Knuckleheads vs Marblehead
Stalingrad
USC/Notre Dame
Ali vs Frazier
Battlegrounds each and all. The past year we have enjoyed a front row seat to another battle that will live in infamy.
Knuckleheads vs Marblehead
First Marblehead is engaged in the nuts and bolts of lending money to college students. It is a specialized niche of lending, and can be extremely profitable if done correctly.
The specialty finance sector has traditionally offered up a bounty of riches to short sellers...Mercury Finance and a host of others come to mind. Apparently the shorts thought this was another zero...until Tom Brown ambled into the firefight.
You remember Tom Brown right? The man who nearly ten years ago had the temerity to call Ed Crutchfield, CEO of First Union (now Wachovia) the “serial diluter” for his questionable acquisition strategy. Tom pioneered Wall Street humor long before Dan Loeb of Third Point LLC arrived on the scene.
Mr. Brown eventually lost his job after criticizing investment banking clients. But he moved on to bigger and better things, founding a hedge fund and the publishing the quirky website bankstocks.com. The site has provided a forum to refute knuckleheads and intelligently discuss the current state of the financial services industry. But back to our story…
The past year and a half witnessed a steep plunge in First Marblehead’s shares followed by a sustained rally. Along the way the longs and shorts have traded catcalls, personal insults and a slew of published research supporting their view. Talking their book fersure.
The latest potshot came from Zach Maxfield, one of Tom’s sharp as a tack analysts and his point man in the battle.
Brown’s lead-in to a letter Maxfield sent to the UBS analyst covering the stocks reads as follows…
It Takes Two to Make a Market
Or maybe even three.
It seems the street is split on the prospects for Riverbed Technology, a stock that has been flying-high since its recent IPO.
yesterday the Dow Jones tape read as follows…
*DJ 12:02:20 EST Riverbed Tech Started at Hold by Citigroup
*DJ 12:30:45 EST Riverbed Tech Started at Buy at Deutsche Bank
*DJ 13:19:20 EST Riverbed Tech Started at Neutral at Goldman Sachs
We are not sure how to play these recommendations...lemme see...hold means sell...neutral means hold....buy means nibble but not too aggressively...aw never mind....
Buffett is Buying!!!!!!
Shares of Target gapped open this morning and traded up to a 52-week high as breathless traders piggy-backed a filing made by Berkshire Hathaway reporting a large stake in the company.
But investment legend Warren Buffett probably is not behind the purchases. The 2004 Berkshire annual report explains that GEICO’s Lou Simpson, an astute investor in his own right, manages approximately $3 billion with Buffet’s blessing. And it appears he has the authority or wherewithal to establish positions up to the $300 million mark…
the Oracle of Omaha opines…
Even then, it is not typically I who makes buying decisions. Lou Simpson manages about $2.5 billion in equities that are held by GEICO, and it is his transactions that Berkshire is usually reporting. Customarily his purchases are in the $200-$300 million range and are in companies that are smaller than the ones I focus on.
You may be surprised to learn that Lou does not necessarily inform me about what he is doing. When Charlie and I assign responsibility , we truly hand over the baton-and give it to Lou just like we do to our operating managers. Therefore I typically learn of Lou’s transactions about 10 days after the end of each month. Sometimes, it should be added, I silently disagree with his decisions. But he is usually right.
Given that the position is smack dab in the middle of Simpson’s sweet spot, it is likely investors are chasing Lou’s pick not Warren’s.
Wonder if Warren likes this one.
Long Live Open Outcry
Traders across the street today are probably still cross-eyed from a messy open in which bids and offers were more tangled and intertwined than bodies in the closing scene in Caligua as the Nasdaq’s computers suffered a brief meltdown.
The FUBAR open has left some traders out in the cold as the NASDAQ cancelled opening prints in Nektar Therapeutics and SCO Group
Although the confusion likely contributed to a weak open for stocks, the 4-letter critters quickly shrugged it off as the recent orgy in high beta names continues at mid-day, with technology issues outperforming and ramping into what might prove to be the final gasps of the requisite month-end markup.
The snafu is unlikely to slow the inexorable move to machine over man at exchanges around the globe, and the more charitable among you might want to take a NYSE specialist to lunch in the near future.
After all, their calendars should soon be wide open. Sure beats letting them sleep on your couch.
Junk Food for Thought
Back in the late 90’s when the dissemination of information was a little different than the vortex we now spin around in everyday, Herb Greenberg was probably the man most feared by long managers on the street. The CFRA’s Howard Schilit was certainly a close second.
Herb effectively used his bully pulpit at thestreet.com to lay waste to pretty much anything he put his mind to. If Herb hit a position of yours with his hatchet, you were looking a bad day and months of hand-to-hand combat with the shorts. Of course, Herb now writes for MarketWatch.com.
He just does not carry the same impact that he used to...although we still enjoy keeping tabs on the Herbinator.
Herb is ranting today about about what would appear to be a case of front running an analyst move in the shares of Krispy Kreme.
Now hear this: An hour-and-a-half after the close a report by Prudential Equity Group analyst Howard Penney hit First Call with his initiation of coverage with an overweight rating and a 12-to-18 month target of $15. The report, dated Thursday, uses Thursday’s closing price. Never mind that in a market like this a report like that can set a fire under a stock, even if it’s undeserving. (And I’m not saying it is or isn’t—or if a recommendation of a company like Krispy Kreme is yet another sign of a toppy market.) A bigger question here, your honor—as the headline on this post said—is who knew what when? Something tells me we will find out.
Yawn...It must be a slow news day on the west coast. Chill out and enjoy the weekend Herb.
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