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Ringing the Register on PetSmart Seems Smart
Tom Clancy gives his thoughts on three stocks, including PetSmart, which is seeing interest from activist investors.
Tom Clancy    

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

I am selling out of my PetSmart (NASDAQ:PETM) position this morning as shorts cover on the news of shareholder activism.

JANA Partners took a 9.9% stake in the company, but PetSmart has a poison pill that severely limits activists' ability to do anything without the Board. 

Here are some relevant notes from PetSmart's 10-K:

We have implemented some anti-takeover provisions that may prevent or delay an acquisition of us that may not be beneficial to our stockholders.

Our restated certificate of incorporation, as amended, and bylaws include provisions that may delay, defer or prevent a change in management or control that our stockholders may not believe is in their best interests. These provisions include:

• The ability of our Board of Directors to issue, without stockholder approval, up to 10,000,000 shares of preferred stock in one or more series with rights, obligations, and preferences determined by the Board of Directors;

• No right of stockholders to call special meetings of stockholders;

• No right of stockholders to act by written consent;

• Certain advance notice procedures for nominating candidates for election to the Board of Directors; and

• No right to cumulative voting.

In addition, our restated certificate of incorporation requires a 66 2/3% vote of stockholders to:

• Alter or amend our bylaws;

• Remove a director without cause; or

• Alter, amend, or repeal certain provisions of our restated certificate of incorporation.

We are also subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, and the application of Section 203 could delay or prevent an acquisition of PetSmart.

I took a position in Whole Foods (NASDAQ:WFM) yesterday as I view the company as a market leader with pricing power and easily visible earnings growth. 

Traditional "growth" investors are out of the stock as same-store-sales growth has slowed, but the "value" investors are still waiting for a lower P/E. 

If WFM executes well, it will get 10% earnings growth from the store footprint expanding from 365 to 500 stores over the next three years, with  approximately 5% additional growth coming from improved same-store sales. So, if management can execute and meet the lowered expectations, earnings should grow at about a 15% clip. This should result in bringing the P/E down, making the stock more attractive to "value" investors seeking cheap stocks. Meanwhile, growth investors will appreciate improved earnings momentum which should help boost the P/E. I consider this a longer-term position with a fairly balanced risk/reward profile.

Finally, I am looking into National Oilwell Varco (NYSE:NOV), as the company has spun off its low margin distribution business. Investors are expecting margin expansion to drive a higher growth rate and P/E multiple. I just don't see it. Orders in NOV's largest division declined 30% in 1Q, and margins are declining in all four business segments.


Note: Values do not sum to total because of intersegment sales & eliminations.

In addition, the business is driven by demand for new rig builds and capital expenditures of Exploration & Development (E&P) companies, and both appear to be peaking. 

I love the company's business and market position, but after five years of 0% interest rates and excellent execution by NOV, this is what it looks like when end market demand begins to roll over. 

I'm going to stay on the sidelines on this one.



Twitter: @Honest_T

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
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Position in WFM.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Ringing the Register on PetSmart Seems Smart
Tom Clancy gives his thoughts on three stocks, including PetSmart, which is seeing interest from activist investors.
Tom Clancy    

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

I am selling out of my PetSmart (NASDAQ:PETM) position this morning as shorts cover on the news of shareholder activism.

JANA Partners took a 9.9% stake in the company, but PetSmart has a poison pill that severely limits activists' ability to do anything without the Board. 

Here are some relevant notes from PetSmart's 10-K:

We have implemented some anti-takeover provisions that may prevent or delay an acquisition of us that may not be beneficial to our stockholders.

Our restated certificate of incorporation, as amended, and bylaws include provisions that may delay, defer or prevent a change in management or control that our stockholders may not believe is in their best interests. These provisions include:

• The ability of our Board of Directors to issue, without stockholder approval, up to 10,000,000 shares of preferred stock in one or more series with rights, obligations, and preferences determined by the Board of Directors;

• No right of stockholders to call special meetings of stockholders;

• No right of stockholders to act by written consent;

• Certain advance notice procedures for nominating candidates for election to the Board of Directors; and

• No right to cumulative voting.

In addition, our restated certificate of incorporation requires a 66 2/3% vote of stockholders to:

• Alter or amend our bylaws;

• Remove a director without cause; or

• Alter, amend, or repeal certain provisions of our restated certificate of incorporation.

We are also subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, and the application of Section 203 could delay or prevent an acquisition of PetSmart.

I took a position in Whole Foods (NASDAQ:WFM) yesterday as I view the company as a market leader with pricing power and easily visible earnings growth. 

Traditional "growth" investors are out of the stock as same-store-sales growth has slowed, but the "value" investors are still waiting for a lower P/E. 

If WFM executes well, it will get 10% earnings growth from the store footprint expanding from 365 to 500 stores over the next three years, with  approximately 5% additional growth coming from improved same-store sales. So, if management can execute and meet the lowered expectations, earnings should grow at about a 15% clip. This should result in bringing the P/E down, making the stock more attractive to "value" investors seeking cheap stocks. Meanwhile, growth investors will appreciate improved earnings momentum which should help boost the P/E. I consider this a longer-term position with a fairly balanced risk/reward profile.

Finally, I am looking into National Oilwell Varco (NYSE:NOV), as the company has spun off its low margin distribution business. Investors are expecting margin expansion to drive a higher growth rate and P/E multiple. I just don't see it. Orders in NOV's largest division declined 30% in 1Q, and margins are declining in all four business segments.


Note: Values do not sum to total because of intersegment sales & eliminations.

In addition, the business is driven by demand for new rig builds and capital expenditures of Exploration & Development (E&P) companies, and both appear to be peaking. 

I love the company's business and market position, but after five years of 0% interest rates and excellent execution by NOV, this is what it looks like when end market demand begins to roll over. 

I'm going to stay on the sidelines on this one.



Twitter: @Honest_T

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
< Previous
  • 1
Next >
Position in WFM.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Daily Recap
Ringing the Register on PetSmart Seems Smart
Tom Clancy gives his thoughts on three stocks, including PetSmart, which is seeing interest from activist investors.
Tom Clancy    

This article was originally posted on the Buzz & Banter where subscribers can follow over 30 professional traders as they share their ideas in real time. Want access to the Buzz plus unlimited market commentary? Click here to learn more about MVPRO+.

I am selling out of my PetSmart (NASDAQ:PETM) position this morning as shorts cover on the news of shareholder activism.

JANA Partners took a 9.9% stake in the company, but PetSmart has a poison pill that severely limits activists' ability to do anything without the Board. 

Here are some relevant notes from PetSmart's 10-K:

We have implemented some anti-takeover provisions that may prevent or delay an acquisition of us that may not be beneficial to our stockholders.

Our restated certificate of incorporation, as amended, and bylaws include provisions that may delay, defer or prevent a change in management or control that our stockholders may not believe is in their best interests. These provisions include:

• The ability of our Board of Directors to issue, without stockholder approval, up to 10,000,000 shares of preferred stock in one or more series with rights, obligations, and preferences determined by the Board of Directors;

• No right of stockholders to call special meetings of stockholders;

• No right of stockholders to act by written consent;

• Certain advance notice procedures for nominating candidates for election to the Board of Directors; and

• No right to cumulative voting.

In addition, our restated certificate of incorporation requires a 66 2/3% vote of stockholders to:

• Alter or amend our bylaws;

• Remove a director without cause; or

• Alter, amend, or repeal certain provisions of our restated certificate of incorporation.

We are also subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, and the application of Section 203 could delay or prevent an acquisition of PetSmart.

I took a position in Whole Foods (NASDAQ:WFM) yesterday as I view the company as a market leader with pricing power and easily visible earnings growth. 

Traditional "growth" investors are out of the stock as same-store-sales growth has slowed, but the "value" investors are still waiting for a lower P/E. 

If WFM executes well, it will get 10% earnings growth from the store footprint expanding from 365 to 500 stores over the next three years, with  approximately 5% additional growth coming from improved same-store sales. So, if management can execute and meet the lowered expectations, earnings should grow at about a 15% clip. This should result in bringing the P/E down, making the stock more attractive to "value" investors seeking cheap stocks. Meanwhile, growth investors will appreciate improved earnings momentum which should help boost the P/E. I consider this a longer-term position with a fairly balanced risk/reward profile.

Finally, I am looking into National Oilwell Varco (NYSE:NOV), as the company has spun off its low margin distribution business. Investors are expecting margin expansion to drive a higher growth rate and P/E multiple. I just don't see it. Orders in NOV's largest division declined 30% in 1Q, and margins are declining in all four business segments.


Note: Values do not sum to total because of intersegment sales & eliminations.

In addition, the business is driven by demand for new rig builds and capital expenditures of Exploration & Development (E&P) companies, and both appear to be peaking. 

I love the company's business and market position, but after five years of 0% interest rates and excellent execution by NOV, this is what it looks like when end market demand begins to roll over. 

I'm going to stay on the sidelines on this one.



Twitter: @Honest_T

Follow the markets all day every day with a FREE 14 day trial to Buzz & Banter. Over 30 professional traders share their ideas in real-time. Learn more.
< Previous
  • 1
Next >
Position in WFM.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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