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Still short Mexican airports / Breaking up is hard to do, but in this case it's good

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July 09, 2008 – Comments (11) | RELATED TICKERS: OMAB , PAC , GE

The trend of slowing passenger traffic growth at Mexican airports continued in June.  OMAB reported its lowest year-over-year increase yet last month, up only 3.1%.

Its international traffic rose only 1.2% during the month.  In its press release, the company stated that its airports in Culiacan, Mazatlan, Zihuatanejo, and Zacatecas reported lower traffic than a year ago "as a result of a cancellation of routes by U.S. carriers and a reduction in frequencies on some scheduled international routes."  It went on to add, "The continued increase in international oil prices has caused the cancellation of routes, reduction in flight frequencies, tariff adjustments, and other actions by the airlines, all of which affects traffic growth."  A reduction in flights by airlines that are getting crushed by the high price of oil has been one of my main concerns about Mexican airports.

Here's an updated table that I have been updating on my own, which includes the latest data: 

OMAB Passenger Traffic Growth by Month 

June 2008: +3.1%
May 2008: +5.8%
April 2008: +5.9%
March 2008: +7.7%
February 2008: +16.4%
January 2008: +11.3%
December 2007: +12.9%
November 2007: +20.6%
October 2007: +20.9%
September 2007: +23.8%
August 2007: +27.1%
July 2007: +31.0%
June 2007: +24.5%
May 2007: +25.8%
April 2007: +17.8%
March 2007: +16.8%
February 2007: +12.1%
January 2007: +14.1%
December 2006: +17.8%
All of 2006: +11.2%

OMA's June 2008 Total Passenger Traffic Increases 3.1 Percent

Traffic at PAC is even worse than it is a OMAB.  PAC's June passenger traffic dropped 4.8% (see press release: Grupo Aeroportuario del Pacifico Reports Passenger Traffic Decrease of 4.8% for June 2008).  At the bottom of PAC's press release is the following ominous statement: "Considering the above, the Company is in the process of adjusting its original guidance for 2008 and will report updated guidance in the second quarter press release."  It sounds like it may lower its guidance for the year...not good.  I should have shorted these things even harder and sooner than I did, I saw this mess coming from a mile away.  At least I saved myself a lot of pain by selling my long positions in them a while ago.

 

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OK here's today's piece of positive news.  I was hesitant to mention General Electric (GE) this morning because I continue to be interested in adding more shares, but I have a feeling that this weakness in the market is going to last for a while so I'll have time to stay quiet about it for ten days after this and buy more if it continues to fall.  I've been planning on adding more shares to my portfolio if its dividend yield rises over the 5% level (it's currently at an extremely attractive 4.6%). 

digression --- I loooooove dividends.  Companies that share their profits with me rather then hogging them for themselves and leaving me to wish for Mr. Market to eventually show me love in the form of a higher share price are OK with me.  --- End digression.

Anyhow, I came across an interesting Reuters article this morning stating that GE may be looking to spin-off or sell part of its NBC / Universal division (see article: GE NBC's Zucker looking at spin-offs, deals -NY Post).  If this is true, to me it is fantastic news.  I always love a good spin-off, because on average they historically have outperformed the overall market.  Even if GE just sells some of NBC / Universal's assets such as television stations, theme parks, Ion TV network, or Shop NBC, it can plow the proceeds into its more profitable sectors, like infrastructure.  I am becoming more and more convinced that breaking up GE, or at least divesting a number of its assets is the best way for it to unlock its true value and improve the performance of its stock.

I am extremely curious to see what GE's earnings look like on Friday.  It better start producing some good numbers soon or its CEO Jeff Immelt could be in trouble.

 

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Speaking of NBC, apparently the high price of gas and food are causing Americans to stay home and watch television.  According to the Neilsen ratings agency, Americans Watching More TV Than Ever,  In May Americans watched a record 127 hours and 15 minutes of television.  That's over four hours per day!  Who in the heck has that much time to watch TV?  I certainly don't.  The only way that I would come even close to that is if it counted having CNBC or Bloomberg on in the background.  The May numbers were up 4% from a year ago. 

Unfortunately for companies that rely on advertising for revenue, this number includes a 56% increase in "time-shifted TV" aka stuff that people watch on their DVRs.  As someone with multiple jobs, a four year-old, and another child on the way I know that I never watch anything without taping it and I never watch commercials.  Media companies are going to have to continue to look for ways above and beyond traditional commercials, like the Internet and product placement to generate revenue because this trend will continue to grow. 

The fact that my family had a TV made out of wood when I grew up makes me feel old :) 

Deej

Short OMAB & PAC

Long GE 

11 Comments – Post Your Own

#1) On July 09, 2008 at 8:52 AM, GS751 (27.70) wrote:

haha the best is about the TV.  GE is starting to get pretty darn cheap.

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#2) On July 09, 2008 at 9:28 AM, chk999 (99.97) wrote:

Agree with you about the attractiveness of GE. I've been adding more in this rundown and it is now an overweighted holding in my real money portfolio. I see some interesting news about electricity generating shortages and suspect that gas peaking turbines will be used to deal with it.

Chris - long GE and CHK 

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#3) On July 09, 2008 at 2:41 PM, colonelnelson (46.14) wrote:

It would be really interesting if GE talked about spinning off their financial division. 

I have a small loan (motorcycle) with GE Money Bank, and talk about behind the times...  they don't even accept electronic payment.

At these prices, I keep looking at MMM.

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#4) On July 09, 2008 at 7:03 PM, DemonDoug (82.98) wrote:

Deej, the problem with GE is not their media division but rather their finance division.  Alstry posted on how GE Capital loaned Steve and Barry's $200m in the first quarter this year, and now S&B is filing BK.  That's potentially $200m down the drain.  I agree on you with their infrastructure and other businesses, but imagine if, say, Washington Mutual was a division of XOM.  Would you still want to buy XOM even if it were beaten up?  I sure as hell wouldn't!  Which is why I'm sure you're fairly confident that we haven't reached a bottom with GE.  The problem with their dividend like any other finance company is that it may have to be cut; as much as I like divvies, i like growing divvies and I like businesses that are positioned to increase their divvies (our favorite company PM/MO fits this profile to a T - no stupid debt, no finance division, strong sales, long history of increasing divvy, growing their markets).  I've had a stock that has cut it's dividend, and if GE has to do this, it may seem that there will be no bottom to the stock (because a lot of long investors in GE are income investors - cut their divvy and you may see a big exodus).

I still say MMM and VE are better long opportunities right now than GE.  VE especially with infrastructure, although they are more utility-like, but they are more of a pure play on infrastructure than GE is, and they have a pretty big dividend right now too.  I'm hoping you've got a blackout on VE right now or something.

Deej, did you see my blog post on blue chips? (It's my second most recent posting.)

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#5) On July 09, 2008 at 7:03 PM, DemonDoug (82.98) wrote:

Deej, the problem with GE is not their media division but rather their finance division.  Alstry posted on how GE Capital loaned Steve and Barry's $200m in the first quarter this year, and now S&B is filing BK.  That's potentially $200m down the drain.  I agree on you with their infrastructure and other businesses, but imagine if, say, Washington Mutual was a division of XOM.  Would you still want to buy XOM even if it were beaten up?  I sure as hell wouldn't!  Which is why I'm sure you're fairly confident that we haven't reached a bottom with GE.  The problem with their dividend like any other finance company is that it may have to be cut; as much as I like divvies, i like growing divvies and I like businesses that are positioned to increase their divvies (our favorite company PM/MO fits this profile to a T - no stupid debt, no finance division, strong sales, long history of increasing divvy, growing their markets).  I've had a stock that has cut it's dividend, and if GE has to do this, it may seem that there will be no bottom to the stock (because a lot of long investors in GE are income investors - cut their divvy and you may see a big exodus).

I still say MMM and VE are better long opportunities right now than GE.  VE especially with infrastructure, although they are more utility-like, but they are more of a pure play on infrastructure than GE is, and they have a pretty big dividend right now too.  I'm hoping you've got a blackout on VE right now or something.

Deej, did you see my blog post on blue chips? (It's my second most recent posting.)

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#6) On July 09, 2008 at 7:04 PM, DemonDoug (82.98) wrote:

Deej, the problem with GE is not their media division but rather their finance division.  Alstry posted on how GE Capital loaned Steve and Barry's $200m in the first quarter this year, and now S&B is filing BK.  That's potentially $200m down the drain.  I agree on you with their infrastructure and other businesses, but imagine if, say, Washington Mutual was a division of XOM.  Would you still want to buy XOM even if it were beaten up?  I sure as hell wouldn't!  Which is why I'm sure you're fairly confident that we haven't reached a bottom with GE.  The problem with their dividend like any other finance company is that it may have to be cut; as much as I like divvies, i like growing divvies and I like businesses that are positioned to increase their divvies (our favorite company PM/MO fits this profile to a T - no stupid debt, no finance division, strong sales, long history of increasing divvy, growing their markets).  I've had a stock that has cut it's dividend, and if GE has to do this, it may seem that there will be no bottom to the stock (because a lot of long investors in GE are income investors - cut their divvy and you may see a big exodus).

I still say MMM and VE are better long opportunities right now than GE.  VE especially with infrastructure, although they are more utility-like, but they are more of a pure play on infrastructure than GE is, and they have a pretty big dividend right now too.  I'm hoping you've got a blackout on VE right now or something.

Deej, did you see my blog post on blue chips? (It's my second most recent posting.)

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#7) On July 09, 2008 at 7:05 PM, DemonDoug (82.98) wrote:

Deej, the problem with GE is not their media division but rather their finance division.  Alstry posted on how GE Capital loaned Steve and Barry's $200m in the first quarter this year, and now S&B is filing BK.  That's potentially $200m down the drain.  I agree on you with their infrastructure and other businesses, but imagine if, say, Washington Mutual was a division of XOM.  Would you still want to buy XOM even if it were beaten up?  I sure as hell wouldn't!  Which is why I'm sure you're fairly confident that we haven't reached a bottom with GE.  The problem with their dividend like any other finance company is that it may have to be cut; as much as I like divvies, i like growing divvies and I like businesses that are positioned to increase their divvies (our favorite company PM/MO fits this profile to a T - no stupid debt, no finance division, strong sales, long history of increasing divvy, growing their markets).  I've had a stock that has cut it's dividend, and if GE has to do this, it may seem that there will be no bottom to the stock (because a lot of long investors in GE are income investors - cut their divvy and you may see a big exodus).

I still say MMM and VE are better long opportunities right now than GE.  VE especially with infrastructure, although they are more utility-like, but they are more of a pure play on infrastructure than GE is, and they have a pretty big dividend right now too.  I'm hoping you've got a blackout on VE right now or something.

Deej, did you see my blog post on blue chips? (It's my second most recent posting.)

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#8) On July 09, 2008 at 7:09 PM, DemonDoug (82.98) wrote:

crap, sorry for the triple post, caps was being stupid on me.

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#9) On July 09, 2008 at 10:07 PM, abitare (35.54) wrote:

Good Post. I was long in CAPS GE. But they are a hedge fund and are performing like a hedge fund. I almost put money in GE at $40.

I like the find about the airports that is a great call.  

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#10) On July 10, 2008 at 4:13 AM, AnomaLee (28.57) wrote:

I love the prospescts of GE and their industrial divisions. I've considered buying over several weeks, but I'd rather wait for the earnings release this Friday before I decide on GE. If I miss a small move up it doesn't matter I treat my porfolio with preventive medicine.

If stalwarth GE misses again you can bank on a 10,000 DJIA and the S&P going towards 1,100

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#11) On July 10, 2008 at 5:43 AM, TMFDeej (99.40) wrote:

Thanks for the comments guys.  You're right, GE Capital is a disaster.  Immelt should fire every single person in that division.  It's a shame that one division could bring a great company like this down.  Having said this, I'm looking past the GE Cap problems.  One would think that GE will eventually work through its problems there and either sell off portions of that arm or just make it much more conservative.  In the meantime, the uncertainty is enabling us to get a great discount on GE's other amazing businesses.  On the dividend, I personally would be shocked if GE had to cut it.

Deej

Long GE 

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