Sign Up Now for Ockham Investment Research, Ratings, Financial News, and In-Depth Reports

Special Features


Daily Market Commentary Features


Ockham on Fox Biz Channel

Ockham CEO Christian Ward was interviewed on Fox Business this morning about Ockham’s StockRazor product for the iPhone.  This innovative deployment of fundamental research is the first app of its kind for the iPhone.  Also discussed, the new development of StockRazor that will track media pundits and gurus on television, so that once Mad Money is over you can check your StockRazor to get detailed research on all of the stocks that Jim Cramer has just talked about.  This new deployment will steer investors away from “sound-byte investing” that is all to common and far too risky in these volatile


 Please take a look at the video and pass it along to any iPhone users you think may be interested



From the Milwaukee Journal Sentinel:


Harley CEO says he’ll retire in ’09

Harley-Davidson Inc. president and CEO Jim Ziemer said Monday he intends to retire in 2009, ending a 40-year career with the maker of Fat Boy and Softail motorcycles.

Ziemer will remain in his current role until a new chief executive is in place, Harley said in a news release.

The company's board of directors has begun searching for his replacement.

Ziemer, 58, has been CEO since 2005. He led Harley to consecutive annual profits in 2005 and 2006, but this year the company has reduced its 2008 earnings outlook to as little as $3 per share, down about 20% from $3.74 a year earlier.

Brand loyalty runs deep, yet even Harley, the largest U.S. motorcycle manufacturer, hasn't been able to overcome recent economic realities and a dearth in consumer spending.

Harley shares have lost more than 60% of their value this year.

"I am not worried about Harley-Davidson declaring bankruptcy. They're an iconic firm that has a one-of-a-kind product. But I think buying the company stock right now is way too risky," said analyst Ned Douthat with Ockham Research.

Ziemer is a Milwaukee native who grew up in the neighborhood next to Harley's original factory on the city's west side. He started with the company in 1969 as a freight elevator operator while attending the University of Wisconsin-Milwaukee. Upon earning his bachelor's degree in accounting at UWM, he joined Harley's accounting department, where he spent most of his career.

He was named chief financial officer in 1990, and in 2005 replaced Jeff Bleustein as chief executive.

"Working at Harley-Davidson has been an honor and privilege and has fulfilled a lifelong dream for me," Ziemer said in the news release.

Bleustein, currently the company chairman, added in the release that Ziemer has been a great advocate for the company. The retirement announcement came after the stock market closed Monday, but analysts say it won't rattle Wall Street.

Harley shares closed at $16.20, down 11 cents.

"This isn't meant as a criticism of Jim Ziemer, but I think the investment community is going to be receptive to a change," said George Reis with George V. Reis Investments in Two Rivers.

A company as large as Harley can handle leadership changes, said analyst Craig Kennison with Robert W. Baird & Co.

Credit concerns

Investors could be more worried about other matters, including consumer spending and bad loans that Harley made to motorcycle buyers.

As many as one-third of the loans outstanding from Harley-Davidson Financial Services, the consumer lending arm of Harley, have gone to borrowers with suspect credit history, according to one industry report.

In its most recent fiscal quarter, Harley had $6.3 million in write-downs for loan defaults, according to analysts.

"We don't want to overreact to a few million dollars in loan losses because, in the grand scheme of things, this is a relatively small amount. However if there is anything that we have learned from the misery of the last year, it's that credit crises of this sort take time to fully unwind," said Douthat with Ockham Research.

"It seems that as the consumer spending environment started to slack, Harley-Davidson began offering loans with interest rates as low as 3% or sometimes without making the borrower put money down on purchases. These are not the sort of sales we were hoping to see factored into our ratings methodology," Douthat added.

Harley-Davidson Financial Services has received a $500 million advance to meet its near-term credit needs, including $400 million in notes that matured this week.

Consumer-lending markets have been in turmoil, but for years Harley-Davidson Financial Services has been consistent in balancing "risk and reward" in its loan portfolio, said Harley spokesman Bob Klein.

It's estimated that HDFS will require $1.5 billion for its lending operations for 2009, analyst Robin Farley with UBS Investment Research wrote Monday in a note to clients.




Stock Of The Week

Buying The Real Thing
John Dobosz 07.02.08, 5:20 PM ET

It's an iconic American brand that has been a leader in creating a consumer culture and developing overseas markets for most of its existence, making it in many ways a sugary paragon of the corporate structure in the U.S. that took root in the decades following the Civil War and blossomed throughout the 20th century.

In 1886 in Atlanta, Confederate veteran and druggist John S. Pemberton created a "delicious, exhilarating, refreshing and invigorating" drink with "the valuable tonic and nerve stimulant properties of the coca plant and cola nuts." A year later, Atlanta businessman Asa Candler made what might be considered a shrewd purchase, buying the formula from Pemberton and other shareholders for $2,300.

It grew steadily around the globe through two world wars, and growth went into overdrive as the world became a global village. All of this from what started out as just another syrup and patent medicine with reputed restorative powers derived from the same leaves that yield cocaine.

Coca-Cola went on, of course, to enrich numerous Candlers and Woodruffs, not to mention a guy named Buffett, who bought a bunch of its depressed shares in the wake of the Crash of 1987.

Today, Coca-Cola is a company worth more than $120 billion, with almost $7.5 billion in annual sales. Although your returns may be a bit less than Candler's, now is looking like a great time to put some Coke into your portfolio.
But like many American brands and businesses that once seemed globally dominant and unassailable, Coca-Cola has struggled recently, finding the spectacular sales and profit growth of the last two decades hard to duplicate today. But it's not doing a horrible job, last year turning in 17.7% profit growth on sales growth of 19.7%.

At around $51.50, shares are down about 21.5% from their high of $65.59 on Jan. 10, and trade at prices about 3.5% lower than they did 12 months ago. Coca-Cola pays an annual dividend of $1.52 per share, for a yield of 2.9%.
Value investors are starting to like the look of Coke as a good investment, especially after the recent market sell-off and the ascension of Muhtar Kent to the post of chief executive officer this week.
"In our opinion, Coke has been attractive on a cash flow and revenue basis for some time now, but overall market movement has dragged it down," says Ned Douthat, editor of the Enterprising Investor's Guide and vice president of Atlanta-based Ockham Research.

Douthat likes to look at stocks the way Benjamin Graham did, comparing the price to what it's worth and buying if the price is lower with a sufficient "margin of safety." He doesn't use intrinsic value, though, preferring to focus on multiples of sales and free cash flow and where they rank compared with historical ranges.

Coke currently sells for 3.93 times sales and 14.25 times free cash flow. Its price-sales ratio ranged between 3.65 and 5.16 last year, and price-cash flow swung between 14.8 and 20.9, making Coke look exceptionally cheap on a cash-flow basis. Douthat figures that Coke is undervalued by at least 17% and could gain even more in price when the market turns.

"While the margin of safety at 17% is not the most attractive of stocks we follow by any means, we see significant appreciation potential for KO and have a price target of about $70 for one to two years from now," Douthat says.

He looks for international sales to continue to drive overall revenue higher and to reinvigorate profits. "Coke has diversified product lines that include water, hydration, soda, even coffee, and as of last quarter about half of their revenue came from international sales," he says. "The stock may get a nice boost from the Beijing Olympics, since Coke has been and continues to be a major sponsor of the games and should sell a lot of drinks to hot tourists."

Douthat's father, Marsh Douthat, the founder of Ockham Research, passed away last October after a battle with amyotrophic lateral sclerosis. In January 2005, Marsh Douthat appeared in an article on recommending Coke when it was around $37, adjusted for dividends. (See "Ben Graham Special: Merck With A Coke Chaser.")
It was a good call. Coke went on to gain 75% over the next three years.


From Wall Street Journal

When Is the Cable 'Buy' Set to Come? Soon, Perhaps, as Values Of Firms Like Comcast Begin to Look Attractive

April 3, 2008; Page C1

It may be time to get back into cable stocks.After a yearlong selloff that clobbered the share prices of cable companies, a number of analysts now say that investors overreacted to the threat posed to cable providers by telephone-company competitors.

And recent positive results from Cablevision Systems Corp. suggest that cable companies may be well-positioned to compete against the new entrants, which offer television services and Internet connections.

That means investors have the chance to pick up stocks such as Comcast Corp., Time Warner Cable Inc. and Cablevision on the cheap.

"We recommend purchasing the stocks at current prices," said Chris Marangi, an analyst at Gabelli & Co., which owns shares of Comcast, Time Warner Cable and Cablevision. "The stocks present compelling values."

While cable stocks lately have bounced from bottoms hit earlier this year, they still are trading at 10-year lows along several key metrics. Comcast, for instance, at its current share price of about $20, is trading at a ratio of enterprise value to earnings before interest, taxes, depreciation and amortization of six. That is nearly half the ratio at which cable stocks have traded in the past decade, said Sanford C. Bernstein & Co. analyst Craig Moffett. And on a price-to-sales and price-to-cash-flow basis, shares are also near 10-year lows, said Ned Doughat, an analyst at Ockham Research LLC.

Big changes in sentiment aren't new to the cable sector, which over the years has been pummeled by worries about the threat of satellite-TV competition or the heavy capital investment needed to upgrade cable systems.

"Cable stocks can be a frenetic investment, and there is a component of investor fear that can quickly come to the surface when people work themselves up over some issues," said Tom Russo, portfolio manager at Gardner, Russo & Gardner, which owns Comcast shares.

Recently, the threat posed by Verizon Communications Inc.'s Fiber Optic Service television and Internet service has investors in a lather. Verizon surprised many observers in the past couple of years by aggressively rolling out the service and signing up one million TV subscribers as of January.

The technology, which includes super-fast Internet connections, has received rave reviews, and Verizon plans to spend about $23 billion on the service -- intensifying a rivalry with cable companies, which already had begun offering phone services.
Late last year, Comcast, the biggest cable operator by subscribers, was forced to lower its estimate for how many new customers it would add in 2007, and executives acknowledged that Verizon was taking some of their subscribers.
But cable bulls argue that there isn't any reason to panic. For starters, while generating massive amounts of attention, phone-company expansions are limited by geography.

By 2010, Verizon expects that FiOS will be able to reach 18 million households -- about 15% of the overall U.S. market at that point -- noted Mr. Moffett. AT&T Inc.'s less technically ambitious U-Verse -- which had its share of technical issues and has received some negative reviews in regard to quality of service -- could reach 30 million households, or 25% of the U.S. market.
Verizon hasn't disclosed how much of its territory it plans to reach beyond 2010. But its territory, primarily the Northeast, overlaps with 34% of Comcast's areas and 43% of Time Warner's, and AT&T's U-Verse will overlap with 30% and 42% of each respective cable company's neighborhoods, noted Gabelli's Mr. Marangi. The only public operator heavily exposed is Cablevision, where the overlap with Verizon eventually will reach 90%.

Cablevision's fourth-quarter results, released in February, offered investors some good news, showing that the cable firm added TV subscribers ahead of analyst expectations -- even though it faces competition from FiOS in 25% of the households it serves. Still, Cablevision stock has fallen about 16% during the past month amid reports the company is considering acquiring -- either on its own or with others -- concert promoter AEG, the Sundance Channel and the Long Island, N.Y., Newsday newspaper.
Cable executives argue that cable providers are getting the better of the phone companies in the contest for customers. For every video customer cable operators lose, they are signing up several phone customers -- and profit margins on the phone customers are higher than they are in the video business. Massive and rising programming costs -- the fees distributors pay for the channels they carry -- make video the lowest-margin segment of the TV-Internet-phone triple play.

Comcast, for instance, has a profit margin of 55% in video but 70% in phone and 80% for broadband, estimates Bernstein's Mr. Moffett. The picture is grimmer for Verizon, given its lack of scale. Because the company has so few TV customers, it hasn't negotiated the kinds of favorable programming deals its cable rivals have. Its profit margins in video are just 25%, according to Mr. Moffett's estimates. Its phone margins are about the same as Comcast's.

Of the three big public cable companies, Comcast might be the best bet for a stock upswing. Under pressure from dissident shareholders, the company recently reinstated a dividend for the first time in nearly a decade and announced the acceleration of a $7 billion share-repurchase program. And it said it was putting a lid on capital spending this year. Capital spending will drop to 18% of revenue in 2008, according to Comcast's forecasts, as compared with 20% in 2007.

Time Warner Cable -- trading at an enterprise value to Ebitda of 5.9, according to Sanford C. Bernstein -- also looks cheap compared with the broader market. But Time Warner Inc., which has an 84% stake, is expected to spin off the cable arm in coming months, which could bring a flood of new Time Warner Cable stock onto the market, possibly depressing the price.
Write to Vishesh Kumar at [email protected]



From Wall Street Journal online:

Blog Roll — Get In, or Out?

Posted By David Gaffen On April 24, 2008 @ 3:30 pm In Blog Roll | No Comments

Analysts at Ockham Research sound a similar tone to many in the market today with their most recent blog post. “The market correction has exposed many undervalued stocks that have fallen out of favor unjustly,” they write. “Valuations have returned to a more justifiable level, as they were unsustainably high for the better part of the last two years. Sentiment dropped very rapidly as fear gripped the market early this year, but our sentiment indicators are starting to noticeably change direction for the positive.”

James Picerno, meanwhile, tries to walk a tightrope in analysing the economic data today that has put a spring in investors’ steps. “Based on other economic variables we track, it still looks like the economy’s suffering,” he writes. “Today’s update on new home sales, for instance, reveals the lowest level in 16 years. But recession isn’t our biggest worry, at least not yet.”

Roger Nusbaum says some of the interference in China’s market from its government gives him pause, even though shares have retreated of late. “The government’s involvement on both sides belies the relative newness of stock market investing for the country. It seems to me that with newness comes the potential for mistakes,” he writes. “Mistakes of this sort don’t necessarily make China any more or less an attractive destination but I do believe creates a visibility for bigger booms and busts to continue into the future.”

Blogs We’re Reading:
• Ockham Research
• Capital Spectator
• Random Roger
• Bill Rempel
• Condor Options
Article printed from MarketBeat:
URL to article: