In yet another twist in the long and winding Martha Stewart saga, fallen Internet superstar analyst Henry Blodget will reportedly cover the Stewart insider-trading case for online magazine Slate.com. According to Slate, Blodget's "inside status in the securities industry and knowledge of a lot of the people involved" make him just the man for the job.
It's an old standby that cub reporters invariably draw the crime beat. The hours are horrendous, and the subject matter is -- how should we say -- unsavory. Imagine if Slate's rationale catches on; it could get downright dangerous. And geez, it's already all we can do to believe what we read on the Net.
In today's Motley Fool Take:
- Qwest's Quandary
- Quote of Note
- Schwab Buys SoundView
- Discussion Board of the Day: Schwab
- Longs' Long Run-Up
- Shameless Plug: Get a Broker
- More Fool News
- And Finally...
By Mathew Emmert (TMF Gambit)
I should note that I'm not making reference to my call on the stock to pat myself on the back, as my opinion was much more about the need to properly balance risk and reward when chasing turnaround stories than trying to make predictions about short-term price fluctuations.
All in all, Qwest's news was a mixed bag, but there are some signs of life here. The company met its earnings number, but missed revenue estimates. However, the market appears pleased with the forward revenue guidance, which predicts decent growth for 2004.
Also, management announced it would redeem up to $2.25 billion in notes of varying maturities, meaning upon close of the redemption, Qwest will have reduced its debt load by more than $7 billion over the past year. It still has a long row to hoe on this front, as even after the reduction it will be carrying more than $19 billion in debt, but this is definitely positive news -- and it allows for a little more faith in management.
"While the industry environment is still challenging," says CFO Oren Shaffer, "we are seeing signs of stabilization in our business." Though the earnings report and comments such as this brighten the outlook for Qwest's business, the ever-looming accounting investigation is still enough to keep me away from the shares. It's still simply not possible to make a reasonable valuation call with such little quantification of the downside associated with this investigation.
I feel even better about the decision when I consider that other telecom firms, such as BellSouth
Mathew Emmert owns shares of BellSouth.
Quote of Note
"The telephone gives us the happiness of being together yet safely apart." -- Mason Cooley, U.S. aphorist.
Schwab Buys SoundView
Brokerage and financial services company Charles Schwab
SoundView specializes in 160 "technology" companies, offering sell-side research, investment banking, and venture capital management. It went public on June 4, 1999, with a split-adjusted first-day close of $74.37. The stock hit an all time-closing high of $179.37 a month later. As the losses piled up through 2001 and 2002, shares crashed to a $5.15 low last October and eventually were forced into a 1:5 reverse split this June. In one good sign, the company eked out earnings of $0.03 a share in the third quarter and its first year-over-year revenue gain after three quarters of double-digit percentage drops.
The announcement mentions only one aspect of SoundView's business: research. It appears that Schwab will merge SoundView into its capital markets subsidiary and use its research operations to drive revenue from "client-focused trade execution capabilities." (What a relief to know they aren't non-client focused.) The business model is to provide research to institutions with the proviso that if they act on it -- buy or sell large blocks -- they trade through Schwab and pay it the commissions. TheStreet.com
Discussion Board of the Day: Schwab
Does this mean that Schwab is killing the rest of SoundView -- or that investment banking is so controversial that it merits no mention? And more importantly, is this a good move for Schwab? Join those already talking about it on our Schwab discussion board. Only on Fool.com.
Longs' Long Run-Up
Shares of Longs Drug Stores
It wouldn't be far-fetched to imagine that Longs, with its massive West Coast footprint, would interest, say, competitors CVS
What would an acquirer get in Longs? The chain has managed sales growth of 1.3% through the three fiscal quarters ended Oct. 30 despite decreased same-store sales. (Full quarterly financial results are scheduled for release after today's market close.) That's not particularly compelling, but since the company lowered the proverbial bar with a downbeat February press release, its shares have nevertheless risen steadily and have, in a roundabout way, managed to keep pace with the S&P 500 over the last 12 months.
Potential acquirers might also be encouraged by the Longs' efforts to meet targets, improve gross margins, manage inventory and distribution, and generate free cash flow in excess of net income in the first half. Management got a vote of confidence when the board elected Warren Bryant, already its president and CEO, to the additional post of chairman in August.
Whether all this means the company deserves its premium (on a trailing-12-month price-to-earnings basis) over CVS and Walgreen's -- not to mention companies like Rite Aid
What's also likely is that investor interest will be trained increasingly on this sector. If Longs truly is "in play," that adds further drama to the soap opera being played out at J.C. Penney
Shameless Plug: Get a Broker
If you want to buy stocks, you're going to need a broker. And who wouldn't want to own stocks? There is no place over the past 100 years where your long-term savings would have fared better than the stock market -- not in bonds, not in real estate, not in gold, and certainly not in Beanie Babies. Our Broker Center makes it super-easy to pick the right broker for you, so check it out!
More Fool News
- Is Gymboree in a Jam?
- Cut Your Car Insurance
- GE's Enlightened Move
- Best Buy Better
- Staples Keeps Clicking
For a list of all our stories from today, see Today's Headlines.
Tom Gardner draws back the curtain on his Hidden Gems approach to small-cap investing and also unveils 3 Rising Stars.... XM Satellite Radio CEO Hugh Panero talks about his nascent industry, and says Sirius doesn't provide serious competition.
Bob Bobala, Robert Brokamp, Paul Elliott, Mathew Emmert, Jeff Fischer, Jeff Hwang, Tom Jacobs, LouAnn Lofton, Alyce Lomax, Bill Mann, Selena Maranjian, Dave Marino-Nachison, Rex Moore, Rick Munarriz, Reggie Santiago, Dayana Yochim