Oct. 9, 10: Guest Frank Curzio

Participants on Oct. 9 included host Brenda Buttner, Jim Cramer, Herb Greenberg, Dave Kansas, Gary B. Smith and guest Frank Curzio.
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Participants on Oct. 9 included host Brenda Buttner, Jim Cramer, Herb Greenberg, Dave Kansas, Gary B. Smith and guest Frank Curzio. The transcript is unedited and phonetic spellings are indicated with a (ph)

.

BRENDA BUTTNER, HOST, "TheStreet.com":

Hi, everyone, I'm Brenda Buttner, and you are connected to "TheStreet.com."

We're here to help you make your own investing decisions. Let's get things started with "Stock Drill."

Our guest stock picker today is Frank Curzio, who is the founder of F.X.C. Investors. His firm manages about $60 million in private accounts and has positions in all the stocks on the Drill today. They are Churchill Downs (CHDN:Nasdaq), Wendy's (WEN_PT:NYSE) and TCBY (TBY:NYSE). And here to play devil's advocates so you can decide if these stocks are for you, from

TheStreet.com

, Jim Cramer, who also runs a hedge fund, and

TheStreet

's senior columnist, Herb Greenberg, and Herb and Jim do not own any of these stocks that we're considering.

Thanks so much for joining us.

FRANK CURZIO:

Thank you.

BUTTNER:

So, up first, Churchill Downs. Now you're really betting on racing here, from the very traditional...

CURZIO:

Yes, we are.

BUTTNER:

... Kentucky Derby, to the Internet gaming. But there's a lot of legal hurdles there. Why do you like the stock now?

CURZIO:

Well, first of all, some call simulcast and horse racing isn't what it used to be. There are over a thousand simulcast and outlets out there. And what we're going to see here is a tremendous dynamic increase in simulcasting and business. We're talking about billions of dollars being bet.

JIM CRAMER, TheStreet.com:

Well, Frank, horse racing has been in decline now for I don't know how many years. Why should I get involved with something that I think is kind of out of secular decline?

CURZIO:

Well, the racing is in decline, but the simulcasting, and people not going to the tracks anymore because they can sit home and wager on the telephone, and look at the races on television.

HERB GREENBERG, TheStreet.com:

Well, wait. If they're not going to tracks, then why are they buying up so many tracks?

This is really nothing but a roll-up, Frank. This company has been consolidating the industry, and you know you pay a lot of money for these tracks. And in an industry where you say racing is going down, para-mutual betting has been a flat industry for any number of years. This company did a secondary offering at $29 a share not long ago. The stock currently -- at $22 or thereabouts. Why?

CURZIO:

Well, the simulcast -- betting is not going down. It's really exploding. The simulcast in betting is going through the roof. They just signed an agreement with TV -- with the TV Guide (TVGIA:Nasdaq) -- they're going to have 50 million people receive the horse racing signal. It's a dynamic industry. It's changing. Yes, we've been going down. But it's really going to turn around.

This is going to be the AOL (AOL:NYSE) of entertainment this company.

BUTTNER:

And your price target for that?

CURZIO:

My price -- well basically...

BUTTNER:

It's running at about $22?

CURZIO:

... my price target right now for the upside is unlimited. The potential is tremendous.

BUTTNER:

OK.

CURZIO:

We'll be growing at 100, 200% by next year...

CRAMER:

Hold it, this is -- wait a second. AOL of Churchill? No.

(LAUGHTER)

CRAMER:

That isn't fair...

CURZIO:

It is fair.

CRAMER:

People -- people will see the show and AOL has been a real winner. This is nothing. I don't like that.

Because people are going to take advantage of that. They're going to think, hey, this is the next greatest thing. I don't like the sons of AOL to -- that's not right to do.

CURZIO:

When AOL was under $85, under $90, we liked it. Now everyone is saying this is where not to be...

BUTTNER:

OK. All right.

CURZIO:

Churchill is where to be right now.

BUTTNER:

Sorry, all right. We're moving on to Wendy's, the fast-food king. The stock has been in quite a slump lately. KFC is targeting their -- targeting them with a chicken sandwich.

Why do you like them?

CURZIO:

Yes. Well, we like the Wendy's preferred. First of all it's in the money. The stock yields around 4.5% and we have growth here.

BUTTNER:

What do you mean by preferred?

CURZIO:

Well, preferred stock, basically, is a stock that has preference over the common, in case the company liquidates but it also pays a decent dividend. We have a 4.5% dividend here.

It's in the money right now, the stock.

GREENBERG:

Look, you know, love Wendy's. Everybody -- you know can't beat them on quality, but you have got a company that -- you know, why can't it be like McDonald's (MCD:NYSE) when it comes to performance? The company just seems to be mediocre when it comes to revenue growth. Mediocre when it comes to earnings growth. They can't seem to get their act together, Frank.

CURZIO:

Well, they're moving at 6 to 8% on revenue growth. As a matter of fact the revenue growth was 11, 12% last quarter, over last year. So, they are starting to get their act together.

CRAMER:

Today, they downsized Europe. The big McDonald's store is international. Wendy's is retrenching. What's the deal?

CURZIO:

Well, there's only seven stores they downsized. They're opening up about 300 or 400 overseas. So what they're doing is they're paring the stores that are not that great.

So, again we buy the preferred stock, picking up 4.5% yield, and this preferred stock is in the money.

CRAMER:

You mean it goes one for one with the common stock?

CURZIO:

Right, right. It makes go two for one with the common stock.

BUTTNER:

OK, you like the food stocks. TCBY, the country's best yogurt, very thinly traded -- 4-buck stock. One analyst covers it Wall Street.

CURZIO:

Right, right.

BUTTNER:

Isn't that a little risky?

CURZIO:

Well, I know a few other analysts who cover it and they all have sell recommendations on the stock. And this is why we like it. It's down approximately 60%, yielding 4%. We like it and this year it -- we've made agreements with Exxon (XON:NYSE), with Stewart's (ph), with BP (BPA:NYSE ADR), they're co-branding.

CRAMER:

Well, wait a second. I got a chart of this stock. Whoops, it's upside down.

(LAUGHTER)

This thing has been a terminal decline. Why does it stop now?

CURZIO:

Well, it stops now because first of all in the $5, the margin came out. And we just watched it sink, sink, sink. We said under $5 we will buy this stock. When it went under $5, the margin came out. There are very few people who want to buy this stock now. It's yielding 4%.

GREENBERG:

Frank, this is yogurt, yogurt, yogurt. Hey, it's great yogurt but I can go anywhere to get yogurt.

CURZIO:

No. No, no, no. What they're doing is they're revamping all their stores.

GREENBERG:

They're revamping their stores...

CURZIO:

They're bringing in coffee...

GREENBERG:

... and they're charging me a ton of money when I get them on the highway or something like that. Why aren't their earnings any better? Why aren't their revenues any better?

CURZIO:

They're bringing in coffee, they're bringing in baked goods. We could be seeing another Starbucks (SBUX:Nasdaq) over here.

GREENBERG:

I can get coffee at Starbucks. I can get coffee anywhere. I can get yogurt and coffee...

CRAMER:

Starbucks costs a fortune.

GREENBERG:

What? Is this good coffee?

CURZIO:

Right.

CRAMER:

Well, I don't know, but the stock's cheap. The stock's certainly low. I don't...

CURZIO:

They have over 3,000 locations here...

GREENBERG:

Why do I want go to TCBY?

CURZIO:

They could go to 6,000, or 7,000 -- because you're going to be forced to go because they're are going to be so many locations. When you're on the road, you can go to...

GREENBERG:

This is one of the great -- this is one of the great disaster stocks in the 1990s. Remember it was a great hype stock.

CURZIO:

Yes, it was $27.20...

GREENBERG:

Same management, never pulled it off.

CRAMER:

You didn't like it at all at $27, $28, did you?

CURZIO:

No, no, no. We like it in this area here. We look for the fallen angels. Hopefully, this is a fallen angel.

BUTTNER:

OK.

CURZIO:

We could go after AOL and Yahoo! (YHOO:Nasdaq) and so forth, sure, they might be up 100, 200% two, or three years out. We're looking for a 100 percenter. Buy three or four stocks -- maybe buy 10 or 15 of these stocks...

BUTTNER:

Let's stick to the TCBY. OK.

CURZIO:

Get one big one, we'll be OK.

BUTTNER:

Gentlemen, that's "Stock Drill." Frank Curzio from F.X.C. Investors, thanks. We will keep track of your picks and update them next time you're on the show.

Jim and Herb, stick around. We will see you later in the show.

But up next, Yahoo! was a big winner for investors last week. Is it too late to get in or will we soon see all-time highs?

Find out what the Chartman thinks after this.

BUTTNER:

Welcome back.

And so, how much do you know about the companies you invest in? What they make, who runs them? How about the movement of the stock; that is, the chart?

Let's get the word from Chartman.

Also known as Gary B. Smith, who trades for a living from his home, using the charting method. Gary joins us from Washington, D.C.

And with us as well in New York, our Silicon Valley columnist Adam Lashinsky who reports on companies on a more fundamental level.

Gary and Adam do not own any of the stocks in this segment.

Hey, guys.

ADAM LASHINSKY, TheStreet.com:

Hey, Brenda.

GARY B. SMITH, CHARTMAN, TheStreet.com:

Hello, Brenda.

BUTTNER:

Gary, Yahoo!, it made a big move on Thursday on a strong earnings report. What's the chart tell you? Is it still heading north?

SMITH:

Well, you know what the chart tells me Brenda is that I hear some music and you know I've not sang in quite a while, many weeks, so I think this calls for...

BUTTNER:

Oh, no.

SMITH:

.... for a little Bob Dylan tune. And it goes like this:

LASHINSKY:

Oh, he's not going to do this.

SMITH:

"The times, they are a-changing."

(LAUGHTER)

You know, I really do think I have a singing talent, by the way.

(LAUGHTER)

BUTTNER:

Stick to the charts, Gary. OK.

SMITH:

What has changed with Yahoo! -- I will you sometimes it -- very rarely does this happen -- but sometimes one day makes all the difference. That gap up that Yahoo! made after it announced its earnings made all the difference. It changed the entire tenor of this chart. It took it from the 170s strongly into the 180s. In fact, by the end of last week, I think it was pushing about 190 or so.

This chart is now super, and it is going to 220 -- a winner here.

BUTTNER:

Adam, it is still pretty pricey though. Is Yahoo!, worth it at these levels?

LASHINSKY:

Well, not only is it pricey but it's had a strong move. It's important for me to say, Brenda, I actually love this company. My sources say nothing but good things about Yahoo!, $800 million on its balance sheet. It's a profitable Internet company. But Gary B. wants you to buy high. Remember you're supposed to buy low, Gary.

It was up 10% last week. And the thing about Yahoo! is it that typically trades up into its earnings report, and then down after its earnings report which was last week.

Investors probably will have an opportunity to get in at a lower price, not a higher one, Gary.

SMITH:

Well, I'll tell you what, Adam, I don't think you're going to have the opportunity. I think it's going to go straight -- once it goes past 200, it's going to 220. If you don't get it now you're going to miss your opportunity forever.

LASHINSKY:

Doubt that, doubt that before -- some point before Christmas it will start running again, but before that I think we will see it come down.

SMITH:

Well, it will be 199 before that...

BUTTNER:

OK, guys come on. No. 2 -- Gary, Compaq (CPQ: NYSE). Now don't take a nap on me on this stock.

SMITH:

What, what -- were you saying something, Brenda?

(LAUGHTER)

I nodded off there thinking about Compaq. I tell you, this is a good example, Brenda, of a stock that would have to wake up in order to be classified as dead money.

(LAUGHTER)

This is -- this is -- I really honestly, I dislike stocks like this because it is -- this probably Adam's dream. You know it's all the hidden value here. You know what this is. You would get more entertainment and a better return putting your money into a Christmas club thank Compaq. It could go -- there is not doubt -- it could go back to 26, but I say why bother? There's more exciting stocks out there. There are better investments both long term, and short term. I would say avoid Compaq completely.

BUTTNER:

Adam, this company keeps having problems. The stock keeps getting hit. It's hard to argue on the fundamentals with Gary, isn't it?

LASHINSKY:

True, and as opposed to Yahoo! this is an investment, not a trade, Gary.

SMITH:

Uh.

LASHINSKY:

It's a snoozer that might just be waking up. What people don't realize is that eventually AltaVista in which Compaq still owns a big chunk, is going to go public. There is some hidden value, you're right, Gary. And it's trading at a huge discount to its competitors. It's worth less than one times its sales.

Dell (DELL:Nasdaq) is worth about 5 1/2 times it sales. And lastly, an interesting point about Compaq. For years, all of its inventory has been a big negative. If this Taiwan situation gets worse -- in other words there aren't enough semiconductors -- the companies with low inventory will get hurt. That's Dell. The companies with more inventory, like Compaq, will be in a relatively better situation. It's a cheap stock.

SMITH:

Adam, I say you could put your money right now in Yahoo! and a week from now take your profits and then if you want to put it into Compaq, for the next 20 years, then maybe you will make 5%.

(LAUGHTER)

LASHINSKY:

Gotcha, Gary.

BUTTNER:

All right, gentlemen, thanks so much.

LASHINSKY:

Thanks, Brenda.

BUTTNER:

Gary, we will see you next week. But Adam, you're sticking around for the next discussion.

And that is, if you think your stockbroker treats you second rate, you're probably right. What can you do about it?

Find out when we get "The Word on TheStreet," next.

BUTTNER:

Well, based on that poll, the majority of us would prefer to get investing advice from the pros. Unfortunately that's getting harder and harder to do.

Some full-service brokers say they can't make a profit from any account with less than 100,000 bucks in it.

Take this internal memo from one of the big brokerage houses that was published last week in

The Wall Street Journal

, and I'm quoting here -- "If we are going to be financial consultants to wealthy and successful individuals, then we don't have time to provide personal services to the poor."

So, what recourse do we have? Back with us on -- with "Word on TheStreet," Jim Cramer, Herb Greenberg and

TheStreet's

Editor-in-Chief Dave Kansas and Adam Lashinsky.

So, Jim, if I have $75,000 to invest, I'm poor?

CRAMER:

This was an outrage. OK, I'm not even going dignify that email that we saw later -- earlier this week -- was just so wrong. And it is why people want to do it themselves.

Because if you only have 75 Gs in the bank, there really isn't a broker that wants your account in this country, who can move up in the hierarchy.

I think this is ridiculous. But it's why, if they're going to make us and treat us like nobodies, we might as well pay commission like nobodies. That's why I think this discount move, the Internet move, has got real legs.

LASHINSKY:

But come on Jim, but he was just telling it like it was, right? I mean, he chose his words pretty poorly, but they have to focus on the business that's good for them. And they're not making money on the people without big assets.

BUTTNER:

I mean this is the way all businesses operate, right? You take care of the customers that make the most money for you?

GREENBERG:

They've never done really anything for the little guy anyway. The reality is a lot of little guys -- I mean they're doing them a favor here.

DAVE KANSAS, TheStreet.com:

Well, when are these guys ever -- if they can't give good advice to the little guy, what makes you think they're giving good advice to the big guy? I mean, I think...

CRAMER:

I think the issue is more and more people -- since when in this country is $75,000 -- is that guy poor? I should be -- you should be proud if you have that much money.

GREENBERG:

Not earning any money off of it.

CRAMER:

They should be treated...

GREENBERG:

Not earning any...

CRAMER:

.... as if you've done a good job in your life. It's the treatment that bothers me.

BUTTNER:

Well, what does this mean to the broker in stocks though? It seems very shortsighted from a business perspective. That $75,000 account could be a high net worth, you know...

CRAMER:

Maybe I will change (ph) my IRA when I have a couple of Gs in it. There's a lot of brokers that wished they had been nice to me then.

(LAUGHTER)

I (OFF MIKE) commission hand over fist now.

No, I think that -- you know there is people who do graduate into higher levels that I think that there's nothing wrong with trying to help them when they're not doing as well. And they're -- and the methodology that is $75,000 not being a lot of money...

LASHINSKY:

Jim, the brokers are also inviting regulation here. They're going to come under regulation from the Community Reinvestment Act if they don't watch it which will force them to serve poor people.

CRAMER:

It could happen.

BUTTNER:

OK, next topic. IPOs, another area where the small investor gets the short end of the stick. It's nearly impossible to buy shares at the offering price of course. And did you also know that your excluded from key information about those companies? Firms about to go public do what are called "roadshows" where they share information about themselves. But do it with only an exclusive bunch of investors.

Adam, what are these roadshows and why can't you and I see them?

LASHINSKY:

Well, they're an opportunity for firms that are going public to present their story again, to their biggest customers, the people who are going to make the biggest investments. They're not supposed to present exclusive information that isn't already available to the public.

Believe it or not the reason you and I can't go to the meetings is that the Securities and Exchange Commission wants to protect us. They're -- believe it or not -- that afraid that if the public gets in, that it could create a hype situation and that would be bad for individual investors.

BUTTNER:

But Adam, the SEC doesn't even go to these things most of the time, right? What kind of enforcement is going on here?

LASHINSKY:

Correct. They really don't know what is going on inside the meeting and they have to wait until they hear about something that might have gone wrong in the meeting before they would take any action.

KANSAS:

Adam, is this a case where the individual would be better served by just being allowed to call in, or participate in any way, shape or form in these things?

It seems, it seems a strange situation where the SEC, so concerned about informing every one including the small investor, is a little bit asleep at the switch here.

LASHINSKY:

You know again, they should go one way or the other way, Dave. They should either -- they should stick to the rules and keep the information very boring the way it's supposed to be, or they should let real investors in. And I think you make a -- they could use the technology both the Internet and, you know, telephones to let people come in on a listen-only mode for example. That way, they wouldn't be a nuisance.

CRAMER:

But, you know, Adam, I think what that does, it begs the question.

The real issue here is that the SEC, by trying to be paternalistic, has favored Fidelity...

BUTTNER:

Right.

LASHINSKY:

Uh, huh.

CRAMER:

... a bunch of big hedge funds, Janus, maybe Wellington. You know, if you want to just favor those -- it's great, those guys run a lot of little people's money. But I don't understand why those in particular get preferential treatment and, in this case, I'm speaking about myself too.

GREENBERG:

That's the way it's always been. That's the way it's always been, Jim. And you know when you think about it, you've got all these IPOs. Everybody is supposed to be getting into IPOs now. And this is just a, you know, I guess the markets haven't caught up with what the trend is. Do you understand what I'm saying?

CRAMER:

Yeah, I get you.

BUTTNER:

All right guys, we have to take a short break. But when we come back: Is now the time to jump into small cap stocks head first?

You will want to hear our predictions when "TheStreet.com" returns.

BUTTNER:

Welcome back. Time for predictions. Jim, you're up first.

CRAMER:

Techs taking a breather. The rest of the market is taking off.

BUTTNER:

Mainly drugs?

CRAMER:

I think the drug stocks are going to be stars all next week.

BUTTNER:

OK. Herb.

GREENBERG:

I'm going way out on a limb this time. Mattel (MAT:NYSE) CEO Jill Barad gets the ax at some point going forward, and my sources believe that will get the stock to eventually rise.

KANSAS:

When are we thinking, Herb? Real soon here or, a week...

GREENBERG:

They better do something soon because they don't -- they have somebody who doesn't seem to know what is going on...

CRAMER:

They could put Barbie in and she would do a better job.

(LAUGHTER)

GREENBERG:

Yeah, well, I thought this was Barbie.

(LAUGHTER)

BUTTNER:

All right. Dave.

KANSAS:

I like small-cap stocks from here to the end of the year. And I usually hate them, but I think they're going to have a good finish this year.

BUTTNER:

Any particular sector?

KANSAS:

No, I just think the smaller stocks have been beaten up a long time, and I think they're going to finish strong.

BUTTNER:

Sounds like a real value investor all of a sudden.

CRAMER:

Usually wait until January to buy those.

BUTTNER:

What happened?

KANSAS:

This is pre-January effect. Way pre-January effect. Early, early impact.

(LAUGHTER)

BUTTNER:

Remember, Dave is the one who's got the best record here.

OK, Adam.

LASHINSKY:

Webvan, the online grocer whose IPO was delayed by the SEC last week -- for comments that were made in its roadshow, which we discussed before -- will go public successfully in about six weeks, after all the excitement dies down.

BUTTNER:

And are you going to be on that roadshows? That's the question, Adam.

LASHINSKY:

I highly doubt it.

(LAUGHTER)

CRAMER:

He was in earlier this week. Even the -- even the

Journal

had to finally mention the fact that

TheStreet.com

broke...

BUTTNER:

Yes.

CRAMER:

... a rule.

BUTTNER:

A couple of times.

GREENBERG:

This is going to be a big deal. This is going to be -- despite everything that has happened, there is a lot of buzz around this company.

KANSAS:

Yes, still a huge IPO. That's right, Herb. I think a lot of fracas this week, but this is still going to be one of the biggest IPOs in...

LASHINSKY:

And they will straighten up and fly right. They will be following things to the letter from here on out.

CRAMER:

That means no Lashinsky on the roadshow.

BUTTNER:

Thanks to you. That's right.

(LAUGHTER)

All right.

Well, you actually have the final say on these predictions. You can tell us what you think about them by going to our television page on the Web site at TheStreet.com/TV. There's also a spot there to register your comments about the show. So, tell us what you like and what you don't like.

And while you are at the site, you can read stories and columns dedicated to helping you making money in the stock market. People like Jim, Herb, Dave, Adam -- me too -- write every day of the week with you the investor in mind.

Well, that's it for this edition of "TheStreet.com." We will see here same time next week.

Until then, we hope you invest wisely.

END

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