Synovus Fin. Corp. (SNV)

SSG and PERT A (11-12-2005) | Google “stocks: snv” | Company Website

We took an initial position today in SNV. It has a projected average return of 18.7% and a RQR quality rating of 70.1. The director of investor relations spoke at the Better Investing National Conference in Atlanta. Two key points from the presentation were that SNV is well managed and the price of banks have been driven down based on concern about bank profitability due to the increase in long term interest rates. SNV has maintained very solid profitability with an return on assets (a key metric for banks) of about 1.9%. Return on equity has been steady aroud 18%. See Morningstar profitability summary below.

Business Description. Synovus Financial Corp., a holding company, provides various financial services. It operates in two segments, Financial Services and Transaction Processing Services (TPS).

The Financial Services segment provides commercial banking services, including commercial, financial, agricultural, and real estate loans; retail banking services, including accepting demand and savings deposits; individual, consumer, installment, and mortgage loans; safe deposit services; leasing services; automated banking and fund transfer services; and bank credit card services. It also provides portfolio management services; securities brokerage; trust services; insurance agency services; financial planning services; asset management services; and investment advisory services.

The TPS segment primarily provides electronic payment processing services in the United States, Canada, Mexico, Honduras, Puerto Rico, and Europe. It also provides back-end processing services to support merchant processing and offers other products and services to support its processing services. In addition, the TPS segment provides commercial printing and related services; programming support and assistance with the conversion of card portfolios to TS2; recovery collections, bankruptcy process and legal account management, and skip tracing services; Internet, Intranet, and client/server software solutions for commercial card management programs; targeted loyalty consulting, as well as travel, gift card, and reward programs; gift card processing services to Japanese clients; prepaid card solutions; and sells and leases computer related equipment associated with its electronic payment processing services. As of April 26, 2005, Synovus operated 41 banks and other Synovus’ offices in Georgia, Alabama, South Carolina, Florida, and Tennessee. The company was formed in 1888 and was formerly known as CB&T Bancshares, Inc. It changed its name to Synovus Financial Corp. in 1989. Synovus is headquartered in Columbus, Georgia.

Occidental Petroleum (OXY)

SSG and PERT A (11-17-2005) | Google “stocks: oxy” | Company Website

We took an initial position today in OXY (and increased our existing position in Chevron). This is our second energy stock. For an assessment of OXY, see the October 15 report by McDep Associates. OXY has the lowest ratio of market capitalization and debt to present value (“McDep” ratio) making it the best value among the medium and large cap independent oil and gas producers. Value Line rates its financial strength A+. OXY pays a 1.5% dividend.

Business Description. Occidental Petroleum Corporation primarily engages in the exploration for, development, production, and marketing of crude oil and natural gas in the United States, Latin America, and Middle East. As of December 31, 2004, the company had proved reserves of 2,489 million barrels of oil and gas equivalent. Occidental Petroleum also manufactures and markets basic chemicals, such as chlorine, caustic soda, potassium chemicals, and their derivatives; vinyls, including polyvinyl chloride (PVC), vinyl chloride monomer, and ethylene dichloride; and performance chemicals, including chlorinated isocyanurates, resorcinol, antimony oxide, mercaptans, and sodium silicates. PVC resins are used in piping, electrical insulation, external construction materials, flooring, medical and automotive products, and packaging. The company markets its chemical products to industrial users or distributors through its own sales force. Occidental Petroleum is headquartered in Los Angels, California.

Sold O’Reilly Automotive

Reluctantly, we sold ORLY and redeployed the cash. It has been a good performer but we needed to reduce the number of stocks in the portfolio (moving torward a total of 20 stocks). Although ORLY remains a quality company, the project average return dropped to 7.5%. We have replaced it with a stock of comparable quality and higher return.
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Sold Lincare Holdings

We sold LNCR today and redeployed the cash. LNCR’s revenue and earnings growth has declined over the past two years. See PERT A graph (above). Lower federal reimbursement for supplemental oxygen has cut into its margins. We used the above stock selection guide in making this decision.
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Sold Fiserv Inc.

We sold FISV today and redeployed the cash. FISV has had three quarters of declining revenue and earnings growth. See PERT A graph (above). Also, FISV’s market overlaps with two other portfolio holdings — JKHY and SNV. We used the above stock selection guide in making this decision.
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Sold Johnson Controls, Inc.

We sold JCI today and redeployed the cash. Although a still quality stock, revenue growth has been slowing and the project average return dropped to 6.5%. We used the above stock selection guide in making this decision.
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