BloggingStocks

Is market rising on Obama presidency?

Peter Cohan — 2008-08-28T19:36:00+00:00

Filed under: Major movement, Forecasts, Good news, Indices, Economic data, Politics, Presidential elections, Housing

Many observers refer to the market as a forecasting mechanism. If so, today's 213 point rise could be a signal that investors anticipate an Obama win. I don't think today's reported 3.3% Gross Domestic Product (GDP) growth for the second quarter can explain the rise. Rather I think the market could be happy with the idea of taking a break from the failed tax cut and spend policies of the last eight years -- which have led to a record $490 billion federal deficit, a $9.8 trillion national debt, and the loss of $8 trillion in housing-related value.

Bloomberg News reports that GDP grew 3.3% thanks to a rise in exports to Europe -- still GDP growth was anticipated to hit 2.7% so today's figure -- which could be revised after the November election -- looked more favorable. Nevertheless, Bloomberg does not expect the so-called expansion to continue since the European economy is weakening and consumers burdened with falling home values -- the average home is down 16% -- and a tough job market -- will lead them to cut back their spending which accounts for 70% of GDP growth. Bloomberg writes that "the number of Americans collecting unemployment benefits reached a five-year high last week."

Investors watching the Democratic National Convention this week are seeing that the prospect of ending the policies that have produced these economic results is at hand. Obama will cut middle class taxes to get this country moving again while investing in alternative energy so we can stop funding terrorism when we pay $3.70 cents to fill up our tanks. By ending the Iraq war, Obama will also help to reduce the budget deficits that have inflation roaring ahead at 14.4%.

Investors welcome the prospect of a healthier economy and see bargains in stocks. And there's nothing more American than that.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

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Forbes expert sees fast growth for Altera (ALTR)

Steven Halpern — 2008-08-28T18:30:00+00:00

Filed under: Newsletters, Hilary On Stocks, Stocks to Buy, Technology

This post is part of a report entitled "Six-pack of technology favorites." You can read about the other top tech stock picks here.

"The semiconductor industry has been under pressure now for sometime, but one of the fastest growing businesses within semiconductors has been in programmable logic devices (PLDs)," notes wireless sector specialist Nikhil Hutheesing.

In The Forbes Wireless Stock Watch, he explains, "One of the top companies in this business is San Jose, California-based Altera (NASDAQ: ALTR). Here's his bullish review.

"These PLDs are chips that allow software developers to use inexpensive software tools to quickly develop, simulate, and test their designs. Then, a design can be quickly programmed into the chip and immediately tested in a live circuit.

"Unlike other chips, PLDs are based on re-writable memory technology. That means that if a designer wants to change the design on the chip, the device can be easily reprogrammed.

"Once the design is final, customers can go into immediate production by simply programming as many PLDs as they need with the final software design file. The result is that a final design can be completed much faster and less expensively than that of a custom, fixed logic device.

"While Altera also manufacturers other kinds of chips, it's the PLD business that could really boost the company's business. Eventually, Altera plans to replace the ASIC business entirely with PLDs.

"One area where PLDs can play an important role is in wireless. The chips allow data to be transferred and processed at high-speed by wireless networks, yet they require low power.

"This, of course, is critical as demand for fast processing power is rising quickly because people want -- and increasingly expect -- to be able to access the Internet anytime, from anywhere at high speeds.

"As wireless networks evolve from the old analog systems to the 3G networks in place today and 4G networks coming soon, demand for Altera's products should rise as well.

"Another potentially big area of growth for Altera is in base stations for WiMax networks. WiMax is increasingly gaining popularity as a broadband wireless access technology with significant market potential.

"But for service providers to deploy WiMax, the system needs to be flexible, highly scalable, and offer a way for costs to keep coming down. So Altera has come up with an 'ecosystem' that offers a comprehensive portfolio of devices and WiMax-compliant, off-the-shelf RF card solutions that allows service providers to quickly get a network up and running.

"Altera announced in July that during the second quarter it racked up sales of $359.9 million, up 13% from the second quarter of 2007. Second quarter net income was $98.0 million, up 43% compared with the second quarter of 2007.

"As the company develops new products and sells into new markets, I think the profitability outlook will improve further. I expect operating EPS of $1.29 in 2009, compared to an estimated $1.19 in 2008.

"The company has done a great job of keeping costs down while focusing on its faster growing businesses. Sales continue to rise, margins are strong, there is very little debt and management is buying back stock.

"This is a fast growing chip company in a fast growing segment the industry. I think shares should do very well-especially if a market rebound is ahead. I recommend buying shares of ALTR at current levels."

Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.

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A six-pack of technology favorites

Steven Halpern — 2008-08-28T17:15:00+00:00

Filed under: Cisco Systems (CSCO), Newsletters, International Business Machines (IBM), Broadcom Corp'A' (BRCM), Stocks to Buy

With concerns over recession, turmoil in the financial sector, fear of rising rates, high market volatility and a rising aversion to risk, many investors have been avoiding technology stocks.

Investors have feared that these economic headwinds will dampen both consumer spending for technology products and reduced capital expenditures for technology in the corporate sector.

Despite these concerns, some of the newsletter industry's leading advisors are looking beyond the current malaise and seeing longer-term value in some of the tech sector's leading players. They believe that much of the "bad news" is already reflected in the price of the shares, with little recognition being given to their longer-term potential.

For those willing to go against the crowd and buy, as they say, "while blood is running in the street," we offer a six-pack of technology stocks that the some top advisors considers to be among their favorite ideas.

Nikhil Hutheesing, editor of The Forbes Wireless Stock Watch has turned bullish on Altera Corporation (NASDAQ: ALTR), noting, "As wireless networks evolve from the old analog systems to the 3G networks in place today and 4G networks coming soon, demand for Altera's products should rise as well."
Read the full article on Altera.

Tech guru Paul McWilliams, editor of Next Inning, thinks Wall Street is missing the boat with its negative assessment of chip maker Analog Devices, Inc. (NYSE: ADI). Rather, he sees a company that has sold off lower profit businesses and is now poised for improving performance.
Read the full article on Analog Devices.

Glenn Rogers, contributing editor to The Internet Wealth Builder, considers Broadcom Corporation (NASDAQ: BRCM) a "good choice for investors who would like to add to their information technology position with shares of a first-class company."
Read the full article on Broadcom.

Richard Moroney, editor of Dow Theory Forecasts, believes International Business Machines Corp. (NYSE: IBM) is shifting from being a "slow growing, stodgy company" to one now showing "strong operating momentum, despite US economic weakness."
Read the full article on IBM.

Ron Rowland and Brandon Clay, editors with All Star Investor, consider NVIDIA Corporation (NASDAQ: NVDA) a "classic turnaround." The graphics chip maker, they note, has been beaten down and is now a "prudent buy."
Read the full article on NVIDIA.

Leo Fascciocco, editor of the Ticker Tape Digest, anticipates a "big jump" in quarterly for Oracle Corporation (NASDAQ: ORCL). Citing a technical breakout for the stock, he recommends purchase for those with a 6 month time horizon.
Read the full article on Oracle.

Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.

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Closing bell: Dow likes the GDP, sort of (MBI, FRE, FNM)

Douglas McIntyre — 2008-08-28T16:23:00+00:00

Filed under: After the bell, Federal Natl Mtge (FNM), Economic data, S and P 500, DJIA, NASDAQ, MBIA Inc (MBI)

The GDP number for the second quarter was revised up to 3.3% this morning. The market liked that, but not as much as people might have guessed. The Dow jumped up 200 points, which is substantial, but not an all-out rally.

The problem is probably that no one in his right mind thinks that Q3 and Q4 will be nearly as good. There is too much evidence of falling employment, rising prices, mortgage defaults, and slowing business spending. Being happy about the past is nice, but not when it is coupled with worry about the future. Below are today's unofficial closing bell levels:

DJIA: 11,515.18 (+1.85%)

NASDAQ: 1,300.65 (+1.22%)

S&P500: 2,411.64 (+1.48)

10-Year Bond: 3.7950% (+.0230%)

Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) continued their spikes up. The market is still enamored of the fact that the companies might avoid a government bail-out, which would wipe out common shareholders. Freddie was up about 10% and Fannie 15%.

The monoline insurers got a goose. MBIA (NYSE:MBI) said it would reinsure nearly $200 billion of municipal bonds backed by FGIC Corp. MBI shares jumped 34% to $16.14.

The excitement of the day boiled over into most of the financial stocks. Investors think there will be no recession. Bank write-off are over. All is well with the world.

Douglas A. McIntyre is an editor at 247wallst.com.

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Firing Fannie Mae management, a bit late

Douglas McIntyre — 2008-08-28T15:31:00+00:00

Filed under: Federal Natl Mtge (FNM)

Fannie Mae (NYSE: FNM) fired a few of its most senior managers. That includes its CFO and head of risk management. At a mortgage finance company, that is as close to the top of the pyramid as an executive gets unless that person is already the CEO.

The timing was awfully odd. All of the people moved out had been at Fannie Mae for at least a year. Over the last several days, the company's shares have turned upward as the market begins to believe that a federal bailout will not be needed to shore up its finances.

According to the AP, "banking industry consultant Bert Ely, a longtime Fannie and Freddie critic, was unimpressed by the changes, noting that the company promoted current executives, rather than hiring from outside." Ely makes some sense. When Fannie Mae began to get into trouble in early March, all of the key executives kept their jobs. They seemed to be good at what they were doing, or why would CEO Daniel Mudd have kept them on the job? When Fannie Mae's stock began to sell down aggressively in June, the team was not booted. When shares collapsed in July and were off over 70% from the beginning of the year, the whole gang was still getting salaries.

Wall Street may want to ask Mudd why he waited so long. At a lot of places, he would be the guy on his way out.

Douglas A. McIntyre is an editor at 247wallst.com.

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Tax Policy Center findings: TIF, WMT could gain, KSS, JCP hurt

Guest blogger — 2008-08-28T14:31:00+00:00

Filed under: Wal-Mart (WMT), Tiffany and Co (TIF), Kohl's Corp (KSS), Presidential elections

The following is a Q&A with Director of Zacks Equity Research Dirk van Dijk, CFA.

We're doing a rather last-minute interview here for publication Thursday morning (the 28th). What is on your mind to talk about?

Well, with the Democratic National Convention underway and therefore political season in full swing, lots of claims and counter claims will be made about taxes. Amid all the spin, careful analysis often gets lost. The Tax Policy Center (TPC), a non-partisan group, sat down with the top economic advisors for both campaigns and attempted to sort out just what the implications are from the proposals of each side would be.

And what is the verdict?

Well first of all, I strongly urge all readers who care about the long-term fiscal health of the U.S. Government to read the report.

But to my mind, given the massive size of the deficit this year and projected for next year, both McCain and Obama are being too "generous." Still, the charge of "tax and spend" is absurd if applied to either candidate, while the charge of "borrow and spend" is valid for both of them.
There are real differences in the distribution of the tax cuts. The bottom 90% will do much better under Obama, while the top 1% will see even more tax cuts under McCain. This will have many repercussions for the types of firms that will do well under each administration.

Where would investors be most likely to see the difference?

Perhaps this would be most clearly seen in Retail. A McCain administration would represent the continued bifurcation of the U.S. economy. High end retailers like Neiman Marcus or Tiffany's (NYSE:TIF) would do very well under such a scenario. Since the working class has to continue to shop somewhere, it would also help the discounters like Wal-Mart NYSE:WMT).

Mid-priced retailers like J.C. Penney (NYSE:JCP) and Kohl's (NYSE:KSS) would be hurt as what is left of the middle class trades down to shop at places like Wal-Mart. Casual dinning firms like Applebee's would be hurt, but high-end steakhouses like Morton's (NYSE:MRT) would do well.

What sort of "back-of-the-envelope" calculations should investors come away with?

An Obama administration would try to shore up the incomes of those earning under $150,000 per year. There are many headwinds that exist, so it is unclear if it would succeed, but it would not be actively pushing the division in the after tax incomes between the top and the bottom of the income scale the way the Bush administration has, and McCain promises to continue.

Zacks.com is a financial web site offering investment research and stock ratings.

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'Natural male enhancement' founder gets enhanced prison sentence

Melly Alazraki — 2008-08-28T14:03:00+00:00

Filed under: Law, Scandals

Oh, if I had never seen those obnoxious "Smiling Bob" commercials...

It's the weirdest thing; it's like we never grew out of those days when peddlers went from town to town selling one bogus potion or another. Somehow, despite regulations and laws, many of those fraudsters still manage to pull the wool over so many eyes and sell their products by the millions. Perhaps it's the promised hope that we just can't resist.

Berkeley Premium Nutraceuticals is one such company, known for making and marketing Enzyte, the so-called "once a day natural male enhancement" -- whatever that means. From the commercials it can mean anything from self confidence to bigger appendages, I guess, but it's called a sexual enhancement.

Good news, though. The founder of Berkeley, Steve Warshak, joined the infamous WorldCom's Ebbers and Enron's Skilling with his own 25-year jail sentence on Wednesday. He was convicted earlier this year on 93 counts of conspiracy, fraud and money laundering.

According to the AP, "Federal prosecutors accused the company of bilking customers out of $100 million through a series of deceptive ads, manipulated credit card transactions and refusal to accept returns or cancel orders." Berkeley Premium and other defendants were ordered to forfeit $500 million.

The judge called it a "case about greed," but I also call it a case of unbelievable naivete (and I won't say bordering what) on the part of the millions who bought into Berkeley's claims. In their defense, however, it's quite possible many thought that since drugs are regulated by the FDA, and since advertising is regulated by the FTC, then perhaps there was some truth to the Enzyte claims. Indeed, when comparing Viagra commercials to beer commercials it could be perhaps confusing to see when valid medical claims stop and fantasies begin. Maybe the regulators should be stricter, especially with nutritional supplements.

While over half a billion dollars would be forfeited, I doubt any consumers would get their money back unless they come forward. And I don't think many, if any, would. Perhaps authorities could use the money to further crack down on other such fraudsters.

If you somehow missed the "Smiling Bob" Enzyte commercials, here are a few:
Short version
Santa Bob
Bob skiing

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Mobile Telesystems (MBT) soars on $452M buyback plan

Brent Archer — 2008-08-28T13:42:00+00:00

Filed under: Major movement, Good news, Options, Technical Analysis

Mobile Telesystems (NASDAQ: MBT - option chain) shares are soaring higher today after the company announced its board approved buying back 11.1 billion rubles ($452 million) worth of shares. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on MBT.

MBT opened this morning at $68.18. So far today the stock has hit a low of $67.55 and a high of $70.54. As of 12:35, MBT is trading at $69.22, up $3.08 (4.7%). The chart for MBT looks neutral and S&P gives MBT a neutral 3 STARS (out of 5) hold ranking.

For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $60 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in just three weeks as long as MBT is above $60 at September expiration. MBT would have to fall by more than 13% before we would start to lose money. Learn more about this type of trade here.

MBT hasn't been below $60 at all in the past year and has shown support around $64 recently.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in MBT.

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U.K. home prices record largest annual decline in 20 years

Joseph Lazzaro — 2008-08-28T13:17:00+00:00

Filed under: International markets, Forecasts, Bad news, Economic data, Housing, Recession

The protracted housing slump that has devastated U.S. home prices now appears to have fully-enveloped the United Kingdom. Home prices in the United Kingdom in August fell at their fastest pace in two decades (pdf), U.K.-based mortgage lender Nationwide Building Society announced Thursday.

On a year-over-year basis, the average price of a U.K. home plummeted 10.5% to $301,500 or 164,654 British pounds in August, NBS said. Further, it was the first year-over-year double-digit decline in the U.K. since 1990.

London-based economist Mark Chandler told BloggingStocks Thursday the August U.K. housing data, "is just dreadful."

"Housing in the U.K. is becoming a bit of a 'magical mystery tour,' to borrow a phrase from The Beatles. For a month or so, we thought the declines in home prices had moderated. Apparently not," Chandler said. "Tighter lending requirements and real concern about the economy have sapped sales and it's really showing up in the price data."

U.S., U.K.: Similar housing dynamics

Further, Chandler said the United States and the United Kingdom are suffering similar housing sector dynamics. "The U.K. did not experience as big a refinancing boom as America did, but in almost every other metric the boom was the same. We had a classic overbuild of homes, a belief that double-digit price gains could not end, and of course, reckless lending," Chandler said. "Now, our inventories are swelling just like in America and prices are plunging."

Chandler said the above data "should push the Bank of England in the direction of one, perhaps two quarter-point interest rate cuts this fall." U.K. GDP was flat in Q2, and Chandler now expects the U.K. to record negative GDP of -0.2-0.5% in Q3.

"I'm confident this data will keep the Bank of England on the same page with the U.S. Federal Reserve. The housing data over the past year confirms a regional housing recession that's cut GDP on both sides of the Atlantic. The housing sector has the potential to drive both economies into a recession," Chandler said. "The task now is to get the European Central Bank on board with an accommodative interest policy to stimulate growth on the [European] continent."

Economic Analysis: More bad news from the United Kingdom. Originally thought to be less vulnerable to the housing sector's downtown than the U.S., the U.K. now appears to be just susceptible as the U.S., although Britain's foreclosure rate may be lower. Echoing economist Chandler, all three major central banks -- Fed, BOE, ECB -- should commit to an interest rate easing policy to promote a regional economic recovery. Let's hope the ECB is paying attention.

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Chasing Value: Obama & Tiffany's shine on!

Sheldon Liber — 2008-08-28T12:46:00+00:00

Filed under: Rants and raves, Tiffany and Co (TIF), Chasing Value, Headline news, Stocks to Buy, Best Stocks for 2008

The Democrats have nearly wrapped up their national convention making history by nominating Barack Obama the first African-American, or person of any color for that matter, to lead a major party in pursuit of the presidency. Tonight they put a big bow on the whole affair and start the next leg of the race.

Speaking of big bows it might be in order for Barack to be giving thank-you gifts to the women in his life, Michelle and Hillary -- a little blue box might be just the 'ticket'. In her daily Before the Bell post my colleague Melly Alazraki reported about Tiffany's super quarter:

U.S. jeweler Tiffany & Co (NYSE: TIF) posted double the quarterly profit from a year ago on Thursday, benefiting from strong international sales and solid tourist spending at its New York flagship store. Net profit was $80.8 million, or 63 cents per share, in its fiscal second quarter, up from $40.5 million, or 29 cents per share a year earlier, and beating estimates of 55 cents per share. Revenue grew 11%. Tiffany also raised its 2008 profit outlook on strong sales in Europe and Asia and expected improvement in the U.S.

TIF has been up and down this year, like most stocks, since I wrote about it last February in Serious Money: Pondering: Home Depot, Tiffany & Wells Fargo. Shares have jumped this morning by almost 10%, trading as high as $44.45 after closing yesterday at $39.61.
After suggesting investors keep on eye on TIF, in April we bought in at $36. I would be very surprised to ever see that number again and I continue to support the value investing style of 'my pal Warren' and another investing star that does not get as much credit: Ken Heebner, America's Hottest Investor, although this is changing.

At this point I think it is anybody's guess as to how high this stock can rise in the near term. In the long term, I still think it is a market beater. TIF does pay a 1.7% dividend yield, which I like, but I tend not to buy when things are heated up as they are today.

Obama and Tiffany seemed to be all a glow at the same time. Next up: McCain picks his running mate, and if he can find as much value as investors did in Tiffany & Co. this year then he may do well also.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. DISCLOSURE: I currently own shares of TIF.

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Could Sprint dump Nextel to join with T-Mobile?

Brian White — 2008-08-28T12:24:00+00:00

Filed under: Analyst reports, Deals, AT and T (T), Sprint Nextel Corp (S)

Sprint Nextel Corp. (NYSE: S) seems to be on the mend from a perception standpoint. CEO Dan Hesse is still running television advertisements with his direct email address and a personal message to potential Sprint subscribers. The cellular carrier has a refined, electric image and has a decent competitor to Apple, Inc.'s (NASDAQ: AAPL) iPhone. Is it still in bad financial shape? That answer would be yes, as it continues to lose customers every single quarter.

While a Sprint/T-Mobile partnership was rumored this summer, the technology used between the two companies is incompatible. From a layman's perspective, it's precisely the problem that doomed the Sprint acquisition of Nextel. To this day, the brands still operate independently in many ways. That's been a death knell for the company, while larger competitor AT&T, Inc. (NYSE: T) perfectly merged its network with the now-gone Cingular over a few years. Still, would T-Mobile really want to team up with Sprint? Only if Sprint jettisons the Nextel brand and network sometime in 2008.

Analyst Christopher Larsen with Credit Suisse makes a decent argument for Sprint and Nextel parting ways as soon as possible, citing the recent $3 billion fund raiser Sprint announced. Could an impending corporate divorce be in the works? Sprint has already written off tens of billions in the bungled Nextel merger, but it could raise over $7.5 billion by selling Nextel.

Still, with the third- and fourth-largest wireless players (Sprint and T-Mobile, respectively) ripe for consolidation, combining two very different networks better work if there's even a hint of a future combination between the two. But right now, that may be the only choice: Verizon Wireless and AT&T are kicking butt in the wireless market in the U.S.

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Brand.net gets a $10 million pickup

Tom Taulli — 2008-08-28T12:04:00+00:00

Filed under: Google (GOOG), Yahoo! (YHOO), Next big thing, Small business

This week, I had a chance to talk to Elizabeth Blair. She joined Yahoo! (NASDAQ: YHOO) in 1998 and then became the company's vice president of business operations for the global operating group. Yes, she got a great education in the online marketing space. Interestingly enough, she also has a law degree from Harvard and even practiced M&A and securities law.

Well, Blair has leveraged her experience into an upstart venture: Brand.net. The company recently raised a $10 million Series B round. The investors include: Norwest Venture Partners and InterWest Partners.

Essentially, Brand.net is an online advertising network focusing on major customers. The platform is more than just some technology, though, as Brand.net has assembled a top-notch team of brand experts.

Of course, as seen with companies like Google (NASDAQ: GOOG), the search-based ad business has become a huge profit machine. But this is only one part of the advertising game. Of course, branding is a huge market in the ad market, so why can't it be the same for the online world?

Certain issues still need to be worked out, such as dealing with user-generated content or finding ways to measure performance. No doubt, these are tough problems. But , if companies like Brandnet.com can find some creative solutions, it should open up another big growth opportunity in the online world.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

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Ford (F) desperately needs more dealers to consolidate

Brian White — 2008-08-28T11:44:00+00:00

Filed under: Products and services, Ford Motor (F)

Ford Motor Co. (NYSE: F), which is reconfiguring plants from producing unpopular trucks and SUVs to fuel-efficient passenger cars, will now be trimming its nationwide automobile dealerships as sales continue to lose steam. High fuel prices and shifting consumer sentiment towards smaller cars are only some of the reasons for the sales decline.

Ford executives believe that more Ford dealerships (along with Ford brands Mercury and Lincoln) will have to consolidate to survive. Ford is right -- there is no way a huge, overwhelming national network of dealers can exist when sales don't. Expect dealers to start amalgamating as Ford's Way Forward plan continues taking longer than expected.

2007 stats tell the tale: Four thousand Ford, Lincoln and Mercury dealers sold an average of 590 vehicles in 2007. Toyota Motor Co.'s (NYSE: TM) 1,400 dealers in the U.S. sold 1,766 vehicles in 2007. Quite the contrast. Ford has managed to make about 400 weaker dealers combine with stronger ones since initiating a program to do just that in 2005. Looks like incentives to speed up profitable dealer concentrations will have to become much sweeter as sales continue to flop as badly as a corner lemonade stand in winter.

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Analyst calls: BT, JAS, EGN, CHL, KO, GILD, DWA ...

Eric Buscemi — 2008-08-28T11:24:00+00:00

Filed under: Analyst reports, Analyst upgrades and downgrades, Coca-Cola (KO), Analyst initiations, Gilead Sciences (GILD), China Mobile Limited (CHL)

Analyst upgrades:

Goldman upgraded BT Group (NYSE: BT) to Buy from Neutral on valuation and improved earnings visibility.
Soleil upgraded shares of Jo Ann Stores (NYSE: JAS) to Buy from Hold following the company's Q2 upside surprise to reflect strong fundamentals and market share gains. The firm raised Jo Ann's target to $30 from $25.
Amylin Pharma (NASDAQ: AMLN) was upgraded to Buy from Neutral at Merrill Lynch.
Energen (NYSE: EGN) was upgraded to Buy from Neutral at UBS.

Analyst downgrades:

Roth Capital downgraded shares of Warner Chilcott (NASDAQ: WCRX) to Hold from Buy pending patent clarity for the company's lead drug, Loestrin 24 for birth control. The firm lowered their target to $18 from $20.
JP Morgan cut China Mobile (NYSE: CHL) to Underweight from Overweight as they believe increased competition may limit earnings growth.
Cantor downgraded shares of Cell Genesys (NASDAQ: CEGE) to Hold from Buy following the termination of the VITAL-2 Phase III clinical trial. The firm also lowered their target to $2 from $10.
Coca-Cola (NYSE: KO) was lowered to Neutral from Outperform at Credit Suisse.
Gilead Sciences (NASDAQ: GILD) was downgraded to Equal Weight from Overweight at Lehman.
Cinemark (NYSE: CNK) was downgraded at BMO Capital to Market Perform from Outperform.

Analyst initiations:

Caris believes STEC Inc's (NASDAQ: STEC) competitive landscape continues to intensify, starting shares with an Average rating and $10 target.
Dreamworks (NYSE: DWA) was initiated at William Blair with a Market Perform rating. The firm believes the company's movies have long-term staying power in family libraries.
GSE Systems (NYSE: GVP) was initiated at Jesup & Lamont with a Neutral rating and $7.25 target.
JP Morgan assumed Nestle (NASDAQ: NSRGY) with a Neutral rating.
Twin Disc (NASDAQ: TWIN) was started at Baird with a Neutral rating and $21 target.

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Option Update: Jackson Hewitt and H&R Block volatility flat into earnings

Paul Foster — 2008-08-28T11:04:00+00:00

Filed under: Options

Jackson Hewitt (NYSE: JTX) is recently down 10 cents to $17.07. JTX is scheduled to report Q1 EPS on September 4. Soleil Group says: "We believe there are too many uncertainties to be aggressive one way or the other; we are maintaining our Hold rating." JTX September option implied volatility of 50 is below its 26-week average of 55 according to Track Data, suggesting decreasing price movement.

H&R Block (NYSE: HRB) is recently up 24 cents to $25.23. Soleil Group has a Buy rating and price target of $28 on HRB. HRB September option implied volatility of 40 is near its 26-week average, suggesting non-directional price movement.

Volatility Index S&P 500 Options-VIX down 27c to 19.48; 10-day moving average is 20.24

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

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Oil broke $120 again as Gustav eyes the Gulf of Mexico

Joseph Lazzaro — 2008-08-28T10:46:00+00:00

Filed under: Other issues, Commodities, Oil

Oil rose for a fourth straight day Thursday as Tropical Storm Gustav prepared to enter the Gulf of Mexico causing oil / natural gas companies to evaluate oil rigs in the area.

Oil rose above $120 a barrel earlier Thursday morning, but is now trading below that level. Oil has risen about $10 in a week on hurricane concerns and geopolitical tensions.

The other, major energy commodities also jumped Thursday morning on news of storm's likely track. Unleaded gasoline rose 6 cents to $3.12 per gallon, heating oil increased about 6 cents to $3.32 per gallon, and natural gas climbed 8 cents to $8.69 per million BTUs.

As of 8 a.m. EDT, Gustav was located about 70 miles east of Jamaica at 17.8N Latitude and 75.6W Longitude, moving west/southwest at 6 mph, with top wind speeds of 70 miles per hour, according to weather.com. Forecasters expect Gustav to track west/northwest, enter the Gulf of Mexico, strengthen to hurricane status, and strike the U.S mainland between Houston and the Florida Panhandle, with the most likely landfall being Louisiana.

Energy Trader Jim Dietz, who currently has no open trading positions, told BloggingStocks Thursday he's hoping Gustav "turns to where it can do the least damage or drifts out to sea," but a Louisiana-region strike would, in addition to threatening lives, homes and businesses, likely damage offshore / shoreline oil / natural gas installations in the area.

"Oil prices could spike $10-15 higher and there could be some gasoline shortages in the southeast U.S., but the main concern obviously is human life," Dietz said. "Let's hope officials can evacuate everyone to safety this time, well before the storm hits. Gustav could become a large and very dangerous hurricane."

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Apple (AAPL) iTunes loses artists - an antitrust problem?

Douglas McIntyre — 2008-08-28T10:28:00+00:00

Filed under: Apple Inc (AAPL)

Since Apple (NASDAQ: AAPL)'s iTune virtually rules the music download business, it is not surprising that some people in the music industry would challenge its dominance from time to time. One of those times is now.

Artists are beginning to realize that the iTunes process of selling individual songs is hurting their album sales. According to The Wall Street Journal, "Label executives, managers and artists chafe against the iTunes policy that prevents them from selling an album only." Indeed, some artists like Kid Rock have stayed away from iTunes and their sales have done quite well.

The plan of selling music without iTunes is only likely to last so long. Apple's 99-cents-per-song format has proved irresistible to most customers. Bands that make a great deal of money may be able to risk staying off iTunes, but if they have one or two albums that do poorly, they will come back.

Perhaps the only way that labels and artists will break Apple's hold on music is to bring an antitrust suit. Apple does control enough of the market to make a case. Who knows?

Douglas A. McIntyre is an editor at 247wallst.com.

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VeriFone Holdings (PAY): Shares form bullish 'pennant'

Larry Schutts — 2008-08-28T10:10:00+00:00

Filed under: Good news, Technical Analysis, VeriFone Holdings (PAY), Stocks to Buy

VeriFone Holdings (NYSE: PAY) makes and services transaction automation systems that enable electronic payments between consumers, merchants and financial institutions. Products include point-of-sale software and terminals, smart card/check readers, receipt printers and Internet commerce software. The firm also makes gas station electronic payment systems that combine card processing and fuel dispensing. Further, it offers a range of client services and customized application development. About 60% of the firm's revenues are generated from customers outside the U.S.

The company pleased the Street last week, when it appointed an interim CFO to replace an officer who resigned following a probe into company accounting errors. VeriFone corrected its books the same day, by deleting $70 million in previously reported fiscal 2007 profits. Management also issued a favorable forecast, guiding Q308 EPS to 34-35 cents (28 cent consensus), Q3 revenues to $256-$258 million ($248.3M consensus), Q408 EPS to 36-39 cents (30 cent consensus), Q4 revenues to $260-$268 million ($255.2M consensus) and FY09 EPS to $1.35-$1.55 ($1.14 consensus). The CEO pointed out that the firm was seeing excellent growth internationally, particularly in emerging markets.

The PAY share price popped on the news and then moved into a bullish "pennant" consolidation pattern. Stocks frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend the issue with three "strong buys", two "buys" and three "holds". Analysts expect a 17% average annual growth rate, through the next five years. The PAY Price to Sales ratio (1.61), Price to Book ratio (2.28), Price to Free Cash Flow ratio (19.25) and Sales Growth rate (57.13%) compare favorably with industry, sector and S&P 500 averages. Institutions own about 90% of the outstanding shares. Over the past 52 weeks, the stock has traded between $10.10 and $50.00. A stop-loss of $17.50 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold a position in the stock discussed above.

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U.S. Q2 GDP of 3.3% likely to be fleeting

Joseph Lazzaro — 2008-08-28T09:55:00+00:00

Filed under: Forecasts, Economic data, Federal Reserve, Recession

A sluggish U.S. economy that grows at 3.3% in Q2? What's going on here?

The U.S. Commerce Department Thursday revised its Q2 GDP growth estimate to 3.3% from the previously-estimated 1.9%, but economist David H. Wang remains a skeptic regarding the appearance of an economic recovery.

"Don't write home or e-mail home that we have 'blue skies' ahead regarding the U.S economy because the skies remain uncertain and stormy looking. If you take away the export gains, the economy is still pretty weak," Wang said. "Also, one quarter does not a recovery make, and we'll get final data on Q2 GDP in September [September 26]."

Economists surveyed by Bloomberg News had expected the preliminary Q2 GDP statistic to total 2.7%. The U.S. economy grew at a 0.9% annualized pace in Q1 and contracted 0.2% in Q4 2007.

Q2 GDP data fleeting?

Wang said an improvement in exports and inventory accumulation strengthened GDP in Q2, but other factors suggest "it will be difficult, if not impossible to match that GDP growth rate in Q3 and Q4."

"We have a housing sector in a deep recession, job losses in most job categories, a pullback in consumer spending, very high energy prices heading into the winter season, and cautious businesses looking to cut costs where possible," Wang said. "These are not factors that lead to Chinese-style growth levels." [China's GDP has grown at about a 10% annual rate for more than four years.]

In Q2, exports rose 13.2%, but business investment fell 2.5%, housing investment declined 3.2%, while real consumer spending increased 1.7%, the Commerce Department said.

"Seriously, I view the revised Q2 GDP as a momentary increase. The headwinds facing the economy remain, which is why the Fed [U.S. Federal Reserve] should resume cutting interest rates when it meets in September," Wang said. "The fundamentals of the U.S. economy are not strong."

Economic Analysis: Economist Wang does not mince words regarding the Q2 GDP report, or the overall health of the U.S. economy. With the above as guidance, it's best to await the Commerce Department's final estimate for Q2 GDP, but even so, clearly the U.S. economy's fundamentals, except exports, remain weak.

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A drop in mobile phone sales growth, more trouble for Motorola

Douglas McIntyre — 2008-08-28T09:40:00+00:00

Filed under: Motorola (MOT), Nokia Corp. (NOK)

It looks like the recession is hurting mobile phones sales. According to The Wall Street Journal, "For the full year, Gartner said it expects handset sales to grow 11% to 1.28 billion phones, slowing from last year's 16% growth."

A trend of that magnitude is bound to hit every company in the industry, but some have the financial strength and market share to weather the storm, That is especially true of Nokia (NYSE: NOK), which has a global market share of 40% of handset sales. Samsung, which has 15% of the market and is one of the largest companies in Asia, should also be fine.

Motorola (NYSE: MOT) is another matter. Its global share has dropped from nearly 15% to just above 10% in a year. More financial pressure could poison its chances of spinning off its handset operation in 2009. It is already questionable whether the division has any value at all.

The Motorola 10-Q shows that revenue at the company's mobile device operation fell 22% last quarter to $3.33 billion. The operating loss for the unit was $346 million. If the handset market as a whole is reaching a challenging period, what is to become of the weakest player in the industry?

The answer is that Motorola may not be able to get rid of its handset operation. It may be faced with the much harder task of fixing it.

Douglas A. McIntyre is an editor at 247wallst.com.

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