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Baird & Co. Breakfast Summary…..

July 16th, 2009 Comments off

     Yesterday I was fortunate enough to receive an invite to a breakfast sponsored by Baird & Co., a St. Louis-based investment bank that specializes in the Small and Mid-Cap sector. Good folks that I have known for some time. The breakfast was to feature Paul Purcell, the CEO of Baird, where he was to discuss his insights on the market and what we might expect. I was pleasantly surprised when I showed up and found a table set for only 16!  I was expecting to be part of a group of 50 or more considering the status of the keynote. Another fantastic surprise was seeing Peter Ueberroth seated at the table across from me! While no stranger to controversy, Peter Ueberroth is an amazing businessman with an endless history of success on the resume.

     Another pleasant surprise was that the group that was assembled was very Retail and Apparel centric and represented a number of different segments. After Purcell delivered his opening remarks on the current results of Baird and how they were positioned to deal with the current market, he had two main topics to discuss with the group – the California economy and CIT Group. I’m not going to touch the California topic since I don’t have enough time to table that topic. Regarding CIT, the group seemed to be split on whether the government should provide any type of bailout to CIT. There were the typical positions….the logical approach of letting them fail and the risk-averse position of bailing them out to avoid more serious ramifications. If you’re unfamiliar with CIT, they provide approximately 60% of the available financing for the Retail and Apparel sector. I’m fortunate enough that I don’t have to rely on them to factor invoices or provide any other level of trade credit, however, we do have a high number of competitors in our industry who do rely on them. There are also a large number of retailers who have a broad portfolio of suppliers who also rely on CIT. The risk to both are high. I’ve already been working with a number of our suppliers to secure discounts for early pay since we are in a good capital position. For my vendors who are currently working with CIT, I’m working towards offering contingencies that have us shifting any factoring discount away from CIT to us, in return for an early payment.  No question, CIT poses a huge risk to the sector I participate in.

     Paul Purcell also discussed a number of other topics as well. While their operating income has slipped in recent quarters, they are still very profitable. He was also very encouraged by the recent results of Goldman Sachs, which he cited with a high level of respect. It should be noted that Baird was recently named a Top-100 employment firm by Forbes, ranked at 14th, and only surpassed by Goldman. While Purcell also acknowledged, that in hindsight, he would never have predicted the liquidation of top-tier firms in his industry, he was very optimistic that the next 12-18 months would provide an incredible period for investment opportunities. There was also further discussion about the increasing presence of foreign wealth within the U.S. market, particularly real estate. This point was confirmed by Ueberroth, who cited a number of statistics relative to the Southern California coastal market and homes that were being purchased by foreign parties for use as second homes or L/T investments.

Definitely a great opportunity to hear the views of everyone in attendance.

Thanks for reading. . . .

Jeffrey Ishmael