Unstructured Finance

Auto stocks end lower

The BSE Auto Index fell 1.4 percent and was the top sectoral loser, with stocks like Hero Honda and Tata Motors slipping.

Hero Honda shed nearly 3 percent after it posted a 1.6-percent drop in quarterly net profit. JPMorgan cut its share price target for the stock.

Tata Motors ended down 2.2 percent while Ashok Leyland ended down 1.5 percent.

M&M was among stocks that closed in the green, closing 2.7 percent higher.

Would you take advantage of this fall and invest in these counters?

Deals wrap: A successor for Buffett?

A fairly unheralded 44-year-old Chinese-American hedge fund manager, with a strong background as a human rights activist, has become a leading candidate to replace Warren Buffett, should he retire as founder and CEO of the $100-billion Berkshire Hathaway fund, according to the Wall Street Journal.

Li Lu, who was a student leader during the 1989 Tiananmen Square protests in Beijing, is the first person to be identified to potentially replace the soon to be 80-year-old Buffett, in what the WSJ story said is “among the most high-profile succession stories in modern corporate history.”

Buffett told the WSJ his retirement plans are not imminent and his job would likely be split after he leaves the company into separate CEO and investing functions. The WSJ story revealed David Sokol, the current chairman of Berkshire unit MidAmerican Energy Holdings, is considered the top contender for Buffett’s CEO role, while Li would potentially serve as one of Berkshire’s top fund managers.

Check Out Line: Reading the earnings tea leaves

beam1Check out the latest batch of quarterly earnings to parse in the consumer world.

Fortune Brands and Newell Rubbermaid both posted a stronger-than-expected quarterly profit and raised their full-year forecasts despite talk of “headwinds” in the second half of the year by the former and a “lackluster economy” by the latter.

Consumer goods maker Fortune Brands said its results were helped by double-digit sales growth for its home and security products. The maker of Jim Beam bourbon, Titleist golf balls and Moen faucets cited headwinds for the rest of the year higher but  still raised its profit outlook.

“We anticipate the back half of the year will be impacted by certain headwinds we’ve previously discussed, including higher costs for raw materials and transportation, the stronger U.S. dollar, annualizing cost savings and increasingly challenging comparisons to last year’s improving results,” Chief Executive Bruce Carbonari said in a statement.

Banking index gains

The BSE Banking index rose nearly 1 percent on Thursday as banks shrugged off rising trend in rates and climbed on hopes robust economic growth will boost demand for loans.

Federal Bank shares gained 2.6 percent and ended as the top gainer in the index, followed by Bank of Baroda which gained 2.5 percent.

Shares in ICICI, India’s top private sector lender, ended nearly 2 percent higher.

Deals wrap: VW revving up for shopping spree?

German automaker Volkswagen has revealed it has amassed a $20-billion war chest it intends to use to finance its ambitious Strategy 2018, VW finance chief Hans Dieter Poetsch told Reuters.

Analysts expect the majority of VW’s cash reserve to be used to bid for the 70 percent of German truckmaker MAN it does not already own and to possibly buy the Porsche AG sports car business and Austria’s Porsche Holding. Even with those three purchases, VW would still have money left over.

Bernstein analyst Max Warburton told Reuters the $22.9 billion cash pile Poetsch claimed the company has accrued is “a ridiculous level of liquidity” unless VW aimed to top up its underfunded pensions or pursue M&A plans.

What’s a nurdle? Well, Colgate and Glaxo are sparring over the word

nurdle1To paraphrase William Shakespeare, would a nurdle by any other name still be a nurdle? 

For those who don’t know, a nurdle — a wave-like gob of toothpaste applied on a toothbrush —  is at the center of a trademark lawsuit filed by consumer product company Colgate-Palmolive against rival GlaxoSmithKline.

Colgate sued Glaxo, which owns the Aquafresh brand, seeking a court order that its packaging for Colgate toothpaste does not infringe trademarks held by Glaxo, which had filed a trademark application for the nurdle design.

Check Out Line: Consumer shopping behavior all over the place

USA/Check out the mixed picture of consumer buying habits revealed by today’s slew of earnings reports:

Judging from quarterly profit reports this morning, U.S. consumers are cutting back on toothpaste buys, making fewer visits to doctors, dining at IHOP and Applebee’s less often, eating fewer Froot Loops and sipping less Dr. Pepper. But on the other hand, they are shopping more at Radio Shack and buying more make-up from Avon.

On Thursday, Rite Aid said same-store sales fell 1.1 percent in July, with front end sales down. (That was the 14th straight month of declines–talk about a cold streak.) A day earlier CVS’ CEO said a lot of U.S. consumers are paying fewer visits to their doctors and the chain lowered its sales forecast for the year.

A painful lesson in diversification

As if RAB Special Situations’ woes weren’t enough already (investing in Northern Rock before its collapse, putting a high percentage into illiquid assets, 70 percent loss in 2008, locking up investors), the company told me yesterday of more bad news.

Explorer Falkland Oil and Gas, whose shares more than halved on July 12 when it revealed it hadn’t found any oil at the part-owned Toroa well, accounted for an amazing 24 percent of Special Situations’ portfolio before the fall (and presumably rather less now).

Of course, concentrated bets are great if they work (and would go some way to making back the losses suffered during the credit crisis).

Morning line-up: Reds, rising suns and prudish GS

News and views on the funds industry from Reuters and elsewhere:

RTR1SGF8Communist investors wanted – FT

SLI makes Japan debut – Reuters

No Sh**: Goldman bans potty-mouth emails – WSJ

Short the banks – Reuters

Are the replicants shining brightly? – ETF Database