Free

Free $100 for test driving a Lexus.

http://www.lexusoffer.com/

My time is currently valued at less than that on an hourly basis.... but even if it weren't, I'm too much of a cheapskate to pass that deal up.

ClearChannel for Cowards...

 ClearChannel for Cowards...

Right off the bat, I don't like ClearChannel, they seem to ruin every radio station. That being said, they can do whatever they want since Sirius/XM is the only real radio competition and I'm too cheap to pay (for now, anyway). CCU is currently involved in an LBO that appears to be on the rocks. The stock is trading below $30, in spite of the LBO bid at $39.25 (>33% higher).  The LBO bid is ridiculous and values a radio company at 13x EBITDA, which is about where recent station-sales have been executed at.

I think a more reasonable multiple for a monopoly provider is closer to 8-9x Ebitda, which is way below any historical trading level for this company. The last time it traded at $20/share was in the recession of 2002 (its debt was $2.2Bln more than current levels) and before that, you have to go back to 1996 when it was much smaller.  This company should generate around $2Bln Ebitda, which puts valuation around $16-18Bln EV. Minus $7Bln debt=$9-11Bln market cap/500 mln shares= $18-22/share.    

I am not willing to buy the stock at $29 on the hopes an overpriced acquisition goes through. However, I am willing to sell one-month puts at $20 for $.40 (2% absolute yield b/f commissions) on the notion that the stock will be a decent buy if hell-freezes-over and the share price drops 30+% within the next month. I do not view this as highly likely, although I do expect weakness when the company reports earnings on February 14th.  If you are a little bit braver, you can sell $22.50 puts for $.90 (4% absolute yield).  I have only done this on a couple contracts per account, but its an interesting idea and arb play.

Snipes

"ALWAYS BET ON BLACK!"

- Snipes found not guilty of defrauding the government, after not paying taxes for 7-8 years, filing fraudulent tax returns, and fraudulently applying for tax refunds. He was also bouncing checks that he did send into the IRS.

I have a new favorite action hero.  It is you, Mr Snipes.  (Even if you do have a bad-taste in neckties)


http://www.reuters.com/article/entertainmentNews/idUSN2959375320080201?feedType=RSS&feedName=entertainmentNews&rpc=22&sp=true

Joke of the day

Joke of the Day-  " Hey Ben Bernanke, Home Depot called, they want their tools back".

I'd better start making a lot more money in my stock portfolio, because inflations gonna be rippinig America a new asshole...as if it hasn't started already.


In other things, Robert Olstein listed his twenty financial-analysis criteria....thought it was worth posting
OLSTEIN’S TOP TWENTY QUALITY
OF EARNINGS ALERTS
1 Material deviations between net income and free cash flow
2 Material differences between the tax books and shareholder books as
measured by deferred taxes
3 Material changes in balance sheet debt and liquidity ratios
4 Inventories, especially finished goods or raw materials, increasing or
decreasing faster than sales
5 Accounts receivable increasing or decreasing faster than revenue
6 Deviations between depreciation and capital expenditures
7 The repetitiveness and materiality of non-recurring write-offs
8 The role that non-trend line changes in reserves contribute to, or negatively
impact, current earnings
9 The repetitiveness and materiality of non-recurring gains such as sales
from venture capital portfolios
10 The impact and reality of a company’s deferred expense capitalization
policies as it effects reported free cash flow
11 Discretionary expenses deviating materially above and below trend lines
12 The reality, consistency and conservativeness of revenue recognition
techniques when measured against the passing of cash
13 The impact that acquisitions have on sustainable free cash flow and the
growth thereof
14 Changes in other asset accounts
15 The impact of transactions with special-purpose vehicles
16 Pension income and expense recognition measured against the pension
plan’s assumptions and the funded status of the plan
17 Large deviations between pro forma and reported earnings
18 The impact of option transactions on reported free cash flow and the
impact on future results and valuations of the company
19 The capabilities of management as measured by their long-term decision-
making capabilities; especially when problems develop; their attitude
toward risk as measured by the quality of the balance sheet; and
their preparation for a rainy day; their methodology of communicating
with shareholders; and finally their ability and emphasis on returning
value to shareholders
20 Disclosure of material information needed to assess the value of the
company
T

Troy Peterson, CFA
Credit Analyst- Americo Life
Phone- 816-391-2039
Fax-       816-391-2037
Email-   Troy.Peterson@americo.com

300 W. 11th St.
Kansas City, MO. 64105

SELL FDX and WM- I'm starting my shot clock

SELL FDX and WM- I'm starting my shot clock

Markets maybe got a week or two to rally more, but think the lows will be retested

Troy Peterson, CFA
Credit Analyst- Americo Life
Phone- 816-391-2039
Fax-       816-391-2037
Email-   Troy.Peterson@americo.com

300 W. 11th St.
Kansas City, MO. 64105

CTL- Centurytel at $35, this is a phone-line company in mostly rural areas, about a $3.8Bln market cap and $3Bln in debt. 11.5x P/E, with approximately $600Mln in trailing free cashflow (actual). Calculated a different way (with more onerous tax assumptions), Centurytel's profitability is mapped out below.

Ebitda- 1325
-interest -220
-taxes(.35)- -350
Capex -300
FCF- $455 (ebitda method fcf)



That equates to about a 12% FCF yield ($455/$3.8Bln), but its actually closer to a 16% yield since I overstated their actual cash taxes. They have a share repurchase authorization for $750Mln, which is like 18% of their shares outstanding. 10% of their stock is held up in 401K/esop plans which means even fewer sellers will be out in the marketplace. This should easily trade up until the implied freecashflow yield is something closer to 8%, which would equate to about $48.80/share , based on a low-end free cashflow forecast of $430Mln/8%= $5,375Mln $5,375Mln/110Mln shares= $48.86 per share This implies 40% upside in the stock.


The company has a lot of debt, which will likely increase given the buyback, but they continue to do a good job switching old phone-line customers over to DSL packages and they should trade at a premium to Citizens Communications (CZN). Currently, CZN trades at EV/sales of 3.7x and ev/ebitda of 6.7x, while CTL trades at 2.6x sales and EV/Ebitda of 5.14x. Both of these multiples imply a 30-40% valuation gap between these similar companies. The free-cashflow numbers make Citizen's still look cheap ($740Mln/$3600= 20% FCF yield), but I believe this represents lower capital investment spending in their infrastructure, which may ultimately come back to bite them. I think the valuation gap mostly exists due to CZN paying a cash dividend of 9%, while CTL pays a yield of .8% (CTL pays its cash through share repurchases, which should prove more efficent as long as they avoid dilutive acquisitions).

Thought this was an interesting equity idea, but would be hesitant to buy the bonds due to the fact that they pay out all of their cash.

I still think these are good companies that will show above-average long-term returns (probably >10%/yr) over the next few years if acquired at current levels. However, the greedy little devil on my shoulder is telling me that it would be much more fun to be able to average-down into the stocks on the declines... it kind of hurts that I was overweighted in the names during the early '08 selloff and not into a position to put more money to work.


A lot of my reading has caused several thoughts to be drilled down into my head. Sayings such as "Losers average losers", " Only add to positions that are showing you gains". I truthfully believe in dollar-cost averaging (down or up), but think this should generally be done as a course of strategy... so now i'm better positioned to buy these companies once they retrace to the lows

Next Idea- Long/Short on MW/JOSB

MW is 3x the size of JOSB, but both in the same business. Both have ebitda
margins of around 16%, but MW has been growing faster than JOSB. MW recently
warned on sales growth and their stock tanked. MW trades at .45x EV/sales, JOSB
trades at .76x sales. I think this is likely to converge, with most likely
outcome being that JOSB falls to MW (rather than MW rising significantly).
I'll map out the idea more fully this afternoon, but it looks pretty
interesting, given how obvious and straightforward the valuation disconnect
appears to be. The JOSB store I drive by every other day always seems to be
empty...