Daily Archives: May 19, 2007

More Under-Dividend Stocks

Stock Tickers: APA, BHI, BJS, CHK, DVN, ESV, XTO, VLO

After digging through the Barron’s list of "under-dividend" companies, something else came back to mind again: there are too many energy companies with tiny P/E ratios that yield under 1%.  This is only some because there is a subjective group of companies.  It is possible that some may have decided to bump their dividends, but here are eight more "under-dividend" energy related stocks that could all be dividend hiking candidates:

Company (Ticker)                      Yield    P/E
Apache (APA)                             0.8%    10.9
Baker Hughes (BHI)                 0.6%    11.0
BJ Services (BJS)                     0.7%    11.0
Chesapeake Energy (CHK)    0.7%    10.4
Devon Energy (DVN)                 0.7%    12.6
Valero (VLO)                               0.7%    8.0
XTO Energy (XTO)                     0.9%    12.1
Ensco (ESV)                               0.2%    10.7

The truth is that these companies are all probably looking at other alternatives and opportunities and these have frequently reserved cash for outside opportunities.  If they aren’t going to make acquisitions that will help solidify their operations, then these should all start loosening up the hold on their wallets.

Shareholders now have more power then in prior times.  Activist shareholders force all sorts of action now, so if a company isn’t being generous enough with shareholders then it might be their own fault.

Jon C. Ogg
May 19, 2007

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

Posted on: May 19, 2007 – 12:00 pm in Dividend, , , , , , , ,

On Barron’s “Under-Dividend” Crowd

Barron’s did something very interesting this weekend: they covered companies that could be paying out much higher dividends.   This is something investors should applaud as too many companies are determining that shareholders are more rewarded by share buybacks than they are with dividends. 

The funny thing is that many companies that should be paying dividends do not even pay them out.  Here is a list of the "under-dividend" companies:

COMPANY (Ticker)                                YIELD    P/E

American International Group (AIG)    0.9%    11.2
Goldman Sachs (GS)                            0.6%    10.6
Franklin Resources (BEN)                    0.4%    19.2
UnitedHealth (UNH)                                0.1%    15.6
Amgen (AMGN)                                        0.0%    12.9
Cisco Systems (CSCO)                         0.0%    18.6
Dell (DELL)                                               0.0%    22.0
Oracle (ORCL)                                          0.0%    17.9
Viacom (VIA)                                             0.0%    17.9
Berkshire Hathaway (BRK/A)                0.0%    18.7

Yep, Berkshire Hathaway is figuring out how to do a whale of an acquisition and it is stiing on roughly $40 Billion in cash.  This company could actually reward shareholders easier than any of these other companies.

Dell is bogged with issues, and if Cisco or Oracle issued a Microsoft-esque dividend the street might interpret that these companies are more like utilities rather than the growth engines investors classify them as. 

But some of these companies NEED to be paying more out. AIG, Goldman Sachs, Franklin, and UnitedHealth are all guilty as charged.  Throw in Berkshire Hathaway.  These companies need to starting paying out cash to holders, and there arer probably very few who would argue. 

Jon C. Ogg
May 19, 2007

Posted on: May 19, 2007 – 11:12 am in Dividend, , , , , , , , , ,

Will Pearson (PSO) Buy Dow Jones (DJ)?

At the risk of stating the obvious, Dow Jones (DJ) needs a way out. Its shares were moving along in the low $30s until News Corp (NWS) offered $60.  If the controlling Bancroft family turns down the News Corp offer, the shares head back to their old territory. To make matters worse, Dow Jones business, especially its Newswire operations, are likely to face stronger competition from a merged Reuters (RTRSY) and Thomson (TOC).

With Reuters and Thomson married, most of the logical buyers for Dow Jones are gone. That is with the possible exception of Pearson (PSO) which owns The Financial Times. The Financial Times owns 50% of one of the world’s most respected magazines–The Economist. Pearson also owns a majority interest in Interactive Data Corp (IDC) which provides financial market data, analytics, and related services to financial institutions, active traders, and individual investors.

Pearson was founded in 1844, and has many of the same values as Dow Jones. The company describes its operating philosophy this way: Our products, customers and technologies are changing fast but some things in Pearson stay the same. "In everything we do, we aspire to be brave, imaginative and decent."

A look at Pearson shows that it is pretty well-run. Revenue in 2006 was $8.1 billion and operating profits was $1.1 billion. The company is growing.

Pearson has a market cap of $14.4 billion. Even at a $60 valuation, Dow Jones cap is below $5 billion.

A merger with Pearson would give the controlling shareholders at DJ a way out the would not require them  to sell the company to someone whose values they dislike. Mr. Murdoch is just not high brow enough for them. And, Pearson has the experience of owning a highly independent editorial property in The Financial Times.

Whether Pearson would be game to takeover Dow Jones is unknown. But, it is not helped by the Reuters tie up with Thomson. Owning Dow Jones is a chance to get bigger by picking up a company with similar DNA.

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

Posted on: May 19, 2007 – 9:52 am in Mergers and Buy Outs

Is Early Release of Study Data to Doctors Unfair?

by Hisham S. Ayoub, DMD
BioHealth Investor.com

It is a common, and expected practice, to release study results and preliminary data of major studies to doctors and members of medical associations ahead of major conferences. But this has incited a collective cry from investors and analysts who claim that releasing data early is unfair to the investment community at large, according to an article in the Friday edition of the Wall Street Journal.

ImClone Systems (IMCL), Regeneron Pharmaceuticals (REGN), Genentech (DNA), and Onyx Pharmaceuticals (ONXX), all apparently were affected by the release of early results to doctors and members of the American Society of Clinical Oncology (ASCO) ahead of a major meeting to be held on June 1st.

ImClone, Regneron, and Genentech all are trading down since rumors arose claiming that preliminary data from key study results were less than positive, while Onyx has gained amid speculation that a key liver cancer drug showed favorable results.

Can the release of early results to doctors be construed as insider information?

It really shouldn’t matter! ASCO believes it serves its members, which include doctors and patient advocacy groups. The esteemed socieity does not care much about Wall Street, and rightly so.

Some investors did claim that they have acquired copies of the preliminary data ahead of the ASCO meeting through ‘third parties’. Obviously, these include member doctors.

So the problem should not lie squarely with ASCO, or other medical societies who are serving their members, it lies with Wall Street.

Regulators should keep on eye out for investment firms and hedge funds who claim to hire doctors as ‘analysts’, while the true purpose is to have insiders at the major medical meetings and conferences to acquire key preliminary data ahead of the general public.

But ASCO also has a role to play here; cancel a doctor’s membership if he/she is linked to any investment firm, group or hedge fund.

As for the doctors themselves; the primary concern should be to discuss data to aid in the future development of promising drugs to relieve the suffering of patients, not to act as an information medium for Wall Street fat cats.

Am I being too naive? Maybe, but being naive is being honest, and that should be on every doctor’s priority list.

Source: BioHealth Investor.com

Posted on: May 19, 2007 – 9:13 am in Uncategorized

Friday’s Top Biotech & Medical Stocks

by H.S. Ayoub
BioHealth Investor.com

Read More »

Posted on: May 19, 2007 – 9:12 am in Uncategorized

Microsoft Bid for aQuantive Signals Desperation

By Chad Brand of Peridot Capitalist

This stunning bid for online advertising firm aQuantive (AQNT) by Microsoft (MSFT) seems to stem from simply missing out on deals that competitors have made and feeling the need to get something, anything, done. After talks with Yahoo! (YHOO) went nowhere and Google (GOOG) bought Doubleclick for $3.1 billion, Microsoft had two options if they felt they needed to keep up with everybody else; buy aQuantive or Valueclick (VCLK).

Not only did they go with aQuantive, but they paid an astronomical price. Shares of AQNT were trading at $36 yesterday and that quote was pricing in a lot of buyout speculation already. Somehow they got Ballmer and Company to offer more than $66 per share in cash, an 85% premium. Such a bid puts Mister Softy on the hook for a cash outlay of $6 billion. In return it gets a business at 104 times trailing earnings, 86 times current year earnings, and a whopping 67 times 2008 earnings.

Is it a good move, given the price tag paid? I can’t see how it could be. Based on 2006 sales figures, AQNT will represent less than 1% of Microsoft’s revenue. This deal can hardly move the needle for them, in my view. Sure it will add some expertise in a field that the company is struggling with, but given that this deal is just being done to keep up with acquisitions already announced by competitors, Microsoft is just keeping pace with rivals, not gaining on them.

Buying Yahoo! would have been a better option. There aren’t any comparable deals Google could have done to match a Yahoo! purchase by Microsoft, so that would have actually closed the gap. I don’t think this aQuantive deal does that. And given the price they paid, I wouldn’t be too happy if I was a Microsoft shareholder.

The only positive coming out of this announcement, unless you are long aQuantive shares (congrats to all of you), is an opportunity for merger arbitrage traders. AQNT is nearly $3 below the $66.50 offer price. Although no other bids are likely, the discount is more than 4% and the deal should close by year-end, so arb players can make an 8% to 9% annual return by waiting six months or so for the deal to close.

Full Disclosure: Long Google, short Yahoo!, and no positions in the other companies mentioned

http://www.peridotcapitalist.com/

Posted on: May 19, 2007 – 9:05 am in Uncategorized

Priceline (PCLN) and Expedia (EXPE) are all about International development, but what if that doesn’t work out?

Yesterday (5/17) Stifel Nicolaus & Company upgraded Priceline.com Incorporated (PCLN) from "hold" to "buy" and set a 12-month target price at $67 a share. Priceline’s stock has gone up 7% in the last week and closed the week at $60.89 a share. Last week shares of Priceline traded up and down after reporting a larger Q1 07 loss but raising revenue 25% to $301.4 million. So now shares of the online travel company trade at a P/E of 49 on a market cap of $2.31 billion with the green light to run even higher.

EXPE VS PCLNPriceline is often compared to Expedia.com (EXPE) which still holds the title as the No. 1 online travel agency. Expedia just reported a so-so quarter and its share price is at $24.64 with a P/E of 33 and a market cap of $7.47 billion. So lately, it all comes down to comparing what each company is doing outside of the United States to increase revenue, and it’s definitely game on. Analysts expect Priceline’s European operation to account for 75%-80% of the company’s operating profits in 2007. According to Stifel Nicolaus & Company, Priceline’s travel market in Europe is expected to grow by 34% in 2007, and there is substantial gross booking opportunity in the foreseeable future.

Expedia has it’s hand in Asia online travel company eLong (LONG) and that company can’t seem to gain any momentum in the past few months. eLong for those who care is trading just 70 cents above its 52-week low of $9.05. Expedia’s CEO Barry Diller said on their earnings call last week:
"With accelerating transaction growth, a 32 percent increase in European bookings, 11 percent revenue growth and the very beginning echoes of resurgence at Expedia.com we are seeing the early results of the reinvestments and reorganizations that made last year so challenging"

International travelSo if both companies are talking up and focusing operations outside of the U.S. and the analysts are banking on it, are you willing to place all your marbles on that factor as well?

Look, Priceline is the strongest of the online travel sites, over the last 52 weeks the share price has gone up 106% but let’s not forget that all of the online travel companies got hammered last year. Expedia has comeback as well with their shares trading up 73% in the past year, but now what?

We all know the airline sector is horrible, and with fuel prices on the rise and the economy slowing back at home, you can’t expect online travel companies to perform that great on the American economy alone. But putting most of your eggs in the international basket seems a bit much when both of the stocks are trading at near record highs. How many stocks are you willing to pay $60 a share for? This is an online business let me remind you, eCommerce if you want to be flashy, they are not the stocks your father invested in that still trade today. If you are willing to pony up that much cash, you want to make sure you aren’t going to be a victim to the bear traders. The short percentage of Priceline’s float as of April 10th is 22% where as Expedia’s comes in at 5%. There are a ton of bears out there betting that Priceline is overpriced and going to fall. So if the international numbers don’t work out and American’s cool their spending habits, it’s very possible Priceline’s shares might not make it to $67.

So bet on Priceline or Expedia? How about neither. Why not just wait things out right now and see what happens in the next few months. These stocks are trading high and maybe International revenue will keep coming in, but maybe it doesn’t? If the analysts say the stock is going up, say "prove it", but paying for these companies near 52-week highs? It just doesn’t add up.

Frank Lara Jr.

Frank Lara Jr. can be reached at franklara@247wallst.com; he does not own securities in the companies he covers.

Posted on: May 19, 2007 – 8:42 am in Uncategorized

This Week on StockHouse May 14 to 18

The world’s most-watched stock index marched higher for most of the week, setting new records along the way. Similarly, the TSX Composite steamed ahead setting fresh closing highs.

Sean Mason and Keri Korteling sorted through the stats and strung together a list of Top Five (http://www.stockhouse.ca/shfn/article.asp?edtID=19732) lists of the most popular posters, BullBoards and other features on StockHouse.

Nickel exploration companies (http://www.stockhouse.ca/shfn/article.asp?edtID=19739 ) have investors seeing dollar signs, said Sean Mason, who looked into the Buzz on the BullBoard of a tiny junior exploration outfit.

Micro-cap Monday columnist Danny Deadlock showcased a small satellite technology company (http://www.stockhouse.ca/shfn/article.asp?edtID=19718 ) in his weekly column, and although he liked the firm’s technology, he worried about its inability to market itself.

The new column by Don Rodgers, Trading Discipline, took a clear-eyed look at how Level II (http://www.stockhouse.ca/shfn/article.asp?edtID=19720 ) can be a very useful trading tool indeed.

One of the secrets to building a successful portfolio, argued Donald Dony, is to abandon the search for quality companies, and start at the top, with an understanding of market direction (http://www.stockhouse.ca/shfn/article.asp?edtID=19721).

While there is no official plan for the U.S. to attack Iran, there is a war of words ongoing between the two nations. The status quo is part of what’s driving gold prices (http://www.stockhouse.ca/shfn/article.asp?edtID=19725 ), argued David Galland, of Casey Research, but a flare up would immediately set gold prices on fire.

Editors at International Research Partners fretted that there is no way to safeguard energy sources (http://www.stockhouse.ca/shfn/article.asp?edtID=19726 ) for North America, Western Europe, and Japan without a serious look at nuclear energy and bio-diesel.

And the editors of the Bio Check, Leon Hamerling and J. Paul, worried that the FDA had developed a hostile attitude to therapies designed to harness the immune system (http://www.stockhouse.ca/shfn/article.asp?edtID=19730 ) for fighting disease.

The yen (http://www.stockhouse.ca/shfn/article.asp?edtID=19731 ), with its low interest rate, has helped provide the liquidity behind the recent market moves higher, said Steven Saville.

In companion pieces addressing the IPO beat, Jon Ogg of 24/7 Wall Street tackled the latest (http://www.stockhouse.ca/shfn/article.asp?edtID=19733) new IPO filings for the week.

If executives were treated more like Paris Hilton, and sent to jail (http://www.stockhouse.ca/shfn/article.asp?edtID=19734 ) for their misdeeds, they might be less likely to engage in illegal activities like back-dating options grants, opined Mark McNair.

A new mining company launched by the executive pair who built Bema Gold and El Dorado Gold was a key attraction for Luke Burgess at the New York Hard Assets Investment Conference (http://www.stockhouse.ca/shfn/article.asp?edtID=19738).

According to Don Vialoux, the old adage “sell in May and go away” seems to be the best way to make sure your Diamonds (http://www.stockhouse.ca/shfn/article.asp?edtID=19740 ) don’t lose their luster.

Following last week’s look at the oft-neglected mid-cap indices, Financially Fit reminded readers that large-cap indices (http://www.stockhouse.ca/shfn/article.asp?edtID=19744 ) are the best reflection of the broader market.

And, STANDUP Advice columnist John De Goey took on the law of averages (http://www.stockhouse.ca/shfn/editorial.asp?edtID=19745 ) in his latest column about mutual fund fees.

Read More »

Posted on: May 19, 2007 – 8:40 am in Uncategorized

Tax Increase “Budgeted” By Congress: Anyone Care?

In a stunningly underreported event, Congress approved the blueprint for the 2008 budget and in it is the single largest personal tax increase in US history. Where is the media on this?

Passed essentially online party lines 52-40 in the Senate and 214-209 in the house, the budget blueprint plans to allow the personal income tax, capital gains and dividend tax rates to increase in 2008. Quoting House Budget Committee Chairman John Spratt (D. SC), "It’s not the perfect solution, but it is a long step in the right direction."

How? Raising taxes has never been the answer to our "budget" problems. Cutting spending has. More money in the hands of Congress will only lead to more spending. If history has shown us anything, this is an undeniable fact. In the outline, it proposes $20 billion dollars MORE of discretionary spending than the President had proposed. How about we back out that "discretionary waste" and not pick my pocket?

Corporations have spent the last 4 years raising dividends at a 20 year record rate as a way to reward shareholders. The effect of these increases will now be negligible when the tax rate on them is allowed to almost double. Look at the chart below.

The S&P has enjoyed a smooth ride as investor have parked their money and enjoyed the steady stream of reduced tax rate dividend checks. An increase in these rates would lead cut the value of these dividends by almost 50% and surely lead to a huge increase in volatility. While professional traders love volatile markets, they are the enemy of the average investor who gets sideswiped by the big market swings and end up losing money.

I cannot figure out why no one is talking about this now. One thing for sure, if it passes, it will be all we talk about..

Todd Sullivan

Posted on: May 19, 2007 – 8:38 am in Uncategorized