Wednesday, April 9, 2014
A 6th grade class from Fargo, North Dakota, recently trounced the competitors in a stock picking competition that included groups from major universities. The students' portfolio included many companies that were familiar to them, including Netflix, Starbucks, and Under Armour. The 6th graders' portfolio had a return of 22 percent since creation, outpacing the McIntire Investment Institute's 18.5 percent return. Maybe these students will be the future Warren Buffett or Peter Lynch. Then again, as one student said, "I think it was sheer luck."
Monday, April 7, 2014
Sears Holdings spun off Lands' End today, although the new stock was greeted poorly by the market. In early trading, the price of Lands' End stock dropped about 7 percent, while Sears' stock increased about 1.5 percent. Sears had originally purchased Lands' End for about $2 billion in 2002. The move is designed to allow Sears to focus on its core operations. Before the split, Lands' End paid a dividend of $500 million to Sears and the hedge fund run by Eddie Lampert, CEO of Sears, will retain about 49 percent of the stock in Lands' End, about the same percentage it has in Sears Holdings. Although you know that diversification is not a good reason for a merger, the diversification benefit of this particular spin off may be even greater than normal. Sears lost about $1.4 billion last year and there is speculation that the company may be forced into bankruptcy. In the event that Sears does file bankruptcy, the assets of Lands' End will no longer be included in the assets of Sears Holdings.
Wednesday, April 2, 2014
At the end of 2013, nonfinancial U.S. corporations held $1.64 trillion in cash, a 12 percent increase from 2012. Apple's cash hoard reached $158.8 billion, or about 9.7 percent of all corporate cash assets. Additionally, U.S. based multinationals have $1.95 trillion outside of the country. Much of the increase in international cash balances was driven by Microsoft, Apple, and IBM.
Sunday, March 30, 2014
Treasury & Risk has announced its annual Alexander Hamilton Awards, named after the first United States Secretary of the Treasury. The awards are given to companies that best improve working capital performance. For example, CoreLogic received the award for streamlining tax payments and improving the management of its cash balance. General Motors also received accolades for better pooling its cash balances. Honeywell's treasury department's award was for better financing subsidiaries in China. To listen to this year's winners describe their projects, you can follow this link to Treasury & Risk's webcast.
Google shareholders of record as of March 27 will be the recipients of a 2-for-1 stock split effective April 3rd. So, on April 3rd, we would expect that Google's stock price will drop by one-half as the number of shares outstanding doubles. What makes this stock split unusual is that instead of simply doubling the number of shares held by each shareholder, Google is issuing non-voting Class C stock that will be paid to shareholders. Google currently has dual voting shares of stock. The Class B shares, held by founders Larry Page and Sergey Brin, have 10 votes each and control 56 percent of the votes, while Class A shares have 1 vote each. There are two unusual concessions with this stock split that have arisen because of a shareholder lawsuit. First, Page and Brin would have to sell an equal number of Class B shares if they sell any of their Class C shares. Secondly, Google must reimburse shareholders if the price of the Class C shares diverges from the Class A shares during the first year. Often, dual class shares sell at different prices, with the difference in the share prices representing the value of a vote.
Thursday, March 13, 2014
In good news for future finance professionals, a recent survey indicates that companies are becoming more proactive about training and retaining finance employees. Forty-five percent of the companies surveyed indicate that they are planning to make changes in training and development programs for the finance area. And 36 percent of companies plan to offer career path guidance from entry-level positions to management positions. Rotational assignments, in which employees move from treasury to operational duties, are increasing as well. A rotational system allows employees to enhance their career outside of the treasury department and gives a more holistic view of the company.
Monday, March 10, 2014
Chiquita and Fyffes announced today that the companies plan to merge. Chiquita, which sells bananas primarily in the U.S., and Fyffes, which sells primarily in Europe, would control about 14 percent of world banana sales. The combined company will have annual revenues of $5 billion. While the companies feel that the ChiquitaFyffes will be the top banana, shareholders went bananas too. Chiquita shares jumped up about 10 percent, while Fyffes shares shot up about 40 percent. Although Chiquita has sales of $3 billion compared to Fyffes' €1.1 billion ($1.53 billion), Fyffes shareholders will own 49.3 percent of the combined company. The merger is expected to save ChiquitaFyffes about $40 million per year in pretax operating expenses.