Lennar Corp: Like a Teenage Drama Queen
It’s always something with Lennar Corp. In the last 3 months, Lennar (LEN) has been like a teenage girl preparing for her Senior Prom. Single, ugly, and lonely, Lennar was all the way down to 4.53/share, when on November 25th, a knight in shining armor, UBS, finally asked Lennar to the big dance. The stock of the home builder subsequently popped from 4.53 to 6.03/share that day as a result of that upgrade. Finally, after years of sitting home on Friday nights and watching TIVO’d “One Tree Hill” reruns and beauty makeover shows, someone noticed “homely” Lennar. A mere three weeks later on Dec 16th, however, the love-fest was over. Maybe Lennar talked too much, maybe she was too controlling, maybe UBS just wanted the quick bang and already received it. Whatever the reason, UBS downgraded Lennar back to neutral (stock was up to 9.81 the day of the downgrade) and left LEN in need of a prom date again. Lennar’s stock price continued to rise however. Perhaps rumors swelled in the hallways that she was easy, which inevitably would lead to additional prom invitations. On January 8th, JP Morgan Securities extended that olive-branch to Lennar and upgraded the stock. True it wasn’t much of an upgrade, as they raised LEN to overweight from neutral and slapped LEN with a price target of 8.50, even though the stock was trading at 10.57 the previous day. Basically, they told LEN “You aren’t as bad as everything thinks. I’ll take you to the prom and bang you in the hotel room afterwards, but don’t expect me to be around in 12 months, let alone next week.” That upgrade resulted in an 8% pop in share price. A day later, however, it was all over for LEN. Like a real bad acne breakout or being caught in a bra-stuffing scandal, LEN was slapped with a 20% loss overnight and suspended from school. There would be no prom for this teenage drama queen. The principal, Barry Minkow of Fraud Discovery Institute, a convicted stock felon in his own right, accused Lennar of perpetrating a “giant Ponzi scheme” as well as questioning the home builder’s debt and a personal loan taken out by the COO Jon Jaffe in 2007. Poor Lennar.
The Truth About Satyam
The Indian word “satyam” translates to “truth” in English. And the truth about India’s fourth largest computer computer, Satyam Computer Services (SAY), will not be good for shareholders. Satyam chairman, Ramalinga Raju, in Enron-like fashion admitted that he cooked the books hotter than a Bobby Flaye Throwdown. In fact, Raju inflated the company’s balance sheet by a whopping $1.04 billion, accounting for nearly 94% of the companies assets. The chairman has since stepped down, citing “the tremendous burden that I am carrying on my conscience.” I’m sure that moral realization will appease U.S. shareholders. The stock ended Tuesday’s session at $9.35/share. As news of the scandal hit, the stock was trading down to 85 cents in the premarket hours before the NYSE halted trading. This will likely end up very badly except for those who had the Jan 5 puts (1,400 open interest) and Feb 7.5’s (6,500 open interest). Full Story.
The Text Message Scam
With the cost of text messages skyrocketing and the cost of gas plummeting, it is no longer economically feasible to dump your girlfriend via text message anymore. As we all know, one text message can easily turn into one or two dozen, so it is probably cheaper to just drive over to your future ex-girlfriend’s house and dismiss her personally with a line such as “later fatty.” This seems to be more effective than texting her “l8r 4evr” and having to answer 15 follow-up texts. What used to be fun and economical at 10 cents is just plain expensive at 20 cents. Over the past three years, all of major cell providers have jacked their text costs up 100% to that 20 cent level, a sizable jump matched only by this man’s weight gain. Thankfully, Democratic Senator and the chairman of the Senate antitrust subcommittee, Herb Kohl, is now on the case. He has uncovered some startling truths concerning text messages, namely that they cost the cell companies almost nothing. In fact, “It doesn’t cost the carrier much more to transmit a hundred million messages than a million.”
Shorting Panera was Good if…
Shorting Panera Bread (PNRA) was a good decision in 2008 if your wallet needed to lose some weight. Last year presented the unprecedented opportunity to make boatloads of money simply by selling short just about any stock. In fact, a drooling, retarded monkey wearing a helmet and goggles, could’ve randomly pointed to a ticker symbol and directed you to short that symbol and you would likely have made more than a few bananas. After all, you had your extra crappy sectors to choose from, like financials, banks, and home builders. You had your ridiculously overpriced individual stocks like RIMM, X, WYNN, WM, NILE, and others. You had terrible leadership in the form of Paulson, Cox, GW, and just about any government official you can name. But you didn’t have Panera Bread. PNRA was the one nut that shorts couldn’t crack in 2008, despite how many attempt to pile in to short the stock.
With more than 35% of the float still short, PNRA has managed to return 71.13% to longs over the last 52 weeks, much to the chagrin of the suffering Panera short. In fact, only 6 (out of 64) stocks that currently sport higher than a 30% shorted float have managed to post positive returns in the last 52 weeks, with PNRA easily leading the pack. They are listed below.
| Stock | 52-Week Return (%) | Float (millions) | Short % of Float |
| Panera (PNRA) | 71.13% | 27.7m | 36.10% |
| Quality Systems (QSII) | 49.71 | 18.2 | 30.77 |
| Buckle Inc (BKE) | 16.54 | 23.9 | 32.72 |
| NetFlix (NFLX) | 14.58 | 39.3 | 40.33 |
| Greenhill & Company (GHL) | 13.16 | 18.2 | 32.14 |
| Jos. A Bank Clothiers (JOSB) | 10.70 | 17.7 | 37.63 |
I am a guy who loves to short stocks. I find nothing immoral about it. If you are a total loser and willing to buy eToys for $200/share and recommends to your friend to do the same, then I will gladly sell short your shares to your friend and we’ll see what happens. But don’t worry longs, with PNRA you have won. Those mean, nasty shorts will likely experience even more PNRA pain in 2009.
Recommendation: Long PNRA
Analyst Downgrades Solar Sector
Why don’t we add Jesse Pinchel, an analyst with Piper Jaffray, to the growing list of useless analysts who attempt to move stock prices with their “late-to-the-party” research? This supposed “solar expert” decided to downgrade two solar stocks today and lower the earnings estimates of 3 others. (Read here for the full rundown). The downgrade victim I will speak about is Canadian Solar (CSIQ). Pinchel slapped the stock with a “sell” rating this morning, replacing the “buy” rating previously issued by his firm, Piper Jaffray, on February 15th, when the stock was trading at $22.84/share. The stock more than doubled after that initial rating (thanks in most part to surging oil prices), but has since tumbled from a high of $51.80 to the current price of $6.46. Jesse could’ve downgraded the stock in August when CSIQ’s earnings missed by 11 cents or again in November when CSIQ’s earnings again missed, this time by 13 cents, but alas that would have required some real-time research. Instead, Pinchel coming out this morning and telling us to sell CSIQ after it has already dropped 45 points is quite useless. Perhaps, Pinchel could follow-up his brilliant solar insights with some analysis on who he thinks will win last year’s Super Bowl. What an ass-basket.
Merrill Lynch Exec Buys $37 Million Apartment
When I hear the words Peter and Kraus strung together consecutively, I am reminded of two other words often strung together in succession: douche and bag. Peter Kraus is a former executive at Merrill Lynch who began working for the firm in September, but not before he was able to negotiate a $25 million buyout package in the off-chance that Merrill happened to be bought out by another firm. Coincidentally, Merrill was sold to Bank of America a few days later for $50 billion. That sale triggered a nice 8-digit payday for Mr. Kraus. With Kraus’ three month tenure having just come to an end, news is breaking that Kraus has treated himself to a nice little $37 million palatial apartment on Park Avenue. The $25 million golden parachute represents nearly 0.1 percent of the $25 billion injection that Bank of America received as part of Congress’ rescue package. The $37 million Kraus used to purchase his Park Avenue apartment represents a big middle finger to US taxpayers. <FULL STORY>
Ponzi Scheme Busted in South Florida
George Theodule could be in deep doo-doo. The SEC has obtained a court order to halt an alleged Ponzi scheme run by Theodule’s two investment companies, Creative Capital Consortium and A Creative Capital Concepts. The SEC alleges that Theodule targeted and collected more than $23 million from Haitian-American’s in South Florida communities with promises of doubling their investments in 90 days. Theodule, not to be confused with Warren Buffett, instead lost $18 million in the stock market over the past year. Along the way, Theodule misappropriated $3.8 million of the funds for himself and his family.
Hexcel Corp Being Pimped out by Stifel Nicolaus
Investors of Hexcel Corp (HXL) have been punched in the face in recent months, with the stock down about 60% in the last three months alone. But don’t worry, at least someone is getting paid. That someone is Stifel Nicolaus. A “research” subsidiary of Stifel Financial Corporation, these guys have the audacity to reiterate Hexcel Corp as a “Buy” with a $25 price target. A little history first: The stock is currently down from a 52-week high of 26.73 to 6.90. So let’s do some math, $25 would represent an almost 300% gain from here. Could happen, but highly doubtful. Stifel Nicolaus’ previous “expert” rating, supplied to us on 12/07/07 when the stock was trading at $27.19 was $30 per share. Ironically, HXL would never trade as high as it did on that very day. How about that for irony? A quick glance at their website reveals the following:
Stifel, Nicolaus & Company, Inc. expects to receive or intends to seek compensation for investment banking services from HEXCEL Corporation in the next 3 months…Moreover, Stifel Nicolaus and its affiliates and their respective shareholders, directors, officers and/or employees, may from time to time have long or short positions in such securities or in options or other derivative instruments based thereon.
HXL is down another 4% in early trading. Let’s all stand while Stifel Nicolaus and Hexcel take a bow. Encore, encore! My eyes are on you, Stifel.
Worst Stocks of 2008
Playing the stock market in 2008 often felt like receiving a route canal by an unlicensed plumber on a heap of scolding hot coals. Kinda like being a Detroit Lions fan. Thankfully 2008 is just about done. But before we depart this year, let’s have a look back at some of the most craptastic stocks in all the land. The following 10 stocks are still on life support, having been spared the execution-style murder received by the Washington Mutual’s and Lehman Brothers’ of the world. The table below depicts the stocks who have performed the worst in 2008 are are still standing, albeit barely. The calculation is based on the percent decline from the 52-week high. These companies are clearly train wrecks (like her) and I truly feel for anyone who has been holding these wallet bombs for the entire year.
| Stock | Current Price | 52-Week High | % Decline from 52-Week High |
| RH DONNELLEY (RHD) | .37 | 37.55 | 99.02% |
| E W SCRIPPS CL A (SSP) | 1.94 | 147.78 | 98.69 |
| JED OIL (JDO) | .0232 | 1.55 | 98.50 |
| VINEYARD NATIONAL (VNBC) | .1799 | 10.63 | 98.31 |
| NORTEL NETWORKS (NT) | .27 | 15.60 | 98.27 |
| FLEETWOOD ENTERPRISE (FLE) | .11 | 6.24 | 98.24 |
| FANNIE MAE (FNM) | .75 | 40.45 | 98.15 |
| SAMSON OIL (SSN) | .38 | 19.90 | 98.09 |
| ABITIBIBOWATER (ABH) | .52 | 26.13 | 98.01 |
| EDGE PETROLEUM (EPEX) | .145 | 6.96 | 97.9 |
The above 10 stocks are pretty much penny stocks and destined for the trash heap. Want to see some of the worst stocks of 2008 that still, in theory, have room to drop? Your wish is my command. The below 5 stocks are still trading above $5 per share, but have performed as poorly as Kanye West on an SNL set.
| Stock | Current Price | 52-Week High | % Decline from 52-Week High |
| LIBERTY MEDIA CAPITAL (LCAPA) | 5.42 | 119.75 | 95.47% |
| BLACKBOARD INC (BBBB) | 25.88 | 544.90 | 95.25 |
| LAS VEGAS SANDS (LVS) | 6.05 | 107.17 | 94.36 |
| USG CORP (USG) | 7.49 | 115.70 | 93.53 |
| PATRIOT COAL CORP (PCX) | 6.22 | 82.23 | 92.44 |
