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Warren Buffett Stocks: The Oracle of Omaha Sees Something in Avon
Just one month after Coty Inc. got the big kiss-off from Avon Products (NYSE: AVP) following a $10 billion offer for the company, Coty called again – and name-dropped in a gussied up proposal.
On Thursday, privately held Coty came courting Avon once more with a beautified bid of $10.7 billion and the backing of none other than iconic investment guru Warren Buffett.
In a letter to Avon's board, Coty listed Buffett's Berkshire Hathaway (NYSE: BRK.A, BRK.B) as a new equity financing provider, along with German conglomerate Joh A. Benckiser and other anonymous clients of BDT Capital Partners.
Buffett and other financiers helped push up Coty's newest offer from $23.25 a share to $24.75 a share, a 36% premium to Avon's share price before the original offer was publicly disclosed.
Coty has made it quite clear how much it wants Avon, and adding Buffett to sweeten the deal could be what finally works.
"I don't think there's any better way to get Avon's attention than to say, "I've got the smartest investor in the world, with the deepest pockets in the world behind me, listen up,'" Jeff Matthews, author of "Secrets in Plain Sight: Business & Investing Secrets of Warren Buffett," told Bloomberg News.
Buffett's Rare Move
The Buffett move is a rare change for the deal maker who customarily shies away from hostile bids, and who is usually an outright buyer instead of financier.
But Buffett was won over by BDT's founder, Byron D. Trott, Berkshire's favorite banker.
"He understands Berkshire far better than any investment banker with whom we have talked and – it hurts me to say this – earns his fee," Mr. Buffett wrote in his 2003 letter to shareholders.
Buffett's previous financing ventures include helping Mars Inc.'s $23 billion takeover of the Wm. Wrigley Jr. Company in 2008, and providing about $3 billion in equity financing to Dow Chemical Co.'s (NYSE: DOW) $15.4 billion takeover of fellow chemical maker Rohm & Haas.
The Coty letter said the new deal would "provide compelling value to Avon's shareholders" compared with Avon's other option, "a difficult and uncertain multi-year turnaround on a stand-alone basis."
"Given the challenges facing your business, we believe the premium is even higher when considering your potential stock price in the absence of a possible transaction," Coty chairman Bart Becht wrote to Avon.
Avon appeared not to be threatened, and said it would consider the letter in due course.
Facebook App Store Will Boost Popularity, Profit
Is there anything Facebook can't or won't do to keep its massive user base happy?
The social network giant just announced plans for a new Facebook App Store where Facebook friends can purchase games and other applications on its heavily trafficked site.
The new Facebook App Store, which will be formally known as the Facebook App Center, will feature applications for web browsers, and be available via the Apple Inc. (Nasdaq: AAPL) iPhone, Android smartphones, PCs and tablets.
The move will provide a platform for software developers to sell their products on the social site.
With over 900 million users worldwide, the new Facebook App Center opens up an alluring venue for developers and entices the social networking Web site's scores of members to keep coming back for new, current and popular applications.
Facebook's App Store is being launched in the midst of the company's highly anticipated, much-hyped initial public offering, expected on or around May 18.
And the Facebook App Store in not merely in the works, it is set to roll out in the next few weeks.
The Biggest Threats Cisco Systems (Nasdaq: CSCO) Needs to Overcome
There was nothing to scoff at in Cisco Systems Inc.'s (Nasdaq: CSCO) third quarter earnings – but the company's disappointing outlook put Wall Street on alert.
Cisco, the world's leading maker of networking devices that support Internet traffic, reported healthy fiscal third-quarter numbers after the close yesterday (Wednesday). Cisco posted a profit of $2.2 billion, or 40 cents a share for the quarter that ended April 28, up from $1.8 billion or 33 cents a share in the same period a year earlier.
Per-share earnings rose from 42 cents to 48 cents, and revenue jumped 6.6% to $11.59 billion. The company's product segment, its biggest top-line contributor, enjoyed a 5% increase, while its service segment's revenue swelled by 13%.
But the company's outlook fell short of expectations, sending shares sliding lower by more than 8% in after-hours trading to $17.18. And that decline could continue if Cisco doesn't address some key areas of concern.
"While Cisco seems to be making considerable headway on improving gross margins, we expect a number of uncertainties could continue to weigh on the stock," Scott Thompson of FBR Capital told Barron's. Thompson cut his CSCO price target to $20 from $22.50.
Investing in Biotech Stocks: The Latest Buyout Candidate
The biotechnology buyout binge continued this week, driving profits for those investing in biotech stocks.
The sector's latest M&A news picks up a story that began in April, when Human Genome Sciences (Nasdaq: HGSI), the U.S. pioneer of gene-based drug discovery, rebuffed a $2.6 billion bid from Britain's GlaxoSmithKline (NYSE ADR: GSK).
Human Genome argued the unsolicited bid did not reflect the company's inherent value. GSK adamantly insisted its bid, an 81% premium when settled upon on April 18, is full and fair.
More Reasons to Avoid Yahoo (Nasdaq: YHOO) Stock
There's been no shortage of reasons for investors to avoid Yahoo! Inc. (Nasdaq: YHOO) stock this year.
Yahoo, once revered as a web pioneer, has been stunted and dwarfed by those who followed in its footsteps.
The storied Internet content company has been upset by an increasing number of competitors like search engine behemoth Google Inc. (Nasdaq: GOOG) and social networking giant Facebook Inc. (Nasdaq: FB), and been wounded by waning ad sales.
Yahoo also is very late to the game in the battle for the mobile space, currently the biggest area of growth for the industry.
And then there is the question of diminishing revenue, declining earnings and slumping stock price.
Revenue fell by more than a fifth last year. Yahoo's stock price has slipped 17% over the past year, and 50% over the past five.
"Yahoo just can't get its act together," Money Morning tech guru Michael A. Robinson warned in January, naming Yahoo a "tech stock to avoid" in 2012. "While key executives were napping, Google burst on the scene a decade ago and rewrote the rules of web search and advertising. Portals like Yahoo never regained their traction."
As Yahoo's struggles continued, CEO Carol Bartz was recently let go with a phone call in September. In January, former PayPal president Scott Thompson was brought in as Bartz's successor.
And now the latest replacement may soon be replaced himself.
Oil Companies: The Search for Unconventional Sources Goes Into the Arctic
The black gold rush on the roof of the world accelerated on Saturday.
Norway's Statoil ASA (NYSE ADR: STO) signed a massive deal with Russian behemoth Rosneft in a venture that may require more than $100 billion over the next few decades.
Specifically, the company aims to help Rosneft develop untapped oil resources in the Arctic, as Moscow struggles to gain a competitive advantage given declining oil production in Siberia.
It's the third recent oil partnership for Rosneft.
Reuters reports:
"The agreement, signed on Saturday, provided a showcase for president-elect Vladimir Putin, serving out his final days as prime minister before a May 7 inauguration, and Deputy Prime Minister Igor Sechin, in charge of energy and industrial policy.
As a legacy of their time in government, the three deals secure capital and expertise for a push into some of the world's potentially most energy-rich regions."
The deal highlights a number of key issues for both oil companies and Moscow moving forward.
Facebook IPO Roadshow Continues without Retail Investors – and Zuckerberg
Facebook Inc. (Nasdaq: FB) launched its roadshow Monday in New York, with planned stops at several prominent U.S. cities before the trip ends.
Spotted sporting his trademark hoodie, 27-year-old CEO and founder Mark Zuckerberg was present at the heavily attended event in NYC.
But on Tuesday, as hundreds herded into Boston's Four Seasons hotel, Zuckerberg was nowhere to be seen.
"It's too bad Zuckerberg wasn't there. It was kind of disappointing," H. Scott Smith, senior equity analyst at Game Greek Capital, told the Boston Herald.
Natural Gas Industry: How Legal Troubles Could Derail this Company's Export Plans
Over the last month, we've spent a great deal of time discussing the potential for Cheniere Energy (AMEX: LNG) to export liquefied natural gas out of the Sabine Pass in 2014.
The Sabine Pass isn't the only terminal being eyed for natural gas exports. Applications for seven other exporting facilities throughout the U.S. are pending with the Federal Energy Regulatory Commission (FERC).
That includes Virginia-based Dominion Resources (NYSE: D), which wants to export more than one billion cubic feet of natural gas per day through its Cove Point terminal in Maryland.
Just this morning, The Washington Post highlighted the potential of Dominion Resources' Cove Point facility.
"Just off Cove Point on Maryland's Western Shore sits an array of empty docks. Built to accommodate massive tankers bearing natural gas from abroad, the facility saw only five ships pass through in 2011, reports Dominion Resources, the owner. None have come this year. American firms have increased their production of natural gas from unconventional shale formations so much in the past few years that they are running out of places to store it, the price has plummeted and Cove Point's expensive facilities are all but idle.
On the other side of the planet, in Japan, the price of natural gas has soared. An energy-hungry world is coping with the shutdown of Japan's nuclear reactors after last year's Fukushima Daiichi meltdown, which left the country scrambling to find fuel for backup power plants. Japanese companies are investing hundreds of millions of dollars in natural gas projects and have paid 10 times the American price for imports.
The opportunity here is obvious: The United States should export some of its bountiful stocks of natural gas to Japan and other countries with fewer supplies and high demand."
Berkshire’s Annual Meeting: Warren Buffett Talks Stocks and Successors
Billionaire investor Warren Buffett held court this weekend at Berkshire's annual meeting, fielding dozens of pressing questions about the company, investing strategies, and a new CEO.
Some 40,000 gathered to hear what the leader of the storied Berkshire Hathaway (NYSE: BRK A, BRK B) had to say about the state of the company and its fate following Buffett's recent diagnosis with prostate cancer. The Oracle of Omaha triggers such an enthusiastic investing response the event ends up more like a festival than a shareholders' meeting.
Buffett dismissed the health news as a mere non-event, barely touching on the subject.
The investing legend instead focused on the money.
Buffett on Berkshire
Berkshire posted first-quarter earnings Friday after the close that doubled compared to the same period a year ago, fueled by gains in its insurance, manufacturing, service and retail businesses.
The company reported earnings of $3.25 billion for first quarter 2012, translating to $1,966 per Class A share, versus $1.51 billon in the first quarter of 2011.
Operating income came in light at $1,615 a share. Analysts surveyed by Thomas Reuters had forecast $1,780.
The company also posted gains from its derivates holdings – investments that Buffett once referred to as "financial weapons of mass destruction."
Food Prices: Here's the Real Story
The United Nations on Thursday reported food prices eased in April after steadily rising in 2012's first quarter.
However, global soybean price increases remained a top concern at the U.N. Food and Agriculture Organization (FAO).
In a conversation with Reuters, FAO economist and grain analyst Abdolreza Abbassian explained:
"We expect global food prices to remain under downward pressure this year unless there are any unexpected shocks to the supply side, such as unfavorable weather. For such reasons, it is very hard to predict for sure in what direction prices will move.
The only real area that could trigger food price increases would be soybeans which we see in tight supply, then pushing up corn prices as a result."
But Abbassian understates the most important issue in the food markets.
You see, Abbassian implies that food prices remain "somewhat" susceptible to outside volatility in the currency and energy markets.
In fact, this view is focusing on the short-term. It's ignoring the sector's most pressing long-term concerns
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