Posts tagged cadbury
1/19/10 Midday Report: Citigroup? More like Shitigroup (and yes, i’ll be here all week so don’t forget to tip the waitstaff)
The market is rising on news of Citigroup putting up another quarter so bad that even Dan Brown refused to write the press release (and that is seriously bad since that guy was more than happy to put his name on a shitstain like the DaVinci Code. And not to ruin the book for you, but the mystery goes unsolved at the end as no one can figure out how such a crappy book sold so many copies). While C’s quarter was inline with analyst estimates, they still put up a loss of $.33 per share or if you want to forget about them paying back the government, it was a loss of $.06 per share. Of course forgetting about the money they received from the government and subsequently paid back would be like forgetting Roman Polanski’s past indiscretions and inviting him over to baby sit for your 13 year old daughter or forgetting about the current global economic cirsis and re-hiring Alan Greenspan as Chairman of the Fed. The good news from C’s Q was that their loan-loss provisions were down 36% from the prior year (though still $8.2B) and 10% from the prior quarter and net credit losses fell to $7.1 billion sequentially from $7.9 billion. So things are getting mildly better in the same way that an increased T-Cell count is mildly better for AIDS patients (newsflash, you still have AIDS). The surprising thing to Money McBags was that C’s NIM was down 30bps. How does this make sense? Spreads are the widest they have been in history so either C doesn’t quite get the whole lending for more than your cost of capital thing (and as evidenced by the last 5 years at C, it is quite possible) or they are reserving so much for future fuck-ups that they are not able to fully utilize their capital base. Either way you spin it, C’s lending business still has yet to shake off the Charles Prince/Sallie Krawcheck ass rapingly bad mismanagement it went through and their current CEO, Vikram Pandit, who had no financial services operating experience before taking over C still seems to be wondering at how ATMs work (“wait, is there a midget in there who gives me my cash? I don’t get it. Can we go over this again?”). So the market was down last week on INTC’s blow out Q and is up today on C’s ass out Q, makes perfect sense.
There is not much macro news today except for the UK reporting that inflation had a record jump to 2.9%. People, let’s not take our eye off the ball here (especially if you are Carrie Prejean and we’re talking about my balls, and just remember, if Jebus were against hummers, he never would have created mouths). Inflation can’t be overlooked. Sure the record jump in UK inflation was driven to some degree by oil prices, but remember, there is more stimulus in the current financial system than in a truck filled with Viagra, cans of Jolt Cola, and copies of old Bridget Bardot pictures. Rates are likely going to have to rise to stem the oncoming inflation, so be prepared and hope Bernanke isn’t late to respond like the dissenters at Tiger Wood’s wedding. Also, beware that the P/E ratio for the S&P has now risen to greater than 20x so earnings either have to start beating expectations, or the market needs to calm down.
In other stock news today, Kraft finally bought Cadbury and as long as they don’t fuck with those delicious Cadbury Creme Eggs (like putting caramel filling in them, and seriously, whose idiotic idea was that? I mean why not just draw a mustache on the Mona Lisa or let John Meriwether consult on your hedge fund), then Money McBags could give a shit.
In small cap news, a bizarre little company which Money McBags has followed for a while yet does not own, FHCO, announced a $.05 quarterly dividend and reaffirmed their operating earnings guidance of 35%-40% growth for fiscal 2010. FHCO of course stands for the Female Health Company and they are the producers of the Female Condom, which is their one and only product and unfortunately does not come in flavors for all you cunning linguists out there. They derive their revenue largely from sales to NGOs (mostly USAID) who then distribute the female condom in AIDS ridden areas like Zimbabwe, South Africa, and Paris Hilton’s panties. Here’s the thing about this company though, they are the only FDA approved producers of the female condom so they get all of the business (about 35MM sold per year) and while the male condom is cheaper and more commercially available and used, the female condom is just as effective and a terrific option for protection for ladies in third world countries where men love unprotected sex like Joanie loved Chachi and where AIDS is spreading more rapidly than that stupid “Pants on the Ground” video (and you know what, if you put your pants on the ground one more time, Money McBags is going to put his foot in your ass, so shut the fuck up with that crap already). Also, despite the global economic crisis, governments are still earmarking money for AIDS treatment and prevention to the tune of more than $50B between the US’s Pepfar initiative and the British government’s $11B pledge. So there is a huge market, FHCO is the only player, funding is not going away, and oh yeah, people love fucking, so demand isn’t going anywhere. The biggest news though is that the second generation female condom recently got FDA aproval and those can be sold at a cheaper price and with greater margins to the company. The company had ~$6MM of operating earnings last year (and remember most of those sales were from the worse margin FC1) and as mentioned earlier is forecasting 35% to 40% growth in that so they could potentially see $8.5MM in operating earnings for 2010 or roughly $.35 per share. With today’s jump they are now trading at around 15x that $.35 number and with the $.20 annual dividend, they are at a roughly 4% yield. Oh yeah, they have $12MM in Federal NOLS and $19MM in foreign NOLS so they are not going to pay taxes until around the same time Bernie Madoff is up for parole. There are a number of things to worry about with FHCO: It is a tiny company, the board of directors are almost all over 60 years old (seriously, check it out, their board reads like a casting call for Cocoon, led by a 76 year old CEO/Chairman/President.), there is no sell side coverage, it is thinly traded, the company has been around for years and is just reaching critical mass, and it relies on government funding. That said, there is upside as they are looking into partners to promote the female condom in US retail chain stores now that FC2 has been approved by the FDA and thus the costs have come down enough to allow for marketing spend (there are trial runs now in CVS and Walgreens stores in select areas). Plus AIDS isn’t going anywhere and the female condom is reaching an infleciton point in many countries where usage is starting to grow. The company is obviously up on a spike today, but it has an interesting little story and isn’t too expensive, so it is worth all of you digging a bit deeper and it is one product where I highly recommend first hand research.
The news out today is that the service sector grew, but less than expectations, so now we know how Vern Troyer’s parents felt. The ISM index of non-manufacturing jobs rose from 48.7 to 50.1 and anything over 50 signals expansion according to the arbitrary metrics measured by the index and the directionally correct economists who are paid to interpret them. This is the third time in four months the index has been over that oh so helpful 50 number (even if at 50.1 it was only over by a rounding error or a He Ping Ping nut hair, and yes that has been two “little person” jokes in the first paragraph so I am sure “Bridget the Midget” is anxiously waiting by her tiny phone). This is a marginally good sign for the economy, but not significant enough for anyone to break out the Dom Perignon or slush fund to pay for that special Hannah Hilton visit.
Also today, ADP released their forecast of job losses for the month of December which came in at 84k, worse than the expectations of 75k according to Bloomberg, but better than expectations of 90k losses according to CNBC. So for the tie breaker, we go to the always reliable New York Times who reports estimates were for 73k job losses. So there we have it, 2 out 3 news sources reporting the same data have a different spin on it. What say you Wall Street Journal? Oh, you have estimates of 90k, so job losses were better than expecations. So we’re back to a tie and everyone knows, the tie goes to the runner. Anway, the point is no matter how you spin this number (though hopefully not on one of those old school sit’n spins, because Money McBags is out of barf bags after watching 10 seconds of Kathy Griffin on CNN New Year’s Eve, and please CNN, make the bad lady go away. Wow, that was quick, but as long as you’re granting wishes, can you have Franco-Nevada up their proposed buyout offer to ROY and give my phone number to Hayley Atwell?), it is directionally positive yet inconclusive as to where the economy is going. The number did reflect the fewest job losses according to ADP since March of 2008 (and if you can remember back that far, it was when Brett Favre first announced his retirement. I wonder what ever happened to that guy?), so yeah for us.
In stock news, gold and commodities continue to run as the Fed remains adamant that they will keep rates near zero until the next bubble, while news from Hershey’s board is squirting out that they may decide to make a bid for Cadbury. And in the small cap universe, EBIX finally split yesterday and has continued to run after a sell off. Now EBIX’s actual business is more confusing than giffen goods, a Higg’s boson, or Dane Cook’s popularity but they essentially try to build/buy networks to be part of every insurance transaction globally. The CEO’s ego is bigger than Alexis Texas‘s voluptuous backside (and that is if she had elephantitus of the anus) and there is always something Enron/Satyam-ish to be concerned about when investing in a complex/hard to define business that shuns the street, relies on acquisitions, and has a cult following centered around their egotistical CEO, but the company has been growing rapidly, is developing networks which are extremely profitable to first movers, has had phenomenal returns, and is almost completely underfollowed by the street. Estimates are for them to earn at least $1.20 next year (though estimates are few and far between) and they are currenty trading at less 20x that (or is it fewer than 20x that? Can someone exhume William Safire and let me know?) since the street does not yet value them as a growing technology company, which they really are. Given that there is upside to that EPS number and their new goal is $200MM in reveune and 42% operating margins by Q4 2011 (which is admittedly a long way out and will require a number of acquisition for which they will probably have to raise more cash), the stock has room to move back up after an unwarranted sell off. Money McBags is an owner of EBIX, but do your own research because why would you trust a random guy on the internet, even if he is the preeminent dick joke teller and money maker in the world (though if you can clearly state what EBIX does in fewer than 5k words, please share with those in the group).