James Montier needs no introduction to the readers of Investment Postcards. A two-part interview with Montier comes courtesy of Miguel Barbosa, editor of the Simolean Sense blog, who has kindly given me permission to publish this excellent material here. The first part is reported in this post and the second part will follow tomorrow.

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Interview: James Montier on value investing

Brick charts can make visualizing support, resistance and trends easier to interpret than daily price charts, by filtering out some of the noise in price fluctuations. The traditional name is “Renko” charts, which was translated into English as “brick”. Like Point & Figure charts, they are time independent and require the price to move more than a

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Brick Chart View of Major Indexes

The world’s largest computer maker Hewlett-Packard Company ( HPQ ) recently came out with a revised version of its first quarter 2010 earnings, whereby the company lowered its net profit by $73.0 million, providing for litigation expenses to be paid by its subsidiary, Electronic Data Systems (EDS).   In February 2010, HP reported first quarter net income of $2.32 billion, or 96 cents a share, which is now revised downwards at $2.25 billion, or 93 cents a share. HP has used these 3 cents to increase the reserve in connection with the litigation expenses expected to be incurred by EDS. Excluding these adjustments income was revised to $2.59 billion, or $1.07 a share, a reduction from the previously reported non-GAAP earnings of $2.67 billion, or $1.10.   Hewlett-Packard, in its media statement declared that this fund is required by the company’s subsidiary Electronic Data Systems, which is liable to pay $112.0 million to the British Sky Broadcasting Group PLC of U.K. British Sky Broadcasting filed this suit against EDS in 2004 over a dispute related to a customer management contract. HP has already made a payment of $320 million in relation to the case. Although this is a slightly negative development for the computing major, the company did not provide any revised guidance for the second quarter, and has kept the previous revenue guidance intact at $29.4 billion to $29.7 billion; with a GAAP diluted EPS of $0.89 to $0.91 and non-GAAP diluted EPS of $1.03 to $1.05.  The Zacks Consensus Estimate for the upcoming quarter is $1.05, exactly same as the most accurate consensus estimate, leaving no room for an upside movement. Although the company has provided an average earnings surprise of 1.92% over the last four quarters, this litigation could put some pressure on the EPS, if continued for a long period. ( We are reissuing this article to correct a mistake.  The original article, issued yesterday, should no longer be relied upon .)     Read the full analyst report on “HPQ” Zacks Investment Research

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H-P Recasts First Quarter Numbers (Revised) – Analyst Blog

Toyota Motor ( TM ) has revealed that it may halt new car launches this year if it is unable to be fully satisfied with correcting the accelerator problem that forced a mass recall of its vehicles. The cars that might be shelved include RAV4 2010, Auris 2010 and the Auris Hybrid. However, the Japanese automaker is hopeful about regaining sales in North America in March after a sharp decline last month when the automaker suspended sales of 8 recalled models. In January, Toyota suspended the sale of 8 models to correct sticking accelerator pedals. The models affected in the sales suspension were RAV4 crossover (2009–2010), Corolla (2009-2010), Matrix (2009–2010), Avalon (2005–2010), Camry (2007–2010), Highlander (2010), Tundra (2007–2010) and Sequoia (2008–2010). So far, Toyota has recalled 8.5 million vehicles. In February, the automaker’s sales fell 9% to 100,027 vehicles. According to Autodata Corp., the automaker’s U.S. market share fell to 12.8%, the lowest since July 2005. The latest string of recalls has no doubt hurt the reputation of the automaker. The company has been slapped with dozens of lawsuits due to the recall. The value of claims under the lawsuits is estimated to reach about $4 billion, reflecting an average loss of $600 per vehicle. Kelley Blue Book — the largest automotive vehicle valuation company in the U.S. — which considered Toyota the best brand as per the resale value two months ago, has stated that its resale value is now worth $200 to $500 less per recalled model (a decline of 1%–3%). Auto research website Edmunds.com estimated resale or trade-in values to fall up to

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Toyota May Suspend Launches – Analyst Blog

ProLogis ( PLD ), a leading global provider of distribution facilities, recently launched a cash tender offer to buy back notes with outstanding principal totaling over $540 million. The offer includes 5.5% notes due Apr 2012 and 5.5% notes due Mar 2013, with approximately $281 million and $262 million in outstanding principal, respectively. In addition to the accrued and unpaid interests, the consideration payable for the 2012 Notes is $1,062.50 per $1,000 principal amount, while that payable for the 2013 Notes is $1,065.00 per $1,000 principal amount. With the tender offer, ProLogis has deleveraged its balance sheet to a large extent.  Year to date, ProLogis has repurchased $165 million of convertible senior notes for total consideration of $152 million. During the same period, ProLogis has issued about 2.2 million common shares at an average price of $12.76 each, generating net proceeds of approximately $28 million. ProLogis owns and manages interests in over 2,500 distribution facilities spanning 475 million square feet (including properties under development) of space. In response to the economic realities of constrained credit and rapidly deteriorating industrial real estate fundamentals, ProLogis has stopped all new development starts and early-stage developments. The company is currently concentrating on increasing its liquidity and de-leveraging its balance sheet. Read the full analyst report on “PLD” Zacks Investment Research

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ProLogis to Buy Back Notes – Analyst Blog

Honeywell International Inc. ( HON ) announced that it has bagged a global five-year agreement to be a Main Automation Contractor (MAC) for Royal Dutch Shell ( RDS-A ). The Global Framework Agreement is part of Shell’s long-term MAC strategy to maximize production while lowering total operating costs by equipping its worldwide facilities with integrated process automation technologies.   As a MAC, Honeywell will design automation and safety systems that will help Shell meet its customers’ energy demands in economically and environmentally acceptable ways.   For more than thirty years, Honeywell has served as a MAC on scores of Shell projects. Currently, the company is working on three of Shell’s largest projects: its new gas to liquids project (GTL) plant in Qatar, the Athabasca Oil Sands Project (AOSP) designed to help Shell dramatically increase production in Western Canada’s oil sands, and the expansion of its Port Arthur Refinery in Texas.   Designing a new facility with an integrated system allows manufacturers to more accurately plan the integration of new technology in the future. This saves money in the long term by providing systems that can be utilized as part of a bigger technological arrangement.   Honeywell International Inc. operates as a diversified technology and manufacturing company worldwide. The company’s Automation and Control Solutions segment offers environmental and combustion controls; sensing controls; security and life safety products and services; scanning and mobility devices; process automation products and solutions; and building solutions and services for homes, buildings and industrial facilities.   The company is a global leader in refrigerants, aerosols and foam-insulation blowing agents used to replace ozone-depleting chlorofluorocarbons and hydro chlorofluorocarbons. These same products also improve the energy efficiency of homes, appliances and commercial refrigeration systems.   Honeywell’s attractive collection of businesses has the potential to earn consistent above-average returns. The company’s focus on working capital management, free cash flow generation and balance sheet strength remain positive attributes in the current weak environment. Its major competitors include Goodrich Corporation ( GR ) and Johnson Controls Inc. ( JCI ).   We currently have a Neutral recommendation on HON. Read the full analyst report on “HON” Read the full analyst report on “RDS-A” Read the full analyst report on “GR” Read the full analyst report on “JCI” Zacks Investment Research

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Honeywell Wins Shell Contract – Analyst Blog

The European Investment Bank says it increased its lending by 37 percent in 2009 from the previous year. The development bank says its loans jumped to a record euro79 billion ($107 billion) from euro58 billion in 2008. The EIB focused financing on s European Investment Bank lending soars to $107b

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European Investment Bank lending soars to $107b

Yourself … Your buyer … Your appraiser … And … your country’s tax assessor … Source: Casey’s Daily Dispatch, March 5, 2010. Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape …

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Your house as seen by …

Don’t be suprised to see higher inflation numbers in the coming months.

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A bad feeling about inflation …

My Big Fat Greek Deficit Tony Daltorio, Investment U Research Saturday, March 6, 2010 Wall Street seems obsessed with pigs these days. PIIGS, that is – Portugal, Ireland, Italy, Greece and Spain – the smaller economies in Europe. Many people worry whether these countries can honor their sovereign debt because of high, already-existing debt levels. And the U.S.

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My Big Fat Greek Deficit

Salix Pharmaceuticals, Ltd. ( SLXP ) is slated to report fourth quarter as well as fiscal 2009 results on March 9. The current Zacks Consensus Estimate for the fourth quarter of 2009 is a loss of 14 cents. For the full year, the Zacks Consensus Estimate stands at a loss of 89 cents. Salix suffered a major setback in Dec 2007 when its lead product, Colazal, started facing generics from several companies including Mylan ( MYL ). The genericization of Colazal adversely impacted the company’s top-and bottom-line. Since then, Salix has been working on reviving growth and is now focusing on gaining additional indications for its current growth driver, Xifaxan (rifaximin). More than earnings, we believe that investor focus will remain on the company’s success in gaining approval for additional indications of Xifaxan. Salix has filed for approval of Xifaxan for the treatment of hepatic encephalopathy (HE). An advisory committee of the US Food and Drug Administration (FDA) recently voted in favor of approval . A response from the FDA should be out by March 24. Approval for the HE indication would be a major boost for the stock. Estimate Revisions Trend There have been no estimate revisions for the fourth quarter of 2009 over the past 30 days. The Zacks Consensus Estimate of a loss of 14 cents is in-line with the guidance provided by the company with no potential surprise. For the full-year 2009, one of the 9 analysts following the stock has revised his or her estimate upward over the past 30 days. The current Zacks Consensus Estimate of a loss of 89 cents is a penny below the company’s guidance of a net loss of 90 cents. Salix expects revenues to increase to $230 million in 2009. Revenues should be driven by Xifaxan, which is currently approved for the treatment of patients 12 years of age and older with travelers’ diarrhea caused by non-invasive strains of E coli. We believe that the drug will experience solid, above-market trend growth for traveler’s diarrhea given its safety profile and lack of systemic absorption. Moreover, the product should benefit from price increases and positive data presentation. Xifaxan sales should cross $115 million in 2009. New product approvals, continued growth for Xifaxan and label expansion for Xifaxan should help Salix swing to profitability in 2010. The current Zacks Consensus Estimate for 2010 is 13 cents. Over the past 30 days, 2 of the 10 analysts following the stock have reduced their estimates for 2010 with no revisions in the opposite direction. 2010 earnings estimate is down by a cent during this period. Historically, Salix usually beats its earnings guidance and reports a lower-than-expected loss. In the third quarter of 2009, the company reported a loss of 15 cents, well below the Zacks Consensus Estimate of a loss of 29 cents. A similar trend was observed in the first two quarters of 2009, as well. There is the possibility that Salix could post a higher-than-expected loss in 2009 if Xifaxan revenues come in below expectations. Moreover, selling, general and administration expenses could be higher than expected with the sales force promoting two …

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Salix: Focus on Label Expansion – Analyst Blog

Nissan Motor Co. has announced that it will recall 539,864 vehicles to inspect brake pedal pins and fuel-gauge components on certain trucks and minivans. Nissan has noticed that the brake-pedal pins in some of its vehicle models have partially engaged, causing a loss of normal breaking ability. The problem is related to a manufacturing error on the part of the supplier. The faulty makes include Nissan Titan, Armada, Quest and Infiniti QX56 of 2008–2010 model years. Yet another set of models have problems related to fuel gauges that incorrectly indicate the amount of fuel is in the tank. This could cause a vehicle to run out of fuel before the gauge reads empty. This set includes Nissan Titan, Armada and Infiniti QX56 and Nissan Frontier of 2005–2008 model years as well as Pathfinders and Xterras that were produced between January and March 2006 and between October 2007 and January 2008. However, the Japanese automaker has revealed that the vehicles that are on sale are free of these problems. So far, no injuries or accidents were reported related to the recalls. Vehicle recalls have become the talk of the town after Toyota Motors’ ( TM ) recent announcement of largest-ever global recall of 8.5 million vehicles related to problems with accelerator gas pedals and braking systems. The recall included popular models such as the 2010 Prius hybrid and Toyota Camry. In February, Toyota’s sales fell 9% to 100,027 vehicles in the U.S. However, Nissan Motors lagged Toyota in terms of market share despite clocking the highest sales growth among its Japanese peers in the U.S. Nissan Motor has reported a 29.4% rise in sales to 70,189 units in February with a market share of 9% (as per Autodata reports) as Versa subcompact sales doubled. Nissan Division sales rose 31.9% for the month, while sales of Infiniti vehicles were 10.7% higher than the year-ago level. Read the full analyst report on “TM” Zacks Investment Research

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Nissan Joins Parade of Recalls – Analyst Blog