11/28/07

Economics

Politics

Domestic

International War Against Radical Islam

In case you didn’t see this. The latest on a possible attack on the US:

http://www.washingtontimes.com/apps/pbcs.dll/article?AID=/20071126/NATION/111260034/1001

The Market

Technical

Fundamental

Once again the decline (Monday) and bounce (Tuesday) looked like a bottom; but once again, volume was not impressive--so there is likely more testing to the downside that needs to be done. That said, I am very encouraged by the $7.5 billion Abu Dhabi investment in Citigroup because (1) it is yet another clarifying development in the resolution of the sub prime mess and (2) it suggests that foreigners are not nearly as pessimistic about US stock values as US investors are. As such I think it means that the downside risk to equity prices continues to lessen.

That doesn’t mean that there is no downside risk--there will undoubtedly be casualties (bankruptcies) before the sub prime turmoil is over and there remains a decent probability of a recession (though I still think that it won’t happen), So caution remains a key part of our strategy along with close attention to our Price Disciplines including the gradual deployment of our cash reserves. But to repeat myself, I do think that there is less risk to the financial system today than there was yesterday.

Continuing our focus on one of the themes for stocks that we want to be buying (in this case, strong consumer oriented, relative recession proof companies), Sysco Corp distributes fresh, frozen and specialty meats, seafood, poultry, fruits and vegetables, bakery products, canned and dry foods, dairy foods, beverages, kitchen and tabletop equipment, paper and disposable products, sanitation items and hotel operating supplies to more than 400,000 restaurants, healthcare and educational facilities, lodging establishments and other food service customers.

SYY is the largest distributor of food and related products to the foodservice industry in the US and has approximately a 15% market share. Historically the company has aggressively expanded its business geographically through both acquisition and internal growth. In doing so it achieved an 11-15% growth in earnings and dividends over the last 10 years. Sysco should be able to sustain that record as it:

(1) continues to expand geographically,

(2) invests in major regional distributions centers which will enhance the efficiency of its warehousing and delivery process,

(3) expands a new business development program which provides a comprehensive analysis of a restaurant’s business that is designed to assist them achieve operational excellence,

(4) leverages its sales by centralizing procurement allowing it to purchase in larger quantities and price more competitively.

EPS: 2006 $1.36, 2007 $1.60, 2008 $1.80; DVD: $.72 YLD 2.3%

http://finance.yahoo.com/q?s=SYY

Subscriber Alert

This morning the Dividend Growth Portfolio will purchase an additional 20% of a position in Sysco Corp (SYY-$32); and the Aggressive Growth Portfolio will purchase additional 10% positions in Nordstrom (JWN-$34) and Reliance Steel (RS-$48).

News on Stocks in Our Portfolios

Brief comments from the CEO of Donaldson (Aggressive Growth Portfolio):

http://www.seekingalpha.com/article/55542-donaldson-co-shows-housing-slump-isn-t-everything

More Cash in Investors’ Hands

Phillips Electronics is buying Genlyte Group for $2.7 billion in cash.

Sears Holdings is offering to buy Restoration Hardware for $267 million in cash.