stock pickers
AEROPOSTALE INC., $25.23, symbol ARO on New York, reported higher sales and profits this week. Notwithstanding the weak economy, the teen-clothing retailer took market share from its rivals, mainly on the strength of its lower prices. During the quarter, Aeropostale posted positive same-store sales, while rivals The Gap and American Eagle saw their same-store sales drop. In the three months ended January 31, 2009, Aeropostale’s revenue rose 16.7%, to $690 million from $591.3 million a year earlier. Same-store sales rose 6%, and online sales jumped 88%, to $41.4 million from $22 million, as more Christmas shoppers chose to make their purchases through the Internet. Aeropostale also added 86 new stores, which brings it to a total of 914. It operates 28 stores in Canada. Aeropostale’s wide variety of clothing, low prices and aggressive promotions continue to drive up the company’s sales. Its earnings rose 5.4%, to $68.2 million, or $1.02 a share, from $64.7 million, or $0.96 a share. Higher holiday sales were offset by markdowns, which lowered profits....
A: Fairfax Financial Holdings, $398, symbol FFH on Toronto, (Shares outstanding: 16.9 million; Market cap: $6.7 billion), is a good replacement for Northbridge. Fairfax is a financial services holding company with assets of $27.9 billion. Fairfax engages in insurance, reinsurance and investment management. Fairfax provides reinsurance through Odyssey Re and Group Re. Reinsurers provide insurance to insurers. Crum & Forster is Fairfax’s main U.S. insurance subsidiary, and Northbridge Financial is its principal subsidiary in Canada. Fairfax also sells insurance in Asia. Fairfax recently acquired the 36.9% of Northbridge Financial that it didn’t already own. Northbridge was a recommendation of our Stock Pickers Digest newsletter. Fairfax’s insurance operations have remained profitable, excluding hurricane losses. Insurance businesses hold a lot of cash for investment. Since 2003, Fairfax has invested conservatively, offsetting stock and bond holdings with investments that rose when stock markets fell. These included short sales and credit default swaps (insurance against defaults on bonds). Its biggest gains came last year....
NORTHBRIDGE FINANCIAL CORP. $38.80 (Toronto symbol NB; SI Rating: Speculative) (416-366-9544; no web site; Shares outstanding: 47.7 million; Market cap: $1.9 billion) jumped over 25% recently after Fairfax Financial Holdings, symbol FFH on Toronto announced that it will make an offer to acquire the shares of Northbridge it does not already own. Fairfax hopes to complete the transaction in the first quarter of 2009. Fairfax, which currently has a 63.1% interest in Northbridge, is offering $39 a share in cash for a total of $686 million to obtain the 36.9% interest outstanding. We recommended Northbridge as a buy at $31 in the most recent issue of Stock Pickers Digest. That’s when we pointed out that the chance of a Fairfax takeover of the company added to its appeal....
FAIRFAX FINANCIAL HOLDINGS $360 (Toronto symbol FFH: SI Rating: Average) (416-367-2612; www.fairfax.ca; Shares outstanding: 16.9 million; Market cap: $6.1 billion) is a financial services holding company with assets of $27.9 billion. Fairfax engages in insurance, reinsurance and investment management. Prem Watsa is the chairman and founder of the company. Fairfax’s shares are high priced, but you can buy an odd lot of as few as 10 shares or so through any broker. Fairfax provides reinsurance through OdysseyRe and Group Re. Reinsurers provide insurance to insurers. Crum & Forster is Fairfax’s main U.S. insurance subsidiary, and Northbridge Financial is its principal subsidiary in Canada. Fairfax also sells insurance in Asia. Fairfax recently announced that it will acquire the 36.9% of Northbridge Financial not already held. Northbridge is a recommendation of Stock Pickers Digest. In the nine months ended September 30, 2008, Fairfax’s earnings jumped 112.8%, to $1.13 billion or $60.63 a share, from $532.2 million or $29.54 a share. The latest nine months included net gains on investments of $1.9 billion, offset by net catastrophe losses (including net losses related to Hurricanes Ike and Gustav) of $366.2 million....
NORTHBRIDGE FINANCIAL CORP. $38.40, symbol NB on Toronto, rose over 26% this week after Fairfax Financial Holdings, symbol FFH on Toronto, announced that it will make an offer to acquire the shares of Northbridge it does not already own. Fairfax hopes to complete the transaction in the first quarter of 2009. Fairfax, which currently has a 63.1% interest in Northbridge, is offering $39 a share in cash for a total of $686 million to obtain the 36.9% interest outstanding. We recommended Northbridge as a buy at $31 in the most recent issue of Stock Pickers Digest. That’s when we pointed out that the chance of a Fairfax takeover of the company added to its appeal....
Many aggressive investors find the lure of stock option investing hard to resist. However, despite their appeal, the vast majority of investors lose money with options. An option is a contract between a buyer and a seller, based on an underlying security, usually a stock. The buyer pays the seller a fee, or premium, for certain rights to the stock. In exchange for the premium, the seller assumes certain obligations. Options trade through stock exchanges, with prices quoted each day in the financial section of newspapers. Each options contract is for 100 shares of stock. So one contract quoted at $5 will cost you $500 (before commissions). Each contract has a limited life span, or time to expiry — usually less than nine months. The expiry date is the date on which the contract expires. The strike, or exercise price, is the price at which the rights granted to the buyer can be exercised. There are two types of options:...
NEW GOLD $7.95 (Toronto symbol NGD; SI Rating: Speculative) (888-315-9715; www.newgold.com; Shares outstanding: 211.9 million; Market cap: $1.7 billion) is the new name for Peak Gold, formerly symbol PIK on Toronto. New Gold is the result of the merger of three companies: Peak Gold, Metallica Resources, symbol MR on Toronto, and New Gold, symbol NGD on Toronto. Under the terms of the merger, Peak Gold shareholders received 0.1 of a New Gold share and $0.0001 in cash for each Peak share held. New Gold expects to produce 297,000 ounces of gold in 2008 and 350,000 ounces in 2009. The company also has $500 million in cash to expand production at Peak’s Amapari mine in Brazil, to develop Metallica’s El Moro mine in Chile and to develop New Gold’s Afton mine in British Columbia....
RUBY TUESDAY, $6.41, symbol RT on New York, rose over 18% this week after it reported fiscal fourth-quarter earnings that exceeded consensus expectations. In the three months ended June 3, 2008, earnings per share fell 41.3%, to $0.27 from $0.46 a year earlier. However, consensus forecasts were for earnings of just $0.20 a share. Sales fell 4.3%, to $341.4 million from $356.8 million. Ruby Tuesday plans to close 15 company-owned restaurants as their leases expire. The company owns and operates 721 Ruby Tuesday restaurants. Domestic franchisees operate an additional 170 restaurants, and international franchisees run a further 54 restaurants....
BIRCHCLIFF ENERGY, $12.82, symbol BIR on Toronto, rose over 15% this week after it reported that cash flow per share rose 33.3% in the three months ended March 31, 2008, to $0.28 from $0.21 a year earlier. Revenues rose 13.1%, to $56.2 million from $26.4 million. Excluding one-time items, the company earned $7.1 million or $0.07 a share, compared to a loss of $1.4 million or $0.02 a share. In the latest quarter, new production and rising oil and natural gas prices boosted both earnings and cash flow. Total daily production rose 62.5%, to 9,470 barrels of oil equivalent from 5,829 barrels. Average daily production from Birchcliff’s Worsley light oil wells more than tripled, to 2,827 barrels from 742 barrels. Average daily production at its Montney/Doig natural gas assets at Pouce Coupe rose 28.4%, to 37.8 million cubic feet from 29.4 million. Both Worsley and Montney/Doig are located in Alberta’s Peace River Arch region....
PEAK GOLD $0.75 (Toronto symbol PIK; SI Rating: Speculative) (604-681-2802; www.peakgold.com; Shares outstanding: 558.1 million; Market cap: $418.6 6 million) has agreed to merge with Metallica Resources, symbol MR on Toronto, and with New Gold, symbol NGD on Toronto. The new company — to be called New Gold — will have a market cap of $1.6 billion. It expects to produce 297,000 ounces of gold in 2008 and 350,000 ounces in 2009. Shareholders of Peak Gold will receive 0.1 common shares of New Gold for each common share of Peak Gold held. The merged company will have $500 million in cash to expand production at Peak’s Amapari mine in Brazil, to develop Metallica’s El Moro mine in Chile and to develop New Gold’s Afton mine in British Columbia....