Daily Archives: July 1, 2007

This Week on StockHouse June 25 to 29

Late in the last full week of trading before the start of summer vacation, the Federal Reserve elected to leave interest rates unchanged, although the Central Bank continued to point to inflation as the biggest economic challenge ahead.

On StockHouse, Sean Mason and Keri Korteling assembled a list of lists to give readers a quick rundown of the Top Five (http://www.stockhouse.ca/shfn/article.asp?edtID=19893) features for the past week.

And investors in a biotech with a squeaky clean product (http://www.stockhouse.ca/shfn/article.asp?edtID=19897 ) were betting that a new patent approval in the U.S. would help boost the company’s share price. Sean Mason got the Buzz on the BullBoards.

A brand new feature from the Investor Education Fund listed 14 things you can expect from your financial advisor (http://www.stockhouse.ca/shfn/editorial.asp?edtID=19879 ).

The Resource Report profiled a company that says it’s time to revisit peat bog (http://www.stockhouse.ca/shfn/editorial.asp?edtID=19884) heat.

With drilling underway at its El Riventon silver project in Mexico, Danny Deadlock said in his Micro-cap Monday column that now’s the time for a speculative leap into shares of gold and silver exploration firm International Northair (TSX: V.INM, BullBoards).

Don Rodgers used his Trading Discipline column to introduce readers to some trading rules to live by (http://www.stockhouse.ca/shfn/editorial.asp?edtID=19883 ).

A recent purchase by pharmaceutical giant Roche Holdings was further evidence that the company is betting that its alignment of treatment and testing (http://www.stockhouse.ca/shfn/editorial.asp?edtID=19890 ) would benefit patients, as well as doctors and insurers, said the Bio Check.

Steven Saville said that the most reliable indicator of gold’s price is its store of value function (http://www.stockhouse.ca/shfn/editorial.asp?edtID=19891).

But George Leong warned that technical indicators show the yellow metal is in a downtrend (http://www.stockhouse.ca/shfn/editorial.asp?edtID=19895 ), and could fall further. 

In the last ETF Check before the summer break, Don Vialoux said that leveraged ETFs (http://www.stockhouse.ca/shfn/editorial.asp?edtID=19896 ) can be a boon for investors who have a strong belief in a certain trend.

StockHouse interviewed (http://www.stockhouse.ca/shfn/editorial.asp?edtID=19898 ) Ed Milian, the publisher of the Micro-cap Spotlight about his recent partnership with Trinity Capital, his portfolio and the ways he finds investment prospects.

The Financially Fit column for Friday focused on the ways investors can use options (http://www.stockhouse.ca/shfn/editorial.asp?edtID=19903 ) to help protect investment capital.

In the weekly STANDUP Advice column, John De Goey renewed his argument for more financial professionals to take the certified financial planner designation by arguing that there is a point of maximum utility (http://www.stockhouse.ca/shfn/editorial.asp?edtID=19901 ) in the markets.

Totally Technology columnists Leon Hamerling and J. Paul profiled two companies with closed circuit television technology (http://www.stockhouse.ca/shfn/editorial.asp?edtID=19904) that wants to help secure America’s schools.

And, the Casey Files examined the exploration cycle, and argued that there’s still room for big gains among gold exploration companies (http://www.stockhouse.ca/shfn/editorial.asp?edtID=19902).

Peltz Pushes Kraft (KFT) To Europe

Nelson Peltz has put a lot of pressure on Kraft (KFT). He bought 3% of the company and fundamentally said that Kraft was not well enough run and had too many under-performing assets.

Kraft’s stock, which traded for about $34.50 through the first half of June jumped over $37 the day that it became public that Peltz was in, but its has fallen back to just above $35.

No one thinks the raider is going to go away.

The FT reports that Kraft is looking at buying the operation that is second to it in the global buscuit business, a division of Danone (DA). Kraft’s sales in the sector last year were $5 billion. The Danone operations had revenue of about $3 billion.

Analysts will probably argue that there is money to be made in cutting duplicate factories, distribution networks, and workers. That could be true. But, the question is whether Kraft can get for the Danone operations at a reasonable price.

Kraft trades for 1.6x sales. Danone trades for 2.2x revenue. So, the company’s biscuit business could easily go for $7 billion, perhaps $ 8 billion. That would be thirteen times operating income.

Big price.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com.

Disney’s (DIS) Pixar Purchase: Never Give A Sucker An Even Break

Disney’s (DIS) Pixar division did fairly well with its new film "Ratatouille" which was No.1 at the North American box office this weekend, bringing in $47.2 million. But, according to CNNMoney, this was the worst Pixar opening weekend in nine years.

Steve Jobs did well selling Pixar to Disney (DIS) for $7.4 billion. One analyst called it a "near perfect strategic fit". Jobs owned about 50% of Pixar and got a seat on the Disney board along with a very nice pay day.

Based on Pixar’s financials, Disney paid 40 times trailing earnings and 21 times 2005 sales. Not exactly a bargain. Pixar had not really been doing that well. In 2005, revenue was $289 million and net income $152. This was only slightly better than the company’s performance in 2003 and 2004.

Pixar’s big film in 2004, "The Incredibles" brought in $261 million in the US. The company’s big release in 2003, "Finding Nemo" brought in $340 million. CNN’s analysis is that "if "Ratatouille" follows the same pattern, it will finish with about $189 million, becoming the third consecutive Pixar release to under-perform its predecessor."

It would appear that Jobs sold at the top. It would also appear that Disney got a lousy deal. It’s their own fault. Job’s was able to get more for the company than it was worth. The markets have learned not to underestimate him.

But, Disney got burned.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com.