Daily Archives: November 20, 2006

Fifteen Most Overvalued Stocks: Polo Ralph Lauren

Stocks: (RL)(LIZ)

Polo Ralph Lauren is expensive by several measures. But, one of the risks in owning the shares is that Ralph Lauren controls the board, he is the brand, and he is not young. Whether the company will due as well once he is gone is a nagging concern.

Almost 20% of Polo’s revenue comes from May and Federated stores. Those companies have merged, so their pricing leverage has improved.

Over the last several years, the company’’s stock price has run wild. From a low of under $17 in October 2002 the stock has moved to just below $77 currently.

Revenue has been growing well, but in the numbers for the last quarter, when the purchase of Polo Jeans was backed out, the topline was up only 9%.

Even Wall St. analysts do not think the stock will go much higher, at least not short term. A Thomson/First Call survey of seven analysts who hold the stock found the their mean price target for Polo was only $81.57.

The company’s growth in both revenue and operating income over the last three years has been excellent, but the stock price is getting ahead of the business  Polo’s price to sales is 1.94. At competitor Liz Claiborne that number is .9 times.

Great company. Overpriced shares.

Douglas A. McIntyre can be reached at douglasamcintrye@247wallst.com. He does not own securities in companies that he writes about.

Posted on: November 20, 2006 – 8:37 pm in Uncategorized

Fifteen Most Overvalued Stocks: Phelps Dodge

Stocks:  (PD)(RTP)(FCX)

There was a case to be made that Phelps Dodge was a super premium priced stock before Freeport-McMoRan agreed to buy it for almost $26 billion. That would tend to indicate that the merger is not a very good deal, at least not for Freeport holders.

Morningstar’s model of cooper prices forecasts that the value of the metal will drop enough to actually cause the revenue at Phelps Dodge to drop over the next few years.

But, the issues at Phelps Dodge are not simply in the distant future. Cooper prices have come down to a 19-week low.  Bear Stearns actually downgraded the stock on fears that cooper will continue down. And, the company’s results have disappointed Wall St.

While mining company Rio Tinto has a PE of 10.17, Phelps’ stands at 13.15.

Owning the stock when it was at $95 had plenty of downside risk. The buyout is a great deal.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Posted on: November 20, 2006 – 8:07 pm in Mergers and Buy Outs

Cramer Say Treehouse (THS) is a LBO Fund Masquerading as a Food Company

Cramer also said the LBO market is hot with guys making money.  Henoted that KKR is actually down in Netherlands since coming public.  Hethinks a food company Treehouse Foods (THS) hat makes private labelfoods is a great play in LBO’s.

The soup and baby food units and others are helping it.  The company isnot just a food company, it’s a leveraged buyout play.  The owners havedone this before with Keebler by flipping it to Kellogg (K).  He thinksTHS is worth betting on.  The food business is slow and non-growth ingeneral, but there are many great plays there that you can takeadvantage of.  This company is an acquisition company and it is growingearnings with select acquisitions.

He has profiled THS before, but they have still grown.  Now it has ahigh enough share price to go out and make deals and he would be abuyer of THS right now even at the 52-week high.

THS has a $18.33 to $30.50 52-week trading range.  THS closed up 1.5%at $30.64, a new 52-week high and above the old high noted from Friday;it traded up another 4% to $32.00 after Cramer touted this stock.

Jon C. Ogg
November 20, 2006

Posted on: November 20, 2006 – 6:24 pm in Cramer

Cramer thinks Reliance Steel is the next steel buyout

Stock Tickers: OS, RS, NUE

On tonight’s MAD MONEY segment on CNBC, Jim Cramer discussed more about takeovers to find the next oregon Steel (OS) or takeover play.

He Reliance Steel (RS) is still cheap, with a considerable rolled and stainless steel that is still in short supply.  Cramer said this could be one of the smaller ones like this could be bought, but he thinks Nucor (NUE) won’t be bought.  RS could be the next buyout according to him. 

He would hold a hearing about who lost Oregon Steel.  He thinks the WSJ publishing a steel glut that kept you out of this name.  Anyway, he will go on and on but he thinks RS is the next steel buyout potential.

RS has a $2.7 Billion market cap; 52-week trading range of $28.43 to $49.75. It closed up 5.7% at $35.55 in normal trading and traded up another 4% to $37.15 in after-hours trading after Cramer touted it. If the trailing P/E is accurate it looks like RS only trades at 7.5 times earnings and 7-times DEC 2007 earnings.

Jon C. Ogg
November 20, 2006

Posted on: November 20, 2006 – 6:09 pm in Mergers and Buy Outs

Test Post

We are clearing oout many of the old feed links to account for the new feed, so please understand we will be making many off-hours announcements on the feed here when you are not using this for trading data etc.

Please do not bother reading beyond here as these are just some notification codes……..

test test

test test

  1. Include this claim key in a blog post: <!– ckey="6DF04CE3" –>
  2. Include this user key in the template for your web site: <!– ukey="5CAAF782" –>
Posted on: November 20, 2006 – 5:55 pm in Uncategorized

Google Leads In Second Search Study

Stocks: (GOOG)(MSFT)(TWX)(YHOO)

There are probably far too many studies of the size and changes in traffic at internet sites.

Google claimed the crown in the Nielsen Netratings survey of search engine traffic for October. Later in the day, ComScore came out with it measurement.

For October, Google had 45.5% of the search market.Total US search queries were 6.8 billion, up 3% from September.

Yahoo! ranked second at 28.2%. Microsoft had 11.7% of the market. Ask.com garnered 5.8% and Time Warner network sites 5.4%.

If you’re Google, it’s good to be king.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Posted on: November 20, 2006 – 4:49 pm in Uncategorized

Google Still Leads Search Ranking, By A Mile

Stocks:  (MSFT)(TWX)(GOOG)(YHOO)

Nielsen NetRatings has announced its October search engine traffic results. If any of Google’s competitors thought they might gain on the search giant, they can dream on.

Fifty percent of all searchs done in the US last month went to Google. That is over three billion search requests. The figure is a 23% growth over last year. Yahoo! was second with just under 24% of the market, 1.456 billion search queries.

The balance of the field migh as well have stayed home. MSN Search had less than 9% of the market, followed by AOL at just over 6% and Ask.com at under 3%.

AOL’s share of the search market grew just 1.9% year-over-year. MSN was down 8%

The message from the statistics was simple.

No one is catching Google.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Posted on: November 20, 2006 – 4:27 pm in Uncategorized

US Market Wrap (Nov. 20, 2006)

DJIA    12,316.54; Down 26.02  (0.21%)
NASDAQ    2,452.72; Up 6.86 (0.28%)
S&P500    1,400.50; Down 0.70 (0.05%)
10YR-Bond    4.595%     Down 0.012
NYSE Volume    2,505,710,000
NASD Volume    1,697,476,000

Japan acted as lid today, with the NIKKEI falling over 400 points today.

After Red Hat’s (RHAT) silly move from NASDAQ to NYSE, the RHAT shares fell over 1% to

Equity Office Property (EOP), the largest REIT around under Sam Zell, received a buyout from Blackstone private equity valued at soem 36 Billion after a $16.5 Billion debt assumption.  This largest LBO ever cause EOP shares to rise 7.7% to $48.14.

CoTherix (CTRX) rose almost 20% to $13.42 as Actelion is acquiring the DNA/RNA drug target company for $13.50 per share.

Research-in-Motion (RIMM) rose 2.8% to $137.41 after Merrill Lynch raised its buy rating target to a higher $165 per share, making it the hifghest price target of the bulge bracket research firm targets out there.

NASDAQ (NDAQ) rose 3% to $37.71 after the London Stock Exchange brushed off attempts of the exchange to buy the rest of it that it doesn’t own.

SanDisk (SNDK) rose 3.4% to $48.73 after it closed the FLSH buyout and after some were speculating that an LBO could come the way of SNDK.

Charles Schwab (SCHW) rose 2% to $18.94 after selling its USTrust operations for $3.3 Billion to Bank of America (BAC); SCHW will record a $1 Billion gain; Bac was essentiall flat at =$0.05 to $54.90 as of the close.

Phelps Dodge (PD) rose 26% to $120.47 after Freeport McMoran made a leveraged acquisition of the company.

Oregon Steel (OS) rose 8% to $63.77 after Russia’s Evraz made an offer to acquire the company.

DJ Orthopedics (DJO) rose 1.9% to $45.27 after Cramer said its knee braces were a huge expansion opportunity to avoid knee surgeries.

After the US FDA finally allowed silicone breast implants back on the market in the US, Allergan (AGN) rose 7.8% to $121.32 and Mentor (MNT) rose 10.9% to $52.78.

News Corp (NWS) fell 1% as it was going ahead with plans to print an OJ Simpson book, before it finally caved in to public pressure to not run the book.

Jon C. Ogg
November 20, 2006

Posted on: November 20, 2006 – 4:19 pm in Market Close

How to use the VIX with an under 10.0 reading

by JON C. OGG
November 20, 2006

The VIX, Under a reading of 10.0 is something that many traders on Wall Street have NEVER seen.  No kidding.  The "VIX" is the Chicago Board Options Exchange (CBOE) Volatility Index, which shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options.

Back in the day of wild trading, we used to see the Volatility Index (the VIX) trade in the 20’s, 30’s, and even higher.  As the market goes up and as the market moves are not sporadic, the value of the VIX drops.  As the market sells off and as the drops become exaggerated, then you see the VIX rise.  It seems that the market has gotten used to a sub-teens reading on the VIX, but at under 10 you have to wonder if it is too low to not take advantage of some hedging transactions.  The VIX is a 30-day reading, but options pricing still is based on this in theory.

Last week this was closing in on 10.0, but this sub-10.0 reading is the lowest in years.  That means that investors are not just non-fearful of the market, but it means they are just outright complacent now.  This is often called the "Fear Index" and it is obvious there is little to no fear.  It also means in general that more traders are buying CALL Options thinking the market is going up rather than down.

This also means that options in many of the normal trading names are theoretically less expensive.  That means it becomes less and less expensive to hedge downside because put optiosn are cheaper to buy.  Trying to say that you can cheaply hedge transactions in shares like Google (GOOG) or Research-in-Motion (RIMM) is a bit of a stretch because those names are deemed volatile even when the overall market isn’t.

But let’s pretend you had a position in Microsoft (MSFT) and you bought a week or so after the company gave a warning in the summer.  You are up huge in the name since you bought at a hypothetical $23.50 after it recovered from its post-July earnings.  At almost $30.00 today, you aren’t sure how well this Windows Vista launch is, you know that the Sony PS3 and Nintendo Wii launches are fighting the Xbox 360, you know the company isn’t making any massive projections for Vista, and you keep hearing about soft chip and motherboard sales signaling a weak PC market 2 months out.  You won’t know anything about Vista sales in January, so you have to go to APRIL 2007 to hedge the Vista launch.  The APRIL07 $30 PUTS cost $1.15 per share/contract, so you decide to spend the $1.15 to lock in a rock-bottom sale equivalent of $28.85 (based on $30 strike minus the $1.15 premium). 

The current market shows the $30 strikes for APR07 at $1.60 to Buy the CALLS and $1.15 to Buy the PUTS.  The call options at $29.80 are not even in the money, but there is $0.20 intrinsic value in the Put contracts.  This shows that no one is worried about the market falling.

Please don’t interpret this as a "The market has it all wrong and people need to worry about the bottom dropping out" because that is not the intent.  What is amazing though is that investors tend to look at protecting profits and making bets about a market or sector drop after it is too late.  That is when they tell themselves "Oh man.  I could have bought downside protection for 5 months for about 4% of the price of the stock.  I could kick myself for not doing that."

So, in summary you have all the opportunity in the world to lock-in some gains here by buying put options that are at the money or slighly out of the money.  You can also write at the money or slightly out of the money calls, but that locks you into holding positions and also takes away big upside if we get a flat December and a stellar January.  Hedging entire portfolios here is becoming very cheap.

Posted on: November 20, 2006 – 3:03 pm in WiMAX

Cramer Discusses Merger Environment

On today’s STOP TRADING segment on CNBC, Jim Cramer had a lot to discuss with so many mergers happening.

He is saying trying to find a common theme may be the wrong approach.  He said in the case of a Phelps Dodge (PD), there are many other companies out there like this.  He thought Freeport (FCX) needed another source of copper and this was a cheap way for them to rapidly get a larger footprint.

Cramer thinks the overall market is undervalued with a 17 P-E and all the cash on the sidelines.

Cramer discussed breast implant approvals.  He said Allergan (AGN) is a genius company doing everything right.  They are winning from Bausch & Lomb (BOL) woes.  Cramer thinks that AGN should have been higher anyway and this is just icing on the case.  He thinks it is too cheap and you should hold AGN.

He thinks Research in Motion (RIMM) is the ultimate gift you could get here and investors should buy.

Jon C. Ogg
November 20, 2006

Posted on: November 20, 2006 – 2:48 pm in Cramer

The Fifteen Most Overvalue Stocks: Franklin Resources

In looking for the most overvalued stocks, we considered metrics like price-to-sales, rapid stock price appreciation not supported by comparable financial growth, pricing and revenue pressure from competition, and future predictions of success like forward P/E. All of the stocks that we examined are large caps, and we have made an attempt to look across as many industries as possible.

Franklin Resources. (BEN) The large mutual fund and institutional investing firm trades at about $109, near its 52-week high. This is up from $29 in October 2003. The company currently has a price-to-sales ratio of 5.66 Janus Capital’s price-to-sales is 4.0. Legg Mason trades at 3.3 times.

In it most recent quarter, growth in revenue and assets under management slowed from the immediately previous quarter. The stock is actually down from the day of the earnings announcement on October 26. Assets under management grew 3% in October to $526.8 billion.

Franklin’s shares were recently downgraded by Prudential from "overweight" to "neutral" on growth and valuation concerns. Like almost all firms in the financial services sector, especially those in the consumer segment, Franklin has risk of both a drop in the stock market and any slowdown in asset growth due to a slumping economy and housing sector.

Morningstar’s "fair value estimate" for Franklin’s stock is only $77.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Posted on: November 20, 2006 – 1:16 pm in Large Cap Stocks

Suntech Still Bright

From The Average Joe Investor

Extending my recent trend of posting about stocks I own, I was up bright and early at 4:45AM PST for the Suntech Power Holdings (NYSE: STP) earnings release and conference call. All in all it was a good quarter from the perspective that anyone doubting Suntech’s potential to continue its blazing growth has to question their spreadsheet (OK, I admit it, I had my doubts). Non-GAAP EPS came in at $0.21, beating the $0.19 estimates. Revenue came in at $163m, which is 188% year-over-year growth. Projections for Q4 revenue were $226m to $234m – sequential growth of 39-44%, not too shabby. Though Q4 revenue projections may seem to be below analyst estimates, I’d note that analyst estimates are all over the place – for example Lehman has a projection of $274m, while Merrill has it pegged at $209m.

It sounds like the MSK acquisition has been a bit slower than expected to integrate and that hurt results somewhat, but they sounded very positive on the prospects going forward. Core Suntech business seems to be well on track to what investors have heard from management previously and, though it didn’t make for a particularly exciting conference call, it does provide comfort for results going forward. Gross and operating margins in the core Suntech business came down as expected, but had some upside to what some of the analysts had expected.

One item that jumped out at me on the call, though, was the projection that over the coming years ASPs would fall at a rate of 5% while raw material prices would fall at a rate of 10% – which would theoretically result in some nice margin upside for Suntech. In such a young and fast-growing industry, though, it’s really tough to make reliable projections out too far.

There was very little pre-market action on the stock and saying that early market action has been tepid is an overstatement – though over 800k shares have changed hands in the first 15 minutes or so of the market open, the stock is up about 0.5%. There doesn’t seem to be a whole lot of conviction in the market right now, so it could take some time for people to get in touch with their feelings on Suntech.

Using a 17% discount rate, I am come up with a $32 price target, so as long as this is trading in the low $27’s (currently it is) it’s near that 20% error range to the upside. I’m a hold here because I have a good number of shares already, and will likely keep holding until the prices runs way up or the story starts breaking down.

Disclaimer: I am a holder of STP stock

-AvgJoe

http://theaveragejoeinvestor.blogspot.com/

Posted on: November 20, 2006 – 12:56 pm in Uncategorized

Large Autobytel (ABTL) Holder Liberate Technologies Slashes Stake

From 13DTracker

In an amended 13D filing on Autobytel (Nasdaq: ABTL) on Friday, Liberate Technologies disclosed a 2.32% stake in the company. This is down from the prior 9% stake the firm disclosed. Also in the past, Liberate was calling for a restructuing or sale of the company.

http://www.13dtracker.blogspot.com/

Posted on: November 20, 2006 – 12:54 pm in Mergers and Buy Outs

The Monday Edition- 1) Corporate Profits & Economic Cycles And 2) Opportunities In Brazil & Canada

By Yaser Anwar, CSC of Equity Investment Ideas

Corporate profits & Economic Cycles-

  • Given the weak forecast for real economic growth and developments in labor costs, I believe that corporate profit growth is set to slow. Why?
  • Unit labor costs in the nonfarm business sector are now growing faster than the prices nonfarm businesses receive for their goods and services. A deceleration in economic activity automatically causes productivity growth to weaken on a cyclical basis. ULC then climb because payrolls are not immediately pruned in the face of reduced output growth.
  • And since labor costs account for the majority of production costs, rising growth in labor costs vs. the growth in total revenues would be expected to have a negative impact on corporate profits. However, Fed rate easing cycles take hold when productivity is slowing and ULC are rising (at least in theory), and forward-looking inflation gauges so far are pointing down.
  • As a student of Economics, I’ve come to learn that in the old days (70s & 80s) it was possible to have a degree of confidence as to where we were within the context of a stable business cycle. Recently, it has been difficult to have a sense of confidence in one’s feel for the cyclical dynamics of the economy because technology driven globalization has changed so much in so many ways.
  • From the cyclical dynamics that dominate most markets (peak, contraction, trough & back) to a re-engineered global economy that has many more reciprocating parts. Until now the G.E. has shown a tendency to run more smoothly, in the context that- cyclical expansion phases have been longer and less asperous.
  • Before I end this section- Historically a move below 50% (in ISM, almost there) has been a good indication that the Fed would soon start to cut rates. The good news for manufacturers is that pricing pressures have receded, prices paid measure plunged in Oct., suggesting that the margin squeeze from high energy prices is easing.

Global Macro- Opportunities in Brazil & Canada

  • B: Torpid economic growth & receding inflation will enable Brazil’s CB to cut interest rates in the coming months. The combo of falling interest rates & inexpensive valuations should lead the market higher on a 6-12 month horizon, with financials (CIB, BBD) the main beneficiaries. Lower policy rates and declining inflation will keep the domestic bonds in bull mode (my favorite being the 3-yr yields for 13%).
  • C: By now you would have heard of the falling axe on Canadian income trusts. I believe there is a good opportunity here thanks to the Canadian FM Jim Flaherty. In a matter of hours there was billions of dollars in market cap. wiped out. So where is my opportunity?
  • Some income trusts now trade with extremely attractive dividends (PGH 17%, PVX 13.4%, PMT 19%). What you need to keep in mind is that the aforementioned stocks (and some more) have a 4-year exemption from paying corporate tax. So you’ll receive the same income streams until 2011.
  • Choose the best energy and resource income trusts you can find, buy ‘em cheap. Enjoy the huge income streams for the next 4 years & who knows maybe the Canadian government decides to make an exception for the energy and NR sector? Four years is a long time in politics.

www.equityinvestmentideas.blogspot.com

Posted on: November 20, 2006 – 12:52 pm in Uncategorized

When Zell Sells, We Listen

By William Trent, CFA of Stock Market Beat

Sam Zell built the largest publicly traded real estate firms in Equity Office Properties (EOP) and Equity Residential Properties (EQR). After years of acquisitions to build the portfolio, he is now cashing out just as many have called a peak in the real estate market. Blackstone Acquiring Trust in Richest Buyout – New York Times:

The Blackstone Group, a private investment firm, said yesterday that it had agreed to acquire Equity Office Properties Trust, the nation’s largest office-building owner and manager, for about $36 billion.Equity Office, with some 590 buildings and over 105 million square feet of office space in major metropolitan markets, was created in 1976 by Sam Zell, a real estate tycoon who built the business through dozens of acquisitions that were worth, in aggregate, more than $17 billion. Last year, Equity Office acquired the Verizon Building on Sixth Avenue in Manhattan for $515 million.

Matthew L. Ostrower, an analyst at Morgan Stanley, called the proposed deal “a ground-breaking transaction for the real estate world in general and an earthquake for the REIT industry.”

Well, actually no ground is being broken as this is a buy- rather than a build- decision. Nonetheless, the fact that residential real estate prices have softened considerably is surely not lost on Zell, who may now feel that office properties have peaked in value as well. The article continues:

For Mr. Zell, one of richest men in America and the owner of more real estate than Donald J. Trump, the sale is an opportunity to cash out of part of the empire he built while working from his office in the old Daily News Building in Chicago. But the sale by Mr. Zell, who made his first millions in the 1970’s buying distressed real estate, may also signal that he believes the market may have peaked.

Just last month, Ross L. Smotrich, an analysts at Bear Stearns, wrote in a note to investors: “REIT’s have outperformed the broader market in each of the past seven years, putting valuations at the high end of historical ranges.”

The only real question is why would anyone want to sit on the opposite side of the table and buy a huge real estate portfolio when Sam Zell is selling. The article also answers that question:

Private equity firms are vying to hold the crown of having led the biggest buyout in history, and, with this deal, Blackstone will be able to do so at least for now.

What a great reason to invest. Yet it isn’t the first questionable buyout this year, nor do we expect it will be the last. Starting with massive buyouts of highly cyclical semiconductor firms and continuing to the largest ever real estate buy when most concede the market has topped, Private Equity funds are showing that they simply have too much money to invest. We highly doubt the future returns on private equity investments will even approach the levels of past returns, as the hot money is unlikely to find sufficient real value opportunities to be put to good use.

The author may hold a position in the securities discussed. The author’s current holdings are as follows: Long: Intuit (INTU) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Lion’s Gate (LGF); Three Five Systems (TFS); Adobe Systems (ADBE) call options; Ceradyne (CRDN); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Lion’s Gate (LGF) call options; Dell (DELL) put options; Ceradyne (CRDN) call options; Plantronics (PLT) put options.

http://stockmarketbeat.com/blog1/

Posted on: November 20, 2006 – 12:49 pm in Uncategorized

Shifting Sands in DRAM Market

By William Trent, CFA of Stock Market Beat

As the companies in the market take different competitive approaches, the market share for producers of the dynamic random access memory, or DRAM, is shifting. DRAM is the primary memory type used in personal computers. According to The Idaho Statesman:

Micron Technology is poised to lose its standing as the world’s fourth-largest producer of  — the primary type of memory using in personal computers.

Micron was barely holding on to the fourth position in the third quarter of this year, according to the latest industry rankings released by iSupply Corp., an El Segundo, Calif., company that provides research and analysis on the semiconductor industry.

The rankings reflect the decision by Micron executives to diversify the company away from producing just DRAM. Micron is focusing growth on other memory products like portable flash memory and products like image sensors used in digital cameras and cell phones.

Samsung, however, is taking a different strategy. The company told investors recently it planned to increase its DRAM production in 2007 by 90 percent in hopes of reaching its goal of controlling up to 40 percent of the market.

Some analysts criticized Micron for moving away from DRAM at a time when prices for the memory, which is primarily used in personal computers, was at record levels. But Micron officials have long maintained that diversifying the product base will better insulate the company from the often wild shifts in DRAM prices.

According to the article, the top 10 producers of DRAM control nearly 99 percent of all production. The companies with the highest market share during the third quarter of 2006 are:

• Samsung, 27.8 percent

• Qimonda, 16.9 percent

• Hynix, 15.8 percent

• Micron, 10.6 percent

• Elpida, 10.2 percent

• Nanya, 6.6 percent

• Powerchip, 4.8 percent

• ProMos, 4.5 percent

• Etron, 0.9 percent

• Winbond, 0.6 percent

Source: iSupply

Such market share tables can be a handy reference for investors new to an industry group. They can then track the company’s relative sales growth in that product line in order to see who is winning or losing share.

The author may hold a position in the securities discussed. The author’s current holdings are as follows: Long: Intuit (INTU) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Lion’s Gate (LGF); Three Five Systems (TFS); Adobe Systems (ADBE) call options; Ceradyne (CRDN); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Lion’s Gate (LGF) call options; Dell (DELL) put options; Ceradyne (CRDN) call options; Plantronics (PLT) put options.

http://stockmarketbeat.com/blog1/

Posted on: November 20, 2006 – 12:47 pm in International Markets

SEMI Cycle Downturn Now Clear as Day

By William Trent, CFA of Stock Market Beat

According to Semiconductor Equipment and Materials International (SEMI), North American-based manufacturers of semiconductor equipment posted $1.50 billion in orders in October 2006 (three-month average basis) and a book-to-bill ratio of 0.95 according to the October 2006 Book-to-Bill Report published today by SEMI. A book-to-bill of 0.95 means that $95 worth of orders were received for every $100 of product billed for the month.

On a year/year basis, the slowdown in both orders and sales of semiconductor manufacturing equipment is even more apparent.

bookingsvbillings.jpg

Although it may seem otherwise, we view this as a positive sign for the industry. To us it means that the overcapacity issue is in the process of being corrected. While orders for new equipment are still growing faster than end demand, the gap narrowed significantly in October and at this rate could evaporate altogether as early as year-end. While it will still take a few months for inventory levels to work down, the market may well look past the worst of the fundamentals.

The author may hold a position in the securities discussed. The author’s current holdings are as follows: Long: Intuit (INTU) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Lion’s Gate (LGF); Three Five Systems (TFS); Adobe Systems (ADBE) call options; Ceradyne (CRDN); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Lion’s Gate (LGF) call options; Dell (DELL) put options; Ceradyne (CRDN) call options; Plantronics (PLT) put options.

http://stockmarketbeat.com/blog1/

Posted on: November 20, 2006 – 12:45 pm in International Markets

The Hunter (Phelps Dodge) Becomes the Hunted

As Bill Cara predicted several months ago, Phelps Dodge’s (PD) bid for Inco and Falconbridge has been thwarted, and has now become dinner rather than diner. Smaller Rival in Agreement to Acquire Copper Giant – New York Times:

Phelps Dodge, the world’s second-largest copper producer, will be acquired by Freeport-McMoRan Copper and Gold, a smaller rival that has been embroiled in environmental and human rights controversies, in a cash and stock deal worth $25.9 billion, the companies said yesterday.

The boards of both companies have approved the transaction. Under its terms, stockholders in Phelps Dodge will receive $88 a share in cash plus 0.67 of a Freeport-McMoRan share. Based on Friday’s closing, the deal is offering Phelps Dodge shareholders a 33 percent premium.

Freeport-McMoRan, which has a market capitalization of $11.3 billion compared with Phelps Dodge’s value of $19.4 billion, will finance the transactions by borrowing about $17.5 billion. Freeport said it expected the deal would be accretive to the combined company’s earnings per share and cash flow immediately.

There are several theories as to the meaning of the wave of mergers in basic materials, particularly metals. Some believe the deals are a signal of a market top, while we believe they signal a belief on the part of management teams that metals prices will remain high. For our part, we think the top will be signaled when the buyers are financial buyers rather than industry buyers.

The author may hold a position in the securities discussed. The author’s current holdings are as follows: Long: Intuit (INTU) put options; Nasdaq 100 (QQQQ) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Lion’s Gate (LGF); Three Five Systems (TFS); Adobe Systems (ADBE) call options; Ceradyne (CRDN); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Lion’s Gate (LGF) call options; Dell (DELL) put options; Ceradyne (CRDN) call options; Plantronics (PLT) put options.

www.stockmarketbeat.com/blog1/

Posted on: November 20, 2006 – 12:42 pm in Uncategorized

Red Hat’s Silly Move to NYSE

by Jon C. Ogg

Stock Tickers: RHAT, ORCL, MSFT, NOVL

Red Hat (RHAT) has not been without controversy nor been without problems of late.  It has managed to see its core Linux office suite market come under a longer-term threat from the likes of Oracle (ORCL), and Microsoft’s (MSFT) settlement with Novell (NOVL) where it will make Suse Linux interoperable with Windows and offer support has it running for cover.

Last week we found out that several published articles said Red Hat has the same offer from Microsoft that Novell had, but it is apparently taking a pass on the deal.  The one saving grace for the company is that its Linux office suite is one of the few Linux office suite brand names that people can buy right off the shelf at office supply and technology stores.

Well, after Friday’s close the company announced it was going to try to switch its NASDAQ listing and go over to the NYSE under the ticker "RHT."  This is just silly for the company to try.  Such moves can create a short squeeze where certain short sellers decide to cover, but NASDAQ is more geared toward the stock trading of Red Hat as a company because of valuations and because of the investor type it attracts.  Maybe this will keep a smaller number of short sellers at bay whenever there is bad news from the company, but it will also take it off fo the radar for many "Buy Only" day traders and investors who like buying the stock.  It is far more important and more appealing to share buyers than it is having to try to cope with short selling.

RHAT has a market cap of $3.1+ Billion, trades 9 million shares per average day, currently has a $16.00+ share price, makes money on a raw profitability basis, and has more than enough liquidity to meet NYSE listing rules.  But with a price to earnings ratio of 43, a price to book value ratio of over 4.0, and a price to sales ratio estimated at about 8-times fiscal FEB-2007 sales, this is far from a "cheap stock."  NYSE traders won’t really care that its 52-week high of $32.48 is close to 100% higher than current prices because a stock slide isn’t what more traditional NYSE listed traders tend to use as a sole determining factor of it being cheap or expensive. 

Maybe the company is just trying to give the air that it is a more established brand and more stable company, but this is probably not a great move for share holders that own the shares higher that are feeling "long and wrong."  The market doesn’t exactly telegraph that this is a great move because the shares are down another 1.5% at $16.42 after the first hour of trading.  This is evident of a company not consulting with holders and taking share price reaction into account of its decision.  The company was thought of as a potential buyout candidate in months past, but even with the CEO saying they want to be an independent company it makes you wonder if anyone WOULD EVEN WANT TO ACQUIRE IT now.

Jon Ogg can be reached at jonogg@247wallst.com and he does not own securities in the companies he covers.

Posted on: November 20, 2006 – 10:41 am in Exchange News

Blackstone’s buyout of Equity Office Properties Trust, a real game-changer

by Jon C. Ogg

The Blackstone private equity buyout of Equity Office Properties Trust (EOP) is a real game changer for Office REIT shares.  This office property sector has been consolidating in the recent years, but this is the equivalent of China buying the State of California.  the total deal is valued at a whopping $36 Billion if you includ ethe enterprise value with some $16.5 Billion in debt.

You keep hearing speculation of a private equity bubble out there, but private equity’s attempt is to make more money off of inefficiencies where public companies can either be run better as private companies or where cash flows from a certain competitive stance are worth taking a company over for its predictable cash flow to provide an equivalent investment yield for the investors.  The size compared to values makes you wonder if the stated values of the properties that this holds are understated or deemed a bargain, or if this deal is meant to invest a huge chunk of cash simultaneously.  So is it a bubble, or is it a lump-sum transaction with the intent of paring off properties?

Sam Zell, the well known CEO of Equity Office (EOP) is also not involved in this deal other than the fact that he’ll be cashing out and becoming worth even more gazillions riding his Harley. 

What is even more substantial here is that while EOP does have many key trophy properties and while it is the largest Office Properties real estate investment trust out there, it is not at all considered a bargain on an overall comparative basis.  In fact, its size and leadership actually has a premium to many other high-value office REITs.  The company trades at about 2.5 times stated book value, its P/E ratio has gone way out of whack because of some balance sheet and operating changes of late, and its dividend yield is lower than many other office REITs.

This has many other office REIT stocks with market caps of $2 Billion or more trading higher right after the open.  Here is a partial list:

Boston Properties (BXP) +7.6% at $116.86; $13.65 Billion market cap.

Liberty Property Trust (LRY) +2.5% at $48.37; $4.35 Billion market cap.

Mack-Cali Realty (CLI) +6% at $52.65; $3.3 Billion market cap.

Brandywine Realty (BDN) +1.1% at $33.32; $3 Billion market cap.

Alexandria Real Estate (ARE) +2.4% at $100.57; $2.9 Billion market cap.

HRPT Properties (HRP) up 1.8% at $11.93; $2.5 Billion market cap.

Corporate Office Properties (OFC) up 2.1% at $48.05; $2.05 Billion market cap.

Maguire Properties (MPG) up 4.5% at $43.76; $2.05 Billion market cap.

Posted on: November 20, 2006 – 9:57 am in Mergers and Buy Outs