Companies & Funds

Citadel shows some moats are still hard to cross

12 Aug 2011

Ken Griffin’s hedge fund is abandoning its foray into investment banking. Internal clashes didn’t help and adding a middle man to a trading business creates conflicts, too. But bulge-bracket firms also held up better than expected. Wall Street turf has some solid defenses.

Financial lifeboats starting to get crowded

11 Aug 2011

Safety from sinking stocks has been sought in Treasuries, and even bonds backed by U.S. homes. But other places of refuge like the Swiss franc and gold showed on Thursday how quickly they can be rocked when too many investors pile in. Havens aren’t immune to mania either.

European market meddling would not be worth it

11 Aug 2011

Shares have jumped on expectations that some countries will impose short-selling bans. The desire to protect banks from a potentially self-fulfilling loss of confidence is understandable. But changing the rules in volatile times would risk damaging markets in the longer term.

News Corp cash finds the right target: investors

11 Aug 2011

After phone-hacking pay-offs and allegations of payments to UK police, News Corp cash is going in the right direction - dividends and buybacks. News also pledges deal discipline. But governance neglect and Murdoch’s unyielding passion for newspapers still hold the company back.

Investment bank cull won’t protect survivors’ pay

11 Aug 2011

Wholesale banks are cutting thousands of jobs. But business is tailing off faster. The only way to protect bonuses would be to pay out a higher proportion of revenues. With capital under pressure and investors wanting better returns, that would be hard to defend.

Groupon’s odds of success may wilt with market

10 Aug 2011

The online coupon company’s Q2 sales increased 10-fold from a year ago. Yet its net loss also swelled to over $100 mln as it financed growth with cash owed to merchants. If investors shunning risk close the window for an IPO, it would leave Groupon less financial wiggle room.

Financials investors brace for the worst

9 Aug 2011

They wiped $100 bln off the 20 largest U.S. institutions on Monday. It may be panic selling. But most big banks are back below book value. Shareholders might not believe a 2008-like crash is coming, but the rout suggests they’d rather get out first and ask questions later.

Cheaper oil may be last best stimulus

9 Aug 2011

Falling crude prices are the silver lining to market woes. While governments lack economic ammo, one estimate says each cent off gas adds $1 bln to US pockets alone. OPEC is unlikely to intervene any time soon, meaning lower fuel costs could be the only economic booster for now.

Why Apple just might be the first $1 trln company

9 Aug 2011

The iPhone maker’s sales have been surging 80 pct a year, and profit faster. While its $342 bln value overtook Exxon’s briefly, it trades on par with the sluggish market - and at half the multiple it fetched in 2006. Relatively, at least, Apple looks worth far more.

Asian equity sell-off reflects three flavours of fear

9 Aug 2011

While the region’s economies are in good shape, investors fear the impact of a U.S. recession - both on exports, which remain key to growth, and on closely linked capital markets. A third worry is that plunging asset prices could cause a real pullback in credit and investment.

BofA leads banks back into mortgage abyss

8 Aug 2011

Its shares fell 15 pct after the U.S. debt downgrade and AIG’s $10 bln home-loan lawsuit. Other mortgage-heavy banks were hit, but none as bad as BofA. Investors now reckon it’s worth $135 bln less than breakup value. That’s a huge housing hole for CEO Brian Moynihan to escape.

Don’t blame S&P for the madness of markets

8 Aug 2011

The credit rating agency targeted U.S. debt, but it was stocks not Treasuries that got clobbered. The counterintuitive reaction is less bonkers than it seems. An economic slowdown combined with dithering leaders and limited central bank resources is a bad mix for risky assets.

Buffett’s value quest pushes a board to seek same

8 Aug 2011

A $3.2 bln offer from a Berkshire Hathaway unit prices reinsurer Transatlantic at just 80 pct of book value. But along with a hostile bid from Validus, the target’s directors are now under pressure to do what they should have done before - find the best deal for shareholders.

Different duty may call for U.S. Treasury boss

8 Aug 2011

There was little upside for the president to let Tim Geithner go back to New York. Finding a replacement would be a political pain. And with markets nervous, Obama needs someone with crisis experience. But Geithner may have a smaller role in this latest stage of the crisis.

Global equity sell-off ignores fundamental value

8 Aug 2011

Stocks have been clobbered by the latest leg of the global economic and financial crisis. But falling share prices are a symptom of fears: they are not, as yet, a cause. Long-term investors unburdened by leverage still have good reasons to hold their nerve.

Logical Kraft slim-down aims to fatten world

4 Aug 2011

The Oreos-to-Cheez Whiz conglomerate is splitting into a growth-challenged American grocery business with $16 bln of sales and an oddly named $32 bln “global snacking platform.” This defies the scale case for last year’s purchase of Cadbury, but it makes sense for shareholders.

Investors in Motown see nothing but recession

4 Aug 2011

GM posted its best earnings in years and Ford’s looking solid even with subdued U.S. sales. Both are sitting on piles of cash. Yet shareholders have wiped a combined $49 bln off their value since January amid economic worries. They’re right to be cautious. But it looks overdone.

Lloyds’ battering may have silver lining

4 Aug 2011

Huge one-off charges, higher funding costs and moribund markets made a mess of the UK lender’s first half. But Lloyds is weaning itself off state funding. And its depressed share price may prompt politicians to back away from plans to force the bank to sell more branches.

Rio shareholders get an extra thank you

4 Aug 2011

The miner needed a $15 bln cash call in the crisis. Now it’s raised its share buyback target by $2 bln to $7 bln. Given slightly disappointing H1 numbers and a global slowdown, that may seem imprudent. But the numbers add up. Rio can afford to repay investors their 2009 favour.

StanChart investors should not get carried away

3 Aug 2011

The lender’s income is growing at a double-digit clip and it is hiring, not firing. Even better, costs are under control. But StanChart’s premium valuation leaves little room for error. A first-half hiccup in India is a reminder that emerging market growth is seldom linear.