Stephen’s Posterous

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November 19, 2008

Execs Buying Battered Stocks

CEO's and other managers have been buying stock at companies like Citigroup, GE and Dow Chemical recently. According to Form4Oracle, officers purchased $214 million in company stock over the past 4 weeks. Dow Chemical CEO Andrew Liveris bought 20,000 shares of company stock for $23 a share this month. Geoffery Merszei, the CFO bought 4,000 shares for $26.48 in late October. Six Citigroup insiders purchased $17.2 million of the company's common and preferred shares last week. At Lear, CEO Robert E. Rossiter bought 100,000 shares for $1.40 a share on Nov. 11, and CFO Matthew Simoncini bought 15,000 shares a day later for $1.57 a share. McDonald's CEO James Skinner purchased 20,000 shares in October for an average price of $55 a share. Source.

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November 19, 2008

Nomura's CEO Says Liquidity Crisis Over

The FT Alphaville reported that the head of Japan’s largest broker said on November 18, 2008, that the global liquidity crisis was over and that a recovery of the global economy would depend on financial support from key governments, especially China. The comments from Kenichi Watanabe, Nomura’s CEO, came after Japan conceded that its economy had fallen into recession.

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November 19, 2008

Oil May Fall to $40 a Barrel

Fu Chengyu, CEO of CNOOC, China National Offshore Oil Corporation, told a conference in Barcelona that national oil companies at a recent meeting in Beijing had predicted that oil prices would fall to $40 a barrel and that this would cancel most planned investment projects. Mr. Fu said that about 27 companies from 23 countries attended the meeting in Beijing which took place in mid-October, 2008. Some executives thought that the oil price would rebound to $50-$55, but even at that level Mr. Fu said that would mean cutting at least 60% of budgeted projects for the next 1-2 years for the national oil companies. Most companies were basing their budgets on oil prices between $70-100 a barrel for their cash flow. Mr. Fu also said that any cut in production by Opec, the cartel of oil exporting countries, was regarded as likely to be ineffectual. “Most of the consensus said that if Opec cut production, it might not be as effective as they thought,” said Mr Fu. From FT.

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November 18, 2008

Insider Buys $1 Million in Juniper Networks

With Juniper Networks trading at near a 52-week low, the company's new CEO made a large stock purchase of 64,000 shares for close to $1 million at $15.01 a share. The CEO is a former Microsoft employee. A spokeswoman for Juniper told Barron's Online that the "purchase is a reflection of Kevin Johnson's commitment to Juniper and a recognition of the strong position and potential the company has over the long term." Juniper has a 52-week high of $34.95 and a 52-week low of $14.14. The company has no debt. Reuters rated the company at Buy or the equivalent, with a 12-month target price of $22.70. Value Line says that the stock offers good 3-to-5-year price appreciation, but can be quite volatile.

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November 18, 2008

Investing in Natural Gas

Oneok, Inc. is the 6th largest distributor of natural gas. The US natural gas business is volatile, but Oneok has eliminated much of its risk by using a fee-based model. The company is also a 48% owner of Oneok Partners, a master limited partnership that owns a network of pipelines, processing plants and gas-storage caverns. Oneok boasts a 6% yield based on the stock price at the close of business on November 17, 2008, of $26.81. The 52-week high is $51.33 and the 52-week low is $21.56. Oneok Partners has focused on a fast growing niche of distilling natural-gas to separate impurities called natural-gas liquids (NGLs). The NGL is processed into different compounds used by customers in the petrochemical, heating and refining industries. NGLs are attractive because they are cheaper than competing products processed from crude oil. Value Line says that Oneok has a worthwhile total return potential for the coming years, especially those seeking a healthy dividend yield. From Barron's.

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November 17, 2008

Stock Market Gems

With the recent sell-off in the stock market, there are bargains to be had. One third of stocks in the S&P 500 are valued at less than a decade ago. Many stocks are trading at P/E Ratios in the single digits. David Bowman, a senior portfolio manager at Red Granite Advisors in Milwaukee, likes Walgreen Co., which is down 9% from a decade ago. He says its an industry-leading company that will benefit from greater emphasis on generic-drug sales. Paul Sutherland, chief investment officer at FIM Group in Traverse City, Mich., can't believe that GE would so cheap to own with its shares down 45% from 10 years ago. He also likes DuPont because of it's almost 6% dividend yield and its shares down 54% from 10 years ago. Other blue-chip names trading at historical lows include Boeing, IBM, Dow Chemical and Walt Disney Co. From WSJ.

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November 16, 2008

Investing in Corn

Corn hit a 52-week low of $3.63 a bushel for the week ending November 14, 2008. Meanwhile, Barron's reported that senior agriculture analyst Gail Martell from Storm Exchange predicts that corn production will be 5% below the US Department of Agriculture's estimate of 153.8 bushels an acre. The reason is horrible weather. The weather was last this bad in 1992. With corn prices being low, this leads to producing less corn in the future. In the end, this means higher corn prices, or perhaps another food crisis beginning in 2009. Corn tends to be the cheapest between September and November as this is when farmers accross North America harvest corn and deliver it to their local elevator. The easiest way to invest in soft agriculture is via an ETF, an Exchange Traded Fun, and one such fund is the PowerShares DB Agriculture Fund (DBA). This ETF invests in contracts for sugar, soybeans, corn and wheat. This ETF has a 52-week high of $43.50 and a 52-week low of $23.16, and closed at $25.19 on November 14, 2008.

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November 16, 2008

Tim Sykes's Tips For Starting a Hedge Fund

Tim Sykes is a hedge fund manager who was featured in the American reality show Wall Street Warriors and also an author of An American Hedge Fund: How I Made $2 Million as a Stock Operator & Created a Hedge Fund. He currently has a website in which he sells various products giving investment advice from his publishing company, BullShip Press, LLC. At the age of 22, Mr. Sykes started his own hedge fund, Cilantro, which he closed in 2007 after experiencing a 35% loss in 2 years. He then started a new hedge fund called TIM, Transparent Investment Management, with the goal of turning of $12,415 into $1.65 million and documenting his experience on his website. Mr. Skyes has several tips on how to start a hedge fund. From FT's Alphaville. More here and here.


Lesson #1: If you consistently beat the market, you will face endless questions about whether or not you are a fraud.
Lesson #2: Everything takes much more time in the real business world compared to the trading world.
Lesson #3: Focus on trading first; never schedule investor meetings during market hours.
Lesson #4: Do not feel bad about changing brokers if they are ripping you and your clients off. They are not girlfriends; there is always somebody cheaper and better out there.
Lesson #5: The larger the ‘nest egg’ stake the manager has, with the initial startup–the better.
Lesson #6: Focus on what works for you and do not change to accommodate others.
Lesson #7: Raising money does not come easily for a startup hedge fund manager.
Lesson #8: With capital introduction, there’s always a catch.
Lesson #9: This industry is full of frauds and con artists.
Lesson #10: Results are much slower in the real world compared to the trading world.

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November 15, 2008

Weekend Interview with Carl Icahn

In this week's Wall Street Journal The Weekend Interview with Carl Icahn by Emily Parker, with a distinct caricature by Ismael Roldan, we discover that the man once known as a Corporate Raider is now a Shareholder Activist. Does anyone remember Gordon Gecko in the movie Wall Street? Gordon Gecko was supposedly based in part on Carl Icahn. Mr. Icahn's new mission is to change US laws so that companies and CEO's are more accountable. He believes that most corporate CEO's are mediocre guys. He believes that current boards and managements are killing the country. He says that he can go in and save 30% in almost any company because there is so much waste and mismanagement. Mr. Icahn believes that poor accountability at the top help fueled the subprime criss. You can join forces with Mr. Icahn by signing up for his campaign, United Shareholders of America, on his blog website.

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November 15, 2008

Future Oil Prices Remain Higher

Crude oil closed at $57.04 on November 14, 2008, on NYMEX. Crude oil has a 52-week high of $147.82 and a 52-week low of 54.67. Crude oil is very close to it's 52-week low. These lower prices will force energy companies to cut their budgets and hold back on investing in new projects. Oil prices are very much a barometer of the world economy. The average price of oil in 2007 was $72 a barrel, and it was $66 a barrel in 2006. This also means that there could be less investment in renewables and efficiency. There has been an intensification of the Contango Structure of the Forward Curve, which is the price of oil in the future. It's been attributed to 3 factors: a current supply glut at the front-end of the curve; the higher cost of financing due to the current tight financial markets; and the belief that short supplies may return soon. Those who are buying future contracts are willing to pay a premium beyond and above the cost-of-carry and storage of oil bought today. The cost of crude oil for December 2010, closed at $74.14, a premium of 30%. With the tight credit markets, look for continued steepening of the Contango. More here and here.

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