts, according to Reuters Estimates, expected earnings of $.34/share on revenue of $107.6 million.  In that same news report, it was reported that the company also raised guidance for 2008 to $1.25/share on revenue of $442 million in 2008.  Just two months ago, in January, the company had guided to earnings of $1.16/share on net sales of $437 million.  The company had been expected to come in at $1.14/share on revenue of $438.4 million according to Reuters Estimates.

As I have described in other blog entries (for example here and here), a "trifecta plus" in an earnings report that for me involves a strong report with increasing revenues and earnings, with the particular company exceeding expectations and raising guidance. 

IPAR has done all of this!  And the market loved the announcement!

What about longer-term results?

Reviewing the Morningstar.com "5-Yr Restated" financials, we can observe the strong and steady growth in revenue from $130.4 million in 2002 to $321.1 million in 2006 and the $360.4 million in the trailing twelve months (TTM). During this time, earnings have steadily grown from $.47/share in 2002 to $1.00 in the TTM (except for a slight dip from $.77/share in 2004 to $.75/share in 2005).  The company pays a dividend and has increased it fairly regularly from $.06/share in 2002 to $.16/share in 2006 and $.19/share in the TTM.  Outstanding shares are quite stable with 20 million in 2002 and an increase to only 21 million in 2006 and the TTM.  In the same time period, revenues climbed almost 200% and earnings were up in excess of 100%.

Free cash flow, while not showing significant growth, is positive at $9 million in the trailing twelve months.  The balance sheet is solid with $54 million in cash and $240.0 million in other current assets.  Thus, this total of $294 million in current assets, when compared to the $122.4 million in current liabilities yields a current ratio of 2.4. 

What about some valuation numbers?

Examining the Yahoo "Key Statistics" on IPAR, we find that this is a small cap stock with a market capitalization of only $401.59 million.  the trailing p/e is reasonable imho at 19.63 with a forward p/e (fye 31-Dec-08) estimated at 15.00.  With the steady growth in earnings expected, the PEG ratio is very reasonable at 0.95.

Using the Fidelity.com eresearch website, we can see that the Price/Sales (TTM) ratio is reasonable at 0.92 compared to the industry average of 1.73.  In terms of profitability, the Return on Equity (TTM) isn't quite as impressive at 12.51% compared to the industry average of 42.83%.

Returning to Yahoo, we find that there are 20.44 million shares outstanding with 9.44 million that float.  Of those that float, 988,960 shares were out short as of 2/12/08, representing 10.3% of the float or 13 trading days of volume!  Using my own idionsyncratic '3 day rule' for significance, this represents a whole lof of shares out short as of last month, setting up for what may well have been a short squeeze today on the good news of strong earnings results.

As reviewed above, the company does pay a small dividend of $.20/year yielding 1.20%.  The company last split its stock on September 17, 2001, with a 3:2 stock split.

What does the chart look like?

Reviewing the 'point & figure' chart on Inter Parfums (IPAR) from StockCharts.com, we can see that the stock has moved very nicely from $2.75/share in 2001 to a high of $32 in March, 2004.  the stock has struggled to reach that level since then making back to only $28 in May, 2007, only to dip back to a low of $14 in January, 2008.  The stock is trading below resistance levels and it would be nice to see this stock break through $23/share to feel more comfortable regarding the technical appearance of the chart imho.


Summary:  What do I think about this stock?

Well, I cannot say that I understand this stock from a Peter Lynch perspective :), but seriously I really do like this stock.  The latest quarterly report was quite strong, beating estimates on both revenue and earnings with the company raising guidance above the street's expectations.  The company has a pretty solid record of growth the past five years, they have a stable number of shares outstanding, and they even pay a dividend that they have been steadily increasing!

Free cash flow is positive and the balance sheet appears solid.

Valuation-wise the p/e is in the teens with a PEG under 1.0.  The price/sales ratio is cheap but the Return on Equity figure is a bit anemic relative to similar companies.  In addition, there are lots of short-sellers out there who have already sold shares and with the current price rise, may well be hustling to cover their shorts.   Technically, the chart certainly doesn't look like it is getting ahead of itself, but I would like to see the stock move a bit higher prior to feeling like it has broken its previous drift lower.  I am not ready to buy shares, but if I were in the market, this is the kind of stock I would be adding to my portfolio!

Thanks again for visiting!  If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.  If you have time, be sure and stop by and visit my Covestor Page where my current trading portfolio is reviewed an assessed, my SocialPicks page where my picks from the last year have been reviewed, and my Podcast page where you can download a radio show that I have put together discussing some of the many stocks mentioned on this blog.

Good luck trading and investing tomorrow!   Remember, "Don't fight the Fed!"

Yours in investing,

 

Bob 


Posted by bobsadviceforstocks at 5:31 PM CDT | Post Comment | Permalink
Sunday, 9 March 2008
Westcorp (WES) "Long-Term Review #16"

 

 

Hello Friends!  Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice!  As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

One of the things I have tried to do on my blog is to look back on past stock picks and find out how they turned out.  With the blog heading towards five years of age, and with the posts approaching 1,700, this does become a bit awkward at times.  Thus, I have done the one year reviews and the "long-term reviews" which look at the earliest posts on this website.  

Last weekend I discussed Dearborn (DEAR) which was originally posted on May 27, 2003.   The next stock was also originally posted on May 27, 2003: Wescorp (WES).

This is what I wrote:

"May 27, 2003

  Westcorp (WES)

Continuing to scan the lists tonight before checking out for the day, I was hoping to find something sexier than another financial. However, using out criteria, that was all that I could find. Please feel free to suggest other issues anytime!

According to CNN.money, WestCorp is "a financial services holding company providing automobile lending through WFS Financial, and community and mortgage banking through Western Financial Bank."

Last month, on April 23rd, WestCorp reported their earnings for the first quarter of 2003. In summary, per the NYTimes on the Web, net income rose 40% to a record $23.5 million for the quarter, EPS increased 30% to $60 for the quarter, and total revenues grew 22% to $194 million for the quarter. An outstanding last quarter....one of the main criteria of our selection methodology.

For the last 5 years, looking at Morningstar, we see STEADY growth (another criterion), from $0.4 billion in 1998, to $0.5 billion in 1999, $0.8 billion in 2000, $1.0 billion in 2001, and $1.2 billion in 2002.

Unfortunately, the entries on cashflow and assets and liabilities are NOT included in complete form on Morningstar but the rest of the numbers look excellent.

WES closed the day ar $24.41 or up $1.70 (7.49%).

Have a great evening and please stop by again soon!

Bob"
 
Fortunately for this reviewer, this will be a short review :).  On September 12, 2005, Wachovia announced the acquisition of Westcorp (WES) for 1.2749 shares of Wachovia.  With Wachovia (WB) closing at $27.22, assuming that WES shareholders were still holding onto their WB stock, this would represent 1.2749 x $27.22 = $34.70.  With WES trading at $24.41 for the post, this would be a gain (despite the recent sharply lower price of WB and all of the financials!) of $10.29 or 42.2% since posting!
 
Thanks so much for stopping by and visiting!  If you have any comments or questions, please leave them on the website or email me at bobsadviceforstocks@lycos.com.  
 
If you get a chance, be sure and visit my Covestor Page where my actual Trading Portfolio is monitored, my SocialPicks page where my stock picks from the past year or so have been monitored and evaluated, and my Podcast Page where you can download some mp3's of me discussing some of the many stocks reviewed on this blog!
 
Have a great week!
 
Yours in investing,
 
 
Bob 


Posted by bobsadviceforstocks at 9:06 PM CST | Post Comment | Permalink
"Looking Back One Year" A review of stock picks from the week of August 21, 2006

 

Hello Friends!  Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice!  As always, please remember that I am an amateur investor, so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

I haven't been very busy posting this past week.  There really hasn't been much to write about except the continuing challenge to the markets by the ongoing correction.  My own Trading Portfolio is down to just 6 positions, from my maximum of 20 and just above my minimum of 5.  These positions are: Copart (CPRT), Covance (CVD), IHS (IHS), Morningstar (MORN), ResMed (RMD) and Meridian (VIVO). 

Especially with just 6 positions, it is easy to have one stock exert an inordinate amount of effect on the portfolio.  This is exactly what happened Friday when Copart disappointed investors with their quarterly report.  The stock plunged $(3.93) or (10)% to $35.50, erasing much of the 'paper profits' on this holding.  However, with the stock trading above my cost of $33.72, and with the report not really being bad enough from my perspective to unload the shares, I hang on and take my 'licks' from this correction

As part of my weekend activity on this blog, I have been trying to look back at stocks I posted a year ago.  Having missed several weeks along the way, it is really a retrospective analysis of stocks selected for this blog more like 1 1/2 years earlier!  In any case, I work week by week through past stock selections to find out what worked, what didn't, and can we possibly learn from these selections.

This review assumes a buy and hold approach to investing.  In reality, I use a disciplined portfolio management strategy designed to limit losses by quick sales of declining stocks and retaining gains by partial sales at appreciation targets.  The difference between these two strategies would certainly affect eventual investment performance.  But for the ease of analysis, I shall continue to do my reviews assuming a passive buy and hold strategy for these stock picks.

Last weekend I reviewed the pick(s) from the week of August 14, 2006.  Let's move a week ahead and take a look at the activity on this blog for the week of August 21, 2006.  Fortunately for this reviewer, I only 'picked' one stock on the blog during the week of August 21, 2006.  Unfortunately for this reviewer it was a bust!

On August 26, 2006, I posted ICT Group (ICTG) on Stock Picks Bob's Advice when the stock was trading at $28.94.  ICTG closed at $8.59 on March 7, 2008, for a loss of $(20.35) or (70.3)% since posting.  (We can see from this price performance, that maintaining a loss limit of (8)% or whatever you choose, would be better than picking a stock and blindly hanging on!)

Let's take a closer look at this stock and I will explain why

ICT GROUP (ICTG) IS RATED A HOLD

First of all what does this company do?

According to the Yahoo "Profile" on ICT Group (ICTG), the company

"...and its subsidiaries provide outsourced customer management and business process outsourcing solutions. It offers customer care/retention, technical support and customer acquisition, and cross-selling/upselling services, as well as market research, database marketing, data capture/collection, email management, collections, and other back-office business processing services."

How did they do in the latest quarter?

On February 27, 2008, ICTG reported 4th quarter 2007 results.  Revenue for the quarter ended December 31, 2007, came in at $112.5 million, down from $117.2 million the year earlier.  The company reported a net loss of $(3.0) million or $(.19)/diluted share.  Excluding one-time expenses, the company came in with net income of $922,000 or $.06/diluted share.  In any case, compared to last year, this was way down from the $5.1 million in net income or $.32/diluted share reported.  Even with the excluded items, the company failed to meet expectations on revenue for the quarter of $114.6 million but did beat on earnings which had been expected to come in at $.03/share

The company was not very optimistic about 1st quarter 2008 results:

"For the first quarter of 2008, the Company expects revenue to be slightly below fourth quarter 2007 levels. As indicated during the Companys third quarter earnings call, first quarter expenses will be higher than normal due to seasonal factors, as well as for training and other start-up costs associated with a large contract won in the third quarter and the completion of the accelerated ramp-up of ICT GROUPs offshore facilities. Consequently, first quarter 2008 diluted earnings per share are expected to result in a loss of $0.03 to $0.07 per diluted share."

This reduced guidance was well below street expectations. 

What about longer-term results?

Reviewing the Morningstar.com "5-Yr Restated" financials on ICTG, we can see that the revenue picture is intact with steady increases from $299 million in 2002 and $448 million in 2006 and $458 million in the trailing twelve months (TTM).  Earnings, however, have dipped from the $1.11/share reported in 2006 to a loss of $(.24)/share in the TTM.

Free cash flow has also turned negative at $(4) million from 2006 when $9 million of free cash flow was generated. The balance sheet is still solid with $24 million in cash and $101 million of current assets, compared to current liabilities of $47.3 million and a nominal amount of long-term debt recorded at $6.5 million.  This $125 million in current assets yields a current ratio of over 2.0 when compared to the current liabilities of $47.3 million.

What about valuation numbers?

Reviewing Yahoo "Key Statistics" on ICTG, we can see that this is a small cap stock with a market capitalization of only $135.64 million.  There is no trailing p/e recorded, but the PEG is cheap at $.73 and the forward p/e is also cheap at 10.23 (fye 31-Dec-09).  

Reviewing the Fidelity.com eresearch website, we find that the Price/Sales (TTM) is cheap at 0.30 compared to the industry average of 2.05.  With the recent losses, the Return on Equity (ROE) (TTM) is reported at (7.23)% compared to the average of 27.89 in the industry per Fidelity.

Finishing up with Yahoo, we can see that there are only 15.79 million shares outstanding with 8.91 million that float.  Of these 618,890 shares were out short as of 2/12/08, representing 7.1 trading days of volume or 6.4% of the float.  This is significant and represents some bullish possibilities with the ratio well above my own '3 day rule' for short interest.

No dividends and no stock splits are reported on Yahoo.

What does the chart look like?

Reviewing the "point & figure" chart on ICT Group (ICTG) from StockCharts.com, we can see how the stock climbed from October, 2005, when it was trading at $11.50 to a peak of $36 in November, 2006.  The stock has declined steadily since that time to the current low of $8.59 just pennies above the recent low of $8.


Summary:  What do I think?

When I first started writing up this particular stock to review, I initially ranked this as a "sell".  But it just seems too late to be advocating a "sell" on a stock that is as decimated as this one is.  The forward p/e (if it can indeed once again turn profitable) is only 10 or so.  The PEG is well under 1.0, the Price/Sales ratio is cheap.  What this has turned into is a value play.  Not my kind of stock at all.  But it appears too late to be advocating a 'sell'.  Thus, the 'hold'.  

If the stock can indeed turn around in a couple of quarters, we may well see this stock moving higher once again beyone its very depressed levels.

THAT was the only stock I picked during that week back in August, 2006. And it was a humdinger.  This stock emphasizes, and I cannot overemphasize this point, the imperative of limiting losses and not riding a stock down all the way from a peak.  Thus, my performance for that week back in August, 2006, was a loss of (70.3)% on my pick--the only stock selected for the blog.  Probably the worst week I have reviewed for awhile.

Thanks again for visiting! If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com. 

If you get a chance, be sure and visit my Covestor Page where my trading portfolio is analyzed, my SocialPicks page where you can view my picks from the last year or so, and my Podcast Page where my podcasts are stored for you listening pleasure!

Hoping we all have a little more profitable week in the days ahead!

Yours in investing,

 

Bob 


Posted by bobsadviceforstocks at 5:17 PM CST | Post Comment | Permalink
Updated: Sunday, 9 March 2008 5:18 PM CST
Tuesday, 4 March 2008
Silicom (SILC) "Trading Transparency"

Hello Friends!  Thanks so much for stopping by and visiting my blog, Stock Picks Bob's Advice!  As always, please remember that I am an amateur investor so please remember to consult with your professional investment advisers prior to making any investment decisions based on information on this website.

A few moments ago I sold my 350 shares of Silicom (SILC) at $13.62.  These shares had been purchased 1/28/08 at a cost basis of $13.67. Thus, they just went 'into the red' for me, starting to generate an unrealized loss.  Since I had added these shares into my portfolio as a result of a trade (the last position from any trades), and I had already sold these shares once at a profit, my 'trading strategy' directed me to unload these shares once they passed break-even.  And I did.

Thus, I am now down to six positions.  I shall be sitting on my hands with the proceeds of this trade as it was a sale on 'bad news'.  And since I am still above my minimum of 5 positions (but getting close), it is not necessary to replace this holding.

With my own sale of Silicom, I am reducing my rating on the stock:

SILICOM (SILC) IS RATED A HOLD

You might ask why I don't reduce my rating to "sell" since I sold my own shares.  Basically, since I sold on a personal technical reason, and not because of any fundamental knowledge that I am aware of, it didn't make sense to change this rating to a sell.  However, I always suggest that we all place limits to our positions to reduce the possibility of incurring a large loss.  Anyhow, that's my take on this perspective.

Thanks so much for stopping by!  If you have any comments or questions, please feel free to leave them on the blog or email me at bobsadviceforstocks@lycos.com.

Yours in investing,

 

Bob 


Posted by bobsadviceforstocks at 9:17 AM CST | Post Comment | View Comments (2) | Permalink

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