Daily Archives: November 26, 2006

E-Commerce New Makes Amazon Look Good (AMZN)(WMT)(TGT)

Comscore says that e-commerce spending on the Friday after Thanksgiving rose 42% to $434 million. That has to be good news for Amazon, which is the largest online retail site in the US by fair with 45 million unique visitors in September.

It is also safe to assume that Wal-Mart should have done well, but its site was down part of the day with traffic problems. It had 22.8 million uique visitors in September. Target’s site sat in third place with 20.9 million visitors. 

Amazon’s stock has had a good run, from below $33 on October 23 to its current price above $42. If e-commerce news stays good for the holidays, it could go higher.

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

Posted on: November 26, 2006 – 8:03 pm in Uncategorized

Barron’s Summary, November 27, 2006 Issue

Stocks: (MNT)(DOX)(CSE)(ERTS)(STZ)(DVA)(GHCI)(DOV)(OSK)(TPX)(COM)(MEL)(ASMI)((VRTX)(ITMN)(IDIX)(HA)(JWN)(CAG)(NTY)(PKD)(GRP)(AMP)(MET)(BAX)(MCK)(CAL)(TFX)(BMC)(HPQ)(GEF)(SEH)(AT)(Q)(AES)(PCG)(GPS)(MU)(BBBY)(NKE)(LIZ)(EMC)(COST)(KMP)(EL)(LLTC)(MXIM)(ADI)(ALTR)(BAC)(SCHW)(AVP)

Bank of America made a smart move by purchasing US Trust from Charles Schwab It should take the bank from the nine place to fifth place among all providers of banking to the ultra-rich. The move prompted CIBC World Markets to lift its price target on the bank from $59 to $65.

Avon is up on rumors of a potential buy-out  At around $33, the stock may have peaked. Management has done most of what it can to imptove earnings. But, a buy-out would have been more attractive last year when the stock was $10 lower. And, if no one makes an offer, the stock could fall.

As private equity expands its appetite for bigger and bigger deals, the list of companies that could be taken private expands. A Morgan Stanley analyst now say that the list could inclue Gap, Micron Tech, Bed, Bath and Beyond, Nike, Liz Claiboren, EMC, and Costco. Merrill Lynch has Estee Lauder  and Kimberly-Clark on its list. And Credit Sights includes Linear Tech, Maxim, Analog Devices, and Altera on its list.

Charles Schwab has a stock picking model that has been working well. Th 20 stocks that are highly recommended by the Schwab Equity Ratings System are Habro, Nordstrom, Conagra, NBTY, Parket Drilling, Grant Predico, Ameriprise, MetLife, Baxter, McKesson, Continental Air, Teleflex, BMC, HP, Grief, Spartech, Alltel, Qwest, AES, and PG&E.

Hepititas C is a dangerous illness that affect 170 million people worldwide. The big winner is likely to  be Vertex. But, other companies are in the running to find a cure, including Intermune and Idenix.

Mellon Financial is pushing Dutch semiconductor equipment company to spin off one of its money losing units to improve share holder value. The irony is that Mellon itself has problems with its asset management businesses and some of its shareholders are trying to get this unit sold. One broker now has a $37 target on Mellon which currently trades at $41.

The head of Westcore Select Fund has generated a 17% annualized return over the last 3 years. The fund’s top holdings are Amdocs, CapitalSource, Electronic Arts, Constellation Brands, Genesis Health, Dover, Oshkosh Truck, Temper-Pedic, and Coach.

News that silicon breast implants has been approved by the FDA is driving up shares of Mentor. However, the stock trades at 42.3 times projected profits and there is resistance to the breast implant approval. So investors should be careful.

Douglas A. McIntyre

Posted on: November 26, 2006 – 7:47 pm in WiMAX

The Conservatives’ Take On Wall Mart Faces A Test

Stocks:  (WMT)(GM)

George Will, the conservative thinker, believes that Wall Mart has done more for the poor in the US than the federal govenment has. Old news. But, if Wal-Mart’s current malaise in the US continue, Will’s theory may indicate that the retailer’s problem’s could become the economy’s problems. Among other things, Wal-Mart saves shoppers $200 billion a year, a sum that is almost 10x what the governemnt provides in food stamp payments each year. With 1.3 million employees, Wal-Mart has almost as many people on its payroll as the US military. And, Wal-Mart adds 100 jobs for each 50 jobs it takes out of the retail sector.

McKinsey says that Wal-Mart was responsible for 13% of the nation’s productivity gains in the second half of the 1990s.

There is every reason for labor unions and other groups that fairly or unfairly have a bone to pick with Wal-Mart to challenge these figures. However, if one supposes that they are largely correct, the slow down in Wal-Mart’s business is certainly bad business for the US economy.

Wal-Mart’s same store sales have been running up very slightly. In November they will actually be down .1%. Under these circumstances, it is unlikely that Wal-Mart will be adding large numbers of new employees in the US. It may be that competitors like Target will take up some of the slack, but it is highly likely that store chains like Home Depot and Lowe’s are not adding new employees. The housing market is simply too brutal.

It may be that the discounts offered by Wal-Mart will continue to help save money in a manner that helps the lower income shopper much more than anything he or she will get from the government. It also may be true that as Wal-Mart drops prices, the action helps bring down inflation. What is equally evident is that whatever benefit Wal-Markt offers the economy in general is diminishing. A chain with falling same store sales is not long a huge growth engine.

In 1953, the CEO of GM said: "what was good for the country was good for General Motors and vice versa." At that point GM was the largest company in the world and employeed 600,000, probably about equivalent to Wal-Mart’s current 1.3 million.

The fall of GM has certainly not done the larger ecomony much good. Did it save consumers some money to buy Hondas? Perhaps. But, hundreds of thousands of jobs have disappeared.

Wal-Mart is at a tipping point. If it moves the wrong way, it is difficult to see who is helped.

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

Posted on: November 26, 2006 – 7:03 pm in Uncategorized

Texas Instruments Gets A Vote Of Confidence (TXN)

Texas Instuments has not done too well lately. While short interest in the company’s stock fell sharply in November, down 9.1 million shares to 27.1 million shares, the stock has dropped from $34 at the end of September to its current level of $30.

Not everyone can be right here, both the longs and the shorts.

Forty-three analysts cover TI’s stock, according to The Motley Fool, so there is no lack of opinion on the company’s future. The company has underperformed the S&P 500, but past performanc is not a sign of future results.

The concern about TI may revolve around whether the cell phone market will keep growing and whether TI can gain share. The number of shares sold short would seem to indicate that at least some portion of the market thinks so. A number of forecaster believe that overall cell sales will grow less than 10% next year and then pick up in 2008. But, TI is trying to attack the markets that are growing most quickly, especially China. The company has developed a low cost chip to power inexpensive smartphones with the big Asian coountry as the primary target.

On the back of an envelop it would appear that TI may not do extremely well in the next couple of quarter, if the cell market growth slows. But, if less expensive phones will drive demand in the fast growing markets, TI has put itself at the center of the action.

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

Posted on: November 26, 2006 – 1:41 pm in International Markets

Shorts Back Verizon’s Bet (VZ)(T)(BT)

Short interest in Verizon fell over 9 million shares in November to 35.3 million. It would appear that at least some on Wall St. do not want to underestimate Verizon’s bet on fiber-to-the-home.

The drop in short interest is certainly not in line with recent criticisms of the strategy. AT&T’s investment in fiber is much less than Verizon’s. An executive from British Telecom recently opined that the service would not get nearly as many takers as Verizon has projeced. Taking the other side of the argument, Barron’s wrote that Credit Suisse recently upgraded Verizon, arguing the the fiber return on investment could be very strong at under 20% market penetration.

The Verizon gamble is still fraught with risk. The company is investing $18 billion in the technology. The company forecasts it will have 3 million to 4 million subscribers by 2010, a 20% penetration of homes passed by the service.

Some short sellers may be exiting the stock which has dropped from nearly $39 at the end of October to it current price of $34.75.

As Verizon gets deeper into its investment, and the early results of subscriber growth become apparent, the bets on Wall St. will increase.

The lines are drawn.

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

Posted on: November 26, 2006 – 1:24 pm in Uncategorized

XM And Sirius: A Merger? Again?

Stocks:  (XMSR)(SIRI)

The CEO of Sirius is at it again. A merger with XM? Maybe. Mel Karmizan, the head of Sirius is playing "cat and mouse" with investors and the press.

Since Sirius is the weaker company, perhaps Mr. Karmizan has it backwards. At $4.26, Sirius is trading near its 52-week low and is down almost 50% this year. It has over $1 billion in debt. And, that company still loses mountains of money. A merger? It may be the only way that Sirius stays in business.

XM’s stock is not up over 50% from its 52-week low, now trades at $15.27. XM has done a good job of restructuring its debt, and still leads its rivals in the key areas of units preinstalled in new cars.

If holiday sales go well both companies could become cash-flow positive, although that may not continue after the end of the year. It certain will help both debt laden companies. It may make a merger less necessary.

The performance of the stocks over the last three months would indicate that investors have much more confidence in XM. The larger company’s stock is up 20% over the period. Sirius’s stock is down 5%.

Karmizan may be right about a merger, but he may not be the last man standing.

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

Posted on: November 26, 2006 – 12:53 pm in Uncategorized

The Internet Becomes It Own Worst Enemey

(WMT)(AMZN)

t has been a  number of years since the Victoria’s Secret site was down due to the huge number of people who wanted to see the live introduction of its new lingerie line. It raised some doubt about whether the internet was the perfect ecommerce and marketing venue. But, as web hosting became more sophisticated, those problems seemed to fall away. Companie like Akamai seemed to solve the problems of web hosting and content transmission over the internet.

This holiday season has delivered a bit of a blow to the consumer’s confidence in the interent as the idea shopping center. Wal-Mart’s site was down for much of the day after Thankgiving. This was surely not what the struggling retailer needed. It posted a drop in same-store sales for November.

Amazon’s site was also down for part of the Thanksgiving shopping week.

Both outages were blamed on unanticipated spike in traffice. Of course, the hosting architecture of these sites and others is supposed to keep that from happening.

There are some online shoppers who will not be returning to the Wal-Mart site, at least this shopping season. They went somewhere else to make their purchases. Or, they are worried that if the site does not work, perhaps the "back end" of the system is flawed and they will not be sent what they could order after the Wal-Mart site came back up.

Either way, ecommerce has done a nice job of shotting itself in the foot.

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

Posted on: November 26, 2006 – 12:29 pm in Large Cap Stocks

Chysler’s Turn To Take The Whipping

Stocks:  (DCX)(GM)(F)(TM)

Early in the year, GM was viewed as the one of the Big Three most likely to fail. Its stock fell to $18 (it now trades at $31) as the market doubted that it could hold share while cutting costs by $9 billion a year. Wall St. now at least half believes the story. Then Ford took its position as the company in trouble. It admitted that its Way Forward program was not taking out enough costs as sales feel sharply. Bill Ford was even forced to replace himself as CEO. The stock feel to $6.17 in June (it now trades at $8.50) Although Ford cound not find a car executive to take the job, getting an aircraft executive seemed a good second.

Ford is now at least viewed as having an even chance at escaping.

Now, according to an AP story in The Oakland Press, one of Michigan’s largest newspapers, Chrysler’s sale in November will be poor. Based on research from Edmund’s, the online car site. overall US car sales should rie 6%. The research operation expects all six of the larges car companies to post November gains, except Chrysler. Even with incentives as large as $7,000 a vehicle, Chrsyler’s sales could fall as much as 4%. Its reliance on SUVs and pick-ups wil simply be too much to overcome.

The Chyrsler unit has become a special pain for parent DaimlerChrysler. While its Mercede unit is doing well, the Chrysler division is dragging overall sales down.

Daimler has countered by sending German executives to the US to try to take $1,000 in expenses out of every car.  However, it is unclear that suppliers and labor will cooperate. The UAW has thumbed its nose at Chrysler’s request to cut health costs.

Chrysler is hurt by the success of its parent. Parts suppliers and unions can fairly claim that Daimler is much better of financially that Ford and GM.It sports a $61 billion market cap. GM’s is $18 billion, although its is a larger company. Ford’s is $16 billion.

Chrysler simply miscalculated the demand for its products, as GM and Ford did before it. Toyota has had not such problems, gaining share by bringing fuel-efficient cars to the US and crossover vehicles, smaller SUVs.

Tom Lasorda, Chrysler’s CEO, has said he may lose his job over the miscalculation. And, well he should.

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

Posted on: November 26, 2006 – 10:05 am in Uncategorized

Merck’s Reprieve (MRK)(MO)

Merck dodged a bullett. A big one. The courts ruled that plantiffs in suits against the company involving Vioxx cannot gain class action status. That means that each suit against the company over the possible side effects of the drug will have to proceed on its own. And, that makes each suit expensive for the plantiffs. Merck has plenty of money to spend on lawyers. A big advantage.

Merck is facing thousand of lawsuits over Vioxx, but, like the tobacco companies before it, Merck plans to fight these, and bleed it opponents for their legal costs. The company has won Vioxx suits in federal courts that it has lost.

Watch for Merck’s approach to be as successful as Altria’s was in tobacco liability suits. Merck now has the upper hand in the long battle in the couts, and that may scare off a lot of plantiffs.

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

Posted on: November 26, 2006 – 9:36 am in Uncategorized

Pfizer’s Effort To Pound Altria May Work

Stocks:  (PFE)(MO)

Pfizer’s world headquarters is a five minute walk from the executive offices of Altria, the owner of cigarett behemouth Philip Morris. The two companie, at one level, have become enemies.

Pfizer introduced a drug, Chantix, is not doing well. Altria can add that to the list of things that is keeping its stock near all-times highs above $80.

But, Pfizer’s marketing approach, which is to soft-sell the drug in a market that is skeptical about smoking remedies, may begin to push up sales, and some estimates says the drug could do $1 billion annually if things go well.Part of Pfizer’s novel approach is to help doctors develop a multifaceted treatment for smoking patients. The drug is only a piece of this. And, doctors appear to appreciate it.

If the drug is sucessful, it would be a blow to Big Tobacco. After side-stepping most of the lawsuits over whether they were liable of tobacco-related deaths, Altria and others are pushing out record earnings. Altria also appears to be doing well in its effort to keep planitiff in a suit over "light" cigarettes and the damage to smokers from gaining class action status. The news drove Altria’s stock up again.

But, perhaps science can accomplish what the legal system cannot. A drug that helps smokers quit could get a big foothold in the US, but may smoking deaths are now overseas in place like China and Japan. The governments in those countries have a national health problem. Cigarettes.

Prizer to the rescue? Altria better hope not.

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

Posted on: November 26, 2006 – 9:21 am in Uncategorized

Sony Playstation Stumbles Out Of The Gate?

Stocks: (SNE)(MSFT)

According to American Research Technoloogy, Sony is already behind the eight ball on intitial US sales of its PlayStation 3.  Sony was anticipated to ship 400,000 units on the first day the game platform was available.American Research says that number is close to 125,000 to 175,000. The research firm also says that this may put in question of whether Sony can hit its goal of shipping 2 million Playstations worldwide by the end of 2006.

Sony’s near term future and the leadership of Howard Stinger, Sony’s CEO, rest with Playstation. PC battery recalls and losses in the company’s game operations brought the company’s net down 92% in the last reported quarter.The company recently announced that is found defects in its popular digital cameras. Sony’s stock has fallen from over $52 to $39 over the last six months.

The fact that PlayStations sales may not be up to forecast is a blow that Sony can ill-afford. Playstation sales in Europe will be delayed until March. And, Sony is projected to lose $300 on each unit.

Sony is not in real trouble, and if Playstation US sales are well below forecast for the holidays, the company’s board has a tough decision to make. Should Stringer be replaced with a senior Japanese executive? That could be popular in the company’s home market, but solves few problems over the near-term. Or, should Sony break itself into several pieces and sell of some divisions like Playstation? There may be interest across the Pacifit in Redmond. That woul leave Sony with its studio, which also might be sold, and its consumer electronics and finance divisions. And, those might prosper if they were on their own.

Perhaps Sony should be a smaller, by more successful company.

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

Posted on: November 26, 2006 – 8:59 am in Uncategorized

As Wii Sales Growth, Nintendo Become Takeover Target

Stocks: (MSFT)(AAPL)(SNE)

The Nintendo Wii Gaming system may have a better holiday season that Microsoft Box or Sony Playstation 3 Based on an analysis published by Breakingviews.com, Microsoft has never made money on sales of Xbox hardware and Sony is projected to lose $300 per system, at least for the time being. The Nintendo Wii has fewer features, but that may allow it to make money on each unit.

Nintendo’s stock has doubled in the last year.

According to MarketWatch, Nintendo now has a market cap of $32 billion. Micosoft’s is $293 billion. Sony’s is $39 billion. Apple’s is $78 billion.

Nintendo’s market value may be beyond what Sony could pay, although it could use Wii’s success and position in the market as a game product for younger player more than Microsoft or Apple could. But, Micosoft could clearler use the Wii as a way to jump ahead of Sony by offering Xbox as a high-end system and Wii as a less expensive alternative. Microsoft could also afford to upgrade Wii’s feature set over time.

But, perhaps the most interesting potential suitor for Wii is Apple. It already has the iPod and computer legs to its business but lacks a consumer game platform. If it could make the Wii as cool as the iPod, Apple might actually come to rule the consumer electronics world.

iPod sales must slow. The penetration is getting high as the device passe 70 million units in sales. Macs may do better, but their share is still only around 6%.

But, the Wii could rule in the hands of someone like Steve Jobs.

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

Posted on: November 26, 2006 – 8:32 am in Uncategorized

Wall Mart’s Sale Fail As It Helps The Economy (WMT)

Wal-Mart posted it wortst sales month in recent memory, with same-store activity dropping .1%  All of the big discounts offered by the chain and its new $4 generic drug program could not pull results up. It now appears that the fear that there is a systemic problem at the company have come true.

The results open the Wal-Mart management to further criticism. Does the company have too many stores in the US? Has the chain reached a point of saturation? Or, is the merchandise mix simply so poor that the store count is academic? The current product selections at the stores is just too poor.

Wal-Mart management has failed to address the question of whether the company’s US problems extend beyond pricing. Pricing was to be the fix, and it is not working.

Irony abounds. There is now educated speculation that the cuts at Wal-Mark could now bring down the rate of inflation because the company’s sales are such a large part of the GDP. If other retailers match these price cuts there could be a ripple effect.

What the company can do for the governemnt is small comfort.

Things are getting worse at the largest retailer and the old fixes are not working.

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

Posted on: November 26, 2006 – 8:09 am in Uncategorized