The S&A Digest: Slamming Cayne

Slamming Cayne... Want a job?... Rob Fannon is up... Citigroup is down... Verizon a ten-bagger...

Editor's note: It's issue time for Porter, which means Goldsmith is at the helm...

 Looking for a new job? Whitney Tilson sent this want ad from an unspecified hedge fund:

"Top performing hedge fund seeks to hire analysts who will work remotely from anywhere in the world except the NYC area.

"We are a hedge fund whose percentage performance places us among the very best performing hedge funds in the US. We subscribe completely to the Warren Buffett-style of investing, which means we believe in reading very extensively, thinking deeply, and making a large number of field research and scuttlebutt research phone calls as a way to determine which businesses have a sustainable competitive advantage.

"We seek to hire analysts that will work for us remotely. We expect each analyst to do very in-depth research on a small number of companies that we assign to them. We will send the analyst about 2,000 pages of reading material on each company and the analyst will read this material. We will also send the analyst the phone numbers and contact information of about roughly 700 customers, suppliers, industry experts, competitors, former employees and journalists who write about the company. The analyst will call all 700 of these people and interview as many of them as possible to determine the moat and the competitive advantage of the company we are studying."

 These guys probably don't know it, but they're looking for Dan Ferris. I was talking with Ferris last night, and he said this job looks like "fun." You should know that Dan reads five 10-Ks everyday and has a garage full of them (Ferris says of himself, "I practically live in them"). Have any of you tried to read one 10-K?

 Crude oil touched $96 per barrel today.

 James Cayne, CEO of Bear Stearns, upset the wrong people... Today's Wall Street Journal featured a front-page article accusing Cayne of leaving work during the subprime crisis to play bridge and golf. While two Bear hedge funds were crashing, Cayne was allegedly playing in a bridge tournament in Nashville and "smoking pot" in hotel lobby bathrooms. The article also accuses Cayne of repeatedly missing work to play golf (without a cell phone) and worrying more about his vast Cuban cigar collection than Bear's shareholders. This is one of the worst hatchet jobs the Journal has ever published. Investors who lost hundreds of millions in the funds' collapse are going after James Cayne via the press.

 Phase 1 pick Pozen (POZN) gained 5% today after the company reported a $14.8 million profit, compared to a $4.1 million loss last year.

 And more good news for Rob Fannon... Shares of Medical Investor pick McKesson (MCK) soared 13% yesterday after the company announced growth across the board. The drug distributor saw double-digit growth in its flagship wholesale business. McKesson earned $0.82 per share, trouncing analyst estimates of $0.72. The company also improved its earnings outlook for 2008 to $3.37 from $3.32. The good news earned the company a "buy" upgrade from a Citigroup analyst.

Of the 15 stocks in Rob's Medical Investor portfolio, only two are down. His new service has one of the best track records in the business, period. To see what else Rob is recommending, click here...

 S&A Oil Report pick Transocean (RIG) jumped 7% in two days after tripling its earnings to $973 million for the quarter. The offshore drilling giant is fetching $500,000 per day for some of its rigs. The stock is at an all-time high, and readers are up more than 20% in just two and a half months.

 Not all the news is good... Today, an analyst downgraded shares of 12% Letter pick Citigroup (C) to "underperform" and said the bank's dividend may be in danger. Shares dropped more than 6% on the news. Tom Dyson sent an update to his subscribers earlier today.

 New highs: Advisory Board Company (ABCO), Covanta (CVA), EnCana (ECA), Exelon (EXC), streetTRACKS Gold (GLD), Google (GOOG), Harvest Natural Resources (HNR), McDonald's (MCD), McKesson (MCK), Markel (MKL), Microsoft (MSFT), Newmont Mining (NEM), Petrobras (PBR), Sigma-Aldrich (SIAL), Silver Standard Resources (SSRI).

 You obviously indulged over Halloween, because the mailbag was full of praise. Don't worry, we only published one of them. Tell us your thoughts, even if they're good ones... feedback@stansberryresearch.com.

 "I know you can't be 100% right all the time. I have learned that the fundamentalist is often early. So I have been using technicals to enter many of your recomendations. As a result, I am having my best year ever. As of the close today Oct 31, I am up 60% year to date in my End of Day stock trading portfolio. Your research gives me a broad perspective of what's going on in the world. Please continue to be useful! Thank you!!!" – Paid-up subscriber Bill Graves

 "It did not surprise me that Ann Coulter was less than thorough in her analysis of our current political mess, but for her to not grasp the significance of removal of the gold standard, the Federal Reserve, and a fiat monetary system is mind boggling. There are a lot of phony talking heads out there who pretend to be champions of liberty, but fail to criticize the Republican party for their frequent actions that serve to crush liberty and grow an increasingly oppressive government. The one significant bright spot in the Republican party is Ron Paul, and the Republican party consistently ignores or shuns him. The leadership of the Republican party is morally bankrupt. The leadership of the Democratic party is morally bankrupt also. A return to constitutional principals would be nice, and sooner would be a lot nicer than later. Perhaps the mess in DC is getting bad enough now that voters will start to wake up and smell the manure." – Paid-up subscriber Roy

Goldsmith comment: I Know we promised no more Ann Coulter notes, but we just couldn't resist.

 "A ten bagger in VZ? C'mon man, that puts the company at about a $1.4 TRILLION valuation. If every thing goes right with FiOS... then the next $100 billion alone will be a great accomplishment... but extremely long time in coming."

Goldsmith comment: For Verizon to become a ten-bagger, it would have to grow 25.8% a year for the next 10 years. And that doesn't include the dividend yield, which is nearing 4%. For us to have a ten-bagger, the market cap would be less than $1 trillion, not $1.4 trillion. And considering Verizon has grown more than 26% a year since 1997, a ten-bagger doesn't seem that far off.

Regards,

Sean Goldsmith

Baltimore, Maryland

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