Daily Archives: December 3, 2006

Barron’s Digest December 4, 2006 Issue

Stocks:  (NTDOY)(MSFT)(SNE)(IBM)(DUK)(SE)(IMCL)(APC)(TWX)(BBI)((AZO)(AN)(HSP)(AXP)(ABT)(GOOG)(AAPL)(QCOM)(TXN)(AMR)(CSCO)(MU)(AMAT)(AMP)(SHLD)(BAM)(RL)(DTV)((ALL)(AHL)(AXS)(ENH)(IPCR)(MXRE)(MRH)(PTP)(RNR)(XL)

A number of property and casualty insurers will do well this year as they rebound from last year’s hurricane season. Some of the shares are already up, but there may be further increases in the price of these companies: AllState, Aspen, Axis, Endurance, IPC, Max Re, Montpelier, Platinum, Renaissance, and XL.

Depite a run-up to a 52-week high of $78.75, Polo Ralph Lauren’s share could continue to move. Certain investors are concerned about insider selling. , but the company’s operating margins continue to rise.

DirecTV does about $1 billion a year in free cash flow. Some investors are concerned that its subsciber churn rate is too high, Other believe that at 18x projected 2007 earnings, the shares are cheap

The five hottest hedge funds are Appaloosa, ESL Greenlight, Icahn, and Lone Pine. Other firms track their buying and selling. Appaloosa’s top five holdings are Oracle, Micron, Applied Materials, AMR, and Mirant. ESL’s are Sears, AutoZone, AutoNation. Greenlight’s are Amerpirise, Microsoft, Hospira, First Data and Live Nation. Icahn’s are TimeWarner, Imclone, Cmerican Railroad, Hilton, and Symantec. Lone Pine’s are Brookfield Asset, Google, Comcast, Schlumberger, and Research in Motion.

Duke Power is spinning off its natural gas distribution business, Spectra Energy. The distribution company may be undervalued. Investors may also understand the business better that typical untility investors.

IBM shareholders have had a tough ride the last few years. But, the company’s plan to convert itself into a software company is working. It is now the second largest software company in the world.Software is now 40% of IBM’s earings.  The company has also gotten out of the PC and disk drive businesses. The pretax margin on software may hit 31.3% up from 22.8% in 2001. If its does, the shares could move up.The company is also No.1 in the world in the blade server business. A hot sector, it is one of IBM’s cash cows.

Microsoft has begin its next stage by introducing its new Windows operating system and its latest version of Microsoft Office. Some investors are worried that Microsoft can improve greatly on its $15 billion a year cashflow business. But, Microsoft is also launching voice communications and collaborative software to compete with Cisco. And, its XBox unit may start to turn a profit.

Nintendo has more than doubled over the last year hitting $30. Its new Wii gaming system may follow the success of the older Nintendo DS. For the stock to run many on Wall St think that they Wii would have to sell well for several years. But, Microsoft’s XBox and Sony’s Playstation are formidable competition, and there is some risk that Wii sales may begin to weaken as Christmas 2007 approaches.

Douglas A. McIntyre

Posted on: December 3, 2006 – 8:32 pm in Press Digest

New Holiday figures, Good For Amazon

Stocks:  (AMZN)(MSFT)(AAPL)

New Comscore figures on holiday e-commerce spending show that spending from Nov 1 to Dec 1 2006 is up 24% to $11.75 billion.

Perhaps more important, visitors to retailing sites is up 12% and "per visit" spending is up 11%.

All of these figures may be good for online sites in general, but Amazon, as the largest site in the category, is almost certain to have good fourth quarter numbers. Additionally, almost all media accounts about sales of the Apple iPod and Microsoft Zune reference sales figures at Amazon. The addtional publicity is likely to be welcome with Christmas only three weeks away.

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

Posted on: December 3, 2006 – 6:34 pm in Internet

Fifteen Moat Overvalued Companies: Manulife

Manulife (MFC) is the second largest life insurance firm in North America. It recently bought John Hancock Financial Services. Four years ago, the stock traded for $9. It now changes hands at $33. At $54 billion, the company’s market cap is twices its annual revenue. By contrast, Met Life trades at about 1x revenue.

Manulife has large businesses in insurance, wealth management, and long-term care.

Long-term interest rates are likely to put pressure on the company’s financial performance. BMO Capital Markets recently downgraded the company from "Outperform" to "Market Perform".

Manulife says that it is focusing on acquistions, so, depending on what kind of firm the company buys, earning could be diluted in the next year or two.

UBS recently dropped its price target on the company because of moderating sale growth.

Good company. Over-bought.

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

Posted on: December 3, 2006 – 12:10 pm in Uncategorized

So Why is Intel (INTC) Cutting Prices?

By William Trent, CFA of Stock Market Beat

When we heard that Intel (INTC) was cutting prices on its new quad-core chips, we said “Since AMD has no direct competitor to Intel’s quad-core design, it is somewhat troubling that Intel would be lowering the price so early.  It is one thing to have aggressive price cuts in older designs in order to clear out inventory. It is quite another thing to discount the latest and, presumably, greatest products.”

A commenter replied, “When you say that AMD is no direct competitor to Intel, this is partly true, and may explain why AMD proposal sounds better than Intel, AMD is proposing today a platform with 2 dual core with the possibility to migrate to an 8 core system when AMD’s quad core will be available.”

Well, the results are in. AMD Quad FX slaughtered by a single Intel CPU | George Ou | ZDNet.com reports:

All the reviews are in for AMD’s new “4×4″ Quad FX dual CPU platform and it loses nearly every single real world benchmark to a single Intel CPU while consuming more than twice the electricity. We basically see two FX-74 3.0 GHz processors getting slaughtered by a single Intel QX6700 2.66 GHz quad core processor! Ironically, three of the four benchmark sites I link to give such contradictory glowing conclusions for the Quad FX in spite of their own data showing AMD being slaughter that Baghdad Bob would be proud. Here are the four reviews of which only TomsHardware had a realistic conclusion that matched their actual data.* FiringSquad
* [H] Enthusiast
* TomsHardware
* Hot Hardware

From highly optimized multi-core applications like 3D rendering and Video encoding to single threaded applications like games the AMD Quad FX either lost by a little or it lost by a lot.

So we ask again: Just why is Intel cutting prices on the latest and greatest processors?

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; IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Ceradyne (CRDN) put options; Lion’s Gate (LGF) call options; Dell (DELL) put options; Plantronics (PLT) put options

http://stockmarketbeat.com/blog1/

Posted on: December 3, 2006 – 11:45 am in Semiconductor

Pfizer Death Drug (PFE)

Those who read this column regularly know our doubts about Prizer’s new blockbuster drugs. These are the ones the are to replace all of those going off patent and into the hands of the generics companies. As we said about the most important drug, torcetrapib, which had a high blood pressure side effect "it fixes one thing and damages another".

Pfizer pulled the drug today. Too many people were dying in the clinical trials. In a test with 15,000 patients 81 of those taking torcetrapib and Lipitor died. Only 52 people taking Lipitor alone pass away. With Lipitor going off patent in 2010, the new drug was the company’s big bet to replace the $12 billion a year in annual revenue.

Watch the stock drop off the edge of the earth on Monday. By the way, why do companies always release bad news on weekends?

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

Posted on: December 3, 2006 – 7:15 am in Pharmaceuticals