Thursday, February 14, 2008

Vince Farrell of Scotsman Capital-Verbatim

From: vince farrell
Sent: Thursday, February 14, 2008 12:14 PM

Almost as important as pitchers and catchers reporting to training camp today (do Clemens and Petite report? They may have misremembered the date) are the unemployment claims. The weekly number fell -9,000 to 348,000, and the four week moving average moved up to 347,250. This is the third week in a row that the four week average has risen, but it's still below the danger point. Ed Hyman and Nancy Lazar at ISI feel that a 400,000 average for a quarter would be more or less equal to 0% GDP. The last two recessions, 2001 and 1990-91, saw the four week average a good bit above 400,000 . This indicator says no recession yet.
Another piece of good news was the surprising decline in the trade deficit to $58.8 billion for December, down from $63.1 for November. Exports were up nicely by +1.5% (weak dollar makes our goods cheaper overseas) and imports narrowed -1.1%. Q4 GDP originally reported up a meager +.6% will likely be revised up.
Comcast is one of our holdings at Scotsman Capital. The company had an excellent quarter. Revenue was up 12% and operating cash flow 13%. The company announced a dividend and a new $7 billion share repurchase. They also predicted operating cash flow growth for 2008 of at least 8-10%, and free cash flow growth of over 20%. If the buyback was done quickly, these metrics would increase. The stock trades at roughly 8X EBITDA (earnings before interest, taxes, depreciation, and amortization.) Call it 8X cash flow. We own a company that trades at or below its growth rate. A value buyers dream. Also, there is a worthwhile article in todays WSJ detailing a new technology called Docsis 3.0. I have no clue what that stands for, but it will allow for much faster speeds and take away the temporary advantage Verizon has with its FIOS service. We feel very good about the stocks prospects.
Should have known. The oddsmakers were using the modified binomial expansion technique when they installed the Patriots as Superbowl favorites. When will they learn!

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