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CIT Group (CIT)
Q2 2010 Earnings Call
July 27, 2010 8:00 am ETComplete Story »

Hao Jin submits:The fact about momentum is there are price reversals at very short horizons and then positive momentum for 6 to 12 months, according to Owen Lamont, a hedge fund manager and a former professor at the Yale School of Management. The following are the top 10 stocks owned by an overwhelming majority of hedge funds. Data is compiled by MarketFolly from the most recent SEC 13F filings:Complete Story »

Market Folly submits:Each quarter, Goldman Sachs (GS) updates a list of stocks owned by an overwhelming majority of hedge funds. The aptly named VIP list details 'very important positions' to hedge funds that employ fundamental strategies (rather than trading oriented firms) and we like to cover it due to the obvious tie-ins with our hedge fund portfolio tracking series. Last quarter, we posted up the previous iteration of Goldman Sachs' VIP list and this time around there are a few notable changes to the basket of fifty stocks.Goldman updates the list each quarter to reflect the most recent hedge fund holdings using the same 13F forms filed with the SEC that we use for our tracking here on Market Folly. Twelve new stocks appeared on the list, representing stocks hedge funds as a whole were buying in the first quarter 2010, including: CIT Group (CIT), Alcon (ACL), CF Industries (CF), Coca-Cola Enterprises (CCE), Kraft Foods (KFT), Xerox (XRX), Assured Guaranty (AGO), Baidu (BIDU), Equinix (EQIX), Gilead Sciences (GILD), Liberty Global (LBTYA), and News Corp (NWSA).Complete Story »

Market Folly submits:Dealbreaker has flagged David Einhorn and hedge fund Greenlight Capital's first quarter investor letter. In it, we learn that the fund has exited its position in Boston Scientific (BSX). Readers will remember that Einhorn had just started this position and mentioned it in his fourth quarter investor letter. The hedge fund purchased shares of BSX for $8.42 and sold them for $7.57. So, Greenlight has cut its losses quickly on this one and moved on to the next investment.The Greenlight team writes,Complete Story »

• Geely buys Volvo. China's Geely Holding Group agreed to buy Ford's (F) Volvo unit yesterday for $1.8B, completing 18 months of negotiations and marking the largest overseas acquisition by a Chinese automaker. It's also the first time a Chinese company is in charge of a major global car brand, a reflection of China's rise in the post-crisis world. The companies expect to complete the deal in the third quarter. F +1.3% premarket (7:00 ET).
• Rio employees sentenced to up to 14 years. The four Rio Tinto (RTP) employees that were on trial in China have been sentenced to seven to 14 years in jail for accepting bribes and stealing commercial secrets. The case has garnered broad international attention, reflecting foreign investors' concerns over China's legal system. The employees are considering an appeal of what Australia has called a "very tough sentence," while Rio Tinto has terminated the employment of the employees because of "deplorable" conduct that was "at odds" with Rio's ethical culture. RTP +2.7% premarket (7:00 ET).
• CIT Group may sell Aussie unit. CIT Group (CIT) confirmed it may sell its Australia and New Zealand vendor-finance unit to Bank of Queensland as part of the lender's reorganization. Bank of Queensland, an Australian regional bank, will begin conducting exclusive due diligence for a potential takeover of the unit.
• FDIC, JPMorgan face off on tax benefit. The FDIC has reversed its earlier support for a $1.4B tax break benefiting JPMorgan (JPM). The tax benefit is a result of JPMorgan's acquisition of Washington Mutual; the failed bank's parent company filed a bankruptcy plan on Friday that would allow JPMorgan to claim the sum from an FDIC receivership, and the FDIC's support for the plan was notable missing. It appears the FDIC first became concerned over the potential windfall after meeting with WaMu bondholders who oppose the deal, and after media reports appeared last week with details of JPMorgan's plan. Moreover, TARP specifically excludes companies such as JPMorgan that received government aid from being eligible to receive the tax benefit.
• Sinopec taps into upstream assets. Sinopec's (SNP) Hong Kong unit is buying a 55% stake in upstream assets in Angola from parent company China Petrochemical Corp. Sinopec said the $2.46B deal is meant to be the first of many, as more such deals could protect the company from the high oil prices that hurt margins in the fourth quarter. In addition to purchases of more upstream assets from China Petrochemical, analysts said Sinopec could also look for assets in North Africa, the Caspian Sea and Latin America. The transaction will raise Sinopec's proven reserves of crude oil by 3.6%, and will increase its daily crude oil production by 8.8%.
• Morgan Stanley to underwrite Citi sale. Morgan Stanley (MS) has reportedly been chosen from a strong competitive field to be the underwriter and adviser in the government's sale of its Citigroup (C) stake. The bank will oversee the "dribble out" sale of the government's 27% stake, a process that could take the rest of the year. Sales are likely to begin after Citigroup's quarterly earnings report on April 19.
• Taiwan Semi wants SMI stake. Taiwan Semiconductor (TSM) formally submitted an application to Taiwan authorities to take a stake in Semiconductor Manufacturing International (SMI). Taiwan Semiconductor, the world’s largest custom-chip maker, is looking for up to a 10% stake.
• Bank tax efforts pick up steam. The U.S. and European governments are working to build consensus over plans to tax large banks in order to cover the costs of any future bailouts. Germany and Sweden want to use the money to create a "resolution authority," France wants to collect the fees after a crisis has already passed, and the U.S. is split, with Congress favoring a resolution authority and the White House leaning towards a post-crisis option. Despite the differing approaches, the concept of a bank tax has picked up so much momentum that officials expect it to be on the agenda at the G-20 meeting in June.
• Toyota supplies hybrid tech to Mazda. Toyota (TM) reached a deal to supply Mazda (MZDAF.PK) with hybrid technology. Mazda plans to launch a car using the hybrid system in Japan by 2013. Separately, Toyota said today that its global production jumped 83% in February from the year before. However, it will be virtually impossible to sustain this pace as the comparison was against a particularly weak February 2009 and Toyota is still reeling from the fallout of its recent recalls.
• Friday's failures. Four more bank failures on Friday brought this year's total to 41. The closures in Florida, Arizona and Georgia (I, II) will cost the FDIC's insurance fund an estimated $320.3M. However, the FDIC said it would cut the amount of losses it shares with buyers of failed banks, moving away from taking a 95% share of potential losses. An 80-20 split is expected to become the new norm for the entire loan portfolio.

Today's Markets

• In Asia, Nikkei -0.1% to 10986. Hang Seng +0.9% to 21237. Shanghai +2.1% to 3124. BSE +0.4% to 17711.
• In Europe at midday, London -0.3% to 5710. Paris +0.4% to 4004. Frankfurt +0.7% to 6162.
• Futures: Dow +0.4%. S&P +0.6%. Nasdaq +0.5%. Crude +0.9% to $80.69. Gold +0.6% to $1111.30.

Monday's Economic Calendar

• 8:30 Personal Income and Outlays 10:00 Treasury: 'Women in Finance Symposium' 10:30 Dallas Fed Manufacturing Outlook
• Notable earnings before Monday's open: APOL

Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post.Complete Story »

CIT Group (CIT) emerged out of bankruptcy yesterday. There is no balance sheet out yet. Heck, people don't even know what the share count is - for that you need to read the bankruptcy filing 8-K. Total share count = 200 mnShare Price = $28 WSJ is saying that $11bn of debt has been wiped out. That is on top of $5bn of pref and equity interests that have been wiped out. So, in total $16bn has been wiped out on a book of $64bn. The books have to be restated at fair value. Even if there is a 15% write off of the book so that $10bn of loans are written down, there should be tangible book value left. And after that, because there wont be any more provisions to take, CIT will report eye-popping earning numbers. This is like the Wells Fargo (WFC) - Wachovia (WB) situation from a year ago.Disclosure: No positionComplete Story »

Davy Bui submits: Scanning the 13F-HR SEC filing of Paulson and Co. suggests that John Paulson employs an active trading strategy. Readers can best view Paulson's moves in spreadsheet format but some broader themes do emerge:

• Similar to some of the other money managers already profiled here (Berkowitz, Klarman), Paulson is bullish in the financial sector, as evidenced by sizable new positions in Wells Fargo (WFC), JP Morgan Chase (JPM) warrants, CIT Group (CIT) and Bank of America Units to complement his already huge holding of the bank's common stock (BAC). Paulson's fund also added substantively to existing stakes in Citigroup (C) and Suntrust Bank (STI).
• While Paulson made some big moves in the financial sector, his single largest new add was Comcast (CMCSA), the cable and now media company.
• Upon examining its holdings, it is evident the fund heavily employs a merger arbitrage strategy. The three large divestitures -- Schering Plough (SGP), Wyeth (WYE) and Liberty Media -- were all related to corporate merger/spin-off activity.
• Perhaps the most intriguing insight to be gleaned from Paulson's holdings is that he appears to be a financial sector bull and a gold bug. The single largest holding revealed in the filing is the gold ETF (GLD) and the fund also has large stakes in several gold miners: AngloGold Ashanti (AU), Gold Fields (GFI) and Kinross Gold (KGC). Apparently, Paulson has taken the stance that the financial sector can thrive despite the massive economic uncertainty that a large gold holding would imply. Or, perhaps one is a hedge on the other.

Martin Whitman is receding more into the background these days and letting other managers helm the funds at Third Avenue. As such, Third Avenue's 13F-HR filing (available here in spreadsheet format) may not be a good reflection of Whitman's thinking. Whitman has always been a big proponent of moving into the financial sector at times of crisis but this time around, he was too early and picked some bad stocks to play. Despite numerous funds and managers, Third Avenue's filing was rather sedate:Complete Story »

• Fed's exit strategy. Heavy snowfall prompted the cancellation of a congressional hearing yesterday, but Bernanke released the testimony he'd prepared on how the Federal Reserve plans to tighten credit once the economy has sufficiently recovered. Bernanke said the interest rate on excess reserves might replace the federal-funds rate as the main policy tool for a time, and suggested the Fed might begin raising its discount rate soon. However, Bernanke stressed that changes in the discount rate should not be taken as a sign of an imminent rate hike.
• Fed looks to money market funds. Sources say the Federal Reserve is in talks with money-market mutual funds to help drain up to $1T from the financial system as officials prepare for the first interest-rate hike since June 2006. The Fed is also said to be considering reverse repurchase agreements with Fannie Mae (FNM) and Freddie Mac (FRE).
• Air Products launches hostile bid. Air Products and Chemicals (APD) launched a hostile tender offer for Airgas (ARG) after its bid was rejected earlier this week. The offer is for all outstanding common shares for $60/share in cash. Separately, the SEC is reportedly investigating unusual activity in Airgas call options that occurred before Air Products and Chemicals announced a $5.1B bid for the company. Air Products made its unsolicited bid on Feb. 5, causing Airgas shares to jump as much as 44%. A burst of activity in select Airgas call options before the bid was announced has regulators concerned that the takeover news was leaked early and used to profit on the Airgas stock spike.
• EU discusses Greek aid. European Union leaders meet today and may create a framework for a Greek rescue package. One possibility is to provide Greece with loan guarantees as long as Prime Minister George Papandreou quiets street protests and further cuts the country's budget deficit. A Spanish official said countries were being spurred to action because "it's about the credibility of the euro," but German citizens, with a longstanding commitment to fiscal responsibility, are loathe to see their country involved in a bailout and "will wish they had their Deutsche Mark back" if a rescue goes through.
• AIG: Mind your grades, get a bonus. AIG (AIG) is rolling out a new compensation system that will rate employees relative to their peers on a scale of 1 to 4, and will dole out bonuses according to employees' rankings. The approach, called a "forced distribution" system, has been used by large companies such as GE (GE) to help reward top employees and weed out underperforming ones over time. Only 10% of employees will get the top "1" ranking, 20% will be ranked as "2," 50% will be ranked as "3," and the remaining 20% will be ranked as "4."
• CME to buy Dow Jones stake. CME Group (CME) reached a deal to take a 90% stake in Dow Jones Indexes (NWS). CME will pay Dow Jones $607.5M for the stake, and Dow Jones will retain a management role in the Dow Jones Industrial Average.
• TARP losses, gains. The Treasury officially recognized the loss of its $2.3B investment in CIT Group (CIT) yesterday. Despite the loss, the Treasury expects the cost of TARP to continue to fall and expects to turn a profit on aid provided directly to the banking sector. To that end, PNC (PNC) announced yesterday that it had completed its TARP payment by redeeming $7.6B of preferred government shares, and Fifth Third Bancorp (FITB) will "most likely" repay its $3.4B of TARP funds in the second half of the year.
• Treasury considers partial Citi sale. The Treasury is said to be considering the sale of a $2.2B investment in Citigroup's (C) junior debt in order to lock in a profit from the firm's bailout. Officials are debating whether it's best to sell the securities, known as trust preferreds, before or after the government sells its 27% equity stake.
• Small banks struggle with soured loans. Soured commercial real-estate loans are still tripping up the economy, according to a report by the Congressional Oversight Panel. Specifically, there are nearly 3,000 small banks that may have to dramatically cut their lending as losses on those loans may reach as high as $200B-300B. Concern about banks' exposure to commercial real estate has been building for months, and Elizabeth Warren, head of the oversight panel, warns that those banks "are about to get hit by a tidal wave of commercial-loan failures."
• Google goes optic for zippy internet. Google (GOOG) says it will start offering ultrafast internet service to a select number of consumers, building its own fiber-optic networks with the aim of serving 50,000 to 500,000 people. For Google, it's a major step into supplying internet connections rather than the services that run on them, though Google says developing the former will help grow the latter. However, the move is risky and doesn't have the necessary scale to compete with industry giants, leading some to say it's as much about politics as it is about technology.
• New antitrust hurdle for Live Nation Entertainment. Live Nation Entertainment (LYV) will be subject to a second antitrust review in the U.K. after a court ruling said regulators had failed to fully consider the input of a competitor in the market for ticket sales. If antitrust officials reverse their earlier approval of the $889M merger, Live Nation Entertainment may be required to make changes to its U.K. operations.
• U.K.'s Brown sees progress on global bank tax. U.K. Prime Minister Gordon Brown said the world's leading economies are close to agreeing on a global bank tax, noting that public opinion has shifted in favor of the tax since Obama's decision last month to raise $90B from a U.S. bank fee. The U.K. hopes to lock in global agreement on the bank tax at the G-20 summit in June.
• Rio employees face Chinese trial. After being detained for seven months, four Rio Tinto (RTP) employees will now stand trial in China on accusations of stealing commercial secrets and taking bribes. Nearly all criminal cases that go to trial in China end in conviction. Australia urged the Chinese to deal with the trials quickly and transparently, but a lawyer involved in the cases said the proceedings won't be made public because they involve commercial secrets.
• Lending, property prices surge in China. China's lending jumped to 1.4T yuan ($203B) in January, more than in the three previous months combined, as banks extended more credit ahead of an expected tightening in monetary policy. Property prices climbed the most in 21 months, rising 9.5% from the year before.
• Motorola may roll out new plan for units. Motorola (MOT) is said to be reconsidering its strategy of selling off its largest unit, which makes set-top boxes and wireless-networking gear. Instead, the company may try to separate out the various businesses, by auctioning the network unit and spinning off the set-top box business with its handset business into a new public company. That would leave Motorola at one-third of its current size.
• Travelport IPO isn't going anywhere. U.S. travel group Travelport delayed its planned £1.2B IPO in London, blaming market volatility for its difficulties in winning investor support. The decision is a blow to majority-owner Blackstone (BX) and its plans to list several other companies this year. It also bodes poorly for the IPO market generally, since news of Travelport's flotation was taken as a sign of a possible IPO revival.
• MySpace CEO steps down. After less than a year at the helm, News Corp. (NWS) announced that Owen Van Natta is stepping down as CEO of MySpace. The social networking site has struggled to keep up with rival Facebook.
• Trade balance. December's trade balance was -$40.2B vs. -$36.8B expected and -$36.4B prior. Exports rose 3.3% to $142.7B. Imports rose 4.8% to $182.9B.

Earnings: Thursday Before Open

• EnCana (ECA): Q4 EPS of $0.50 beats by $0.08. Revenue of $2.7B (-44.2%) vs. $3B. (PR)
• Macerich (MAC): Q4 EPS of $0.90 misses by $0.01. Revenue of $201M (-17.2%) vs. $200M. (PR)
• Marriott International (MAR): Q4 EPS of $0.32 beats by $0.06. Revenue of $3.3B (-12.1%) vs. $3.2B. (PR)
• Teradata (TDC): Q4 EPS of $0.45 beats by $0.08. Revenue of $496M (+0.6%) vs. $478M. (PR)

Earnings: Wednesday After Close

• Activision (ATVI): Q4 EPS of $0.49 beats by $0.05. Revenue of $2.5B vs. $2.2B. Sees Q1 EPS of $0.02 vs. $0.08, on sales of $525M vs. $741M (Company plans one release in last week of March). Sees 2010 EPS of $0.70 vs. $0.73, on sales of $4.4B vs. $4.8B. Shares +3.3% AH. (PR, earnings call transcript)
• Allstate (ALL): Q4 EPS of $1.09 beats by $0.08. Revenue of $8.1B (+23%) in-line. “We successfully executed our first priority of keeping Allstate financially strong by achieving excellent underwriting margins and improving our capital position." Shares +0.2% AH. (PR)
• Amkor Technology (AMKR)Q4 EPS of $0.21 beats by $0.12. Revenue of $668M (+21.7%) vs. $549M. Shares -3.7% AH. (PR, earnings call transcript)
• Arris Group (ARRS)Q4 EPS of $0.32 beats by $0.05. Revenue of $300M (+2.6%) vs. $276M. (PR, earnings call transcript)
• Biomed Realty Trust (BMR): Q4 FFO of $0.31 in-line. Revenue of $88M (+6%) vs. $89M. (PR)
• Boston Scientific (BSX)Q4 EPS of $0.13, in-line. Revenue of $2.08B (+3.8%) vs. $2.07B. Guidance for Q1 and FY10 revenues in-line. Shares -3.1% AH. (PR)
• DENTSPLY International (XRAY): Q4 EPS of $0.48 misses by $0.01. Revenue of $569M (+12%) vs. $556M. (PR)
• Highwoods Properties (HIW): Q4 FFO of $0.60 beats by $0.01. Revenue of $114M (-1%) in-line. (PR)
• Masco (MAS)Q4 EPS of $0.02 beats by $0.05. Revenue of $1.9B (-3.0%) vs. $1.96B. Shares -0.6% AH. (PR)
• Prudential Financial (PRU): Q4 EPS of $1.07 misses by $0.04. Revenue of $6.8B (+16%) vs. $6.86B. Sale of Wachovia Securities JV brought $4.5B in cash vs. initial 2003 book value of $1B. Shares -2.6% AH. (PR)
• Realty Income (O): Q4 FFO of $0.47 beats by $0.01. Revenue of $82M (-1%) in-line. (PR)

Today's Markets

• In Asia, Nikkei +0.3% to 9964. Hang Seng +1.9% to 20291. Shanghai +0.1% to 2986. BSE +1.4% to 16153.
• In Europe at midday, London +0.8% to 5175. Paris +0.4% to 3650. Frankfurt +0.1% to 5542.
• Futures: Dow +0.44% to 10029. S&P +0.52% to 1069. Nasdaq +0.44%.

Thursday's Economic Calendar

• 8:30 Initial Jobless Claims 10:00 Business Inventories 10:30 EIA Natural Gas Inventory 1:00 PM 30-Yr Note Auction 4:30 PM Money Supply 4:30 PM Fed Balance Sheet
• Notable earnings before Thursday's open: ALU, AN, BWA, ECA, ECL, EXPE, FLIR, LH, MAC, MAR, NRG, OHI, PEP, PGN, PLD, PM, PTEN, TDC, VIA.B
• Notable earnings after Thursday's close: ACL, BGC, CAKE, CEPH, DCT, MFE, RSG

Seeking Alpha editors Eli Hoffmann and Jason Aycock contributed to this post.Complete Story »

Miriam Metzinger submits: Stocks discussed on Jim Cramer's Stop Trading! TV Program, Monday February 8.Goldman Sachs (GS), CIT Group (CIT), Ralph Lauren (RL), AIG (AIG), Complete Story »

Linus Wilson submits:Bloomberg reports that the imperial bailout CEO is back. It is insulting that John Thain will be given the reins of another public company. Especially a company, CIT Group, that handed taxpayers the largest loss of the bank bailouts save American International Group (AIG).John Thain used his crony capitalism connections with the Secretary of Treasury Hank Paulson to pass of his bankrupt company on Bank of America's (BAC) shareholders. In 1999, John Thain led a coup at Goldman Sachs that elevated Hank Paulson to Goldman Sachs CEO and pushed his mentor John Corzine onto the voters of New Jersey and out of the top job at Goldman Sachs. In 2008, Thain sold a bankrupt company with $27.6 billion in losses, Merrill Lynch, to Bank of America.Complete Story »