Daily Archives: February 20, 2007

Capstone Turbine (CPST)

From The Stock Masters

Capstone Turbine (CPST) is trading just 3 cents above its 52 week low today at only $.88 a share. Just think, you could go crazy at a 99 Cent store or 99 Cent Storespick up a few shares of Capston, is it me, or are their more 99 Cent stores than people in America?This is an interesting company that could be undervalued right now,we’ve been keeping an eye on it since May ‘06 when shares were tradingaround $4.50. They’ve been under a dollar for about a month now, ifthey get a de-listing warning they will have to do something to bringtheir stock price back up. We normally don’t even look at stocks under$1, but the risk/reward ratio could be too good to pass up on CPST. We encourage you to do your own research before even thinking about buying this stock.CPST does not have an impressive track record – this month theyreported a Q4 loss of $8.5M and revenue declined to $5M from $7M whencompared to the same quarter last year. Capstone has some real hatersout there, the Motley Fool ran a great article with an even better title last month called "Keep your Hands out of the Turbine – Capstone is one of the worst stocks I’ve ever seen." Again, 99 Cent store or CPST, you decide.

www.thestockmasters.com   

   

Posted on: February 20, 2007 – 6:28 pm in Research

Ex-FCC Head Believes Sirius & XM Merger Will Pass

In a CNBC interview a few moments ago (around 4:45 PM EST), former FCC-Head Michael Powell said he believes that the merger between Sirius (SIRI) and XM (XMSR) will pass.  He did state that there would probably have to be some serious concessions that have to be made, but the interesting part is that he he does think the deal can pass.  For whatever it is worth I echo this, and that is the belief that this deal will pass with some serious concessions.  Most likely this will be in the form of price locks for a fixed period, and with demands that local media content not be stripped to where these licenses compete on local radio markets for a fixed period of time.  Powell did note that FCC’s current chairman (Martin) is tough on deals and tough on decency, and he thinks that it will not just be a rubber-stamping of an approval.  This is far less critical than the AT&T (T-NYSE) merger with BellSouth/SBC, and the FCC became very weak in the knees on that merger and allowed the merger to proceed with far fewer concessions that the companies would have agreed to (that is my opinion anyway).

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Posted on: February 20, 2007 – 5:06 pm in After-Hours Activity, Bait Shop, Regulation, Satellite, Technology Companies, Wireless

H-P All Clear, But Traders May Want More

Hewlett Packard (HPQ-NYSE): $0.65 EPS and $25.1 Billion revenues.
Estimates were $0.62 EPS & $24.3 Billion revenues.

Second quarter FY07 GAAP EPS is expected to be in the range of $0.57-0.58, and non-GAAP diluted EPS is expected to be in the range of $0.63-$0.64 on revenues of $24.5 Billion; estimates are $0.63 EPS & revenues $24.1 Billion.  GAAP EPS for 2007 are $2.35-2.40 & $2.60-2.65 non-GAAP EPS and $98-$99 Billion in revenues; estimates are $2.57 EPS and $97.5 Billion.

Personal Systems Group revenue grew 17% year-over-year to $8.7 billion, with unit shipments up 19% on a year-over-year basis. Notebook revenue grew 40% over the prior year period, while desktop revenue declined 1%.  Imaging and Printing revenue grew 7% year-over-year to $7.0 billion.  Enterprise Storage and Servers reported revenue up 5% to $4.5 billion. HP Services revenue increased 5% year-over-year to $3.9 billion.  HP Software revenue was $550 million, an increase of 81% year-over-year, reflecting strong momentum in the Mercury business, HP OpenView growth of 14% and revenue declines of 6% in HP OpenCall; excluding the Mercury acquisition, which closed on Nov. 6, 2006, revenue increased 7% over the prior year period.  HP Financial Services reported revenue of $547 million, an increase of 10% year-over-year.

Going into earnings HPQ shares were up roughly 50% from the year lows of $29.00 and more than 100% from two years ago in the ‘Pre-Hurd Turnaround’days. HPQ’s options were little help since the stock was between strike prices but it looks like the options traders were only expecting $1.00 move either way.  Shares were less than 2% from highs of $43.72.

HPQ will have $500 million in one-time pension charges.  Shares are down modestly at $42.90 from its $43.13 close (up 0.8% ahead of earnings).  This can’t really be picked apart as bad by any stretch, but it looks like after the huge run it has seen that Wall Street is going it continue to overly impress rather than just have small earnings beats at current prices.  This should also mark the end of the DJIA components reporting earnings until April.

Jon C. Ogg
February 20, 2007

Posted on: February 20, 2007 – 4:18 pm in Earnings, PC Companies, Software, Technology Companies

Crocs Disses Its Critics

Crocs (CROX-NASDAQ): $0.51 EPS & Revenues $112.9 million.
Estimates were $0.43 EPS & $96.5 million.

CROX guided $0.47-0.49 vs $0.35 and $113 to $117 million in revenues versus $84 million estimates; Raises Fiscal 2007 Revenue and EPS Growth Targets to +45% from +30%.  CROX also signed NASCAR as a partner now, although don’t expect drivers to wear them during a race.  CROX shares are up 4% at $5.50+, back on year highs in after-hours.

These estimates were only a benchmark because the stock was up almost 200% from its 52-week lows of $20.32.  The company had to beat and beat big to please the street and just to emphasize this the current at-the-money puts were $3.10 and that was when the shares were $0.75 to $0.90 out of the money.  So depending on how you calculate options, this was looking for a $3.00 to $4.00 move based on pricing.  That even seems low in afterthought, because this is one that you could have guessed would have easily had more than a $5.00 swing.  Keep in mind the cult status of this stock creates extra swings, plus this usually has a huge short interest.

Jon C. Ogg
February 20, 2007

Posted on: February 20, 2007 – 4:08 pm in Earnings

Sirius Stock Price Votes “No” On Merger

Over the last three months, the price of Sirius (SIRI) shares has risen over 7% twice. The most recent was January 10 when the share moved up 7.3% to $3.98. The second time was November 22 when the share jumped 8.1% to $4.29.

Then, there was today. The stock traded over 258.5 million shares. It was up only 5.95% to $3.92.

This was supposed to be the deal of the decade. The deal of the year, at least. XM (XMSR) and Sirius together. Huge costs savings. The works.

But, the market does not buy it. Either Wall St. believes that satellite radio will stay under siege from the iPod, the iPhone, the music phone and WiMax, or investors believe that the FCC will shut the deal down. And, the government could either say "no" altogether or simply suggest that pricing is going to be capped or that a competitor can come into the market with a new license.

Any which way, it ain’t good.

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

Posted on: February 20, 2007 – 4:06 pm in Consumer Electronics

Kraft’s Cheesy Share Buyback(KFT)

Kraft Foods Inc. (KFT-NYSE) has announced that its Board of Directors has approved a $5 billion share repurchase program, which will replace the current repurchase authority.  The repurchase program will become effective immediately following the distribution of the approximately 89% of Kraft’s outstanding shares owned by Altria (MO-NYSE). The details are a bit different and there is going to be some time value taken out of this distribution, buyt this is Kraft’s anticipation of how to put in a perceived floor in their stock when so many new recipients of shares sell into the market.  The distribution will be made on March 30, 2007, to Altria shareholders of record as of 5:00 PM EST on March 16, 2007 (that is the "record date"). The repurchase program will last two years and is not to expire until March, 2009.  So while this is a huge buyback, you probably shouldn’t expect to see $5 Billion worth of shares on teh bid day after day.

This is after the company announced cost cutting plans and a retargeting of its food categories.  It already said it would increase its revenue by 3-4% and will invest up to $400 million this year in research, marketing and other efforts.  It also gave guidance earlier at the same investor conference of $1.50 to $1.55 EPS for 2007 (prior to a $0.25 charge, so $1.75 to $1.80) compared to street estimates of $1.90 to $1.94 for 2007.

KFT shares did pop a tad on this, but are still down 2% at $34.28 after this news.  What’s the oldest trick in the book of rectifying a bad guidance outlook?  At the end of the presentation announce "Oh yeah, and we’ll be spending a ton of our cash on trying to keep the shares propped up!".

Jon C. Ogg
February 20, 2007

Posted on: February 20, 2007 – 1:48 pm in Food

TheStreet’s Take on SIRI/XMSR

Today 2 specialists sat in for Jim Cramer on WALL STREET CONFIDENTIAL at TheStreet.com about the XMSR/SIRI merger.  This doesn’t really answer how Cramer will warm up or not, but you can bet you’ll hear about that on your own later.  If you wish to check further you can click through to the second page.

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Posted on: February 20, 2007 – 1:33 pm in Cramer, Mergers and Buy Outs, Satellite, Technology Companies, Wireless

Seattle’s Zymogenetics Inc. has a promising pipeline but spends like Barkley

From The Stock Masters

ZGEN logoLast Thursday ZymoGenetics, Inc. (NASDAQ:ZGEN) announced that the Biologics License application for its bleeding control during surgery drug, rhThrombin has been accepted for review by the U.S. Food and Drug Administration (FDA). ZymoGenetics is developing rhThrombin as a general aid to achieving hemostasis (halting bleeding) during surgery. However, the additional news they reported about their Q4 loss of $37.1M, which compares to their $15.1M loss a year earlier wasn’t as exciting. For fiscal 2006, ZGEN reported a loss of $130M anSir Charlesd the year before that was loss of $78M.

Charles Barkley couldn’t lose that much money if he tried and that guy’s a champ at throwing his money away. In an ESPN interview in May 2006, Barkley estimated that he’d lost about $10M gambling over the years. Sir Charles said two weeks ago on the air that he lost $2.5M million "in a six-hour period" one night last year. Lucky for us there isn’t a Sir Charles Barkley Index Fund, but ZGEN comes close when you look at the returns.

So what’s ZymoGenetics smoking and if it’s any good can I have some?

Fellow Masters, ZGEN’s rhThrombin has the potential of billions in revenue. If and when their blood stopping drug is approved, they will be part of the growing market of recombinant coagulation factors which posted 2006 sales of more than $4.6B (this according to Business Intelligence firm La Merie S.L.). But ZGEN’s not the only company out there to make a run for all that money, it’s a competitive field pioneered by Bayer Schering Pharma (SHRGY), Wyeth (WYE) (with a clinical Phase I project) and Novo Nordisk (NVO).

Last Thursday during the Charles Barkley-like-conference call, Bruce L.A. Carter the CEO of ZymoGenetics said:
"We’re extremely pleased that the FDA accepted our Biologics License Application for rhThrombin for review. In the past, recombinant products have quickly replaced animal and human plasma products, so we’re excited about the potential opportunity to compete in the thrombin market. We believe based on our market research that we can attain a substantial share of the existing bovine thrombin market and that there is significant potential to grow the use of thrombin in surgical procedures through increased awareness."
ZGEN HQ
Besides rhThrombin, ZGEN has a few things in the pipeline including a cancer drug (Interleukin 21 – IL-21), autoimmune diseases drug (Atacicept – TACI-Ig) and hepatitis C drug (PEG-interferon lambda IL-29). ZymoGenetics has been around for over 25 years and it’s landmark building is a fixture seen by Seattle commuters daily along I-5 located on Lake Union. ZymoGenetics IPO’d in 2002 and the stock really hasn’t done much, but why would it, all they do is spend money? The stock has been floating in the $15 to $16 range, they have a Price to Earnings ratio of -10, and their annual revenue reads like average points scored by Barkely per game (take out the million factor) – 2003 was $25M, 2004 was $35M, and 2005 was $42M.

Don’t you think that shares should be trading around $3 with 67.4 million ZGEN shares outstanding? However the Stockmasters believe like Barkley, this stock will be a superb rebound candidate once their drugs go to market. I know, waiting for a pharmaceutical stock to finally take off can be painful, like listening to Barkley’s commentary on TNT, but when that ship comes in you can believe it’s going to sail. ZymoGenetics has been around a long time when comparing it to other pharma companies, and they have been working on their drugs since Barkely went Pro. In January A.G. Edwards and Sons initiated coverage of the company with a "Buy" rating citing good potential for growth. Analyst Albert Rauch also set a price target of $20 per share for ZGEN and predicted that they will be profitable in 5 to 6 years.

This is a sit and wait story – the Stockmasters are not recommending putting your life savings into ZGEN. We are just making you aware of the company and their up and coming pipeline. ZGEN expects to post a bigger losses in 2007 due to costs related to the planned launch of rhThrombin. But what makes us write about this stock is the fact that their shares still remain trading at a respectable price range, the company’s history, and the potential for hundreds of millions in revenue. The success story is a way off, but you can bet if things go well with the FDA and we get some positive press releases, ZGEN is going to the All-Star game in a hurry.

Article written by: Eric Cheshier
Article posted on: February 20th, 2007

Disclaimer: The Author does not own any shares or hold any short/long positions in ZGEN.

http://thestockmasters.com/index.asp

Posted on: February 20, 2007 – 1:10 pm in Research

Will Cramer Warm Up to Karmazin Now? (SIRI, XMSR)

Now that Sirius (SIRI-NASDAQ) and XM (XMSR-NASDAQ) have announced a merger of equals to tie the knot, you have to wonder how the media and the street will treat the companies as a single combined entity.  The street has been hoping for this, so you know the bulge braclet coverage won’t treat it any more unfavorably than before.  But it will be interesting to see how Cramer treats it since he can talk about the combined entities on a daily or nightly basis.  This SIRI stock is one of the most active stocks every day and is one of the most widely held stocks in the country. 

How many times have we heard Jim Cramer on MAD MONEY and other shows on CNBC apologize for befriending Mel Karmazin at Sirius (SIRI-NASDAQ)?  Many.  He felt duped because he invited Mel Karmazin on MAD MONEY for an interview and then later the company came clean and issued some downside to its Q4 subscriber additions.  Cramer had been out before that interview saying that XM (XMSR) and Sirius (SIRI) needed to merge, but after Karmazin came on MAD MONEY Cramer lightened his stance.  If you wanted to see an ‘angry Cramer’ it was after the downside came out from when he trusted Mel Karmazin.  That is not Cramer’s fault nor is it anyone else’s who actually believed management.  A statesman wouldn’t call most CEO’s liars, but a realist would certainly expect that CEO’s just aren’t going to come on national TV and be negative or cautious about their company if they don’t have to.  CEO’s also tend to be optimistic and hope that minor trends aren’t part of a major slowing.

Since that subscriber warning date Cramer has maintained that he didn’t want to speak about Sirius until IF/WHEN the company announced the merger with XM.  So now that this has happened how will Cramer treat the combined entity?  A fair guess is that he’ll treat it with some caution because of all the research concerning the potential blockage of this merger by regulators. Most likely it will be in praise of the merger, but he is probably going to be reluctant calling Karmazin the man of the year.

This is not a done deal by any stretch and you can imagine that today and beyond we’ll start seeing more and more one-liners from wire services filling everyone with doubts.  With at least 3 federal agencies that get to review this and with the various congressional committees that have overlaps on this, you know the ‘govies’ and regulators are all going to want their own share of air time covering this after the fact. 

The last issue to take is the inherent losses that will be still seen on paper from holders.  Many shareholders have been long and wrong on these names for some time.  That doesn’t mean that they are instantly entitled to gains, but it doesn’t mean they will just go out with a whimper either.  These won’t be recognized losses, but a loss in one name and a switch to an instant loss in another doesn’t always make it an easier of a sell.  Many well known investors have been caught in these names along with the retail investors, so get ready for the boxing gloves and megaphones to be out instead of pom-poms.  This one is going to be controversial all the way to the closing date.

Jon C. Ogg
February 20, 2007

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

Posted on: February 20, 2007 – 12:35 pm in Cramer, Media, Mergers and Buy Outs, Satellite, Technology Companies

S&P 500 “Top 25″ Lists: P/E Ratio and Dividend Yield

From Ticker Sense

Over the weekend, we highlighted the best and worst performing members of the S&P 500 over various time frames.  Today we look at the 25 stocks with the lowest price to earnings ratios and the 25 stocks with the highest dividend yields.  The P/E ratio for the S&P 500 Index is currently at 18 and the dividend yield is 1.74%.

Spxpeup

Yield

http://www.tickersense.typepad.com/

Posted on: February 20, 2007 – 12:28 pm in Research

Satellite Radio Companies are Finally Getting Sirius

From The Average Joe Investor

The AP reported today that XM Satellite Radio (Nasdaq: XMSR) and Sirius Satellite Radio (Nasdaq: SIRI) are going to merge. This comes after a lot of speculation, heckling from Cramer, and denials from both companies. The merger is probably the best thing to happen to satellite radio since, well, satellites. The worst part about the business has been the cutthroat competition between XM and Sirius that has absolutely bled both companies. The merger doesn’t guarantee success, but it does give this pay-for-play radio a fighting chance against alternatives like free radio and free Podcasts.

Get ready for fireworks.

-AvgJoe

http://www.theaveragejoeinvestor.com/

Posted on: February 20, 2007 – 12:25 pm in Consumer Electronics

Joost In: Some Real YouTube Competition?

From Internet Outsider

Perhaps Viacom had an ace up its sleeve after all.  When the company stormed out of negotiations with Google a few weeks ago and demanded that YouTube remove all its clips, the popular thesis was that the "Big Media YouTube Rival" was a go.  It wasn’t–and, likely, will never be–but Viacom appears to have found a reasonable Plan B:

Just two weeks after ordering its content to be pulled from YouTube, Viacom Inc. today is expected to announce a broad licensing deal with Joost, a new Internet service that specializes in commercial video content. The anticipated deal, which follows the recent collapse of similar talks between Viacom and YouTube parent Google Inc., involves licensing hundreds of hours of programming from Viacom cable networks such as MTV, Comedy Central and Spike as well as movies made by the company’s Paramount studios.The companies declined to disclose financial details. In similar deals in the past, Viacom has received two-thirds of the advertising revenue and other compensation.  (WSJ)

YouTube has already won the online video-clip game.  It may be, however, that the online video-show game–the place where users can go to find full-length TV shows and other Big Media content–may eventually have a different winner. 

According to the WSJ, Joost’s strategy is not to run clips but full episodes with high-quality resolution–"real TV online."  It is not hard to understand why this, combined with a guaranteed revenue share and a commitment to partners, is appealing to those in the TV business.

What is hard to understand, at least at this point, is why anyone would want to watch "real TV online"–at least when there is a functioning television set nearby.  YouTube viewers watch 100 million clips a day in part because the clips are a different entertainment product than a television show, one that is well suited to both the smaller screen and short attention span of the average Internet user (for whom a 30-second television ad seems as long as Dr. Zhivago)  Using the internet to distribute TV shows to televisions is one thing, but using it to actually watch those shows on computers is another.

Unless Viacom and other TV companies figure out how to break their shows into clips, and then license those clips exclusively to Joost, deals like today’s are probably not much of a threat to YouTube.  If Viacom does figure out the clip thing, however, and Joost signs up a bunch of other media companies… Well, then, YouTube might want to hurry up and get its Big Media act together.

Posted by Henry Blodget on February 20, 2007

http://www.internetoutsider.com/

Posted on: February 20, 2007 – 12:23 pm in Internet

Can’t the US Get A Little Love

From Ticker Sense

US equity markets have continued to perform well into 2007, but when we compare the S&P 500’s performance with other equity market indices across the globe, the returns rank very near the bottom.  Mexico is currently up 8.10% for the year and ranks at the top of our list, followed by Sweden, Switzerland, Germany and Australia.  While all indices are up, the Netherlands ranks last at 2.41% followed by the US at 2.63%.

2007ytd

Ytdtable

http://www.tickersense.typepad.com/

Posted on: February 20, 2007 – 11:09 am in International Markets

ANSS: Ansys Does it Again

Ansys (ANSS), which makes simulation software to help engineers engineer things, is a great little company (we did a financial workup on it last year that is reasonably accurate still today.) We also missed a great buying opportunity last year and aren’t benefitting from today’s strong earnings report either [though we included the company’s closest competitor, Dassault Systemes (DASTY) in our Mid Cap Watch List.]

Ansys grew its revenues by 78% in 2006, partly on the back of its acquisition of Fluent. It is guiding for another 37% in 2007, no acquisitions necessary. Dassault should profit from the strong industry growth as well.

http://stockmarketbeat.com/blog1/

Simulation software is an advanced engineering tool that formerly required high-end computers available only to senior engineers. One of the benefits of the vicious price environment for computer hardware is that the simulations can now be run on inexpensive equipment by any engineer. This is cutting the time and cost to develop all sorts of new products, and creating a much larger potential customer base for Ansys and Dassault. This is not a short term trend.

Looking over the earnings report we found little to criticize. The company implies that investors should ignore the write-off of in-process research and development costs incurred as part of the Fluent acquisition, but there are pretty good reasons to do so – at least in terms of estimating sustainable income.

The acquisition also resulted in 632 million of intangible assets, which now make up the vast majority of the company’s total assets. Tangible book value is negative. But this is a software company, and earnings and cash flow are more indicative of the company’s value than tangible assets.

So we’ll go ahead and pick at these nits, but they don’t lessen our admiration of the company or the industry.

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; 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; Plantronics (PLT) put options

Posted on: February 20, 2007 – 11:07 am in Uncategorized

Clearwire IPO Closer With Year-End Financials

Clearwire has further set itsproposed IPO terms of 20 million shares at a price range of $23.00 to $25.00per share, plus an additional 3 million for overallotments; and keep in mind that is has the A shares and B shares.  The finalunderwriting group has been deemed as Merrill Lynch as the lead withco-lead underwriters Morgan Stanley and J.P.Morgan.  Others in thesyndicate are Wachovia, Bear Stearns, Citigroup, Jefferies, RaymondJames, ThinkEquity, and Stifel Nicolaus.  Here is the full SEC Filing from this morning.

We now have the year-end financials from the company for the first time, although we did already have the year-end subscriber figures: total revenues in 2006 were $100.18 million ($32.5+M from equipment; $67.6M from subscription service); operating expenses were $338+ million, so net losses were $284 million.  Despite the losses, this is one the street is eagerly awaiting.  Here was Jim Cramer’s IPO playbook on the CLWR IPO.

This one is split because the product has developed a core and thereis strong demand for the IPO, but the one issue that may act as aquasi-cap is the ongoing need for more capital.  It will have to raisemore and more cash to fund ongoing expansion plans, so just know goingin that the Clearwire will be selling more shares and debt in therelatively near-future.  This one is supposed to be well receivedthough and may still command a premium because of the McCaw founder andthe hot technology and backers.

Here is the last report we gave on it from January 30, and there is the prior filing on it at the end.

Jon C. Ogg
February 20, 2007

Posted on: February 20, 2007 – 10:45 am in Cramer, IPOs, Semiconductor, Technology Companies, Wireless

Sirius Still Trades Near Two Year Low

Herb Greenberg over a MarketWatch has an interesting theory. The XM (XMSR) merger with Sirius (SIRI) may be a move of desperation given the large number of competitors in the market. He quotes this comment from the press release about the merger: "In addition to existing competition from free ‘over-the-air’ AM and FM radio as well as iPods and mobile phone streaming, satellite radio will face new challenges from the rapid growth of HD Radio, Internet radio and next generation wireless technologies."

And, perhaps the market itself is signaling a critical truth about the deal. Sirius stock is up only 7% on the news and still trades below $4 at 10.40 AM New York time. In December of 2004, the stock was above $8.

Maybe the deal will only buy time for a business model that has become flawed as competition enters the market.

The price of the stock seems to be saying so.

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

Posted on: February 20, 2007 – 10:39 am in Consumer Goods

KBW Exceeds Our Own 2007 Price Targets; What To Do Now?

KBW Inc. (KBW-NYSE) this morning has done some of what we had been expecting, although now it feels perhaps above and beyond expectations.  The company beat earnings $0.88 basic EPS instead of $0.35 EPS estimates and this put EPS up threefold for all of 2006 compared to 2005.  There are some items accounting for all of this, but no matter how you slice it the street loves it.  Shares are up 14% at $36.50 after opening under $35.00; its prior 52-week high was $31.80.  Here is what we had said right at the IPO timing and here is what we said about it still being worth holding after the IPO.

Since KBW is the investment banker ‘for investment banks’ and for the banking and financial sectors they truly are sitting in the sweet spot.  We had expected this one to trade quite well for some time, but now the yearly target has been hit.  We were looking for as much as $35.00 this year.  We’ll address this one this week with a better outlook after we have had a chance to review the conference calls.  For now we aren’t changing any stance and would be inclined to stand firm on it (or at least on most of it). 

No one ever went broke taking profits and getting out before the insiders and employees can start shovelling out there shares to lock in profits and take out some of their instant-millionaire money wouldn’t be criticised.  Most likely the thing to do here is to take some profit and keep some in the game.  There are probably 30 or more regional banking mergers coming in the next 18 to 24 months, and KBW is set up to be involved in many of these.  Stay tuned this week for more on KBW.

Jon C. Ogg
February 20, 2007

Posted on: February 20, 2007 – 10:14 am in Analyst Calls, Banking, Earnings, Financial Stocks

Will The FCC Create A Competitor For The New Sirius/XM?

Consumer advocates will be all over the FCC on the XM (XMSR) merger with Sirius (SIRI). The case will be that the merged company will raise rates from about $13 a month per subscriber to some higher amount. That would be natural. The news company needs cashflow to pay down its huge $1 billion plus plus debt.

The management of the new company could agree to a cap or moratorium on price increases. It is, however, an inelegant way to regulate a monopoly.

A better answer might be to allow another company to come to market with a satellite radio competitor. DirecTV (DTV) perhaps. Partnered with a car company like GM (GM) or Toyota (TM). Or Clear Channel (CCU) which could put money into the pocket of a company like Loral (LORL) or Delphi, which currently makes satellite receivers.

Clear Channel and the car companies have the capital to enter the business and several of the satellite infrastructure companies could use the money.

A solution for the FCC, a match made in the heavens.

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

Posted on: February 20, 2007 – 10:09 am in Uncategorized

A Week Without China

For those worried about Chinese debt buying, a Chinese equity bubble, trade deficits, current account deficits, and the like this is at least a week to put that aside.  This week the Chinese markets are closed for Chinese New Years (Year of the Pig).

Most of the main ADR’s that trade here in the US and Europe will continue trading, and this may create more swings since the other side of the globe’s trading on the names is inaccessible on the local markets.  Companies with active shares such as Baidu.com (BIDU) will likely continue to see active trading on NASDAQ, but lighter volume shares that trade on NYSE such as CNOOC (CEO) could see a lighter volume week.  As we get to the end of the week you’ll also see some trades go on the various ETF’s if there are any big macroeconomic events that move the international markets.

The Chinese New Year also affects Taiwan, Singapore, and Malaysian equity markets.

Jon C. Ogg
February 20, 2007

Posted on: February 20, 2007 – 9:30 am in Uncategorized

E*Trade Decides To Span The Globe

E*Trade announced that it will allow its customers to trade on the Toronto Stock Exchange, the Tokyo Stock Exchange, Euronext Paris, the Hong Kong Stock Exchange and the London Stock Exchange. A survey by the discount broker showed that a majority of its customer wanted to trade foreign stocks.

The move may be good financially for E*Trade (ETC). It will charge a price for each trade in a foreign currency.

The question is whether the move is good for investors. Research for stocks traded overseas is not always complete and the financial statements of companies in other countries don’t usually match those that US individual investors are used to seeing.

It may not be as attractive as it sounds.

Douglas A. McIntyre

Posted on: February 20, 2007 – 7:27 am in Brokerage Firms