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Early Movers for Feb. 6, 2013
Posted by: earningsyield (IP Logged)
Date: February 6, 2013 09:41AM

U.S. markets will continue to rally after yesterday’s gain following Monday’s sell off. Helping feed yesterday’s bullishness is the $24.4 billion deal that would take PC-maker Dell (DELL) private. Founder and current CEO Michael Dell, and private equity firm Silver Lake Partners will offer current shareholders $13.65 in cash. The deal is subject to shareholder approval, excluding shares owned by management and directors. I’ve yet to see any other shareholders come out and support the deal. Gurus who will benefit from DELL going private include Donald Yacktman, Brian Rogers, Wallace Weitz, Richard Pzena, Ray Dalio, Michael Price and a few others. None of the Gurus own a significant stake in DELL.

In another possible deal, Liberty Global (LBTYA) is in talks to purchase British cable company Virgin Media (VMED) for $23 billion in cash and stock. The deal would give Liberty a bigger share in Europe and would become one of the largest broadband companies in the world. covering approximately 47 million homes in 14 countries. Recent Gurus who have purchased Virgin Media include Joel Greenblatt and David Einhorn. David Einhorn’s 1.9% impact to portfolio is the most significant of the two. Einhorn purchased his shares of Virgin Media in the second and third quarter of 2012 with a total cost basis of $29.44.

Amidst of the two takeovers, earnings season continues to be in full swing.

CVS Caremark (CVS) reported EPS of $1.14 per share, beating the Street’s estimate of $1.10. At the same time it raised its earnings outlook for the year on improved revenue growth from pharmacy services and its CVS drugstore chain. Revenue in the retail division rose 5.1 percent to $16.28 billion, with sales at drugstores open at least a year up 4%. Gurus have for the most part been net sellers of CVS with Scott Black and John Hussman being the only bulls. Each have made purchases in the $43 to $49 range and those purchases have a 1.2% impact to their portfolio.

Dow Jones component The Walt Disney Company (DIS) reported a fourth quarter profit of $0.79 per share or three cents above the Streets estimates. Profit was down from last year as increasing costs to sporting rights hurt the bottom line. Despite the small setback, shares are up on comments CEO Bob Iger made during an interview with CNBC that Disney is working on stand-alone “Star Wars” movies that are not part of the new trilogy that’s in the works.

According to the Washington Post, Iger said the movies would be based on “great ‘Star Wars’ characters that are not part of the overall saga.” The films would be released during the six-year period of the new trilogy, which starts in 2015 with “Star Wars: Episode VII.”

Disney purchased Lucasfilms in late 2012 in a $4.4 billion deal that brought the Star Wars franchise under the Disney umbrella.

Gurus have been buying and selling shares of Disney as its shares make multi-year highs. Recent buyers of Disney include Blue Ridge Capital’s John Griffin and Ken Fisher. John Griffin’s stake is slightly more significant as it has 2.5% impact to the Blue Ridge portfolio.

Engine maker Cummins (CMI) posted a fourth quarter profit of $2.02 per share versus the Street’s estimate of $1.75 per share. Despite the beat, profit is down 30% on a year over year basis amidst “uncertainty” in some of its markets. The company is witnessing weak demand in truck, construction, oil and gas markets in North America. In response to the weaker demand, Cummins stated that it will start slash its workforce by 3% or 650 employees. Gurus who have recently purchased Cummins include Bill Nygren, Hotchkis & Wiley and George Soros. Bill Nygren’s recent purchase has the most significance as it now represents 1.9% of the Oakmark Fund.

Disclosure: None



Guru Discussed: Bill Nygren: Current Portfolio, Stock Picks
David Einhorn: Current Portfolio, Stock Picks
Stocks Discussed: DELL, LBYTA, VMED, CVS, DIS, CMI,
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