The ratchet continues to turn a notch on Bank of America CEO, Ken Lewis.  According to an analysis by Elinor Comley of Reuters,

The government may now add to the pressure from shareholders, analysts said. The sudden departure of Wagoner after nine years in the top job at GM signals the Obama administration is looking for management changes at bailed-out companies.

“His longevity in the job is probably very much in question,” said Keith Wirtz, chief investment officer of Fifth Third Asset Management and a former CIO at a Bank of America subsidiary. Fifth Third holds shares in the bank.

The bank disagreed with the assessment. “We do not see the parallel with the U.S. auto industry,” said a Bank of America spokesman, noting that since 1991 the bank has been profitable in every quarter except one, and made a $4 billion profit in 2008.

Still, shareholders say Lewis is in a precarious situation, citing both the government bailout as well as the fourth-quarter losses at Merrill, which suggest Bank of America did not perform adequate due diligence.

Lewis’ time as CEO of Bank of America may finally be coming to an end.  As the pressure continues to grow, Lewis and the board will find it more and more difficult to justify his position as CEO.  Keep a close eye on B of A.

For more:

The Plum Line

The Washington Post

When we recently spoke with Adrienne Tennant of Friedman,Billings, Ramsey for our Specialty Retail Report she identified one company as her top pick;

Mrs. Tennant: I liked Hot Topic (HOTT) throughout the back half of last year and  into this year, and it is still my top pick for 2009, despite its excessive  valuation. You have to have something that kids or people, or whoever the target  market is, would want to pay full price for. For Hot Topic thus far, it’s been a  connection, which was either one they locked into or it was by design, with this  “Twilight” movie phenomenon that came out in November. It is based on a four- book series, and they have not only taken that “Twilight,” target market, but  they have taken other categories of products around that target customer and  they have merchandised this store not only to capture the customer for  “Twilight”, but also to continue to have the customer come into the store for  all these other things. In the recession of 2001, post that recession, we saw  the teen kid going a bit darker, going for something a bit off the beaten path,  and that fits in nicely with the Hot Topic theme. So I do like that one. 

Once again the younger demographic seems to be pushing this sector and Hot Topic is leading the way

The Mitchell Group is a portfolio management firm that invests specifically on the energy sector. When we spoke with the company’s President and CIO Rodney Mitchell, he told us about some of the problems that might be coming up down the road for this space:

Mr. Mitchell: The immediate challenge is natural gas supply in the US. I’ve already talked about that. Longer term, we are facing a worldwide problem where companies will not be able to maintain their production of crude oil. For a while, that will be covered up by natural gas liquids, but that only lasts a reasonably short period of time. After that it’s going to be a major problem for the world. The world is using a higher percentage of each barrel of oil each year for transportation fuels. That is the highest and best use of crude. Back in the late 1970s or early 1980s, the US and Western Europe dramatically reduced stationary use of crude oil, that is using crude oil for boiler fuel. The rest of the world will do that as we move along here, and more and more percentage will go toward transportation. Once we do that migration, where you cannibalize your stationary uses to put it into the transportation field, once we complete that, then we’re going to see much higher oil prices. Maybe Matt Simmons is going to be right then.

For the latest edition of our Investing Strategies report, including a full interview with Mr. Mitchell, and a variety of other portfolio managers, click here.  

Joanne Lublin of the Wall Street Journal wrote a piece examining the growing acceptance of the need for splitting the corprate chairman and CEO positions.  Lublin discusses a recent report,

… prepared by the Millstein Center for Corporate Governance and Performance at Yale University’s School of Management, the Chairmen’s Forum proposes that companies appoint a separate chairman after an incumbent CEO-chairman leaves — or explain why not to shareholders. The group is considering asking the New York Stock Exchange and Nasdaq to adopt listing rules that would require separate chairmen.

More U.S. companies are dividing the roles, but the trend is spreading slowly because many CEOs resist sharing power. About 37% of companies in the Standard & Poor’s 500-stock index have separate chairmen and CEOs, up from 22% in 2002, according to the Corporate Library, a research firm in Portland, Maine.

I would expect this trend will grow as the economy comes under increasing government regulation.  Check out the story.

General Motors’ board and shareholders have for too long time failed to get Rick Wagoner to resign as its CEO and chairman but the Obama Administration appears to have had the final say.  Just prior to the Obama Administration’s newest announcement on what it intends to do with the American Automobile Industry planned for Monday news has come out that Wagoner will resign.  According to a story by Justin Hyde and Tim Higgins of the Detroit Free Press,

President Barack Obama’s rescue plan for Detroit automakers will be unveiled Monday, but one condition became clear today: the resignation of General Motors Corp. Chairman and Chief Executive Rick Wagoner.

As a condition for additional government aid to GM, the Obama administration asked Wagoner to step aside, which Wagoner agreed to do today, people familiar with the plan said. Wagoner’s move, effective immediately, ends a 31-year career with GM.

…. It was not clear who would replace Wagoner; chief operating officer Fritz Henderson would appear to be the most likely candidate. GM declined to comment.

We are certain many auto analysts will assert that the CEO change right now is a mistake.  I fail to agree.  While it is very late in the game for this change, it is about time.  I have been calling for resignation for a long time.  Wagoner has shown throughout his career a keen understanding of the overall auto industry but he has failed miserably over the last five years to turn GM in a proper direction and deserves to leave.  Let’s all hope the White House has a handle on what they might be able to do to save the industry and its hundreds of thousands and even possibly millions of auto-related jobs.

Stay tuned as we continue to follow this story and the travails of the American auto industry.

For more:

NY Times

City News

Mercury News

Time.com 

Globe and Mail  (3/30)

Wall Street Journal 3/30

Contrary to earlier comments by Ken Lewis in my blog below Lizzie O’leary and Christine Harper of Bloomberg this afternoon reported,

he (Lewis ) doesn’t advocate a legal division of commercial and investment banking and that his comments about separating the two referred to rhetoric and public perception.

Lewis continues to stumble even when he is trying to improve his image with the public.  What’s next on his agenda?

Henry Blodget wrote a piece for Clusterstock today that questions (as I have been doing for quite some time) why Ken Lewis continues to remain as the CEO of Bank of America.  Blodget stated,

Ken Lewis may be an excellent banker.  He may be the pillar of his community.  He may be a kind, considerate, and fair boss who is admired by his troops.  He may, generally, be a real asset to his company.

But Ken Lewis just screwed up.  Massively.

Ken Lewis screwed up so massively that he single-handedly demolished at least half of the value his shareholders’ spent decades accumulating–through a knee-jerk decision to buy the sinking super-tanker known as Merrill Lynch.  Six months ago, in one tense weekend, Ken Lewis let himself get duped into thinking that if he didn’t bid now and bid high for an imploding Merrill Lynch, he’d lose the prize he’d had his eyes on for years.

Lewis continues to have the “confidence” of his board which seems to defy reality.  He continues to try and redeem himself in the eyes of the public.  Today, before meeting with President Obama, he was quoted by Bloomberg making what appears to be a valuable suggestion.  Lewis stated,

… the U.S. should consider separating commercial lenders from investment banking activities.

While he is probably correct his suggestion is not enough to give him a pass on the damaged he overseen to BofA.  Stay tuned.

In a recent interview with Thomas A. Filandro of Susquehanna Financial he discussed how Buckle has bucked the trends in Speciality Retail:

Mr. Filandro: Buckle is an excellent example of not being under-merchandised. BKE has successfully expanded its market penetration, delivering 18 consecutive months of positive same-store sales, as well as higher pricing, lower markdowns and improved full-priced selling. Buckle’s offerings, which are both branded and private label, are highly differentiated from the majority of specialty retailers, which have become somewhat homogenous. In this environment, outside of necessities, consumers are only willing to pay up for product that they are emotionally connected to. Since apparel differs from electronics that may provide greater functionality, it’s all about emotional connectivity in this sector.

The complete 39-page Wall Street Transcript Specialty Retail report contains 6 analysts and 2 sector firms and can be read here.

While casual dining may be on the decline, according to Steven West of Stifel, Nicolaus & Co., “we continue to eat out; we are just eating out at cheaper options…” As a result of this, West’s top pick in this space is Burger King (BKC). Here’s why:

Mr. West: They are where McDonald’s was a few years ago. They’ve done most of the McDonald’s playbook, if you will, such as the rationalization, although they didn’t have to re-franchise because they were so heavily franchised already. Now they’re going to the remodeling phase. Pushing forward, I think the focus would be on remodeling their US stores. Burger King’s average store age is over 20 years. One of the big drivers of McDonald’s sales over the last few years has been because their stores are in good shape again. Healthy looking stores attract consumers. That’s where Burger King needs to get. So you will see them really focus on remodeling, which should continue to drive incremental sales. They are seeing about a 15% to 20% boost to sales on their remodeled stores.

For the complete restaurants report, including a roundtable discussion of the sector and more stock picks, click here.  

Sinclair Stewart wrote an irreverent piece for Toronto’s Globe and Mail entitled, Let us Prey, Wall Street’s recklessness has toppled the most exalted occupation in the land.  Get Ready CEOs for a new job description.  According to Stewart the celebrity CEO may be a dying breed.  Judge for yourself, read the piece.