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Bank Stock Outlook: Will First-Half Gains Give Way to Second-Half Pain?

Money Morning — Wed, 29 Jul 2009 20:05:53 +0000

[Editor's Note: After more than a year of chaos and controversy, some of the leading U.S. banks saw their stock prices soar during the second quarter. As part of its mid-year forecast series, Money Morning examines the outlook for U.S. banks for the rest of this year. To see earlier stories from our mid-year forecast [...]

The Top 12 U.S. Banks: From Zombies to Hidden Gems

Martin Hutchinson — Wed, 18 Feb 2009 12:50:10 +0000

By Martin Hutchinson Contributing Editor Money Morning U.S. Treasury Secretary Timothy Geithner last week proposed a series of programs, totaling $1.5 trillion, to bail out the U.S. ... Money Morning is here to help investors profit handsom...

The All American Investor

Contrarian Profits — Thu, 08 Jan 2009 14:30:20 +0000

pAmerica#8217;s finest quality is that it has no memory! Three months ago, the topic of the day was which window to jump from; today all I hear is how hot the market is. This morning#8217;s conversation on #8220;Squawk Box#8221; was how the market has moved 24 percent and maybe there is too much exuberance./p pToo much exuberance? Last October we were wondering if there would be a run on the banks. Now it#8217;s too much activity./p pThis complete lack of an ability to remember any bad news has a backside, you knew that was coming. The backside is that we also are blinded by the short-lived bad news./p pFor four months, almost every editor at #8220;The Daily Edge#8221; described the market this fall#8230;/p

Billions in U.S. Bank Rescue Funds are Fueling Buyouts Worldwide – Instead of Lending at Home

Contrarian Profits — Fri, 05 Dec 2008 14:57:31 +0000

pBank of American Corp. (a href="http://finance.google.com/finance?q=bac" target="_blank"BAC/a), which is getting $15 billion from the U.S. government as part of the Treasury Department’s $250 billion “recapitalization” effort, is doubling its stake in state-owned a href="http://finance.google.com/finance?q=SHA%3A601939" target="_blank"China Construction Bank Corp/a., and will hold a 20% stake worth $24 billion in China’s second-largest lender when that deal is finalized./p pPNC Financial Services Group Inc. (a href="http://finance.google.com/finance?q=NYSE%3APNC" target="_blank"PNC/a), which will get $7.7 billion from Treasury’s a href="http://en.wikipedia.org/wiki/United_States_Emergency_Economic_Stabilization_fund" target="_blank"Troubled Assets Relief Program/a (TARP), is using that cash infusion to help finance its $5.2 billion buyout of embattled National City Corp. (a href="http://finance.google.com/finance?q=NYSE%3ANCC" target="_blank"NCC/a)./p pAnd U.S. Bancorp (a href="http://finance.google.com/finance?q=usb" target="_blank"USB/a), which received a $6.6 billion capital infusion from that same rescue package, has acquired two California lenders – Downey Savings #38; Loan Association, F.A., a subsidiary of Downey Financial Corp. (a href="http://finance.google.com/finance?q=downey" target="_blank"DSL/a),#8230;/p

Bailouts Are Setting Us Up For A Bigger Crisis

Andrew Gordon — Wed, 03 Dec 2008 13:57:55 +0000

pThe government is banking on the American consumer to rescue the economy. But debt-ridden households have had enough, says strongAndrew Gordon/strong. He says the government#8217;s massive bailout are benefiting very few in the short-term. But the long-term consequences will be felt by all./p pThis from Investor#8217;s Daily Edge:/p blockquotepThe government#8217;s latest a href="http://www.investorsdailyedge.com/article.aspx?id=1651"bailout moves/a have me scratching my head. It#8217;s throwing $200 billion worth of guarantees at recent and current loans tied to consumer and small-business spending./p pHank and Ben want the consumer to bail out the economy. And they want to do it by putting consumers deeper into debt./p pThey don#8217;t get it./p pThey don#8217;t get that consumers are tapped out./p pWhat do they think when they see numbers that show that American households are in deeper#8230;/p/blockquote

The American Dream Is Drowning In Debt

Andrew Gordon — Wed, 19 Nov 2008 13:55:32 +0000

The American dream is drowning in debt, says Andrew Gordon. The middle class are being squeezed as tumbling asset prices hack away at household wealth. And things won’t change unless the government steps up to the plate.

More from Andrew at Investor’s Daily Edge:

We’re in a “damned if we do, damned if we don’t” economy. And there’s not a damn thing we can do about it.

Our economy floats on the whims of the American consumer. When they feel confident about the future, they spend. The more they spend, the better the economy does. This is oddly true even if 80 percent of the spending is on goods from Asia.

Right now the American consumer isn’t feeling so confident and the economy is…

$250bn Bank Rescue Will Encourage Acquisitions, Not Lending

Contrarian Profits — Thu, 30 Oct 2008 13:08:28 +0000

The Treasury’s plan to inject $250 billion in capital directly into US banks is underway. But William Patalon III says some of these taxpayer funds will be used by big banks to acquire junior competitors. This means the increase in lending that the plan is supposed to spark will be modest at best. And less competition in the banking sector could mean a rise in fees going forward.

This from Money Morning:

While the U.S. government’s plan to invest $250 billion into U.S. financial institutions has been billed as a strategy that will bolster the health of the banking system and also jump-start lending, the recapitalization plan is likely to have a secondary effect – one that whipsawed U.S. taxpayers likely won’t be…

Billions in Bank Rescue Funds are Fueling Buyout Deals, and not the Increase in Loans That Would Help Ease the Financial Crisis

William Patalon lll — Thu, 30 Oct 2008 09:00:34 +0000

By William Patalon III Executive Editor Money Morning/The Money Map Report While the U.S. government’s plan to invest $250 billion into U.S. financial institutions has been billed as a... Money Morning is here to help investors profit h...

Maverick Capital Management 13F | Lee Ainslie Hedge Fund Holdings Analysis

Richard C. Wilson — Mon, 22 Sep 2008 12:41:00 +0000

Maverick Capital

Maverick Capital Management Holdings Analysis

This post is being written as part of HedgeFundBlogger.com's Investment Securities Tool which analyzes the holdings of hedge fund managers.

Lee Ainslie started Maverick Capital back in 1993 with $38 million. Nowadays, the fund is worth $10 billion. Ainslie, like many of the other fund managers I've profiled, has a background rooted in learning from legendary great Julian Robertson at Tiger Management. So, due to the fact that these proteges learned from the best and have had great success running their own hedge funds, I continually try to find a reason not to follow these funds. And, needless to say I'm never successful. Some contacts over at Maverick have explained that their hedge fund strategy is straight up stock picking, both long and short. They made it clear though, that they do not employ pairs trades. Although, some of their long/short setups might be in the same sector. They try to hedge their positions like a true hedge fund by picking out the shining stars in certain sectors, as well as identifying the pieces of garbage. Now, of course, this presents us with a problem in that the 13F filings only show long positions (unless they're holding puts on a name, we can see those). So, a good amount of Maverick's portfolio (the entire short side) is unbeknownst to us, because they have reported zero put positions. But, let's look on the bright side in that we can see all their long positions. Maverick uses a value approach (obviously learned from Julian) and one of their most popular metrics is finding companies and comparing their enterprise value to sustainable free cash flow.

So, now that we've got a little background on Maverick, let's see what they were up to. The following are Maverick Capital's current holdings as of June 30th 2008, as released in their most recent 13F filing with the SEC. The positions in this most recent 13F were compared to last quarter's 13F and here are the changes made to their portfolio:

New Positions:
First Solar (FSLR): 1,202,118 shares. This position is 2.93% of Maverick's portfolio.
Lorillard (LO): 3,820,856 shares. This position is 2.36% of Maverick's portfolio.
CVS Caremark (CVS): 5,912,073 shares. This position is 2.09% of Maverick's portfolio.
Netapp (NTAP): 9,331,862 shares. This position is 1.81% of Maverick's portfolio.
ITT Educational Services (ESI): 2,422,090 shares. This position is 1.79% of Maverick's portfolio.
Macy's (M): 9,008,174 shares. This position is 1.56% of Maverick's portfolio.
Hansen Natural (HANS): 5,712,952 shares. This position is 1.47% of Maverick's portfolio.
Polo Ralph Lauren (RL): 2,431,244 shares. This position is 1.36% of Maverick's portfolio.
Dicks Sporting Goods (DKS): 7,589,473 shares. This position is 1.20% of Maverick's portfolio.
Cigna Corp (CI): 2,931,045 shares. This position is 0.93% of Maverick's portfolio.
Digital River Inc (DRIV): 1,974,144 shares. This position is 0.68% of Maverick's portfolio.
Viacom Inc (VIA): 2,442,500 shares. This position is 0.67% of Maverick's portfolio.
Forest Labs (FRX): 1,789,900 shares. This position is 0.56% of Maverick's portfolio.
Lamar Advertising (LAMR): 1,542,918 shares. This position is 0.50% of Maverick's portfolio.
Visa (V): 565,005 shares. This position is 0.41% of Maverick's portfolio.
South Financial Group (TSFG): 50,000 shares. This position is 0.38% of Maverick's portfolio.
Athena Health (ATHN): 1,245,819 shares. This position is 0.34% of Maverick's portfolio.
National City Corp (NCC): 6,625,176 shares. This position is 0.28% of Maverick's portfolio.
Sohu.com Inc (SOHU): 170,485 shares. This position is 0.11% of Maverick's portfolio.
MSCI Inc (MXB): 287,186 shares. This position is 0.09% of Maverick's portfolio.
Universal American (UAM): 1,004,391 shares. This position is 0.09% of Maverick's portfolio.
Comscore (SCOR): 436,640 shares. This position is 0.09% of Maverick's portfolio.
Citizens Republic Bancorp (CRBC): 937,500 shares. This position is 0.02% of Maverick's portfolio.

Added to:
Berkshire Hathaway (BRK.B): Increased position by 1412%. Position is now 0.45% of their portfolio.
Gmarket (GMKT): Increased position by 317%. Position is now 0.19% of their portfolio.
Infinera (INFN): Increased position by 171%. Position is now 0.54% of their portfolio.
American Capital (ACAS): Increased position by 141%. Position is now 0.30% of their portfolio.
Nordstrom (JWN): Increased position by 136.61%. Position is now 2.79% of their portfolio.
America Movil (AMX): Increased position by 129.88%. Position is now 3.91% of their portfolio.
Lexmark (LXK): Increased position by 109.39%. Position is now 1.42% of their portfolio.
Citrix (CTXS): Increased position by 109.36%. Position is now 2.20% of their portfolio.
Bank of New York Mellon (BK): Increased position by 55.42%. Position is now 3.15% of their portfolio.
Baxter Intl (BAX): Increased position by 51.69%. Position is now 2.90% of their portfolio.
Advanced Micro Devices (AMD): Increased position by 45.89%. Position is now 2.87% of their portfolio.
Raytheon (RTN): Increased position by 41.72%. Position is now 2.58% of their portfolio.
Fidelity National Info (FIS): Increased position by 40.56%. Position is now 2.05% of their portfolio.
Covidien (COV): Increased position by 32.99%. Position is now 2.32% of their portfolio.
Liberty Media Corp (LMDIA): Increased position by 28.09%. Position is now 1.59% of their portfolio.
Resmed (RMD): Increased position by 26.46%. Position is now 0.74% of their portfolio.
Burlington Northern (BNI): Increased position by 22.73%. Position is now 1.83% of their portfolio.
Google (GOOG): Increased position by 22.27%. Position is now 1.72% of their portfolio.
Genentech (DNA): Increased position by 21.38%. Position is now 1.40% of their portfolio.
Zimmer Holdings (ZMH): Increased position by 20.28%. Position is now 1.73% of their portfolio.
Cypress Bioscience (CYPB): Increased position by 19.98%. Position is now 0.20% of their portfolio.
Apple (AAPL): Increased position by 19.45%. Position is now 4.09% of their portfolio.
Research in Motion (RIMM): Increased position by 15.41%. Position is now 4.08% of their portfolio.
MetroPCS Comm (PCS): Increased position by 13.6%. Position is now 0.77% of their portfolio.
Home Inns & Hotels (HMIN): Increased position by 7.72%. Position is now 0.54% of their portfolio.
Gilead Sciences (GILD): Increased position by 6.66%. Position is now 2.37% of their portfolio.
Marvell Technology (MRVL): Increased position by 5.24%. Position is now 3.08% of their portfolio.
Newstar Financial (NEWS): Increased position by 5.21%. Position is now 0.14% of their portfolio.
Cardinal Health (CAH): Increased position by 3.33%. Position is now 1.56% of their portfolio.
Amylin Pharma (AMLN): Increased position by 2.84%. Position is now 0.58% of their portfolio.
Discovery Holding (DISCA): Increased position by 1.74%. Position is now 1.21% of their portfolio.
Palm (PALM): Increased position by 1.40%. Position is now 0.51% of their portfolio.
Lumber Liquidators (LL): Increased position by 1.14%. Position is now 0.26% of their portfolio.
China Nepstar (NPD): Increased position by 0.75%. Position is now 0.18% of their portfolio.
First Advantage (FADV): Increased position by 0.65%. Position is now 0.15% of their portfolio.
Under Armour (UA): Increased position by 0.17%. Position is now 0.83% of their portfolio.
Mylan Inc (MYL): Increased position by 0.06%. Position is now 1.09% of their portfolio.
Monsanto (MON): Increased position by 0.04%. Position is now 1.68% of their portfolio.
Potash (POT): Increased position by 0.03%. Position is now 2% of their portfolio.

Reduced positions:
Thermo Fisher (TMO): Reduced their position by 4.91%. Position is now 1.68% of their portfolio.
Western Union (WU): Reduced their position by 10.2%. Position is now 2.08% of their portfolio.
Marsh & Mclennan (MMC): Reduced their position by 12%. Position is now 1.55% of their portfolio.
Textron Inc (TXT): Reduced their position by 18.93%. Position is now 1.44% of their portfolio.
Wyeth (WYE): Reduced their position by 20.6%. Position is now 1.46% of their portfolio.
Leap Wireless (LEAP): Reduced their position by 23.40%. Position is now 0.39% of their portfolio.
Trubion Pharma (TRBN): Reduced their position by 24.38%. Position is now 0.04% of their portfolio.
Dish Network (DISH): Reduced their position by 27.75%. Position is now 1.13% of their portfolio.
Avon Products (AVP): Reduced their position by 33.23%. Position is now 1.36% of their portfolio.
JP Morgan Chase (JPM): Reduced their position by 38.68%. Position is now 0.89% of their portfolio.
Cognizant (CTSH): Reduced their position by 42.97%. Position is now 0.85% of their portfolio.
DirecTV (DTV): Reduced their position by 49.69%. Position is now 0.83% of their portfolio.
Suntrust Banks (STI): Reduced their position by 50%. Position is now 0.16% of their portfolio.
Gamestop (GME): Reduced their position by 51.64%. Position is now 0.81% of their portfolio.
Corcept (CORT): Reduced their position by 57.49%. Position is now 0.01% of their portfolio.
Bluefly (BFLY): Reduced their position by 90%. Position is now 0.11% of their portfolio.
Berkshire Hathaway (BRK.A): Reduced their position by 95%. Position is now 0.66% of their portfolio.

Removed Positions (Positions Maverick sold out of completely):
Hanesbrands (HBI)
Autozone (AZO)
Bankrate (RATE)
CNET (CNET)
Crocs (CROX)
Cumulus Media (CMLS)
Harmonic (HLIT)
Loews (L)
Move Inc (MOVE)
Nucor (NUE)
OfficeMax (OMX)
Qualcomm (QCOM)
Salesforce (CRM)
Sandisk (SNDK)
Sears (SHLD)
Starbucks (SBUX)
UnitedHealth (UNH)

Positions with no change:
VMWare (VMW). Position is 0.59% of their portfolio.
BPW Acquisition (BPW). Position is 0.18% of their portfolio.
FIrst Marblehead (FMD). Position is 0.05% of their portfolio.
Ultra Clean Holdings (UCTT). Position is 0.01% of their portfolio.
Vivus (VVUS). Position is 0.01% of their portfolio.

Top 20 holdings by % of portfolio:
1. Apple (AAPL): 4.09% of the portfolio
2. Research in Motion (RIMM): 4.08% of the portfolio
3. America Movil (AMX): 3.91% of the portfolio
4. Bank of New York Mellon (BK): 3.15% of the portfolio
5. Marvell Tech (MRVL): 3.08% of the portfolio
6. First Solar (FSLR): 2.93% of the portfolio
7. Baxter Intl (BAX): 2.90% of the portfolio
8. Advanced Micro (AMD): 2.87% of the portfolio
9. Nordstrom (JWN): 2.79% of the portfolio
10. Raytheon (RTN): 2.58% of the portfolio
11. Gilead (GILD): 2.37% of the portfolio
12. Lorillard (LO): 2.36% of the portfolio
13. Covidien (COV): 2.32% of the portfolio
14. Citrix (CTXS): 2.20% of the portfolio
15. CVS Caremark (CVS): 2.09% of the portfolio
16. Western Union (WU): 2.08% of the portfolio
17. Fidelity National Info (FIS): 2.05% of the portfolio
18. Potash (POT): 2.00% of the portfolio
19. Burlington Northern (BNI): 1.83% of the portfolio
20. Netapp (NTAP): 1.81% of the portfolio

----------------------------------------------------

Breakdown: Maverick changed up their portfolio a decent amount over the past quarter. Most notable are their changes within their top 10 holdings. Hedge fund favorite Qualcomm (QCOM) was Maverick's 3rd largest holding last filing. This filing, they no longer even hold a position. Additionally, they were selling off chunks of other top 10 holdings from last quarter. They sold off 33% of their position in Avon Products (AVP), which was their 4th largest holding just one quarter ago. They also sold over 51% of their Gamestop (GME) position, which last quarter was their 7th largest holding. With those positions vacating their place in the top 10 holdings of Maverick's portfolio, new holdings obviously took their place. America Movil (AMX), another hedge fund favorite, was Maverick's 9th largest holding last time. This time, they increased their position by 129% and it is now their 3rd largest holding. They obviously used the weakness in this name to add to their position, just like fellow 'Tiger Cub' fund Lone Pine Capital. Maverick also added heavily to Nordstrom (JWN), increasing their position by 136% and making it now their 9th largest holding.

Maverick was out adding to tech across the board. Apple (AAPL) and Research in Motion (RIMM) are their top 2 largest holdings respectively, as they boosted their positions in both by over 14% each. Additionally, they added to their Marvell (MRVL) position, bringing it up to the fund's 5th largest position now. Maverick also continues to build a position in Advanced Micro Devices (AMD), as it now is their 8th largest holding.

Among their new positions this quarter are First Solar (FSLR), Lorillard (LO), and CVS Caremark (CVS). I highlight these three in particular because Maverick started large, new positions in all three names. First Solar (FSLR) was brought up all the way to the fund's 6th largest holding after not even owning shares last quarter. They started a new position in CVS Caremark (CVS) and brought it up to the fund's 15th largest holding. Also, they added heavily to Lorillard (LO) as well, making this new position their 12th largest holding. This position is interesting because we also saw Lone Pine Capital (ran by Stephen Mandel Jr.) start a new position in this exact same name. And, actually, this is not the only position that both Maverick and Lone Pine both started together. In this 13F filing, we see that Maverick started a position in Hansen Natural (HANS). And, Lone Pine recently disclosed that they have a 7.8% stake in HANS. It's definitely common to see many similar positions within the portfolios of various 'Tiger Cub' managers who now run their own funds because they all undoubtedly keep in touch and come from the same school of thought.

One last thing I would like to point out is Maverick selling completely out of various consumer related names. They sold completely out of their positions in Autozone (AZO), Hanesbrands (HBI), Sears (SHLD), Starbucks (SBUX), Crocs (CROX), and OfficeMax (OMX).

You can view their most recent 13F as filed with the SEC here.

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Fannie, Freddie Bailout Just a First Step – Zacks Analyst Interviews

Zacks Market Commentaries — Mon, 15 Sep 2008 00:00:00 +0000

With the first bit of distance from which to view the U.S. governments bailout of government-sponsored entities (GSEs) Fannie Mae (FNM) and Freddie Mac (FRE), we wanted to find out from Zacks senior finance industry analyst Neena Mishrahow much of a game-changer this is for the housing market, Wall Street overall and the U.S. economy as a whole.

What sort of immediate impact do you expect among financial companies in your coverage now that Fannie and Freddie will officially be bailed out?

The move was overall positive for the housing market and the wider economy, as it removed the uncertainty related to the government support of the GSEs, and is also likely to help bring mortgage rates down. Yet we do not expect it to lead to a recovery in the housing markets. The housing situation in the country continues to be quite grim as there is still a large supply of unsold homes in the market and an increasing number of foreclosures.

While the bailout will bring down the mortgage rates, we do not anticipate any significant increase in the buying activity in the housing markets, in view of high inflation, rising unemployment (now above 6%) and increased job losses. Further, since the banks continue to struggle with large amounts of problem assets on their balance sheets, their lending abilities will be limited and tighter lending and underwriting norms will also limit the lending activity. Thus, we also do not see housing prices stabilizing very soon.

Does this mark the beginning of a new direction in the U.S. finance business, mortgages, etc., or are there other big questions still out there?

We maintain our negative outlook on the banks and mortgage insurers and neutral outlook on the P&C and Health insurers. While we acknowledge that the GSE bailout was overall supportive for the markets, we do not see the housing markets bottoming out at present.

Many of the banks under our coverage will report higher losses, particularly related to the mortgage and residential construction portfolios, in the coming quarters. Same is the case with the mortgage insurers who will report increased losses in the U.S. mortgage operations. As a result, they will need to raise additional capital and/or eliminate/cut their dividends. We also anticipate losses related to some banks and insurers exposure to preferred stocks of the GSEs, which will likely need to be marked down.

Do you see any sub-sectors within your coverage trading at attractive valuations these days?

We suspect that the credit costs will remain elevated during the second half of 2008 and at least a part of 2009 and will continue to impact the earnings. Among the banks, we favor those which have low exposure to housing and residential construction loans and/or derive a significant portion of their earnings from fee based sources. Among the insurers also, we continue to prefer those which have superior capital levels and lower exposure to mortgage related securities in their portfolio, compared with their peers.

Are there Sells you would care to point out for investors to stay away from?

We would advise the investors to stay away from banks like National City Corp. (NCC), Wilmington Trust (WL), Zions Bancorp (ZION), Keycorp (KEY) and Comerica (CMA), and mortgage insurer PMI Group (PMI).

Neena Mishra is a senior analyst covering financial institutions and insurers for Zacks Equity Research.
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