Daily Archives: February 23, 2007

Cramer Changes His Stance on Sun Microsystems (SUNW)

Cramer also said on CNBC’s MAD MONEY that he has hated Sun Microsystems (SUWN-NASDAQ) for very long, but he said new management is doing the right thing.  He said he saw it was turning around but didn’t want to believe it.  Cramer thinks this sub-$10.00 has $2.00 upside to the stock but you need to wait until after Monday afternoon for the dust to settle so you can make your $2.00 rather than $1.50 by paying up during the hype.  The company is going through a restructuring and the turnaround is real.  Now the profits in 2007 will be the first since 2002.  The cost cuts of $500 million are working and they are taking margins up to 10%.  The operating system sales in Solaris are going well too.  The IT guys on Wall Street are even considering starting to use Sun machines again like they used to.  He likes the KKR deal too with the company.

SUNW traded up 2% after-hours to $6.40 after closing flat at $6.27 today; its 52-week range is $3.74 to $6.78, so he has missed a lot of the turnaround already. This is also essentially a 4-year high.

Jon C. Ogg
February

Posted on: February 23, 2007 – 6:22 pm in Cramer, PC Companies, Semiconductor, Software

Cramer Wants To Speculate on Biosite (BSTE)

Cramer has a speculative play that could be bought: BioSite (BSTE), a medical diagnostics company that you want to be in if the democrats take over after next year.  This is one of the smaller diagnostic testing and drug screening companies (plus heart monitoring and bacteria/parasite infection) testing.  This actually helps doctors save time and money by determining early what has to be done to save someone.  It also has new stroke and acute coronary and kidney tests coming online this year.

BSTE closed down 0.7% at $55.32 today; shares are up 2% at $56.40 after Cramer discussed this.  BSTE had a $900 million market cap before Cramer touted this name and he said it has a huge short interest.  The 52-week range is $38.08 to $58.18.  This was all noted on tonight’s MAD MONEY on CNBC.

Jon C. Ogg
February 23, 2007

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

Posted on: February 23, 2007 – 6:07 pm in Analyst Calls, Cramer, Medical, Mergers and Buy Outs

TXU To Be Acquired by KKR in Largest Deal of Its Type (TXU, BRK/A)

CNBC’s merger star watch dog and scoop artist David Faber just announced that TXU Corp. (TXU) will be acquired by KKR over the weekend.  TXU is the Texas power plant that controls much of the power in the state.  The market cap of TXU is $27.5 Billion and $12.3 Billion in debt, so in a cash deal any premium would top the latest buyout of Equity Office and should be the largest LBO ever.  Any premium will make this roughly the largest private equity buyout ever.

So where is Warren Buffett and his power plant acquisitions that he had been discussing for Berkshire Hathaway (BRK/A)?  He even said the likes of "one $10 Billion deal is easier to do than ten $1 Billion deal…".  TXU shares are up 13% at $68.00 in after-hours; the 52-week high is $67.21.  Before the deal was announced TXU traded with a 14.6 P/E ratio and had a 3.1% dividend yield.

Other utilities to focus on after this are the following (partial list):
Duke Energy (DUK) $30 Billion market cap;
FPL Group (FPL) $24.9 Billion;
Entergy (ETR) $20 Billion market cap;
Firstenergy (FE) $20 Billion market cap;
American Electric Power (AEP) $18 Billion market cap;
Edison Int’l (EIX) $15 Billion market cap;
AES Corp (AES) $14.9 Billion market cap;
PPL Corp. (PPL) $14.1 Billion market cap;
Constellation (CEG) $13.7 Billion market cap;
Progress Energy (PGN) $12.9 Billion market cap;
Xcel Energy (XEL) $9.9 Billion market cap;
DTE Energy (DTE) $8.5 Billion market cap;
NRG Energy (NRG) $7.9 Billion market cap.

We already offered a break-up value of Duke (DUK) and here is what we came up with: $29.00 as of FEB 09, 2007.  Have a great weekend, and enjoy comparing the power utility valuations over the weekend.

Jon C. Ogg
February 23, 2007

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

Posted on: February 23, 2007 – 5:43 pm in Bait Shop, Mergers and Buy Outs, Utilities

The Week of Cramer (FEB 20-23)

This wasn’t just a short week for the markets.  It was a shortened week of Cramer as well.  As usual, Cramer had some controversial calls.  Some of these calls were a bit off base and probably a bit too leading and preemtive. 

Since he didn’t have a STOP TRADING segment and since he didn’t do a Wall Street Confidential video on TheStreet.com website it is assumable that his MAD MONEY program tonight won’t be a live show with current picks.  Anyway, here are his comments and picks for the week:

Last night he came out attacking IBM (IBM) saying that Palmisano has to leave as CEO before it was a buy because of underperformance.

He also came out and surprisingly called Paul Allen’s Charter Communications (CHTR) a Buy after he has been so negative on it.  Here was his reasoning on it.

Cramer also noted Energy Metals (EMU-NYSE) as a good speculative buy in the uranium arena.

One very surprising call was that Cramer lightened his SELL SEMI’s & TECH stance, and you could even imagine that he was telling you to buy the semi’s after they have already risen.  This was after Analog Devices (ADI) beat earnings and rallied so much.

After the XM/SIRI merger, Cramer came out with what was a high anti-competitive list of mergers that he thinks could or should happen.  Trust me that if you are on Main Street you don’t want his predictions to come true.  The first half of the list is here and the second half of the "list of ten" was actually quite a bit more names.

He was very positive on the XM (XMSR) and Sirius (SIRI) merger and here is what he said there.

Jon C. Ogg
February 23, 2007

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

Posted on: February 23, 2007 – 3:32 pm in Cramer

Sourcefire Sets IPO Terms

Sourcefire, Inc. (FIRE-NASDAQ) has filed an amended IPO filing and the terms for the IPO have been set: It is 5.77 million shares with a price range of $12.00 to $14.00 per share. 

Underwriters are Morgan Stanley, Lehman, UBS and Jefferies.  The company is a data security operator with compliance enforcement, real-time network awareness, intrusion detection, intrusion prevention, and velnerability assessment.   

We now have the 2006 financials.  Revenues grew from $23.6M in 2005 to $30.2M in 2006 and the losses in each year were $8.1M and $4.75M respectively.  Sourcefire is a venture-backed IPO backed by Sierra Ventures, New Enterprise, Inflection Point, Core Capital, and Sequoia.  Its Snort security product has over 3 million downloads and over 100,000 registered users.

Jon C. Ogg
February 23, 2007

Posted on: February 23, 2007 – 3:13 pm in IPOs, Software

Companies Management Can’t Fix: Majesco Entertainment (COOL)

Majesco Entertainment (COOL-NASDAQ) may have a very hard time surviving if it can’t find a way to recapitalize.   It recently added Gui Karyo, former president of Marvel (MVL) publishing, as VP of Operations.  Unfortunately the company is under an interim CEO.  Gui was a consultant and has helped redefine the strategy of the company, but the strategy is still unknown if it can work.  If the company focuses on Wii, DS, and other lower-budget and quick production games they may come out alright, but if they try to keep competing in Xbox, Xbox 360, PS3, and high-graphic PC games then they are going to have a hard time making it.

The company received a ‘Going Concern Note’ in its most recent audited financial statements from its auditors, and that is never a fun statement to get.  It has at least broken away from big budget games after the failure of Advent Rising to attract the attention it hoped for, even though it had one of the best gaming soundtracks out there.  2006 revenues did grow to $66.7 million and showed an operating loss of $3 million and a fully reported loss of $5.4 million. It claims that it posted $0.2 million in yearly operating cash flows, and its losses were far worse in 2005.

Here was the outlook for 2007:   "We are cautiously optimistic about 2007…. Based solely on our current release schedule, we expect fiscal 2007 revenue to decline approximately 10 percent to 15 percent as compared to fiscal 2006 revenue, with the fourth quarter being the strongest. That said, we expect to achieve higher gross margins and a lower break-even model………"

This really sounds like the Michigan auto market of shrinking to profitability to me, and it requires lots of patience during a time that the balance sheet is teetering.  The one exception is on the Wii and DS games, but their Xbox and other game titles just don’t get the draw that other game producers have (although they are going for lower-budget and faster game production intentionally now).  Too much capital and effort went into Advent Rising and the BloodRayne titles in the past.  Unfortunately, the graphics and gaming engine for an action game looked old-school and not modern compared to other high-end action games.

Majesco is not 100% doomed but it is in very difficult spot and the company is on survival mode rather than growth and expansion mode.  Did you ever hear of a "value play" in the video gaming sector?  Me neither.  This is supposed to be a growth sector, particularly after the launch of PS3, PSP, Wii, DS, and Xbox360 all within a fairly short time of each other.  They may even start selling more shares or warrants to stay alive, but this can be like robbing Peter to pay Paul after Peter also borrowed money from Paul.

We’ll have new financials soon, but the last balance sheet showed almost $3.8 million in cash, accounts receivable were $3.1 million, and its entire total assets were listed as $15 million.  Its current liabilities were $13.26 million.  Majesco’s market cap is still $37.5 million and the two analysts that cover it both carry an expected loss for this year.

Here is the good news: they really do appear to have the worst of the blow-ups behind them as far as making huge bad bets that don’t pay off and shares are up about 50% from their lows. If you went into this ahead of that Advent Rising game you were in the stock at $8.00, $10.00, or even $14.00. There are still a lot of shareholders that are long and wrong, and this name has sort of developed a mini cult status among micro-cap traders now.

Hopefully this company can get it back together, but even if they do succeed on their mini-game model it is not a strategy that sounds like they will ever back to their glory days.  The company may not be that attractive to a suitor either because its titles and gaming engine haven’t been as big as was hoped and they are behind the other game producers in the industry.  There is always the oddball chance too that one of their low-budget games end up being a smash hit.  If only the company was offering that feeling in their body language.

Jon C. Ogg
February 23, 2007

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

Posted on: February 23, 2007 – 1:06 pm in Accounting, Casinos, Consumer Goods, Management Change, Research, Shareholder Issues

Brazilian Homebuilder IPO: Gafisa SA (GFA)

Gafisa SA, a Brazilian homebuilder, has filed for an IPO in the United States.  Since it already trades on the Sao Paulo Stock Exchnage in Brazil, this isn’t exactly a 100% true IPO.  The company listed up to $774.31 million in securities for filing purposes.

It plans to trade on the NYSE under ticker symbol "GFA/ADR" and the lead underwriters were listed as Merrill Lynch, Banco Itau BBA and Citigroup. The company has key shareholders GP Investimentos and Equity International Properties.

The issue that IPO traders are going to potentially have even though this is within the BRIC (Brazil, Russia, India, China) model, the stock is still a homebuilder.  Brazil is a different market than the US and that isn’t arguable, but with the implosion of sub-prime mortgages falling out into the rest of homebuilder sector.  The timing on this one is a bit off and the fact that it has already been trading will usually take away any instant-IPO price jumps.

More can be found on their website at www.gafisa.com.br

Jon C. Ogg
February 23, 2007

Posted on: February 23, 2007 – 11:14 am in Housing, IPOs, International Markets

Would A Private Equity Firm Buy Chrysler? No.

The Financial Times is saying that several private equity firms are looking hard at buying Chrysler from its German parent DaimlerChrysler (DCX). The players apparently include Apollo Management LP, the Blackstone Group, the Carlyle Group, and Cerberus Capital Management LP.

Not likely. The UAW would look at a private equity firm as a treasure trove of cash. It would be hard to convince the workers on the line that they should take large pay-cuts and lose benefits when the heads of private equity firms are spending million on their birthday celebrations and being written up in Forbes as billionaires.

The other reason a private equity buyer would not make sense is that, from a management standpoint, they could do less than Daimler, or another car company like GM (GM), to cut costs. With an automotive parent expenses might be shaved by combining management, manufacturing, and product development.

Last we saw, the private equity firms don’t have engineers designing new car platforms.

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

Posted on: February 23, 2007 – 10:57 am in Mergers and Buy Outs

A NEW Upgrade

From Ticker Sense

UBS upgraded NEW this morning.  Although they didn’t have a buy recommendation on the stock as it went from $40 to $50, they did make a good sell call in August of last year.  They currently have the second best record on the stock.

Ubs_news

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

Posted on: February 23, 2007 – 10:45 am in Research

Earnings Season Ends

From Ticker Sense

Wal-Mart’s (WMT) report on Tuesday marked the end of fourth quarter earnings season.  For the quarter, 67% of S&P 500 companies beat estimates while 19% missed.  The 67% beat rate is the lowest in three quarters and the 19% miss rate matches the highest in four quarters.  Although we won’t know the final year over year quarterly earnings growth number for a couple months, it currently stands at 9.8% according to Bloomberg, which would break the 17 consecutive quarter streak of 10%+ earnings growth.

Beatmiss

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

Posted on: February 23, 2007 – 10:32 am in Earnings

Wall Street Likely to Yawn Despite Another Blowout Quarter for Chesapeake Energy

By Chad Brand of Peridot Capitalist

The hardest thing for value investors oftentimes is to stand by one’s convictions, even when Wall Street doesn’t seem to take notice of what you see. Shares of natural gas producer Chesapeake Energy (CHK) have been doing nothing for more than a year. Many investors have likely grown tired from Wall Street’s yawns and have moved on to more hip names. However, CHK’s fourth quarter earnings report issued yesterday afternoon once again shows that the company is clicking on all cylinders.

Chk

Chesapeake reported earnings of $0.90, 13 cents above estimates of $0.77 per share. Revenue came in at $1.87 billion, versus the consensus view of $1.52 billion. Spectacular quarters are nothing new for CHK, as they have reported stellar results for many quarters in a row now. However, the stock has merely been tracking the commodity price of natural gas, ignoring the fact that shares trade at 8 times trailing earnings and 5 times trailing EBITDA.

The weakness in Chesapeake shares, relative to its operating results, is likely due to two things. First, CHK has issued a lot of convertible debt to fund increased natural gas production, and continues to do so. In order to hedge their positions, buyers of the convertible debt simultaneously short the common stock in order to lock in the income generated from the convertible securities. The good news is that the land grab that CHK has embarked on is largely over so they are doing fewer acquisitions. In fact, CHK’s long term debt actually fell in Q4 for the first time in a long, long time.

Read More »

Posted on: February 23, 2007 – 10:30 am in Utilities

Conolog Jumps on Unquantified Orders (CNLG)

This morning Conolog Corp (CNLG-NASDAQ) is up big after it issued a press release saying it sold 19 PTR Systems in various configurations from United States and Canadian electric utilities following the introduction of its CM100 communicator.  Unfortunately there is no detail about any of the financial terms at all, so it is impossible to know if this order is worth a few thousand dollard or a lot more. 

If you are not familiar with Conolog (CNLG), this is one of those mini-micro-cap cult stocks that has been around the micro-cap trading circles for years.  In the late 1990’s it even used to have warrants with a CNLGW ticker.  The company does not even do $1 million in annual revenues and has no coverage because its market cap is literally listed as under $6 million.

The stock is up 28% at $3.02 this morning and has already come close to its average daily volume; the 52-week range is $1.00 to $7.80, so you have to understand it is very volatile.  CNLG is one of those that also used to have a significantly higher stock price.  It used to be known as an electrical equipment supplier for power companies but it is now known as a micro-cap focused on electrical components and subsystems used in telecom, radio, fiber optics, and other communications.

Jon C. Ogg
February 23, 2007

Posted on: February 23, 2007 – 9:44 am in Telecom

“Top Corporate Citizens” Don’t Alway Make Money For Investors

A magazine called Corporate Responsibility Officer puts out a list of the top corporate citizens. Investors should hope that some of the companies would stop being so nice and spend more time trying to make money for shareholders.

How does a company get on the list? According to MarketWatch: "distinguish themselves from their peers at other large public companies by embracing higher standards — combining strong financial performance with responsible practices on environmental and social issues,"

Among the top ten companies on the list: Green Mountain Coffee (GMCR), Advanced Micro (AMD), Nike (NKE), IBM (IBM), Intel (INTC), Motorola (MOT), Aligent (A), Timberland (TBL), Starbucks (SBUX), and General Mills (GIS).

AMD can’t be doing worse, down from $42.70 to $14.55 in the last year. As Jim Cramer pointed out recently, IBM’s stock is actually down over the last five years. Motorola’s shares are down about 13% over the last year. The Dow is up 15%. Aligent is also down over the last year.

Maybe companies on the list are good for shorting, but, in most cases, not much else.

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

Posted on: February 23, 2007 – 9:39 am in Uncategorized

Yum!my Down on Rats (YUM)

If you are a restaurant chain, what is the second worst thing that can happen?  A LIVE rat infestation caught on live TV.  Why is that the second worst?  Because the worst would be if rats started running customers out of the place when it was open instead of them being caught on tape when the place was closed.

That’s what happened to Yum! Brands (YUM-NYSE) as a Greenwich Village store of KFC & Taco Bell was shown live on CNBC (link to video) this morning with rats running around inside the store and a handwritten note saying "closed, sorry for the inconvenience."  It sounded like this was a franchised location because they said they have the name of the owner and have not been able to reach or hear from him yet.  This location has also supposedly had ‘mouse’ notices from the local inspectors as well, but keep in mind that the network also said the health score at that location was actually better than it has been at many prime restaurant locations around the city.  Also keep in mind that New York City is not really representative of the entire country and keep in mind that there is a policy from the parent Yum! about keeping a restaurant clean.  They certainly don’t condone rat squatters.  Yum! has 34,000 restaurants or something like that when you break out KFC, Pizza Hut, Taco Bell, and others.  It also has a market cap of $16 Billion.  This is horrible PR and that is undeniable, but this isn’t a systemwide issue and isn’t representative of the company itself.  NYC is a very different market and if you have been around the city early in the morning or in the wee hours of the night you will have likely seen worse.

Shares are down 1.7% at $60.01 pre-market, and that is after closing down almost 1% ($0.55) at $61.06 yesterday. Its 52-week trading range is $44.21 to $63.68, so keep in mind that this is much closer to its highs than lows and can create a vacuum when sellers hit.  In a market neutral sense or in a static world this would be a situation where buyers look for an overreaction.  With the stock right up at new highs that may be an exception today.

Do you think rats taste like chicken?  Didn’t NYC do a transrat ban?

Jon C. Ogg
February 23, 2007

Posted on: February 23, 2007 – 8:44 am in Food

Analyst Research (FEB 23, 2007)

ARNA started as Buy at Lazard.
AT cut to Hold at Deutsche Bank.
BIO cut to Neutral at Baird.
C started as Overweight at JPMorgan.
CERN started as Outperform at CIBC.
CMVT raised to Outperform at RBC.
CSCD started as Buy at Merriman Curhan Ford.
CSGP cut to Neutral at Credit Suisse.
DNA target cut to $88 at FBR.
ETN raised to Outperform at Bear Stearns.
EXC raised to Buy at Citigroup.
FII raised to Buy at Goldman Sachs.
ISE raised to Outperform at Wachovia.
KND raised to Equal Weight at Lehman.
KSWS cut to Neutral at Susquehanna.
LGCY started as Buy at Stifel Nicolaus.
LLL cut to Neutral at B of A.
MCCC cut to Hold at Citigroup.
MDRX started as Sector Perform at CIBC.
MOVE cut to Hold at Deutsche Bank.
MPWR cut to Neutral at Goldman Sachs.
NEM cut to Underperform at RBC.
NEW raised to Neutral from Reduce at UBS.
NIHD cut to Hold at Citigroup.
NLC started as Neutral at Baird.
PGI raised to Buy at Roth.
QADI raised to Buy at SunTrust.
QSII started as Outperform at CIBC.
R raised to Outperform at Baird.
ROP raised to Outperform at Baird.
SKX reitr Buy at First Albany.
TCB raised to Buy at UBS.
THOR raised to Outperform at Bear Stearns.
TIF target raised to $48 at JMP.
TK cut to Peer Perform at Bear Stearns.
TKLC cut to Neutral at Merriman Curhan Ford; downgraded at Oppenheimer and Piper Jaffray too.
UCTT raised to Overweight at JPMorgan.
VITL started as Outperform at CIBC.
WDC raised to Buy at Citigroup.
XRTX raised to Buy at Citigroup.

Jon C. Ogg
February 23, 200

Posted on: February 23, 2007 – 8:10 am in Analyst Calls

Goldman Sachs Research Summary (FEB 23, 2007)

Federated Investors (FII) raised to Buy, and added to America’s Buy List.
Monolithic Power (MOSY) downgraded from Buy down to Neutral.

Earnings estimates Raised: FII, BEAS, VRGY, JCP, ESV, ENDP, HMA.

Earnings estimates Decreased: HOG, KSWS, LAMR, CLI, FSS, FRP.

CBS maintained sell and fiscal estimates trimmed frm $1.84 to $1.83, so not much change.

Suncor (SU) is replacing XTO (XTO) on the Conviction Buy List in the E&P sector.

Goldman Sachs also says it is closing out of its HOUSING position trade after being stopped out from the January 31 index ad.

Jon C. Ogg
February 23, 2007

Posted on: February 23, 2007 – 8:00 am in Analyst Calls

Pre-Market Stock Notes (FEB 23, 2007)

(ALU) Alcatel-Lucent rose 2% overseas after winning patent case against MSFT for MP3 patents; plans to go after other suppliers as well.
(BEAS) BEA Systems fell 3.5% after beating EPS targets but gave soft guidance.
(DCX) Chrysler may have private equity groups interested in it.
(EMU) Energy Metals Corp noted as a great speculative Uranium play by Cramer on MAD MONEY.
(GAS) Nicor $1.29 EPS vs $1.00e; unsure if comparable because lower than last year.
(GLGC) Gene Logic posts loss and seeks alternatives for genomics unit.
(HLTH) Emdeon
(HRB) H&R Block posted a net loss after mortgage operations.
(HTV) Hearst Argyle TV $0.46 EPS vs $0.42e.
(IBM) IBM was noted as a SELL according to Cramer based on CEO Palmisano being noted as one that needs to go.
(IMH) Impac Mortgage posted a loss for the quarter.
(INTU) Intuit beat earnings $0.45 vs $0.42e; but lowered full year guidance.
(LOW) Lowe’s $0.40 EPS vs $0.37e.
(LYG) Lloyds TSB traded down 3% after earnings overseas.
(MNI) McClatchy January ad revenues were down 5.8%.
(MSFT) Microsoft ordered to pay $1.5 Billion to Lucent-Alcatel in MP3 patent case.
(MT) Arcelor-Mittal to develop iron ore mining in Senegal.
(NVS) Novartis gets EU backing for its pandemic flu vaccine mock-up.
(PFE) Pfizer reported that 17 countries OK Celebrex for ankylosing spondylitis.
(TKLC) Tekelec traded up 2% after lowered guidance, but 3 downgrades this morning may take that away.
(VRGY) Verigy rose 17% after beating earnings expectations.
(YUM) YUM’s has a Taco Bell unit that is rat infested in NYC in Greenwich Village being shown with rats running wild around the store live.

Jon C. Ogg
February 23, 2007

Posted on: February 23, 2007 – 7:42 am in After-Hours Activity, Earnings, Pre-Market Activity

Shorts Miss The Right Call On HP

The short interest in Hewlett-Packard fell 12 million shares in February. And, based on HP’s wonderful quarter, they should have been right to get out of the stock.

But, Wall St. moved that stock against them, dropping it on HP’s earnings report.

Hewlett-Packard did not have a stellar year in server sales in 2006, according to Gartner Group. And, the market does not think the company’s future is particularly rosy. MarketWatch quoted one analyst from ThinkEquity as saying: "We believe H-P will face tougher competition going forward as competitors fight to regain" share of key market segments."

The brutal reality of the market, especially in tech stocks, is that no amount of good news is enough. HP’s stock was up more than 20% over the last six months, until it announced earnings.

Some shorts thought the company would do well. And it did. But not well enough.

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

Posted on: February 23, 2007 – 7:31 am in Short Interest

Earlybird Analyst Research (FEB 23, 2007)

AT cut to Hold at Deutsche Bank.
BIO cut to Neutral at Baird.
C started as Overweight at JPMorgan.
CERN started as Outperform at CIBC.
CSCD started as Buy at Merriman Curhan Ford.
EXC raised to Buy at Citigroup.
FII raised to Buy at Goldman Sachs.
ISE raised to Outperform at Wachovia.
KSWS cut to Neutral at Susquehanna.
LGCY started as Buy at Stifel Nicolaus.
LLL cut to Neutral at B of A.
MDRX started as Sector Perform at CIBC.
MOVE cut to Hold at Deutsche Bank.
MPWR cut to Neutral at Goldman Sachs.
NLC started as Neutral at Baird.
QADI raised to Buy at SunTrust.
QSII started as Outperform at CIBC.
R raised to Outperform at Baird.
TKLC cut to Neutral at Merriman Curhan Ford.
UCTT raised to Overweight at JPMorgan.
VITL started as Outperform at CIBC.
WDC raised to Buy at Citigroup.
XRTX raised to Buy at Citigroup.

Jon C. Ogg
February 23, 2007

Posted on: February 23, 2007 – 7:06 am in Analyst Calls

Shorts Bet For GM, Against Ford

In February, short sellers moved out of General Motors (GM) and into Ford (F). The short interest in GM dropped 9 million shares, but at Ford shares short jumped 15 million.

Wall St. was smart. Since the beginning of the year, GM’s shares are up almost 17%, while Ford’s are up a little over 10%.

The market is still concerned about two things with Ford. The first is that the company says that its US market share could drop as low as 14% in the next two years. The second is that the company has taken on an additional $23 billion in debt.  But, the head of the UAW is lobbying the media saying that Ford is fine.  It is a self-interested statement based on positioning the big union for its upcoming negotiations with The Big Three. A healthy Ford can continue to pay big health benefits and pension contributions.

The market knows better.

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

Posted on: February 23, 2007 – 7:04 am in Short Interest