Daily Archives: March 20, 2007

Cramer Sticks With Heinz

On CNBC’s MAD MONEY on the road at UT in Austin, Cramer also came on with a DEFENSIVE PLAY from Texas and he brought on the CEO of HJ Heinz (HNZ-NYSE).  Cramer thinks is the best defensive stock out there.  The CEO said they won’t be replaced by China and they are on Chinese tables.  As far as shareholder activists, the CEO said they have worked with the activists; CEO’s have shareholder bosses and they can use the activist shareholder as a good fit.  HNZ launched 100 products this year and wants to launch 200 next year. 

Jon C. Ogg
March 20, 2007

Posted on: March 20, 2007 – 5:59 pm in Cramer

Cramer’s Top 4 Picks from Texas

Today’s MAD MONEY on CNBC with Jim Cramer was on the road at the University of Texas at Austin.  Today Cramer said he’d have 4 best of breed stocks at a discount the he would buy from Texas.  He looked at 207 stocks with a $500 million market cap or more and that have all been overlooked or tossed out by Wall Street.

The first stock he likes is J.C.Penney (JCP-NYSE) as the best retailer in his universe right now out of large cap retail stocks.  He thinks the CEO, Mike Goldman, should get the benefit of the doubt.  When they said they had to fix the product mix and take a charge, the stock was dropped and is down another 10% hit.  With the buyback and with the strong sales he thinks it can have an upside surprise. 

His second pick is Transocean (RIG-NYSE) even after the group was hammered today.  Cramer said this has little exposure to the weak areas of Canada and the Gulf of Mexico.  They can raise rates highly because of rig demand.  They can only buy back stock so fast and the cash is coming in faster than can be spent.

His #3 pick is XTO Energy (XTO-NYSE) as the finest Wildcatter in North America with 17% reserve growth.  It replaced 265% of production, and they hedged gas at $9.00 and oil at $70.  Cramer says it is a growth stock and he would buy it aggressively.

Cramer’s FAVORITE pick is Temple-Inland (TIN-NYSE) that needs to be broken up.  Carl Icahn is in it and that was successful.  Here are the unit values: $21, $21, $31, & $18; then -$15 debt….He thinks it is an $85.00 stock masquerading as a $58 stock.  He thinks this one has $27 upside.

In a student question, Cramer said he cannot get behind Whole Foods (WFMI) yet because it is expensive, even though he thinks that the Wild Oats buy was genius.

In another question Cramer said that JetBlue (JBLU-NASDAQ) is the airline to own with a $2 down and $7 up scenario even though he likes Continental (CAL-NYSE).

Jon C. Ogg
March 20, 2007

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

Posted on: March 20, 2007 – 5:17 pm in Cramer

Housing: Enough Already!!

From The Stock Masters

"I got two words for you, shut the **** up" ~ Robert De Niro, Midnight Run (1988)
Todd Sullivan puts the "housing" and "subprime" talk into perspective and provides some relevant data as to why everyone just Midnight Run - 1988needs to cool their jets. When the media gets stuck on something they are like Rainman obsessing about Wapner being on in 5 minutes. Let it go gang. For two years all we have heard is "housing must slow down" and "there are too many risky loans out there". Now that the housing market has slowed down and the home buyers with those risky (subprime) loans did exactly what we knew they would do, default, this is suddenly a big deal? Read more at ValuePlays..

http://www.thestockmasters.com/index.asp

Posted on: March 20, 2007 – 4:15 pm in Housing

Market Comments From The Stock Masters 3/20/2007

Big Money and Bullies always get their Boss Hoggway. Ain’t that right Boss Hogg? Today Blockbuster’s (BBI) CEO John Antioco will leave by the end of the year (Uncle Jessy for this story) and agreed to a smaller 2006 bonus and resolved a dispute over his pay package. Billionaire investor and director Carl Icahn (Boss Hogg in this story) tried to kick out Antioco from the board during a 2005 proxy battle and called his $54M severance package at the time "unconscionable." Well, looks like that all worked out. As you know fellow Masters, we love the Icahn. He knows how to throw his money and weight around just like he has done at American Railcar (ARII) and everywhere else he goes. Wedbush Morgan analyst Michael Pachter said:
"My guess is that as long as Antioco is there, they don’t change anything. The impact should be positive short term, because … Icahn wants the share price to go up. I really think Icahn just is impatient. He is not a long-term investor." So what does Antioco get? Don’t feel bad for him, he will receive a salary of $1.25M, a $2,025,000 bonus, a bottle of moonshine, and deferred compensation of $1.45M. Icahn’s gets even a bigger ego and the "badass of the week award". Ya’ll come back now, ya hear.

Stock Tips Palm (PALM) is expecting a buyout this week, they are saying shares could fetch $20, it’s trading at just below $19 today. The price tag for Palmmy is a nice $2B (maybe Boss Hogg will buy them) and the sale could happen this week. "Sources" have previously told Reuters that Palm hired Morgan Stanley to pursue a buyer. Unstrung said that Morgan Stanley wanted to wrap up a deal by Thursday, when Palm is scheduled to report quarterly results.

http://www.thestockmasters.com/index.asp

Posted on: March 20, 2007 – 4:13 pm in Research

Adobe Climbs

Adobe Systems (ADBE): $0.30 EPS non-GAAP on revenues of $649.4 million. Estimates were $0.29 EPS & $655.6 Million.

While this was under on some revenue estimates, this was toward the higher-end of its prior guidance.  Adobe’s GAAP diluted earnings per share for the first quarter offiscal 2007 were $0.24, based on 604.2 million weighted averageshares.

Q2 Guidance: Adobe announced it is targeting revenue of $700 million to $740 million (ESTIMATES are $717 million). The Company also is targeting a GAAP operating margin of approximately 23% to 25% percent in the second quarter. On a non-GAAP basis, the Company is targeting a second quarter operating margin of approximately 36% to 37%.  The Company also is targeting other income in its second quarter to be approximately $23 million to $24 million, with a GAAP tax rate of approximately 24% to 26% and a non-GAAP tax rate of approximately 25 to 27 percent.  Adobe is targeting its share count to be between 605 to 607 million shares in the second quarter of fiscal 2007.

For fiscal year 2007, Adobe announced it is reaffirming its annual revenue growth target of approximately 15 percent. The Company also reaffirmed it is targeting a GAAP operating margin of approximately 25% to 27% and a non-GAAP operating margin of approximately 37% to 38%.

ADBE closed up 1.24% at $40.74 in normal trading; shares are up 2.7% at $41.85 in after-hours; the 52-week high is $43.22.

Jon C. Ogg
March 20, 2007

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

Posted on: March 20, 2007 – 3:28 pm in Earnings, Internet, Software

Oracle Marches On

Oracle (ORCL-NASDAQ): $0.25 EPS non-GAAP and Revenues $4.4 Billion; GAAP EPS $0.20.

Estimates were $0.23 non-GAAP EPS on revenues of $4.33 Billion.  As a reminder ORCL does not give guidance until its conference call (5:00 PM EST). 

Total GAAP software revenues were up 25% to $3.5 billion with GAAP database and middleware new license revenues up 17% and GAAP applications new license revenues up 57%. GAAP services revenues were $916 million, up 36% compared to the same quarter last year.

Oracle President and CFO, Safra Catz: "Both revenue and earnings growth accelerated sharply in the third quarter.  We exceeded guidance on every metric with strong revenue growth across all product lines and in all geographies. We’ve now completed eleven quarters of our five year EPS growth plan of 20% per year, and we are delivering earnings growth comfortably ahead of that target. 

ORacle CEO Larry Ellison: "Our middleware new license sales grew 82% in the third quarter and 62% over the last twelve months. This compares to BEA’s growth rate of 8% in their most recently reported quarter and 12% over their last year. Not only are we growing faster than BEA, we’re now larger than they are in the middleware business."

"Our applications new license sales grew 57% in the third quarter and 61% over the last twelve months," said President, Charles Phillips. "This compares to SAP’s growth rate of 7% in their most recently reported quarter and 10% over their last year. Although SAP is still larger than Oracle in the applications business, we are closing the gap consistently and rapidly."

ORCL was up 2.15% at $17.55 in normal trading and shares are up almost 5% at $18.38 in after-hours.  The 52-week high is $19.75.

Jon C. Ogg
March 20, 2007

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

Posted on: March 20, 2007 – 3:13 pm in Earnings, Internet, Software

The 52-Week Low Club

Hancock Fabrics (HKF) Closing stores and default notice from banks. Dropped to $1.03 from 52-week high of $4.36.

Technical Olympic (TOA) Home builder has ugly Q4. Stock down to $5.02. The 52-week high is $23.

KBR (KBR) Construction company spin-off of Halliburton (HAL) falls with former parent’s earnings warning. Dropped to $20 against 52-week high of $27.63.

AMD (AMD) Competition from Intel (INTC) and rumors of price cutting on chips drives these shares even lower. Drops to $13.38 from 52-week high of $36.16. Over $12 billion in market cap gone.

ArtheroGenics (AGIX) Its big drug fails Phase III trials. Now down to $2.62 from 52-week high of $20.03.

Atari (ATAR) Former video game king keeps getting moved to the fringes of the business. Drops to $2.94 from 12-month high of $9.70.

PixelWorks (PXLW) Makes semis for TVs. Announced loss in January and CFO left recently. Down to $1.59 from $5.25 at 52-week high.

SigmaTel (SGTL) Makes chips for MP3 players. New CEO named recently. Concern about pressure on chip pricing. Drops to $3.13 down from 52-week high of $10.87.

Douglas A. McIntyre

Posted on: March 20, 2007 – 3:01 pm in HI/LOW

Cramer on Halliburton & Other Buyout Candidates

On today’s STOP TRADING segment on CNBC, Jim Cramer was out on the road at UT in Austin.  On the Halliburton (HAL-NYSE) he said the company begins a $3 Billion buyback next week.  Cramer thinks this is why they are doing the Dubai move because they are 60% levered to North America.  He said he’d buy it.  He doesn’t think the stock actually needs to be public now.

As far as all of the other buyouts, he has a new list of public companies that should go private:

Sysco (SYY-NYSE) is public and doesn’t need to be public.

Ceridien (CEN-NYSE) can avoid its problems if they go private.

Landry’s (LNY-NYSE) reminds Cramer of Dollar General in that it doesn’t need to be public. He thinks that LNY can go private and then come back as a public company in each of its units.

On Motorola (MOT-NYSE), Cramer said that Icah’s actions against MOT may be the savior of the company.

Jon C. Ogg
March 20, 2007

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

Posted on: March 20, 2007 – 1:52 pm in Bait Shop, Cramer, Mergers and Buy Outs

Should Halliburton’s Warning Have Been Assumed?

Halliburton’s (HAL-NYSE) earnings warning today may have been predictable, depending on your take.  If the company came out recently and said it was moving its corporate headquarters to Dubai, UAE to stop losing out on international contracts because it was not anchored enough in the portion of the world that holds its most lucrative contracts, then maybe this is not the biggest surprise in the world.  The drop in earnings guidance is from $0.54 to $0.49 for Q1.

If you twist the news a certain way you might even draw the conclusion that the company has done this to be able to point to it over and over how they NEED to move whether they like it or not.  This corporate headquarters move is one of the more controversial issues of this year, and maybe this is just what the company needed to be able to show how they need the move.  "Oh, don’t throw me in the briar patch!" 

Before you go too far into this conspiracy theory, you have to look at what the blame is on.  HAL’s Production Optimization and Fluid Systems Divisions of Halliburton’s Energy Services Group experienced reduced activity in North America; and a significant portion of these lower than anticipated results is attributable to decreased drilling and completion activity in Canada and the northern United States.  So they say.

This makes note that the results are outside of the tender and exchange offer of KBR (KBR-NYSE), although KBR shares fell up to 4% with HAL shares upon the news.  HAL shares are down 7% at $30.00 on the news and any chartist will now tell you they broke their uptrend with this news.  There are already some upset holders since it has been such a laggard, but now all the newer shareholders that came in over the last month get to enjoy some of the same pain.

The Oil Service HOLDRs (OIH) are down almost 2% at $139.85; Schlumberger (SLB) is down 1.1% at $65.50;  Transocean (RIG) is down 0.4% at $78.00; GlobalSantaFe (GSF) shares are down 0.8% at $60.40.  Companies that have recently issued guidance in the sector are probably now under more pressure to come out and say if their business outlook has changed or if it is the same. 

Jon C. Ogg
March 20, 2007

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

Posted on: March 20, 2007 – 1:27 pm in Oil & Gas

Was the NY Post Fair to Cramer?

The New York Post has an article from this morning out saying that Jim Cramer may have revealed too much about stock manipulation when short selling stocks from his days at a hedge fund.  This is being passed around today in chat rooms, blogs, and articles.  The NY Post article also notes that the acknowledgment that some of his actions may have been illegal.  While the article does point out the faults of Cramer, they leave themselves and BIG MEDIA out of the picture completely. 

Before you think this is an online "defensive" call for the practice of spreading rumors or even a defense of Cramer, think again.  You can bet that if you went up and asked Jim Cramer himself who was the most controversial and most loved or hated financial market pundit on TV or with a huge audience right now, then he would probably answer, "Jim Cramer."   Sometimes his stance and is great and sometimes it isn’t.  That’s life.

Stock manipulation of any sort is wrong, but investors need to know there are tricks that the investment community uses DAILY now and forever that anyone could deem manipulative.  It is not just hedge funds or short sellers that manipulate or try to manipulate stocks.  Day traders, brokers, analysts, hedge fund managers, stock promoters and others have all seen this more than once if they have been around.  If you are an active trader or if you have a lot of "connected contacts" then think back to the number of times that you have received the exact same instant message within a few minutes from completely unrelated sources where the same message has been copied and pasted and forwarded over and over. 

Read More »

Posted on: March 20, 2007 – 1:01 pm in Cramer, Regulation, SEC

ORCL: Oracle Earnings – The Word of the Day is “Linearity”

By William Trent, CFA of Stock Market Beat

As we noted this weekend, Oracle Corp. (ORCL) is reporting earnings after the close tonight. And analysts are feeling more optimistic about the numbers, according to a Bloomberg article:

After delays in locking up contracts cut growth in the second quarter, Oracle managed to close big orders just before the period ended Feb. 28, said analysts including UBS AG’s Heather Bellini in New York, Institutional Investor’s top-ranked software analyst.”Two weeks before the quarter closed, people thought they were going to miss,’’ she said. “The quarter will be better than people thought it was. When you talk to Oracle salespeople they tell you their pipeline is huge.’’

Leaving aside the fact that we’ve never heard a salesperson descibe their pipeline as anything other than huge (they are salespeople, after all) the thesis nonetheless is in line with our prediction that “acquisitions will result in upside to estimates though organic growth may disappoint.” We aren’t particularly impressed by last-minute order closings, as we worry the company may be offering too good of a deal just to close on the sale before the quarterly reporting deadline. Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports, Second Edition would describe it as an aggressive revenue recognition practice. Furthermore, it isn’t the first time Oracle has relied on last-minute sales to meet numbers. In fact, they appear to have done it just last quarter.

So, if you listen to the conference call, listen particularly closely when anyone mentions the word “linearity.” It is the analyst code word for “stuffing the channel.” If the quarter was linear, each month would have roughly the same level of sales. Since software companies typically have a strong finish, they are said to have “back-end linearity.” The last month of the quarter is the strongest. If Oracle says anything like “linearity was more back-ended than normal,” look out. Analysts would interpret that as a potential revenue concern.

http://stockmarketbeat.com/blog1/

Posted on: March 20, 2007 – 11:33 am in Software

Google to be “King of All Media”?

From Internet Outsider

King_of_all_media_2In a debate at OMMA Hollywood today, I will argue that Google will NOT become "king of all media."  Although my esteemed opponents will no doubt come packing heat, it seems to me that theirs is a losing proposition.

Four points:

  • Traditional media content–journalism, linear storytelling (in TV and movies), music, talk shows, comedy–is not going away. Google currently does not produce traditional media content, and won’t unless it radically changes its business. What Google does do–extremely well–is organize, distribute and aggregate media.  As a result, it is a major threat to traditional media distributors, but not (in most cases) to media creators.  (For the purposes of this debate, I’m going to assume that to be "King of All Media" one can’t just be a distributor).
  • Google generates the vast majority of its profit (profit, not revenue) from the one content product that it does produce: search results.  Some fear/assume that Google’s recent initiatives with print and radio will result in these and other media industries being subsumed into a Googleplex.  This is ludicrous.  In its offline initiatives, Google is acting as little more than a technology enabled ad-rep firm–one that takes a small cut of the profits (and, with big partners, after overhead, the cut is small), in exchange for selling ads.  If Google’s offline efforts are successful, it will likely become a good partner for media companies, not a competitor.  (Which isn’t to say that other online companies aren’t assaulting traditional media).
  • Even Google can’t win three wars at once.  Yes, Google has, so far, crushed its online competition.  It will only continue to do so, however, if it keeps its eyes on the ball.  In addition to keeping its Intenet competitors at bay, however, Google has also indicated that it wants to destroy Microsoft Office–a move that probably will not cause Redmond to just wave the white flag.  To become "king of all media", meanwhile, Google will have to go about destroying newspapers, magazines, cable companies, radio networks, TV studios, and other entities not known for just rolling over.  If Sergey, Larry, Eric, et al, are as smart as they appear to be, they won’t be dumb enough to try to do this.
  • Believe it or not, Google does have some online competition.  Although Yahoo was knocked flat in the early rounds, it has recently staggered back to its hands and knees.  Now that Microsoft’s core business is under attack, meanwhile, it may finally begin to get its Internet act together (unlikely, I know).  But if Google really does try to "attack" traditional media, these two companies and others will be waiting with their arms open–a fair, reasonable Internet partner who doesn’t want to doesn’t want to see the media glory days come to an end.

Now, will Google, Yahoo, and others eventually become single-destinations in which people can go to find and use ANY content?  I sure hope so.  Before that happens, however, a lot of revenue-sharing, copyright, security, and other issues are going to have to be worked out.

Posted by Henry Blodget on March 20, 2007

http://www.internetoutsider.com/

Posted on: March 20, 2007 – 11:30 am in Internet

Hussman: Sorry, Market Still Overvalued

From Investment Intelligencer

In his weekly market letter, John Hussman of the Hussman Funds notes that the current market environment feels a lot like that of the late 1990s and then invokes a sobering statistic to back this up.  Hussman’s conclusion is the same as that of Jeremy Grantham, Andrew Smithers, Robert Shiller, and others: the U.S. equity market is still overvalued by at least 30%. 

As with all analyses based on mean reversion, Hussman’s assumes that past is prologue.  As a result, if something is "different this time" (which it sometimes is), the concern may be unfounded.  The bad news is that, if something isn’t different this time, if past is prologue, the outlook is very grim indeed.  The "mean" in a mean-reversion analysis is in the middle: half of the observations are above and half are below.  A drop of 30% in the market, in other words, would not necessarily take us to the bottom.  It would just take us to the mean.

Hussman:

Ever watch those old Road Runner cartoons where the Wile E. Coyote goes over the edge of a cliff holding an anvil and just hovers there for a moment, while it sinks in that he’s in trouble? That’s about what this market feels like. In particular, the current environment in housing, financials, and the stock market feels a lot like what we observed in the dot-com bubble in the late 90’s. It was the clear (or should have been) that speculation had gone too far, and that the excessive bullishness of investors would probably end badly. But even after individual stocks began to collapse, many investors maintained hope until it was far too late..

…[S]tocks remain very richly valued. The bait taken by investors here is the belief that the market’s “price-to-forward operating earnings” ratio is reasonable. Unfortunately, this morsel of bait carries a very sharp hook. “Forward operating earnings” did not even exist prior to the 1980’s, and if one proxies it historically as Cliff Asness has done (based on how it relates to other fundamentals with longer records), you find that the historical norm of “price-to-forward operating earnings” is about 30% below current levels. Adjusting for the present elevation of profit margins, the normalized level is probably even lower.

Posted by Henry Blodget on March 20

http://www.investmentintelligencer.com/

Posted on: March 20, 2007 – 11:28 am in Research

SAC Capital Boosts Stake in WCI to 9.5%, May Engage in Discussions with Management

From 13D Tracker

In a 13D filing on WCI Communities, Inc. (NYSE: WCI), SAC Capital disclosed a 9.5% stake (4 million shares). This is up from the 3.25 million shares stake the firm disclosed for the quarter ended Dec 31, 2006. SAC changed its filing status from 13G (passive) to 13D reflecting its more activist role in the investment.

In the filing, SAC said, "The Reporting Persons have reviewed public information regarding the potential proxy contest and unsolicited tender offer by Icahn Partners LP and others, and regarding the Issuer’s process of reviewing financial, strategic and operational alternatives (including a potential sale of the Issuer). The Reporting Persons intend to review their investment in the Issuer on a continuing basis and may engage in discussions with management, the Board of Directors, other shareholders of the Issuer and other relevant parties concerning these matters and potentially concerning other matters with respect to the Reporting Persons’ investment in the Common Stock, including, without limitation, the business, operations, governance, management, strategy and future plans of the Issuer."

WCI Communities is currently reviewing strategic options and Carl Ichan recently announced an unsolicited tender offer to acquire any and all of WCI’s outstanding common stock for $22.00 per share.

http://www.13dtracker.blogspot.com/

Posted on: March 20, 2007 – 11:26 am in Satellite

StreetInsider.com Unusual 11 Mid-Day Movers 03/20/2007

Hirsch International Corp. (NASDAQ: HRSH) 56% HIGHER; Reports 150% Increase in 2006 Net Income and Tripling of Operating Profits. Net sales increased $3.2 million to $15.2 million for the quarter ended December 31, 2006,

Accredited Home Lenders Holding (NASDAQ: LEND) 24.6% HIGHER; Received a commitment for a $200 million term loan from one or more entities managed by Farallon Capital Management, L.L.C.

Systemax Inc. (NYSE: SYX) 20.5% LOWER; Reports Q4 EPS of $0.22 compared to $0.09 for the same period last year. Net sales increased 11% to $648 million compared to $583 million in the fourth quarter of 2005. Announces Special $1.00 Per Share Dividend.

Exide Technologies (NASDAQ: XIDE) 20% HIGHER; Announces a new supply agreement with Toyota Motor Engineering & Manufacturing North America (NYSE: TM). Exide has begun shipping lead-acid starting batteries for the next generation of Toyota Tundra trucks assembled at Toyota Motor Manufacturing, Texas, Inc. (TMMTX) in San Antonio, the automotive manufacturer’s $1.28 billion assembly facility which began operations in November 2006.

Affiliated Computer Services (NYSE: ACS) 17.25% HIGHER; Founder and Chairman, Darwin Deason, announced that he, together with his investment partner Cerberus Capital Management, L.P., has submitted a proposal to acquire, for a cash purchase price of $59.25 per share, all of the outstanding shares of common stock of Affiliated Computer Services.

RF Industries Ltd. (Nasdaq: RFIL) 17.2% LOWER; Company is unable to file its Quarterly Report on Form 10-QSB for the fiscal quarter ended January 31, 2007 by the scheduled filing deadline as a result of its further review and assessment under SFAS 123R and the resulting impact to our income tax provision. SFAS 123R became effective for the Company on November 1, 2006, and this is the first fiscal quarter in which the Company has had to apply SFAS 123R to its stock option grants.

Eschelon Telecom (NASDAQ: ESCH) 13.8% HIGHER; Signed a definitive agreement to be acquired by Portland, Oregon-based Integra Telecom, Inc for $30 per share.

AtheroGenics (Nasdaq: AGIX) 8.4% LOWER; Continues to fall after yesterday’s 60.5% drop whenthen company announced that its ARISE Phase III clinical study of its lead drug candidate, AGI-1067, did not show a difference from placebo in its composite primary endpoint; however, it did achieve a number of other important predefined endpoints.

Technical Olympic USA Inc. (NYSE: TOA) 8.2% LOWER; Stock continues to fall for seventh straight session, company tied to residential construction.

Gottschalks Inc. (NYSE: GOT) 7.5% HIGHER; CL King upgrades GOT to Strong Buy.

Novastar Financial Inc. (NYSE: NFI) 7.9% HIGHER; Stock continues to rebound after crashing due to worries in sub-prime market.

http://www.streetinsider.com/index.php

Posted on: March 20, 2007 – 11:24 am in Research

S&P 500 Stocks Furthest Below 50-Day Moving Average

From Ticker Sense

Below are the eight S&P 500 stocks trading furthest below their 50-day moving averages.  The blue lines in the charts represent the stocks’ 50-day moving average spread (% difference between price and 50-day).  The brown line represents money flows.  Of the eight stocks below, DHI and CTX currently have the best money flows.

50day320_2

50day23_2

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

Posted on: March 20, 2007 – 11:21 am in Research

Palm: What Would a Buyer Need to Pay?

Well the reports are rampant again on Palm (PALM) being a takeover candidate with a bid as soon as Thursday.  Why Thursday?  Because its earnings are Thursday.  This batch of rumors now reported everywhere has Motorola or Nokia as the bidder, while the company may want a private equity buyer.  We noted on March 2 "A bidder could come in and start an offer at $20.00 and that would make most of the holders whole that bought in the last two years."

In that same article here is what we noted a buyer would be getting, and we didn’t even include the technical staff and intellectual property: First they would be buying a competitor to Research in Motion and one that already has they Microsoft business platforms signed.  They would be buying a global IP network cloud that is already in place with its partners.  The balance sheet is fine with accounts payable hardly above receivables and inventory and no real long-term debt.  It has more than $500 million in cash and equivalents and roughly $200 million more in assets I would count (my estimate is lower than the balance sheet claims).  Even if the company continues to falter it trades at a massive discount to RIMM on forward revenues and RIMM is just about the only company you can directly compare this to.  So if you strip everything out that I am counting as net tangible value, a buyer would be paying $1.1 Billion plus whatever deal premium they would have to pay.

So, earnings are coming out Thursday and the risk is that if they are very weak again that a buyer can stand back and be a scavenger OR if the earnings are too strong then they’ll have to pay up even more.  It is still a coin toss, but if a buyer wants to win a deal here with shareholder approval they will have to start around the $20.00 level.  It is also assumable that a would-be acquirer would get at least some access to the books and have a feel for Palm’s outlook.

If they start at a lower price there is a perception that others may want to get in the fold and that bid could be higher.  These shareholders that have been in the stock for some time are not likely to approve a "takeunder" or an at-the-money bid, particularly since the stock was over $20.00 just one year ago.  Maybe after two years of rumors this one will finally come to fruition.  IF a bid comes in at under $20.00 shareholders are likely to say, "This is PALM, not SLAP." 

After almost an hour of trading PALM shares are up more than 4% at $18.90 and have already exceeded an average day’s trading volume.  As a final reminder, this one has been rumored or speculated upon as a takeover candidate in what feels like more months than it hasn’t.  This $20.00 area is our estimate and there are no assurances at all that a buyout offer is imminent nor that the buyout offer will come in at that level. 

Jon C. Ogg
March 20, 2007

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

Posted on: March 20, 2007 – 9:43 am in Bait Shop, Consumer Electronics, Mergers and Buy Outs, Technology Companies, Telecom, Wireless

Comerica: All My Exs Live In Texas

As the old country Western song says "All my exs live in Texas". Now Comerica (CMA), the big commercial bank based in Detroit for many decades has decided to leave for Dallas. (The roots of the bank actually date back to the 1840s). At least the baseball park in Detroit will keep its name "Comerica Park".

With all the problems that Detroit is having with car makers, the last thing it needed was to have the big bank take a powder. Maybe GM will move to Dallas, too.

Douglas A. McIntyre

Posted on: March 20, 2007 – 9:36 am in Banking

CEO Leaves Blockbuster, Problems Stay

Blockbuster’s (BBI) CEO John Antioco is leaving. He has battled with the company’s big shareholder Carl Icahn about everything from his bonus to his strategy.

Blockbuster is constantly under siege. First it was NetFlix (NFLX) and selling DVDs over the internet to be sent through the mail. Blockbuster countered with its own service.

Then the Blockbuster model got a little more disruption. Apple (AAPL), Movielink, Amazon (AMZN), and a host of other companies are delivering movie digitally and often over the internet.

And, BBI is left with a lot of stores and a lot of employees that it does not need.

Antioco was actually a guy who did a lot with very little to work with. BBI stock moved up to over $7 recently from a 52-week low of $3.30.

Now he is leaving. And Icahn gets to stay behind with the problems.

Douglas A. McIntyre

Posted on: March 20, 2007 – 8:37 am in Retail

As Alzheimer’s Dementia Increases So Could Nursing Home Stocks

The number of people with Alzheimer’s disease rises above five million, one of the questions that come up is who will care for the patients. As The Wall Street Journal points out, the baby boomers are about to start turning 65, and age is the No.1 factor in "the long-forecast dementia epidemic."

There are several companies in the nursing home and elder care industry that are likely to benefit from the problems of an aging population:

Senior Housing Properties (SNH) The stock trades at $22.56, near the middle of its 12-month range. Total revenue last year was $179.8 million.

Sunrise Senior Living (SRZ) The company has problems with releasing its financials because the SEC has requested that the company restate its 2005 numbers. That does not seem to have hurt the stock. It trades at $39.12, just below the 52-week high of $41.50.

Brookdale Senior Living (BKD) Another company in the industry that has its trials. Company revenue doubled in Q4 to $432 million. But, one time charges knocked down net and Goldman Sachs downgraded the shares. Trades in middle of its range at $45.28.

Assisted Living (ALC) Not growing very fast, which is odd. Revenue in Q4 was $58.5 million. Operating margins strong with $9 million income from operations. Trades at $11.98 near the 52-week high of $13.18.

Manor Care (HCR) Mostly short-term assistance, but, as the patient profile changes, so could that. Q4 profits up 56% and upgraded by Matrix Research. Trades at $54.18, near 52-week high of $55.33.

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

Posted on: March 20, 2007 – 8:20 am in Medical