Wednesday, February 4, 2009
(Cont'd from above)...

Jim (cont'd):    It is simply a case of who is taking advantage of the crisis… and who is getting made… who is able to take shares and raise prices… vs. who isn’t…. who is getting it right vs. who is getting it wrong… something that has never been more stark than in this tides going out quarter… a famous reference to a famous Warren Buffet phrase… about how when we had that oceanic phenomenon we see who is swimming naked and who still has on the tight Speedos… let me add a Cramer caveat… we also find out who is smoking dope… ala Mr. Phelps… and in Mission Impossible, we are disavowing knowledge of his or their actions… take today’s action…. Clorox… well Donald Knause, a famous fantastic package good CEO, who spent plenty of time in the trenches of the soda wars… has finally gotten arms around this unwieldy company and has been able to take advantage of the weakness to deliver good numbers… take share and yes of course take name… quite impressive… although aided by the fact that the company doesn’t have a lot of exposure to the over weak dollar… which is now the strong dollar… which is now the too strong dollar, at least for its own good.

Or consider Colgate… huge international base… just delivered on margins, delivered on sales, and delivered on innovation… these are the winners… the strong players who are using this time of crisis to get even stronger.. I want you to contrast those now with Kraft… or Sara Lee… uh uh bad… and unfortunately because it is such a good company Proctor & Gamble… these were all smoked… now doubt on a bed of Clarks Mesquite flavored Kingsford… and I blame these companies management’s for dropping the ball… because these businesses are too similar to Clorox and Colgate’s to draw any other conclusion… now the old Cramer… you know the one who probably wasn’t one of a diplomat… he would have sentenced the defeated managements to put their heads in Glad bags made by Clorox… but I am now more of a statesman in the vein of founding dad James Madison… so I will simply make them take a bath in cat litter filled with Soil Fresh Step and Seven Seas Caesar Salad dressing… a curious smelling add mixture if their ever was one.

Now, consider the banks… Goldman Sachs is talking about paying back TARP… Citigroup might need more tarp… same with Bank of America… Morgan Stanley has got a new business model, Pure Brokerage… UBS has no business model… these differences are meaningful… and you can tell in their share prices… as both Morgan Stanley and Goldman Sachs, two AAP names, were ramping big today despite a huge decline…. in the financials… the out execution extends to manufacturers… Emerson and Honeywell put on some pretty fab numbers now that we sort through all the quarters… but I did not see much out of United Technologies, or Ingersoll-Rand, or Illinois Tool Works to excite me… and Textron… down huge again today… on financial woes… who has Textron become do you ask… why it is Mr. T… aka Culver Rain post the Rockie beating… with Apple breaking out you can see that it is… unlike this where I am breaking out… is running circles around Dell… which is struggling to come up with anything proprietary… it is even trying to go into phones… I meanwhile the PC division of Apple is coming on strong… Apple is pants-ing Dell for heavens sake… more proof by the way that this 63 year old, soon to be 64 year old is regressing… and did you notice that Motorola and Nokia tried to blame the environment for their short falls and their dividend cuts… I didn’t hear that kind of talk from the newly resurgent Palm… or from Apples iPhone people… or certainly not from Research In Motion… maybe it is just raining on Motorola and Nokia’ side of the street… but across it, it is sunny…. but it is more likely Palm, Apple and RIMM have the products people want while Motorola and Nokia don’t.

How about Abbott Labs vs. a Pfizer… Abbott has got the growth… it has got the growth… it has got the innovation… it has got a new heart stem… it has got a growing anti-inflammatory franchise with Neumera… double digit growth… that is what we want in a drug company… which is why of course my charitable trust owns it… Pfizer’s execution on the other hand is terrible… and when you hang it there for the dividend… what do they do… they John Wayne Bobbit the darn thing… and then they go chase growth with Wyeth… sold to you my friend.

Even oil separated the men from the boys… Chevron the other day reported that it could only replace 80% of its production… but Cramer fave and charitable trust owned BP replaced 100% of its production… a metric that I find is still the single best determinate of future stock price when it comes to oil… BP has 5% production growth, Chevron only 1%… hey, in natural gas… Devon today post a fourth quarter loss and gets pantsed by Mad Money endorsed Anadarko… which hedged perfectly… and had a good game… we could go on and on but here is the point… I have never seen this kind of dichotomy of the strong vs. the weak before… usually we have had most companies in the same sector travel together with few ever distinguishing themselves… not in this downturn… despite the fact that using sector ETF’s… is increasingly becoming the way to accepted way to trade… it has never been more clear to me from these examples that it is the wrong way to go…. homework right… ETF no… this explains a lot of todays 122 point decline in the Dow… as many of the poor executors like Bank of America… Proctor & Gamble… and Kraft… not to mention suddenly poor executor Disney… contributed mightily to the miserable performance of today’s market.

Here is the bottom line….

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The Bottom Line!:     Some companies are just getting it right… others to be polite just aren’t doing enough to take advantage of the situation… stick with the winners who know how to execute… and take advantage of the crisis… stop buying into the sector ETF nonsense… it is about individual managements and their execution right now… not the sector that a company is in… the guy who got it right will be rewarded with a higher multiple on earnings…meaning we will pay more for their excellence… their new found best of breed status… own the great execution brothers… and leave the raggedy rest to others.

Strong companies are playing the downturn right & taking advantage of it… the companies performing the best could be rewarded & you could too! 

[verbatim recap]

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Jim went on after this segment to take questions from callers, and responded with his comments...

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Q:    I am seriously concerned about today’s new Obama restriction, regarding CEO’s salaries, because I don’t believe that you can get a top CEO for a half a million a year. Is Obama now bad for business? And isn’t he now leaning toward socialism?

Jim:    Alright… let’s understand this plan… because it didn’t make a lot of money… I didn’t spend a lot of time on… but it obviously isn’t what I want to see… because a New York law firm associate makes a little bit more than the top executives of banking… what the point of this thing was basically to say if you are going to take more TARP money, and we judge you to be an excessive user… we are basically going to shut you down… you are going to make $500,000 and you are going to have to work your way out of the hole… I have got to tell you before we just indict them for socialism… if these guys were making $20 million a year for like 7 years… can’t they go on $500,000 for a couple of years… I mean I have got to tell you unless you are a really terrible investor…if you are making $20 million a year you are not really hurting… you have got enough municipal bonds… you should have you moron… to be able to put away a lot of money and make money quarter after quarter… so I am not feeling that bad for these clowns… I am really not… the guys that I feel bad for are the guys who are hard working who basically could say… they have to tell with this… basically what Obama is doing, he doesn’t realize it then… rather than make the $500,000 what these guys will do is say hey listen we are going to fail… bail us out.. it could create even more ripples… they have not thought this through… I wonder why that is… could it be the fact that the Treasury Secretary who caused a lot of the problems in the previous administration while he was Federal Reserve President… is back doing his magic… I think it is a real legitimate question… since I was the only one who asked it before… and to continue to be the only one to ask it… and I have never been invited to one of his parties and never will.

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Q:    Do you feel comfortable enough know in differentiating Hudson City Bank from the other regional banks, to restore your prior recommendation of HCBK?

Jim:    Well I did pull it because I felt that we shouldn’t own any banks… there was a deliberate and miserable hit job today on Hudson City… and Cramer fave Ron Hermance (CEO) in The Journal… it was really a nasty piece saying that they do not know what they are doing… and saying that the bad loans are up… I mean… I got to tell you that the bad loans are the equivalent of like rich homes… they ought to get on the case and stop slamming the guy… all that said… the sector is so horrible that only if you are totally out executing by not being in banking… can you make a lot of money.

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Q:    Pfizer I sold it when I heard they were merging, and when they were going to cut their dividends. So I am wondering is that a good call, or should I stay out of it for awhile?

Jim:    Stay the heck out of Pfizer… they don’t have a clue… I got to tell you something… I begin to look at this Pfizer and I don’t think that they are doing anything right… they need a new CEO… they bought Wyeth… I don’t know if that is even going to matter to them… I am a sell, sell, sell on Pfizer… I got a lot of other drug stocks I like much better.

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[verbatim recap]

[end of segment]

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