Monday, June 30, 2008

E*Trade Panic?

(1929 Crash)

Panic on our long position in ETFC? Not yet. Responding to the collapse of it's shares last week, E*Trade issued a press release today regarding it's upcoming Q2 conference call. I've provided the link here, as well as copied it below. Reading between the lines, take a look at what words were chosen to describe what investors are in for on June 22nd :

"...strong performance..." "...generating positive trends..." "...strength and stability..."

A key note: "While the overall credit environment remains highly challenging, the strength and stability of the Companys retail business continues to generate earnings in the Bank to absorb credit losses in excess of managements current three-year forecast."

I find it hard to believe that a company would put out such a strongly worded announcement unless they know they can back it up.

E*TRADE FINANCIAL Corporation Announces Second-Quarter 2008 Earnings Conference Call
Monday June 30, 8:05 am ET

Company Comments on Retail Business Trends and Updates Progress of Parent Company Debt Reduction

NEW YORK--(BUSINESS WIRE)--E*TRADE FINANCIAL Corporation (NASDAQ: ETFC - News) today announced that it will report its second-quarter 2008 financial results after the close of the U.S. financial markets on Tuesday, July 22, 2008. The Company will host a conference call to discuss the results beginning at 5:00 p.m. (EDT). This conference call will be available to domestic participants by dialing 800-683-1525 and 973-872-3197 for international participants. The conference ID number is 54304105. A live audio webcast and replay of this conference call will also be accessible at
The Company also announced that it continued to experience strong performance in its retail franchise during the second quarter, generating positive trends in net new customer accounts and asset flows. While the overall credit environment remains highly challenging, the strength and stability of the Companys retail business continues to generate earnings in the Bank to absorb credit losses in excess of managements current three-year forecast. The Company also affirmed that it continues to expect excess risk-based capital at the Bank (excess to the regulatory minimum threshold for well capitalized) to approach $1 billion by year end.

Additionally, the Company completed actions during the second quarter that further reduced Parent Company debt by approximately $95.8 million, for total year-to-date reduction of $155.8 million. The second quarter reduction was achieved through a series of debt-for-equity exchanges (3(a)(9) exchanges). As previously announced, such exchanges serve to reduce leverage and debt service requirements at the Parent Company, and represent the principal means of capital raising expected in connection with the 2008 Turnaround Plan. The Company believes that these exchanges continue to provide a cost-effective and shareholder-friendly way of reducing corporate interest expense and leverage at the Parent Company.

Tuesday, June 10, 2008

The E*Trade Mystery

E*Trade continues to confound loyal longs as it struggles to gain traction in a suffocating market.

On Monday June 9th, ETFC closed at $3.81/share, a price it has not seen since late April. Given the overall sentiment of traders, it is still difficult to watch ETFC slide despite a positive flow of news this month: 6/9/08 update showed 28 fund managers buying 1,426,375 shares of ETFC versus 5 managers selling 7,751 shares.
E*Trade Launches Groundbreaking Mobile Platform
SmartMoney ranks E*Trade The #1 Online Broker

To view a PDF version of the E*Trade presentation given 6/5/08 at The Sandler O'Neill Global Exchange and Electronic Trading Conference, follow this link:
E*Trade: 3 Areas of Focus to Unlock Shareholder Value
The presentation was given by Chairman and CEO Donald H Layton and shows some very positive metrics.

Monday, May 26, 2008

ETFC and V....All In

After getting absolutely crushed (losses almost equivalent to a barrel of oil!) for 6 months now we have consolidated our positions to ETFC and V. E*Trade looks to be a waiting game, but one that I am daily growing more positive about. The company's turn-around plan is shaping up as promised and appears to be on schedule. Check out the long case for ETFC here:
E*Trade Primed for a Breakout
Seeking E*Trade's 'Magic Moment'
Entered a position in Visa on the dips and looking to see this one continue to perform well. This will be the 'anchor' for the portfolio. Need convincing? More Seeking Alpha perspective:
Visa Keeps Charging Ahead
We will hold through earnings season while we work on our plan of meeting our earnings goal by years' end.

Monday, March 3, 2008

ETFC: News, FRPT: Hammered!

Shares of ETFC suffered with the market free fall on Friday and closed at $4.27. I've provided links to the latest ETFC news and opinion here for convenience.

E*Trade, With Layton as CEO, Might Be Angling For a Sale-WSJ
What If E*Trade is worth Zero?-24/7 Wall St
E*Trade Chairman Layton to Add Role As CEO-Reuters
Schwab, Ameritrade, and E*Trade Sell Ways to Ward Off Bear Market
Mr. Brown's Picks-Mo'ilil'ili Quarry
Read This Before Buying E*Trade-Seeking Alpha
E*Trade Financial: Great Company, Great Bargain-Seeking Alpha

If E*Trade is angling for a sale, as the Wall Street Journal suggests, it's a drastic 'turn-around' for E*Trade's much hyped turn-around plan.

FRPT absolutely tanked after market close on Friday on news that it would be delaying it's filing of it's annual report. When all was said and done investors were left with $3.27/share and no clue as to when FRPT will file with the SEC. The reason for the delay? "Significant accounting errors". I smell significant trouble. All the contracts in the world won't save us from an incompetent CFO who already has a history of failure. Can you say "Job Opening!"
Without some P.R. guidance Monday, this trade has unfortunately become a poor investment. By the way, still waiting on January and February production numbers, which does not boost our confidence.

Hope someone out there is making a fast fortune.

Monday, February 25, 2008

FRPT: Contracts, Partnership, and Cheetah?

FRPT is having a good run of positive press that started on Thurday with the announcement of European vehicle contracts. 184 Cougar's, Mastiff's, and Buffalo's are on their way to Britain and Italy and adds confidence that Force Protection can be a global supplier for mine resistant vehicles for years to come. Read the press release here. This morning FRPT announced a new partnership with DRS Technologies, Inc., to compete for the JLTV program. FRPT longs had worried that without a partner, FRPT would be a longshot at best contending with bigger rivals such as the Northrup Grumman-Oshkosh, and Lockheed Martin-Armor Holdings joint ventures. Read the press release here. Last but not least, the above photo posted over on the Yahoo message board. No info yet on how legit this is but surely a Cheetah in the picture. The question is, Where?
Additional MRAP news over the weekend:
Big Wheels for Iraq's Mean Streets-New York Times (featuring a great photo of Cougar productions line)
Marines: Story that said lack of MRAPs led to deaths 'mischaracterized report-Stars and Stripes (With link to reports)

Wednesday, February 6, 2008

Beating The Averages: No Moral Victory

A quick update on how the portfolio is doing....
Holdings Return YTD: -4.5% (-2.61 yesterday alone).
Dow Jones Return YTD: -7.54%
S&P 500 Return YTD: -8.97%
Nasdaq Return YTD: -12.92%
In play we have ETFC, CBAK, FRPT, DFNS, and IOGH. (I will not comment further on IOGH, I hold on to it so that every time I see it I am reminded of every lesson learned thus far.)
Breaking it down by holdings we get this:
ETFC: -7.33%
CBAK: -29.67%
FRPT: +12.21%
DFNS: +37.04%
IOGH: +40.0%
Our CBAK position looks ugly but is still green from our basis. The red is basically all our gains wiped out from the end of December run-up. Although ETFC seems to be getting punished for daring to cross the $5 mark, we remain confident in the company's turn around plan. FRPT has held up well possibly because of 1)rumors of a large contract soon (reported by Trade The News) and 2) an upgrade from Stephens, Inc. from "Underweight" to "Equal Weight". A strong January vehicle production number via press release would be welcome.
All told we are holding up well in a horrible start to the year and in terms of the major benchmarks, but we have a lot of work to do. We continue to evaluate our positions and understand that beating benchmarks is no moral victory.

Monday, January 21, 2008

News: FRPT and DFNS

Some positive news over the weekend for 2 of our picks, DFNS and FRPT.
FRPT: Senator John McCain visited Force Protection Inc., while campaigning through South Carolina. From the FRPT website: McCain had a fruitful visit to Force Protection Industries Inc., where he and his entourage inspected armored (vehicles) with names including Buffalo, Cheetah and Cougar. "What you're doing here saves lives," he told employees.
Hopefully management expressed to the Senator (who is the Republican ranking member of the U.S. Senate Committee on Armed Services) that they have an interest in saving lives for many years to come with the vehicle that his wife got to climb into for a photo op. That vehicle of course is the Cheetah:

: Announced that it has filed amendments to previously released financial statements. Basically, nothing has changed. That's good news.
Joseph Postbinder, CEO of Defense Industries said: "I would like to use this opportunity to note that these amendments will not impact our improved results for the nine months ended September 30, 2007. Our revenues for the nine months ended September 30, 2007 increased by $7 million, compared to the same period last year, to $14.2 million, and our gross profit increased by $3.1 to $4.8 millions. Net cash provided by operating activity increased by $3.5 million to $3 million, compared to net cash of $500,000 used in operating activities in the same period last year. We had a net profit of $1.2 million for the nine months ended September 30, 2007, compared to a net loss of $400,000 in the same period last year." Mr. Postbinder concluded, "I believe that we are well positioned for growth and expansion in our markets and we look ahead optimistically that our share price will in time reflect our company's true value."
Deliver a solid year end quarterly report Mr. Postbinder, and that time should come quite quickly. Full press release here.
By the way, stock blogger Steve Hoven has done some great DD on the valuation of DFNS. Check him out here: StockDoubling
Hope you make a Fast Fortune.