Archives for March 2010

The Growth Is Back At Time Warner Inc.

Time Warner Inc. (TWX) appears to be making all of the right moves. The media conglomerate posted strong 4th quarter results with revenue of $7.3 billion dollars and earnings per share of 55 cents. Time Warner announced that it would be raising its dividend to 85 cents per share and buying back an additional $2 billion dollars in stock. Time Warner looks attractive now that the company is no longer held back by its horrific merger with AOL.

Time Warner Inc. owns many valuable media properties including New Line Cinema, Warner Brothers, Turner Broadcasting System, HBO,  Sports Illustrated, Time Inc, CNN, Cartoon Network, DC Entertainment and etc.  They compete in every area of the media market including television, movies, dvd’s, blog’s, gaming, entertainment, and print journalism. And that’s not all. According to Reuters, Time Warner just placed a $1.5 billion dollar bid to buy cash strapped MGM. If the bid is successful, MGM’s classic movie library could be spread across Time Warner’s different media channels. This would provide Time Warner with additional content at lower costs than producing its own movies.

Time Warner has a decent balance sheet with almost $5 billion in cash. The only negative is the high debt load which they are looking to reduce. Time took massive writedowns and losses from the failed merger with AOL inc. Yesterday, Time Warner announced that they will be redeeming almost $227 million dollars in outstanding debt next month. Going forward Time Warner looks like a solid buy candidate. With the economy rebounding, Time should benefit from growth returning to the advertising market. Earnings per share is expected to grow 13% over the next five years. This is a definite improvement from the negative growth of the previous five years. Shares are currently trading at a 13 P/E multiple based on next year’s earnings estimates of $2.42 per share.

CEO Jeff Bewkes appears to be making all of the right moves to keep Time Warner moving in the right direction.

I do not currently own any shares of Time Warner Inc.

NRG Energy Downgraded

Shares of NRG Energy (NRG) have taken a beating over the past 6 months dropping 30% since October. Shares have fallen from $29 to the low $20’s. NRG closed the week at $20.25. I first noticed NRG when Warren Buffett started buying shares in 2008. Buffett currently owns 6,000,000 shares.

NRG has been downgraded by Bank of America amid concerns of lower fuel prices. Bank of America has placed a $24 price target on the ultility firm. Citigroup downgraded NRG’s shares as well based on an expected decrease in profit fron declining dark spreads. Citigroup has a $25 price target on the stock. Goldman Sachs lowered its price target on NRG to $28 and has dropped the firm from its conviction buy list.

I am a big believer in buying shares of strong companies that have been beaten down. Analyst downgrades often signal a bottom for a stock. While shares are not a steal at $20, NRG is quickly becoming a value stock. It would be ideal to purchase shares around $17, since next year’s earnings are expected to be $1.20 and the five year EPS growth rate is 6%. This may be a good opportunity to start building a position in NRG. If commodity prices rebound NRG could rise significantly.

Picking The Right Credit Card For You

This is a good article from Farnoosh Torabi posted at CBS MoneyWatch on Picking The Perfect Credit Card For You.

Credit cards offer an array of tempting rewards as their issuers try to get your business.

But what types of cards are the best match for someone with your spending habits? And which cards lead the pack in each category? 

CBS correspondent Farnoosh Torabi shared valuable insight, on “Early Show Saturday Edition.”

Click the link above to view the complete article.

The Most Expensive American Cities

Check out my Forbes article on The Most Expensive American Cities.

Is E*TRADE Worth The Gamble?

It’s been a busy week for E*TRADE (ETFC) Financial. E*TRADE’s shares rose 7% to $1.62 Tuesday on news of a debt upgrade by Standard & Poors. This is one day after shares were down big after the company introduced its new CEO and announced a 1 for 10 reverse stock split.

 E*TRADE’s shares have been battered over the past two years. The online brokerage firm is still trying to recover from the subprime mortgage crisis. E*TRADE had 3 billion dollars in asset backed securities and collateralized debt obligations. ETRADE sold these obligations but the firm has struggled to find its financial footing. Analysts are forecasting a .03 per share loss for 2010 and a gain of .08 per share for 2011.

The company has been a rumored takeover target for the past 2 years despite denials from other brokerage firms. While the company’s brokerage accounts would be attractive to another broker/dealer; E*TRADE’s balance sheet has a few issues. E*TRADE has twice as much debt as cash and a negative ROE. Even though the company has a market cap of $3.1 billion, the enterprise value is $9.55 billion. Revenue and profitability are continuing to decline. On the plus side, E*TRADE is trading below book value and below cash per share.

For investors looking for a speculative buy, E*TRADE looks like an interesting play. The upside could be significant if the brokerage is taken over and the downside appears limited.

Great Wealth Building Articles

$1 Million Doesn’t Cut It for Retirement – Interesting article from on how $1 million dollars is not enough for retirement. The average family will need to save 2 or 3 times that amount.

The Hidden Advantages of Dividend Investing – The Dividend Guy explains all of the benefits of dividend investing. While dividends may be falling out of favor, they should still be an important part of your investing strategy.

Handling Personal Finance Mistakes – The Simple Dollar reveals steps to get over bad personal finance decisions.

8 Steps To Build Wealth – The Dividend Monk outlines 8 easy to follow steps to build wealth.

Yahoo March Madness MVP’s Article

Check out my Investopedia article that was picked up by Yahoo.

Yahoo Article March Madness MVP’s

Slideshow March Madness MVP Slideshow

Dow Jones is Seeing Red

The Dow Jones is down 60 points today in morning trading.

Palm (PALM) is the biggest loser of the day dropping over 18% to $4.62 per share. PALM reported a greater than expected loss of 61cents per share. Canaccord Adams issued a $0 price target on PALM declaring the cell phone maker’s shares worthless.

Motorola (MOT) is one of the biggest decliners in the tech sector with the handset device maker’s shares losing 3% of their value dropping to $7.12 per share.

It’s not just the tech stocks that are being punished today. Energy stocks are bleeding as well. Sunpower Corp. (SPWRA) shares have been slaughtered today after last night’s earnings report. Sunpower lowered guidance for Q1 estimating a profit of just 5 cents per share. Analysts were looking for a profit of 34 cents per share. The solar power provider is restating earnings for the 2008 and 2009. Oil services firm Haliburton (HAL) has seen its stock drop 3.77% to $30.39.

What are Blockbuster’s Options?

Shares of Blockbuster (BBI) dropped to 28 cents today after the stock lost 29.18% of its value. A Chapter 11 bankruptcy appears highly likely as the firm is saddled with debt. Blockbuster is dealing with declining earnings, profitability, and market share. I wrote a post last March about how Blockbuster’s business model is dead. You can read it here (Blockbuster Is Flat Broke).

In my post last March I suggested that Blockbuster “close a large number of stores and place self service kiosks in the remaining locations. The company could then commit to offering more downloadable content and online rentals. Eventually Blockbuster could become an online movie rental business with a few store locations. ”

A Chapter 11 bankruptcy may not be worst thing for the former king of movie rentals. Bankruptcy would allow Blockbuster to rid itself of its long term debt problems. Blockbuster has $943 million in debt and just $247 million in cash and cash equivalents. If Blockbuster can unload its debt and change its business model than Blockbuster may be able to compete in the movie rental business. The way I see it Blockbuster has three choices going forward.

1. Blockbuster could adopt the Redbox business model. Blockbuster could close underperforming store locations and place self service kiosks in the remaining locations. All Blockbuster stores could sell dvd’s like Redbox but Blockbuster could differentiate by offering snacks, candy, and drinks. Blockbuster could set up kiosks in all grocers, fast food chains, and convenience stores that do not currently have agreements with Redbox. Since Redbox uses McDonald’s locations to sell DVD’s, Blockbuster could negotiate a deal with YUM Brands and set up kiosks at KFC and Taco Bell locations. Redbox already has Walmart and Walgreens. So, Blockbuster could negotiate deals with Costco, Kmart, and CVS. All kiosks could sell dvd’s for 99 cents making them the low cost provider in the movie rental industry.

2. Blockbuster can place its focus on the digital download business. Blockbuster can put all its chips on being the leading content provider of digital delivery programs. Over the next 5 years more people will watch movies from their smartphones, PDA’s and computers. Blockbuster could make a niche for themselves in this emerging market. Soon people will be paying for movies for their iPhones, iPads, and iMacs.

3. Blockbuster can compete against Neflix in the DVD by mail business. This would be the most difficult option because Netflix has a huge advantage in this market and this business model is changing.

All three choices are based on Blockbuster going through a bankruptcy proceeding and getting rid of its onerous debt. If Blockbuster doesn’t finally change its business model than Blockbuster’s days in the movie rental business are likely over.

Photo by: The Consumerist

4 Great Sites That Could Save You Money

Are you looking for new ways to save money?  If so, you’re not alone. During these turbulent economic times, every dollar counts.  I have recently come across a couple of “new” sites that can save you cash. Here are 4 sites that you may not know about that can help you save money.

SmartyPig is an online piggybank that lets friends, family members, and other users contribute to your savings goals. SmartyPig is currently paying 2.01% interest on savings accounts. This is the highest rate that I have found for any savings account anywhere.

New York movers can save money on moving expenses using Citymove. CityMove is a reverse auction site that allows you to auction off your move. Just enter your job information and movers will bid on your job.   Review the ratings of movers and select the most reliable mover with lowest rate. 

Spoofee is an online forum where users post the best deals online everyday. Spoofee contains daily coupon codes, promotional deals and weekly specials from select retailers. You can also find free samples, freebies, and giveaways on the site.

Priceprotectr helps you keep track of prices for items that you are considering buying and purchases that you have recently made. Priceprotectr will email you when the price for an item drops. Priceprotectr shows you how to get a rebate on purchases whose price has dropped within the price protection period.

Photo by: Tony Crider