Tonight on Cramer’s MAD MONEY on CNBC, Cramer wanted to review a high-flyer to ask if you know what you own in growth stocks to see if it is too hot to handle.
He asked about Riverbed (RVBD) because it is up more than 200% from IPO and up still huge since recommended it before. Cramer says RVBD is a keeper, but if you are way up you should sell some. He says the company makes Wide Area Netoworks 50-100 times more efficient.
Have a good night.
Jon C. Ogg
December 21, 2006
Tonight on Cramer’s MAD MONEY on CNBC, Cramer thinks that Jones Soda (JSDA) could be the next Hansen Natural. This stock closed at $10.65 and had a $270M Market cap, but shares popped up more than 15% to almost $12.50 after Cramer touted the name.
He thinks this is alot like HANS was back before the run. He likes their premium sodas. JSDA has an 82 P/E, and there are only 2 analysts that cover it with a neutral rating. It has $0.12 Estimates this year and he said that is 100% growth from 2006, but he didn’t note the earnings multiples. This is one of his regional to national plays that may really break out here. He thinks the National Beverage win will really help it and noted briefly that this could be acquired.
The stock has doubled recently and Cramer was not allowed to discuss it before because the market cap was under $250M. He said you can’t buy a lot of it because it is too small and you have to use big limit orders. He said buy the stock next week after the Cramer after-hours jokers can’t take the pain anymore.
Jon C. Ogg
December 21, 2006
USG (USG-NYSE) issued a press release today stating that the company has made its final payment of $3.05 BILLION as part of the settlement for reorganization into that United States Gypsum Asbestos Personal Injury Settlement Trust. USG shares had been down roughly 2% on teh day, but shares are now down about 0.6% at $54.50 (around 2:40PM).
This means that USG can finally operate out from under any asbestos issues now and can finally be analyzed and evaluated on a real corporate basis instead of a company reorganizing and under a perpetual asbestos cloud. This has been known for some time that this day was coming, but you have no idea how as an analyst just how nice it is to FINALLY be able to evaluate this company with a quantifiable business. The total trust payments came to a $3.95 Billion, and now this finally completed. Sorry for using "finally" in every sentence, but this has been an issue in trying to evaluate USG for a decade.
The only issue about the company here is the shareholder rights plan. The old rights plan had a 5% trigger, but the new one has a 15% trigger. Berkshire Hathaway (BRK/A) currently owns a huge portion of the company and actually holds the right to purchase roughly 40% of the company without triggering the rights issue. Rights plans are deemed as one of several anti-takeover provisions that companies can implement to avoid being gobbled up. Since we run a BAIT SHOP of takeover candidates, we don’t like seeing rights plans, poison pills, loaded stock classes, nor other corporate trickery that could prevent a buyer from being able to step in.
USG is often thought of as a potential takeover candidate, and it is a "half-position" in the BAIT SHOP since the stock endured a meltdown in the summer and since Warren Buffett has been acquiring shares from that recent offering. We believe that with a forward P/E of roughly 11 to 12 for DEC07 that Warren Buffett and company could pay up to $70.00 per share before getting into price-sensitivity. The only reason at all that this was a "half position" instead of a full position or a double position is because the payments were still pending and because of this shareholder rights trigger being so low.
We are now putting it under evaluation for potentially being a Full Position in the BAIT SHOP, but that determination won’t be made until after the new year.
If you would like to join the free email newsletter list for BAIT SHOP candidates, BACKDOOR PLAYS TO IPO’s, and other SPECIAL SITUATION INVESTMENTS please send an email to the address below and list the email as "SUBSCRIBE" in the subject field. We value your privacy and do not share our email subscriber lists with any outside parties.
Jon C. Ogg
December 21, 2006
Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in any of the companies he covers. All data contained herein is based on information from sources deemed reliable and accurate, but no assurances and no guarantees can be made to the accuracy of any claims or figures. This is meant for informational purposes only and should not in any way be deemed as investment advice nor should it be interpreted as a recommendation to buy or sell securities. Neither the author nor any partners in 24/7 Wall St., LLC have been compensated to portray this or any other company in any biased or particular manner.
On today’s STOP TRADING segment on CNBC, Jim Cramer noted that the Philly Fed Index is not a good reading according to Cramer, because it would always give a negative yearly reading.
Cramer on Copper prices with copper off more than 2% today: he said it is a fiasco because homebuilders are working off their inventories. He said Copper itself is headed lower because of oversupply and low demand. Cramer on Phelps Dodge (PD) said they aren’t just a short-term play and he would actually be a buyer here for longer-term players. He doesn’t like pure plays right now though like Rio Tinto (RTP) and sell Southern Peru (PCU).
Cramer said on Las Vegas Sands (LVS) that the Macau trade may be long in the tooth, but he thinks LVS & Wynn (WYNN) are well managed and could be bought.
On Google (GOOG) Cramer was positive for its next earnings quarter but said it is "Driftola" right now through the year-end.
Jon C. Ogg
December 21, 2006
Research-in-Motion (RIMM-NASDAQ; RIM-CN) expectations: $0.94 EPS on revenue of $816 million, up from $0.71 and $560.6 million. The company is expected to say that it added a net 800,000+ subscribers in this last quarter and that the current quarter could be as many as 900,000 net users, although those numbers tend to fluctuate wildly and can create a new focal area other than just the bottom-line metrics. The company’s next quarter expectations are currently $0.98 and $861 million.
Options traders aren’t messing around for RIMM earnings, because it looks like options are pricing in a move of up to $8.50 to $10.00 in either direction. The street is going to focus on its Pearl crossover product that migrates the company from a business-only into a consumer products company, and investors should know that RIMM is up more than 100% since January 1 now that the NTP case has been settled.
Keep in mind that calling RIMM share price reactions ahead of Christmas "volatile" might be the understatement of the year. Most recently price targets from analysts on the street have crept up to $160 and some even higher. RIMM trades at 40 times FEB07 Fiscal earnings on a P/E basis and trades at and roughly a 25.5 forward P/E on a fiscal FEB08 basis, so that trailing P/E of 62 is actually a bit misleading.
Investors should also keep in mind that Ontario securities regulators have recently imposed insider trading bans until some time late in Q1 due to the fact that the company is delinquent in regulatory filings.
Jon C. Ogg
December 20, 2006
Scholastic (SCHL-NASDAQ) remembered how to reward shareholders: it release the name of the new Harry potter book. Scholastic has dubbed the 7th book in the Harry Potter series "Harry Potter and the Deathly Hallows."
This is supposed to be the finale to the mega-hit book and movie series, but we’ll see if that ends up being truth or fiction. That series has such dynastic financial success and has had such popularity that there is really no reason to kill it off. 50 and 80 years from now when may of the current Harry Potter readers are in nursing homes it is imaginable that they will remember back to Harry Potter.
It likely isn’t fair to refute a story before it has happened, but Harry Potter is too much of a success to squash. There are too many avenues for that series to branch off that could be a money-maker for Scholastic and anyone involved for years (if not decades). J.K. Rowling may not want to personally write anymore, but she could literally license and "ghost" so many things out of this. Either Scholastic or another company will probably make an offer that just can’t be refused. If yo go Barnes & Noble’s website you will see that they have 941 items under "Harry Potter," so they may say the "finale" is underway. Been there, heard that.
Scholastic should take note of this. SCHL shares are up almost 2% at $34.95, close to the $35.73 high over the last year. No date has been set for release and no run rates have been set yet.
Jon C. Ogg
December 21, 2006
From William Trent, CFA of Stock Market Beat
We have commented before on how Sony’s (SNE) tried to bite off more than they could chew with the PS3 gaming system. Now, a bizarre statement from one of their executives leads us to wonder what, exactly, they are thinking. According to ArsTechnica:
In an interview with MTV, Sony executive Phil Harrison talked about the PlayStation 3 and where his company was planning on taking their latest game console.Harrison saved his most interesting comment for last. In discussing the future of the PS3, he stressed that developers are not currently using the machine to its full capacity. In fact, he stated that the current crop of games are using “less than half” of the machine’s power, and that “nobody will ever use 100 percent of its capability.” Of course, it is common at the beginning of a new console’s life for games to not make full use of the power of the hardware: it takes some time for developers to learn the best tricks and techniques for squeezing every last bit of calculating power from any new platform. But to claim that nobody could ever make full use of the system’s power, ever, seems a bit hyperbolic. Some developers, at least, will be wanting to tap the full power of the Cell, such as IBM’s high-end customers in the HPC market. Some of this knowledge is bound to leak over to the game development world.
If Sony doesn’t think developers will use the machine’s capability, then why on earth did they put all of the capability in the machine? All they have done, apparently, is make it later to arrive and more expensive.
The author may hold a position in the securities discussed. The author’s current holdings are as follows: Long: Union Pacific (UNP) put options; Air Products (APD) put options; Nasdaq 100 (QQQQ) put options; FedEx (FDX) put options; Intuit (INTU) put options; Bookham (BKHM; Ballard Power (BLDP); Syntax Brillian (BRLC); CMGI (CMGI); Genentech (DNA); Ion Media Networks (ION); Three Five Systems (TFS); IShares Japan (EWJ); StreetTracks Gold (GLD); Starbucks (SBUX); U.S. Oil Fund (USO); Plantronics (PLT) call options; Short: Landstar (LSTR) put options; Ceradyne (CRDN) put options; Dell (DELL) put options; Plantronics (PLT) put options;
Private equity and hedge fund money is all over Detroit, driving through the streets with trucks filled with gold. KPS Special Situations has put $23 million into Jernberg Industries. The car parts company has been bankrupt since 2005. The fund thinks that management can get out of number of obligations during its period in Chapter 11 and that labor may be more likely to "talk turkey" with the company in real trouble.
But, the deal is small potatoes compared to money going into bankrupt Delphi, the former auto parts arm of GM. Spinning it off turned out to be a fantastic idea. Highland Capital, which owns about 9% of Delphi’s shares, want to fund the company as it comes out of Chapter 11 to the tune of $4.7 billion. Two other funds are also trying to finance the parts company as well.
Unsecured creditors don’t like private equity walking in and possibly carving them out of getting as much of the money owed them as possible. Of course, the union does not want to loss more jobs. But, the money has to come from somewhere, and it’s "play ball, or else".
Big labor, especially the UAW, have to renegotiate with the Big Three next year. Ford has brought in an extra $23 billion to fund its restructuring and has pledged a lot of its hard assets for the priviledge. But, if Ford’s share drops below the projected 14% of US vehicle sales or if the UAW makes things tough, all of the hedge fund boys may be willing to write Ford a check. And, put the screws to creditors and employees.
Not very nice people, but rich.
The GDP rose at only 2% in the late summer, with real estate putting on a damper. Tough luck for home builders and Home Depot.
Bristol-Myers settled the government’s beef with the company over marketing and pricing practices. It only cost the company $499 million. Retail pricing.
Hedge funds are fighting over who gets to take Delphi out of bankruptcy. The latest offer for financing the car parts maker is $4.7 billion.
IBM will compensation board members with cash and stock grants and not options. Good idea. Keeps them honest.
Douglas A. McIntyre
Stocks: (YHOO)(MSN)(GOOG)
Someone has to be wrong. One the one hand, Nielsen/NetRatings and Comscore, and on the other the head of Topix, the large online news aggregator. A survey of web page referrals, including those coming to Topix shows that Google drives 70% of web searches at large sites. The survey relied on internet measurement tool Hitwise. Since traditional measurements from companies like Comscore put that number at 45% to 50%, the disparity in figures is bound to be troubling.
And, for Yahoo! and MSN, it could be devastating.The share for MSN using this methodology is 9%. For Yahoo! 19%.
Hat’s off to Rick Skrenta of Topix.
Henry Blodget of the Internet Outsider thinks that the news is actually bad for Google. With 70% share it may have no where to grow.
Who would rather own shares in Yahoo! if the numbers from Hitwise are right? No one.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
With all of the fanfare about the success of the iPod and Mac, Apple’s stock is up very little this year. Rivals in the online music business including RealNetworks, Microsoft, and even Sony, have kept a good pace.
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Chart from AOL Finance |
It is sometimes lost in the news, but Dell’s year is worse on a chart than it is often portrayed in the media. WIth the former CEO of American Airlines joining as Dell’s CFO, perhaps he can improve Wall St.’s mood. Or, maybe he will be Dell’s next CEO.
| From AOL Finance |
Stocks: (SAP)(BCS)(BP)(BT)(GSK)(PUK)(RTRSY)(UL)(VOD)(BAY)(DCX)(DB)(DT)(ALU)(AXA)(FTE)(V)
Markets in Europe were narrowly mixed at 6.40 AM New York time.
The FTSE was down .1% to 6,192. Barclays was up .2% to 722.5. BP was down .6% to 566. BT was flat at 318.5. GlaxoSmithKline was up .1% to 1327. Prudential was up .4% to 708.5. Reuter was up .7% to 442.25. Unilever was down .5% to 1406. Vodafone was down 1.7% to 143.5.
The DAXX was down a fraction to 6,584. Bayer was up .2% to 40.8. Daimler was flat at 46.83. DeutscheBank was down .1% to 101.2. Deutsche Telekom was up .1% to 13.88. SAP was up 2.1% to 40.45. Siemens was up .6% to 73.81.
The CAC 40 was up .1% to 5,519. AlcatelLucent was .2% to 10.84. AXA was down .3% to 30.51. France Telecom was down .8% to 20.81. ST Micro was up .6% to 14.09. Vivendi was up .3% to 29.84.
Data from Reuters
Douglas A. McIntyre
Stocks: (LVLT)(VZ)(T)
Level 3 is looking good. The video revolution is filing the company’s pipelines with heavy duty internet traffic. The stock is up to $5.65, making it a double over the last year.
But, even Level 3 excecuties admit that current traffic would have to increase a great deal to sharply improve earnings:
As The New York Times points out: "Level 3’s management acknowledged to a group of investors last week that even though traffic from Internet video is huge and growing fast, it is at least two years away from becoming a large revenue contributor." Then there is the $6.8 billion in debt LVLT has. Industry analysts say that there is still too much capacity for internet traffic and as the company moves into voice traffic it comes up against AT&T and Verizon. They are not likely to let that business go easily and do not have LVLT’s balance sheet issues. They can afford to drop prices.
Cash flow from operations at Level 3 has only been $30 million over that last year. That would have to improve several fold to allow the company to handle its debt.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.
The New York Times hits Lilly (LLY) almost daily with a new article on how the drug company dupped doctors and patients into thinking that its drug for schizophrenia was safe and did not have horrible side effect. The Times sums it up: "The original results showed that patients on Zyprexa, Lilly’s pill for schizophrenia, were 3.5 times as likely to experience high blood sugar levels as those taking a placebo"
The drug is 30% of Lilly’s revenue at $4.2 billion in 2005.
For investors who like risky or distressed investments, Lilly represents an especially dangerout bet. Think of Merck’s Vioxx suits with the possibility that Lilly does not haved a good defence.
Although Lilly’s stock has dropped from $58 to $52 recently, it could go much, much lower. It has not been much below $50 since mid-2002, and that was for a brief period.
According to Morningstar, Lilly has $5 billion in debt. Its cash and equivalents cover that. Cash from operations for the last four quarters is about $3 billion.
Liability suits, if successful, can suck up Lilly’s earnings fairly quickly. And that is the risk. It appears that there are several smoking guns for plantiff’s attorney to take to court. And, the stock could get killed.
The case for the recent price increase in GE stock goes something like this: As the economy slows, investors want a steady performer with stable earnings growth and a decent payout. The stock has gone nowhere over the last two years, but has moved up almost 8% in the last week.
There are flaws in the reasoning. GE actually expects earnings growth to slow to a rate of 10% to 13% next year. It also has businesses that could be badly hurt in a downturn.
The company’s NBC Universal unit is still a loser in terms of contribution to GE’s operating income. There is no solid reason to believe that this will change. GE’s infrastructure business could be hurt if large capital spending projects are cut back in an economic slowdown. The same is true for businesses like jet engines. A poor economy is not likely to help the airlines, espcially if it is accompanied by spiking fuel costs, which often causes a slowdown on its own.
GE’s stock is at $38 now. It has a long way to go to get back to $60 where it traded in 2000. If the economy slows, GE has just as much of a chance of getting hurt as any other company. It is so broadly diversified that it is almost a proxy for the economy.
In a slowdown, how is that good?
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com.
Surrender before the battle is over. Things are going that poorly. Ford conceded that Toyota would pass it sometime next year pushing the US car company into the No. 3 spot.
The company’s downfall was hardly inevitable, nor was Toyota’s success.
Since Toyota’s share in the US market is over 15% now and growing, and Ford’s share is moving toward 14%, it will be hard for the American company to keep its slot.
Ford simply relied on pick-ups and SUVs for too long to fuel sales. It is as if Bill Ford did not see the trend to fuel efficient cars coming. He lost site of a rule of commodities markets. At some point they will rise when down, and being prepared is critical.
Ford and his managers essentially lost the company a reasonable chance to do well in the US.
Both Ford and Toyota say that their spot in the hierarchy of US sales is not important. But, share is often a key component of profit, so the talk is a little hollow.
Ford may now wish that it had tied up with Carlos Ghosn and his Nissan and Renault auto operations, or that another company like Honda would strike a strategic alliance. Even aftre raising over $20 billion, Ford looks like a rough long-term bet.
Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about
Stocks: (VOD)(NKE)(F)(TM)(CMX)(CVS)(LLY)(LVLT)(IBM)(FDX)(GE)
According to Reuters, Nike’s profits rose 8% in the last quarter, helped by sales of its smaller brands.
The New York Times writes that Ford expected Toyota to overtake it as the second largest car company in the US sometime next year.
Reuters reports that the Caremark deal with CVS has cleared a key regulatory hurdle.
The New York Times writes that provided information to doctors about the blood-sugar risks of Eli Lilly’s drug Zyprexa that did not match data that the company circulated internally.
The Wall Street Journal writes that Fedex had good earnings for the completed quarter but gave guidance for a slowing business in the next quarter.
The WSJ also writes that IBM will not longer give directors stock options. Instead they will receive $200,000 a year in stock and cash.
The WSJ reports that hedge fund Highland will present a $4.7 billion restructuring offer to Delphi’s board. Another hedge fund group has put in a bid.
The WSJ also reports that an increase in web video traffic has helped network owner Level 3 double its stock in the last year.
The New York Times reports that a new method for extracting oil from shale could create a highly profitable new business.
The New York Times also reports that GE’s stock is rising, perhaps because investors want a stable stock as the economy slows.
The FT reports that British phone company Vodafone is considering a $13 billion offer for large India cell phone operator Hutchinson Essar.
Barron’s writes that healthcare and biotech stocks, which have lagged the market, should do well in 2007.
Douglas A. McIntyre
Stocks: (CAJ)(FUJ)(HIT)(HMC)(NIPNY)(NTT)(SNE)(TM)(CHL)(CHU)(PCW)(HBC)
Asian markets were narrowly mixed.
The Nikkei was up .2% to 17,048. Bridgestone was up .7% to 2705. Canon was down .6% to 6650. Daiwa Securiies was down .9% to 1322. Fuji Film was up .6% to 4920. Hitachi was flat at 720. Honda was up 1.1% to 4470. Japan Tobacco was up 2.1% to 578000. NEC was down 1% to 569. NTT was down 1% to 594000. Sharp was up .5% to 2865. Softbank was down 1.8% to 2445. Sony was up .2% to 5090. Toshiba was up .1% to 784. Toyota was up 1.7% to 7680. Yahoo Japan was down 1% to 50100.
The Hang Seng was down .1% to 19,223. Cathay Pacific was down .5% to 18.7. China Mobile was down .3% to 62.7. China Unicom was 1.4% to 10.05. HSBC was down .3% to 142.1 PCCW was down .8% to 4.71.
The KOSPI was down .4% to 1,436.
The Straits Times was flat at 2,921.
The Shanghai Composite was down 1.3% to 2,343.
Data from Reuters
Douglas A. McIntyre
Cramer’s had several extra calls on last night’s MAD MONEY that weren’t really the gung ho Boo-yah adda-boys you usually hear from him:
Cramer said he got the Trump Entertainment (TRMP) wrong because he thought they would win a casinolicense and they didn’t. That’s why it fell today, and Cramer said he predicted the downside improperly too, because he thought it would have $2 downside and it was down more than that.
One thing that Cramer also said in a call-in was that SanDisk (SNDK), one of many day traders’ favorite stocks, was still suffering from Tax-Loss selling going into year end and traders should wait until January to go into the stock.
Another of Cramer’s ex-favorites is UnitedHealth (UNH). He noted that the stock was a buy as it is breaking out and may finally be back on track.
Also here is a full feature on Why Cramer Like Syneron (ELOS).
Cramer also Revisited DivX (DIVX), but not like he did before.
Jon C. Ogg
December 21, 2006
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