Tycoon Research Weekly Market Advisory - Vol 1, Iss 5
TycoonResearch.com Weekly Advisory
December 3, 2004: Volume I, Issue 5
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
IN THIS WEEK'S ISSUE:
1. WATCHIN THE WHEELS GO ROUND AND ROUND: Markdowns and shopperswere out early this season. What does that mean for retailers?
2. ANOTHER BRICK IN THE WALL: Is it too late to profit from thetakeover battle between Mylan Labs and King Pharamaceuticals?
3. SPECIAL REPORT - "WORLD'S TOP 20 THINNEST BOOKS": Finally, a reading list that won't expand your mind. --By The Tycoon Academic Staff
**STOCKS MENTIONED THIS WEEK: Gap Stores(NYSE: GPS),Sears(NYSE:S),COach (NYSE: COH), Wal-Mart (NYSE: WMT), Mylan Labs (NYSE: MYL),King Pharmaceuticals (NYSE: KG)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
1. WATCHIN THE WHEELS GO ROUND AND ROUND: Markdowns and shopperswere out early this season. What does that mean for retailers?
THEY CALL IT BLACK FRIDAY for good reason.
It is this particular Friday, the Friday that follows each and every Thanksgiving, that lets retailers know if they're income statements will indeed be black.
Black is good. Black means higher profits. Higher profits mean higher stock prices. Higher stock prices mean stock options that are, well, in the black.
And what a black Friday it was.
You saw the pictures. Shoppers braving the elements to bum-rushGap, Sears and H & M in search of the latest markdowns.
Hair flying. Elbows hitting. It reminded me of a mosh pit.
It seemed that the retailers - who've been worried about a weak holiday season all year - we're wise with the markdown strategy.
On Friday evening ShopperTrak, a national survey firm, said that sales for the day rose an estimated 10.8 percent over last year to appx. $8 billion.
Analysts & retailers proudly hit the talk show circuit Friday nite to declare that the 10 percent rise in spending was a combination of the modest "drop" in oil prices combined with the recent rise of the stock market.
Retailers began to secretly cross their fingers...dreams ofstock options dancing in their head.
All seemed good.
And than came Saturday. And Sunday.
It was as if all of the shoppers who partied on Friday suddenlyremembered that oil is 100 percent higher than it wasa year ago Black Friday.
And that prices at the pump haven't fallen.
And that the stock market hasn't really moved during the year.
And that their adjustable-rate mortgages were creeping up with interest rates.
So for the rest of the weekend they rested. The post shop hangover must have been severe.
First Binge. Than Purge. Some of you know what I mean.
By Monday the "smart money" was back on the talk show circuitquestioning the strength of the shopping season again.
It seems that their old research was wrong.
It's not discounts that people were running to. It's discountsthey were running from.
Wal-Mart is out. Coach is in.
Brand names galore. Fewer, but more expensive gifts.
At least for now.
And so we await the cycle to begin anew next weekend.
Too much drama for me.
Guess what I did this weekend? I slept.
I slept because Tycoon is knee-deep in companies with strong brand names.
Strong brand names mean people want their products.
Strong brand names mean pricing power. Pricing power means higher profits. Higher profits mean higher stock prices.
Higher stock prices mean, well, Tycoon subscribers who are, wellin the black for the year.
Yea, I slept pretty well last weekend.
Can you guess what I plan to do this weekend?
Enjoy,
--The TR Staff
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
2. ANOTHER BRICK IN THE WALL: Is it too late to profit from thetakeover battle between Mylan Labs and King Pharamaceuticals?-- By Tycoon Staff
IT STARTED WITH A SIMPLE ENOUGH PROPOSITION.
Mylan Labs (NYSE:MYL), seeking to increase it's competitive position within the generic drug industry, makes a $16.49/share all-stock bid for King Pharmaceuticals (NYSE: KG).
The board of King, believing that the offer makes "strategicand financial" sense accepts the offer as fair.
Mylan Labs rejoices.
Enter financier Carl Icahn, the scrappy member of the Forbes 400 list and supposed influence for Oliver Stone's "Gordon Gekko" character in the movie "Wall Street."
Believing that Mylan was overpaying for King, he tries to thwartthe deal by purchasing a 9.8 percent stake in Mylan and offeringto buy Mylan for $20 per share.
Mylan Labs cries foul.
Enter financier Richard Perry. The famed money manager, who already owns 7 million shares of King, steps in and one-up's Icahn, purchasing 9.98 percent of Mylan.
It's clear that Perry supports the merger and wants to vote hisMylan stake in favor of the deal.
Talk about playing two endsagainst the middle.
While the clash of the ego-titans continues, I decided to see ifthere was any money in it for us.
Here's what I found:
King Pharma is currently trading at $12.42. That's $4 dollarsbelow the agreed upon merger price - a 32 percent discount.
Generally, when two companies agree to merge and there is littlereason to believe that the Justice Department won't disapprove,there would be a far smaller discount, say 5 - 10 percent, depending on if it's a cash or stock deal.
But this discount is large for two reasons:
1. Icahns purchase has thrown a monkey wrench into the deal,raising a chance that it won't happen.
2. Accounting Investigation: King Pharmaceuticals is being investigated by the SEC and may have to re-state several years of its "historical returns reserves."
Not a pleasant thing, but its more of an accounting issue thana cash flow issue.
The real danger is that Mylan, who was well aware of the SEC investigation before it offered to buy King, lowers the acquisition price if the result is bad.
Here's my bet:
**Icahn won't prevail in his quest to purchaseMylan or derail the merger. As a matter of fact, he soundsmuch less optimistic now that investors such as Perry are challenging his moves.
**The SEC investigation into King will not conclude with a "material" event that will dramatically impact the financials of the company.
**The deal will prob. take 12 months to close from today.
**There is a 75 percent chance this deal gets done.
**If the deal doesn't happen, King will fall down toit's pre merger price and year low of $10 per share.
By purchasing King today, I think youre likely to make20 percent on your money.
Not bad for a years work.
Open minds mean larger wallets,
-TR
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
3. SPECIAL REPORT - "WORLD'S TOP 20 THINNEST BOOKS": Finally, a reading list that won't expand your mind. --By The Tycoon Academic Staff
WORLDS TOP 20 THINNEST BOOKS
20. FRENCH WAR HEROES - by Jacques Chirac
19. HOW I SERVED MY COUNTRY - by Jane Fonda
18. MY BEAUTY SECRETS - by Janet Reno
17. HOW TO BUILD YOUR OWN AIRPLANE - by John Denver
16. MY SUPER BOWL HIGHLIGHTS - by Dan Marino
15. THINGS I LOVE ABOUT BILL - by Hillary Clinton
14. MY LITTLE BOOK OF PERSONAL HYGIENE - by Osama Bin Laden
13. THINGS I CANNOT AFFORD - by Bill Gates
12. THINGS I WOULD NOT DO FOR MONEY - by Dennis Rodman
11. MY WILD YEARS - by Al Gore
10. AMELIA EARHART'S GUIDE TO THE PACIFIC
9. AMERICA'S MOST POPULAR LAWYERS
8. DETROIT: a Travel Guide
7. A COLLECTION of MOTIVATIONAL SPEECHES - by Dr. J. Kevorkian
6. ALL THE MEN I HAVE LOVED BEFORE - by Ellen de Generes
5. GUIDE TO DATING ETIQUETTE - by Mike Tyson
4. SPOTTED OWL RECIPES - by the EPA
3. THE AMISH PHONE DIRECTORY
2. MY PLAN TO FIND THE REAL KILLERS - by O. J. Simpson
1. MORALITY - by William Jefferson Clinton~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
December 3, 2004: Volume I, Issue 5
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
IN THIS WEEK'S ISSUE:
1. WATCHIN THE WHEELS GO ROUND AND ROUND: Markdowns and shopperswere out early this season. What does that mean for retailers?
2. ANOTHER BRICK IN THE WALL: Is it too late to profit from thetakeover battle between Mylan Labs and King Pharamaceuticals?
3. SPECIAL REPORT - "WORLD'S TOP 20 THINNEST BOOKS": Finally, a reading list that won't expand your mind. --By The Tycoon Academic Staff
**STOCKS MENTIONED THIS WEEK: Gap Stores(NYSE: GPS),Sears(NYSE:S),COach (NYSE: COH), Wal-Mart (NYSE: WMT), Mylan Labs (NYSE: MYL),King Pharmaceuticals (NYSE: KG)
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
1. WATCHIN THE WHEELS GO ROUND AND ROUND: Markdowns and shopperswere out early this season. What does that mean for retailers?
THEY CALL IT BLACK FRIDAY for good reason.
It is this particular Friday, the Friday that follows each and every Thanksgiving, that lets retailers know if they're income statements will indeed be black.
Black is good. Black means higher profits. Higher profits mean higher stock prices. Higher stock prices mean stock options that are, well, in the black.
And what a black Friday it was.
You saw the pictures. Shoppers braving the elements to bum-rushGap, Sears and H & M in search of the latest markdowns.
Hair flying. Elbows hitting. It reminded me of a mosh pit.
It seemed that the retailers - who've been worried about a weak holiday season all year - we're wise with the markdown strategy.
On Friday evening ShopperTrak, a national survey firm, said that sales for the day rose an estimated 10.8 percent over last year to appx. $8 billion.
Analysts & retailers proudly hit the talk show circuit Friday nite to declare that the 10 percent rise in spending was a combination of the modest "drop" in oil prices combined with the recent rise of the stock market.
Retailers began to secretly cross their fingers...dreams ofstock options dancing in their head.
All seemed good.
And than came Saturday. And Sunday.
It was as if all of the shoppers who partied on Friday suddenlyremembered that oil is 100 percent higher than it wasa year ago Black Friday.
And that prices at the pump haven't fallen.
And that the stock market hasn't really moved during the year.
And that their adjustable-rate mortgages were creeping up with interest rates.
So for the rest of the weekend they rested. The post shop hangover must have been severe.
First Binge. Than Purge. Some of you know what I mean.
By Monday the "smart money" was back on the talk show circuitquestioning the strength of the shopping season again.
It seems that their old research was wrong.
It's not discounts that people were running to. It's discountsthey were running from.
Wal-Mart is out. Coach is in.
Brand names galore. Fewer, but more expensive gifts.
At least for now.
And so we await the cycle to begin anew next weekend.
Too much drama for me.
Guess what I did this weekend? I slept.
I slept because Tycoon is knee-deep in companies with strong brand names.
Strong brand names mean people want their products.
Strong brand names mean pricing power. Pricing power means higher profits. Higher profits mean higher stock prices.
Higher stock prices mean, well, Tycoon subscribers who are, wellin the black for the year.
Yea, I slept pretty well last weekend.
Can you guess what I plan to do this weekend?
Enjoy,
--The TR Staff
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
2. ANOTHER BRICK IN THE WALL: Is it too late to profit from thetakeover battle between Mylan Labs and King Pharamaceuticals?-- By Tycoon Staff
IT STARTED WITH A SIMPLE ENOUGH PROPOSITION.
Mylan Labs (NYSE:MYL), seeking to increase it's competitive position within the generic drug industry, makes a $16.49/share all-stock bid for King Pharmaceuticals (NYSE: KG).
The board of King, believing that the offer makes "strategicand financial" sense accepts the offer as fair.
Mylan Labs rejoices.
Enter financier Carl Icahn, the scrappy member of the Forbes 400 list and supposed influence for Oliver Stone's "Gordon Gekko" character in the movie "Wall Street."
Believing that Mylan was overpaying for King, he tries to thwartthe deal by purchasing a 9.8 percent stake in Mylan and offeringto buy Mylan for $20 per share.
Mylan Labs cries foul.
Enter financier Richard Perry. The famed money manager, who already owns 7 million shares of King, steps in and one-up's Icahn, purchasing 9.98 percent of Mylan.
It's clear that Perry supports the merger and wants to vote hisMylan stake in favor of the deal.
Talk about playing two endsagainst the middle.
While the clash of the ego-titans continues, I decided to see ifthere was any money in it for us.
Here's what I found:
King Pharma is currently trading at $12.42. That's $4 dollarsbelow the agreed upon merger price - a 32 percent discount.
Generally, when two companies agree to merge and there is littlereason to believe that the Justice Department won't disapprove,there would be a far smaller discount, say 5 - 10 percent, depending on if it's a cash or stock deal.
But this discount is large for two reasons:
1. Icahns purchase has thrown a monkey wrench into the deal,raising a chance that it won't happen.
2. Accounting Investigation: King Pharmaceuticals is being investigated by the SEC and may have to re-state several years of its "historical returns reserves."
Not a pleasant thing, but its more of an accounting issue thana cash flow issue.
The real danger is that Mylan, who was well aware of the SEC investigation before it offered to buy King, lowers the acquisition price if the result is bad.
Here's my bet:
**Icahn won't prevail in his quest to purchaseMylan or derail the merger. As a matter of fact, he soundsmuch less optimistic now that investors such as Perry are challenging his moves.
**The SEC investigation into King will not conclude with a "material" event that will dramatically impact the financials of the company.
**The deal will prob. take 12 months to close from today.
**There is a 75 percent chance this deal gets done.
**If the deal doesn't happen, King will fall down toit's pre merger price and year low of $10 per share.
By purchasing King today, I think youre likely to make20 percent on your money.
Not bad for a years work.
Open minds mean larger wallets,
-TR
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
3. SPECIAL REPORT - "WORLD'S TOP 20 THINNEST BOOKS": Finally, a reading list that won't expand your mind. --By The Tycoon Academic Staff
WORLDS TOP 20 THINNEST BOOKS
20. FRENCH WAR HEROES - by Jacques Chirac
19. HOW I SERVED MY COUNTRY - by Jane Fonda
18. MY BEAUTY SECRETS - by Janet Reno
17. HOW TO BUILD YOUR OWN AIRPLANE - by John Denver
16. MY SUPER BOWL HIGHLIGHTS - by Dan Marino
15. THINGS I LOVE ABOUT BILL - by Hillary Clinton
14. MY LITTLE BOOK OF PERSONAL HYGIENE - by Osama Bin Laden
13. THINGS I CANNOT AFFORD - by Bill Gates
12. THINGS I WOULD NOT DO FOR MONEY - by Dennis Rodman
11. MY WILD YEARS - by Al Gore
10. AMELIA EARHART'S GUIDE TO THE PACIFIC
9. AMERICA'S MOST POPULAR LAWYERS
8. DETROIT: a Travel Guide
7. A COLLECTION of MOTIVATIONAL SPEECHES - by Dr. J. Kevorkian
6. ALL THE MEN I HAVE LOVED BEFORE - by Ellen de Generes
5. GUIDE TO DATING ETIQUETTE - by Mike Tyson
4. SPOTTED OWL RECIPES - by the EPA
3. THE AMISH PHONE DIRECTORY
2. MY PLAN TO FIND THE REAL KILLERS - by O. J. Simpson
1. MORALITY - by William Jefferson Clinton~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
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