Tuesday, July 10, 2007

How Long Can Home Depot And Others Masked Poor Results With Buybacks?

Here we go agian....... A warning that is masked by a huge cash infusion that is fueled with almost $ 12 billion of new debt! The rating agencies have already said that they will downgrade the rating from A to the third lowest investment grade rating. Please make sure you read this post Reviewing The Home Depot Buyback History to see what the former $13 billion buyback during the greatest housing bull market has done for the stock.....

Hier ein typisches Beispiel wie sehr momentan maue Ergebnisse mehr und mehr durch gewaltige schuldenfinanzierte Aktienrückkäufe geschönt werden. Im Falle von Home Depot sollen insgesamt 12 mrd $ neu aufgenommen werden. Die Ratingagenturen haben bereits angekündigt das Rating von A auf das drittniedrigste Investment-Grade- Rating herabzusenken. Um zu sehen wie das bisherige Aktienrückkaufprogramm von über 13 mrd $ verpufft ist, solltet ihr Euch den o.g. Link zu Gemüte führen ....

The Home Depot®, the world's largest home improvement retailer, today announced the launch of a tender offer for 250 million shares of its common stock at a price range of $39.00 to $44.00 per share. In addition, the Company updated its fiscal 2007 sales and earnings per share guidance.

On June 19, 2007, the Company announced a recapitalization plan whereby its board of directors authorized a $22.5 billion increase in its share repurchase program. It is the Company's intention to repurchase up to $22.5 billion in shares as soon as practicable. As part of its plan, the Company's board of directors authorized a self-tender offer for the purchase of up to 250 million shares of the Company's common stock. The tender price range is $39.00 to $44.00 per share
The Home Depot may purchase up to an additional 39.5 million shares in the tender offer without extending the tender offer.

..based on weaker conditions in the housing market, the Company said that it now expects its earnings per share to decline by 15-18% for fiscal 2007, with total retail sales down 1-2% and comparable store sales down mid-single digit

> This is now the third warning since February......They risk their strong financial position just when the housing market is facing a long year bear market and shares are close to 5 year highs......That sounds clever......This management could be forced to do some "bondholder" value management insteadt of their excessive shareholder management after this buyback is completed...This could also be a good entry point to open a short position :-)

> Dieses ist bereits die dritte Warnung seit Februar........HD riskiert die bisher starke finanzielle Position im Angesicht eines jahrelangen Abschwungs im Immobiliensektor.....Das Timing die Aktien gerade nahe dem 5 Jahreshoch zurückzukaufen ist ebenfalls eigentümlich....Alles in allem gut durchdacht.......Diese Aktie könnte in naher Zukunft dazu gezwungen werden sich nach den Anleihebesitzern zu richten und anstelle eines Sharholder eine Bondholder Value orientierte Politik zu betreiben.... Dann könnte ebenfalls der Punkt gekommen sein um eine Shortposition zu eröffnen :-)
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Anonymous Anonymous said...

This could also be a good entry point to open a short position :-)

Genauso habe ich gedacht vor ungefähr zwei, drei Wochen.

But I didn't do it, and am still not 100% convinced, mainly due to the buyback talk and the lingering 'The impact of subprime will be limited' buzz. From experience I am also generally cautious about shorting marquee names like HD, since they attract a lot buying interest -- 'bottom fishing' usw.


3:08 AM  
Blogger jmf said...

Moin Eh,


Very dangerous to short "trophy" names. Especially when they still have a good rating.

This could change after they have wasted billions during the next buyback. Until that point i will stay patient...at least that´s my hope.....

Fortunatley there are so many weaker names out there that there right now....

3:50 AM  
Blogger jmf said...

Here comes the next one.....

Sears Holdings Announces Second Quarter Outlook and Increased Share Repurchase Authorization

Sears Holding sets $1 bln stock buyback

Sears sees Q2 net of $1.06-$1.32 a share, including 8c gain ( estimate over $2!)

During the nine-week period ended July 7, 2007, the Company repurchased 2.8 million common shares at a total cost of $484 million, or an average price of $174.67 per share

The Company has repurchased approximately 13.8 million of the Company's common shares at a total cost of $1.9 billion since the third quarter of fiscal 2005, when Holdings' repurchase plan was first approved

What now Eddy Lampert......?

4:11 AM  
Anonymous Anonymous said...

Ja, komisch. Ganz komisch.

A short while ago I was also looking to short SHLD due to their traditional weighting on the 'industrial side' of the consumer market -- appliances, tools, etc. And their generally deteriorating sales figures -- both overall and same store. But it would never pop above my chosen entry price of 180, so I waited...But it might not be too late for someone braver than me.

7:15 AM  
Anonymous Anonymous said...

Oops -- forgot to add my initials to my previous post.


7:19 AM  
Blogger jmf said...

Moin Eh,

i have watched SHLD also for month now.

The business was really awful for month now with same store sales down , down, down....

So far Eddy has managed the stock with the buybacks and the spin that he is an investment genius....

I think he still has to proof this.

On a fundamental basis the stock is very very expansive.

lets hope we will see a bounce so whe maybe have a good entry point. :-)

7:26 AM  
Blogger jmf said...

Herb sums it up!

Herb Greenberg nails Sears!

7:47 AM  
Anonymous Anonymous said...

What an interesting blog. I have been browsing the net in search of a company which could assist in buying a house. I have checked Home Depot for the customer reports on this really great site www.pissedconsumer.com. I think this company is worth being trusted. The most customers are satisfied with the services as well as terms and conditions offered by the company.

12:37 PM  

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