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November 2008

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BCE: argh

November 26, 2008 – Comments (6) | RELATED TICKERS: BCE

KPMG, the auditor for the BCE deal, has reportedly told the firm that it will be insolvent if it completes the deal under present terms. BCE would take on $33 billion of debt under the buyout. The first few reports I read said merely that KMPG said it wasn't able to deliver a solvency opinion by the close date given the state of the markets.   [more]

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Fairholme buys more Americredit

November 24, 2008 – Comments (1) | RELATED TICKERS: ACF , FAIRX , LUK

Americredit is a subprime auto finance lender. It promotes loans through a network of dealerships. It also securitizes those loans. Normally, I'd stay far away from the shares, but the good folks at Fairholme Fund (FAIRX), my largest holding, see something in the company that I don't. As of 8/31/08, Fairholme had 1.46% of the fund in Americredit, and 0.84% in Americredit's 8.5% bonds. Americredit's market cap is in the region of $500+ million, and Fairholme has over $7 billion of assets - so it owns a pretty significant chunk of the company and it's position size is rather large for such a risky company.  [more]

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Arbitrage: Huntsman?

November 24, 2008 – Comments (0) | RELATED TICKERS: HUN

Huntsman is a maker of specialty chemicals. After a short bidding war, Hexion, a unit of the private equity firm Apollo Capital Management, agreed to buy the firm at $28.  [more]

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Worst calls of the year

November 24, 2008 – Comments (0)

Everyone needs to admit their mistakes. It's good for the soul. Decebmer 31 might be a better time, since I could still make a disastrous call in the next month, but I'll save it for the following year.  [more]

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BCE and Citi

November 24, 2008 – Comments (1) | RELATED TICKERS: BCE

BCE is up nearly 11% today from its closing price on 11/21. It had got as low as $25.12 on that day. I bought a few shares at $26.94.   [more]

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Mylan Pharmaceuticals - equity and converts

November 23, 2008 – Comments (1) | RELATED TICKERS: MYL

Mylan is the now world's third largest generic drug maker behind Teva and Sandoz. It's a competitive business, but Mylan has managed to carve out an economic moat through quality and innovation.   [more]

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Bank of America and Chesapeake convertibles

November 23, 2008 – Comments (2) | RELATED TICKERS: BAC , CHK

There's a huge amount of uncertainy around Bank of America right now. I bought the stock in the low $40s, so this is one of my year's worst blunders. If Citi is forced to fire sale its CDO assets, which I believe is possible, both BAC and JP Morgan will be forced to mark them down and will take significant hits to their capital. They'll then have to raise more. BAC isn't as well positioned as JPM because it bought both Countrywide and Merrill Lynch - without government help.  [more]

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Aribtrage: BCE

November 21, 2008 – Comments (3) | RELATED TICKERS: BCE

BCE, a Canadian telecom holding company that trades on the TSE and NYSE, received a CAD$42.75 buyout offer from a consortium led by the Teachers' pension fund in mid 2007.  [more]

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Another arbitrage opportunity: Barr Pharmaceuticals

November 20, 2008 – Comments (1) | RELATED TICKERS: BRL.DL

I lost track of this one, but some time ago, Teva offered $67 a share for Barr in a very friendly transaction. After some worries in the commercial paper market, Teva announced that its lenders agreed to let their unsecured credit facilities remain in place. This will give them enough liquidity to complete the acquisition. The acquisition is expected to be completed by the end of the year.   [more]

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GM and Ford comments

November 19, 2008 – Comments (2) | RELATED TICKERS: GM , F

Dodge and Cox Stock (DODGX) held nearly $700 million worth of Ford and GM stock as of 9/30, with Ford being the larger position. The US auto industry has been all over the headlines for all the wrong reasons lately. GM's stock won't even get you a latte at Starbucks. Ford's won't even buy you a doppio espresso, which is my usual drink. DODGX's performance has been bad - -47.05% YTD, in the 87th percentile among large value funds. GM and Ford account for a bit under 1% of assets, but the fact that the firm bought them at all is a significant lapse in judgment. I bought Dodge and Cox Balanced when it reopened, but sold in frustration in October.  [more]

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Anheuser Busch acquisition closes Nov 20

November 18, 2008 – Comments (0) | RELATED TICKERS: BUD , ROH , CEG

Stocks have been headed steadily and precipitously downward in the last few days, but there's one piece of good news: InBev reported that it will close the acquisition on Nov 20, quite a bit earlier than I expected.  [more]

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Paychex: another undervalued, predictable, wide-moat business

November 18, 2008 – Comments (1) | RELATED TICKERS: PAYX

Continuing with my new theme of predictable businesses, I'd like to highlight Paychex, a payroll outsourcing company that primarily targets small and medium businesses. The value proposition that such firms offer is undeniable, especially for Paychex's customers, because it allows companies to focus on their core business.   [more]

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Gurufocus' business predictability grades and Fastenal

November 15, 2008 – Comments (3) | RELATED TICKERS: FAST

I mentioned in my last blog post that Gurufocus now grades stocks on business uncertainty. Businesses that have shown consistent growth in revenue and EBITDA per share tend to perform better than businesses whose growth is inconsistent.  [more]

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Warren buys Conoco Philipps, Eaton, reduces Bank of America

November 15, 2008 – Comments (0) | RELATED TICKERS: BAC , COP , ETN

According to Bloomberg, Berkshire's recent SEC filings indicate that the company bought Eaton (ETN), added to its stakes in Conoco (COP) and halved its stake in Bank of America.   [more]

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Comments on Sears Holdings

November 14, 2008 – Comments (0) | RELATED TICKERS: SHLD

The Fairholme Fund is my largest personal investment. Fairholme has been getting quite a bit of good press lately, and held up very well during the first half of the year. Their performance has suffered somewhat in the second half, although they are still well ahead of the average large blend fund.  [more]

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Comments on Applied Materials Q4

November 13, 2008 – Comments (2) | RELATED TICKERS: AMAT , SUNE

Applied Materials reported Q4 results after the bell yesterday, sending the shares down in the aftermarket, but up about 4% as of 11:30am on 11/13.   [more]

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Patience on Fuel Tech

November 11, 2008 – Comments (0) | RELATED TICKERS: FTEK

Fuel Tech's disappointing earnings have taken a bite out of the stock price today. I'm obviously not happy, but I think investors should exercise patience.  [more]

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Arbitrage: Feds approve Constellation deal

November 06, 2008 – Comments (0) | RELATED TICKERS: CEG , BRK

Federal regulators announced yesterday that MidAmerican's bid for Constellation doesn't violate antitrust law. The merger still has to clear review with Maryland's Public Service Commission. The PSC said that such review could take up to 6 months.  [more]

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Arbitrage opportunities: comments on Anheuser Busch and Rohm and Haas

November 04, 2008 – Comments (1) | RELATED TICKERS: BUD , ROH , CEG

I recently took a small position in Anheuser Busch around $59. I think the stock was in the low $50s when the rumors about the InBev takeover started. On its own, I think Anheuser was worth something in the mid $50s, although its subsequent growth prospects weren't too hot.   [more]

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Comments on Autodesk

November 04, 2008 – Comments (0) | RELATED TICKERS: ADSK

Today, Autodesk cut their estimates for revenue growth. They also mentioned that sales had been hurt by customers who couldn't get financing. Aside from the financing issue, the sharp global downturn is affecting their business.   [more]

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