Daily Archives: September 21, 2007

The 52-Week Low Club

Advance Amer Cash (AEA) Payday loan company forced to close a number of locations. Down to $10.44 from 52-week high of $19.05.

Expressjet Holdings (XJT) Bad days for airlines. Drops to $3.62 from 52-week high of $9.61.

Bearingpoint (BE) Ongoing financial problems at consulting firm. Down to $4.33 from 52-week high of $9.

Time Warner Cable (TWC) Most cable stocks down due to competition from telecom companies. Falls to $31.14 from 52-week high of $44.

Circuit City (CC) Still falling due to poor financial results. Drops to $8.42 from 52-week high of $29.31.

Pool Corporation (POOL) Swimming pool business following home builders down. Drop to $24.29 from 52-week high of $42.75.

Douglas A. McIntyre

Posted on: September 21, 2007 – 6:03 pm in HI/LOW, , , , , ,

KKR And Goldman Walk On Harman

Harman International (HAR) said that Goldman Sachs (GS) and KKR have walked away from an $8 billion private equity deal to buy the company. The buy-out interests say that Harman had undergone a "material adverse change" allowing the firms to kill the agreement.

Reuters writes the "Harman bail-out appears to be centered on the financial conditions of the company itself, and marks the first time in a two-year private equity acquisition frenzy that buyers walked out of a major deal."

It would appear likely, at this point, that Harman will file a lawsuit challenging the move by Goldman and KKR.

Douglas A. McIntyre

Posted on: September 21, 2007 – 5:51 pm in Mergers and Buy Outs, ,

GM And UAW Getting Close On Deal

GM (GM) and the UAW are getting close to a contract according to news from The Wall Street Journal and several other sources. WSJ.com comments that the parties have moved "toward a historic deal that would include a multi-billion-dollar independent trust fund to manage retiree health-care costs for hundreds of thousands of Detroit autoworkers."

A deal along these lines would allow Detroit to close the gap in hourly costs between it and the Japanese. For GM, it would also take about $50 billion in liabilities off its balance sheet.

Douglas A. McIntyre

Posted on: September 21, 2007 – 5:45 pm in Autos,

The VIX, Back Under 20..The Market Fear Is Gone

These are the unofficial market closes, and note how close the DJIA is to 14,000 again…….

DJIA           13,820.84; +54.14 (+0.39%)
S&P500    1,525.56; +6.81 (+0.45%)
NASDAQ   2,671.22; +16.93 (+0.64%)
10YR-Bond  4.632% (-0.04)

The CBOE VOLATILITY INDEX, or the famed "VIX" has given back all of the "Fear" out of it being referred to as "The Fear Index."  Back in August this crossed 30 for the first time in what felt like ages, and now this is finally back under 20.00.

When the market was humming along in early summer it was trading under 13.0, which is quite low historically.  As far as how this works, it is pretty simple: As the nominal value of the index rises it reflects broad selling and broad fear; and when it starts reaching extreme levels it gets used to measure extremely oversold conditions.

As the index gets very low at say under 15.00 (in recent times anyway), it shows that goldilocks lives and no one is worried.  In essence this measures the cost of limiting downside in put options.  Here is a more formal explanation: The VIX is a weighted blend of prices for a range of S&P 500 index options that measures the market prices for all out-of-the-money puts and calls for the front month and second month option expirations.

The VIX is now at 18.70 (unoffical close), down 1.75 and that will be the first sub-20 close since July 25, 2007.  Here is a BigCharts.com chart:

Vix_chart_9_21_07
Jon C. Ogg
September 21, 2007

Posted on: September 21, 2007 – 3:07 pm in Index, Options, , ,

Cramer Calls Texas Instruments Higher (TXN)

Texas Instruments (NYSE:TXN) shares are up 3.1% today at $36.85 on the dividend hike and share buyback increase.  Jim Cramer on today’s STOP TRADING segment on CNBC came out and said Texas Instruments has nothing else to do with its cash except buy stock and it should be a $45.00 stock masquerading as a $36.00 stock.   The 52-week trading range on Texas Instruments is $28.24 to $39.63, and its market cap is over $52 Billion.

Cramer also said he would be a buyer of bank stocks despite a Lehman cut to estimates.  JPMorgan (JPM), Wells Fargo (WFC), Wachovia Bank (WB), and Citigroup (C) are the name he mentioned.  In oil, Cramer said the stock that people flock to for Rig Construction recovery is National Oilwell Varco (NYSE:NOV).  They can print money because they are the last ones making rigs here.

Jon C. Ogg
September 21, 2007

Posted on: September 21, 2007 – 2:00 pm in Cramer, , , , , , , ,

IPO FILING: EMPHASYS MEDICAL, INC. (EMPH)

EMPHASYS MEDICAL, INC. has filed to come public via an initial public offering and has listed it initial sale of securities as up to $86.25 million for filing purposes.  The underwriting group includes Morgan Stanley, Thomas Weisel, Leerink Swann, and Canaccord Adams.  Emphasys will take the proposed ticker "EMPH" on NASDAQ.

Emphasys is quite simply an emphysema fighter.  It is a medical technology company focused on developing and commercializing therapeutic devices for the treatment emphysema and other debilitating breathing disorders.  It recently completed its pivotal clinical trial to demonstrate the efficacy and safety of its first product, the Emphasys Bronchial Valve, or EBV, in patients with emphysema.   Emphasys has submitted our application for pre-market approval to the Food and Drug Administration in September 2007.  The company believes it is the first company to have submitted a PMA application for a device to improve lung function in emphysema patients.  Emphasys says in its prospectus that it anticipates receiving FDA approval for the EBV and beginning sales in the United States in late 2008. Its EBV has received CE marking in Europe, and it has begun selling the product in Europe on a limited basis and plans for a full commercial launch through distributors in Europe by mid-2008.

This new device company is venture backed and lists the following as owners: ABS Ventures (10%), Advanced Technology Ventures (17.8%), Orbimed Advisors (13.7%), Cargill Inc. (6.1%), Morgan Stanley Venture Partners (7.4%), Morgenthaler Partners (13.8%), and SPVC VI (11.5%).

More can be found at the Emphasys site http://www.emphasysmedical.com/

Jon C. Ogg
September 21, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the 24/7 Wall St. Special Situation Investing Newsletter and does not own securities in the companies he covers.

Posted on: September 21, 2007 – 1:27 pm in IPOs, Medical, , , , ,

Simplicity Cribs Made In China: One Million Recalled

Simplicity Inc is recalling one million child’s cribs according to an article in The Chicago Tribune. The newspaper had been doing an investigation of the products. Made in China, they were sold in department stores, children’s stores and mass merchandisers nationwide from January 1998 through May 2007 for between $100 and $300.

The paper writes "following a Chicago Tribune investigation to be published this weekend, the Consumer Product Safety Commission announced the recall of cribs sold under both the Simplicity and Graco name. It is the largest recall of cribs since the agency was created in the 1970s."

US toy giant Mattel (MAT) just apologized to the Chinese government for potentially tarnishing its product safety standards. Maybe they will take that back.

Douglas A. McIntyre

Posted on: September 21, 2007 – 12:35 pm in China,

Google Adds Market Share In August

comScore’s new numbers indicate that Google (GOOG) added to its US market share in August. Its piece of searches done during the month rose to 56..5% from 55.2% in July. Yahoo!’s (YHOO) share fell .2% to 23.3%. Microosft’s dropped from 12.3% to 11.3%.

The news would indicate that Yahoo! may well have a tough Q3. For its new search initiative to pay off in added revenue, it cannot afford for its number of searches to drop. But, total searches at Yahoo! were down 1.5% in August to 5,459 million.

Douglas A. McIntyre

Posted on: September 21, 2007 – 11:39 am in Internet, , ,

HSBC Closes A US Sub-Prime Unit

HSBC (HBC), the largest bank in Europe, said HSBC Finance would close Decision One Mortgage. According to Reuters the company will  be "cutting 750 jobs and taking an $880 million writedown, because the business is no longer sustainable."

HSBC Finance has closed two of its three channels for subprime mortgage lending. Reuters reports that the company will continue to originate subprime loans through its network of more than 1,350 branches.

The move may have two consequences over the near-term. The first is that the number of large sub-prime lenders is beginning to drop. The may end up being good for market leader Countrywide (CFC), which appears to be recovering from its recent trouble.

The other by-product of the decision is that HSBC is probably much less likely to buy another bank in the US to improve its market share here.

HSBC has been pressured by activist investors to improve returns. The retreat from the US market may also be a sign that the agitation is having an effect.

Douglas A. McIntyre

Posted on: September 21, 2007 – 11:08 am in Financial Stocks,

Mixed Short Interest In Brokerage Stocks (GS, BSC, LEH, MS)

There was no clear direction in the change in NYSE short interest on the major bulge bracket brokerage firms.  If you look at the earnings this week, Goldman Sachs seems to have been the key winner.  Its stock gave back all of its early gains after the earnings were out, but Jim Cramer came out Thursday night on CNBC’s Mad Money to call Goldman the key winner and said it’s going significantly higher by this time next year.

Here is a list of the bulge bracket brokerage firm and investment banker stocks showing the change in the short interest from August to September 2007:

Brokerage Stock            SEPT          AUG       %Change
Goldman Sachs (GS)  10.359M    9.907M        4.56%
Morgan Stanley (MS)    14.226M    16.059M    -11.40%
Merrill Lynch (MER)      23.230M    23.279M     -0.20%
Lehman Bros. (LEH)    25.259M    24.190M     4.40%
Bear Stearns (BSC)     14.636M    12.082M     21.00%

There was a lot of mixed feelings heading into earnings for the brokerage firm stocks this week.  The mixed results in short selling makes sense if you consider the overall environment.

Jon C. Ogg
September 21, 2007

Posted on: September 21, 2007 – 10:58 am in Brokerage Firms, Short Interest, , , , ,

The Business Day In Global Warming (EEE, AECOX, GE, VOLV, SOLF, FTEK, AW, PCG, PGN)

Evergreen Energy Inc (NYSE:EEE) has signed an “Agreement to Proceed” with specifications and design work that lead to the construction of a K-Fuel® lignite coal refinery in the Inner Mongolian Autonomous Region of the People’s Republic of China (PRC). The agreement was signed yesterday with a subsidiary of China Power Investment Corporation (CPI), one of the five state-owned power generation companies in China.

Our friends at TheStreet.com have a great article "A Green Fund for Global-Warming Skeptics."  As we have noted ourselves over and over, whether you believe in "global warming" or "climate change" doesn’t really matter.  Green business is becoming big business.   Allianz RCM Global EcoTrends Fund (AECOX) is a $131 million fund has appeared in the top 10% of stock funds for several months this year.

Thursday, September 20, 2007
Plutonic Power Corporation (TSX:PCC) and GE Energy Financial Services, part of GE (NYSE:GE), executed a fixed-price construction contract with Peter Kiewit Sons Co. for the construction of the 196 MW Toba Montrose run-of-river hydroelectric project.  The signing of the approximately $500 million engineering, procurement and construction (EPC) contract allows Kiewit to move ahead to the next stages after the initial rejuvenation and construction of forestry roads and bridges to the powerhouse site that had begun in July 2007.

With higher than $80.00 per barrel oil, alternative energy is all forms is highly important.  Many of these initiatives started back in the 1990’s and 2000 when oil was cheaper than water.  T. Boone Pickens is still bullish on oil prices and he’s bullish on his natural gas for autos initiative.  Earlier this week Goldman Sachs unveiled their "Super-Spike" in oil prices with the high-end of that band moving from $100 to $135 per barrel and up to $4.50 per gallon of gas at the pump.

Read More »

Posted on: September 21, 2007 – 10:27 am in Alternative Energy, , , , , , , , , , , , , , , ,

Major Banks: Big Drop In September Short Interest (BAC, C, JPM, WB, WFC)

It looks like short sellers decided to bail out of the money center banking stocks ahead of the FOMC decision on rates.  This is consistent with the overall trends if you look at the total exchange short interest we discussed last night on the short interest dropping on NYSE and on AMEX for the first time in months.

Here we have a small table showing the short interest dropping in all of the money center and giant U.S. banking stocks:

Bank Stock (ticker)              SEPT.         AUG.       %Change
Bank of America (BAC)    31.748M    41.285M    -23.00%
Citigroup (C)                      34.406M    40.521M    -15.10%
JPMorgan Chase (JPM)   37.516M    45.234M    -17.05%
Wachovia (WB)                   36.059M    49.889M    -27.70%
Wells Fargo (WFC)            47.395M    62.988M    -24.75%

If you average this out, it appears that the overall short interest on a raw average of percentages was a drop of 21.52% from August to September 2007.

Jon C. Ogg
September 21, 2007

Posted on: September 21, 2007 – 9:28 am in Banking, Short Interest, , , , , ,

Chasing Stocks of Forbes Richest Americans (MSFT, BRK-A, DELL, ORCL, GOOG, WMT, LVS, CHTR)

Forbes has released its list of the 400 wealthiest Americans.  We really wanted to see the corporate impact of the wealthy.  What is interesting is to compare how these companies tied to the super-wealthy have performed.  We did not include the companies where there are multiple ties not direct to an underlying public company and we eliminated the private company billionaires.

We did a list in order of the top 20, and consolidated the names where appropriate.  Based on the close of Thursday, September 20 the S&P 500 Index was up 7.08% year to date, and here is the performance each stock year to date based on a dividend adjusted close on December 29, 2006 (9/20 closing price included):

Microsoft (MSFT) $28.42; -3.8%
    William Gates III

Berkshire Hathaway (BRK-A) $117,400 ;+6.73%
    Warren Buffett

Las Vegas Sands (LVS) $131.27; +46.7%
    Sheldon Adelson

Oracle (ORCL) $21.04; +22.75%
    Larry Ellison

Google (GOOG) $552.83; +20.05%
    Sergey Brin & Larry Page

Dell (DELL) $27.85; +11.00%
    Michael Dell 

Charter Communications (CHTR) $2.66; -13.07%
    Paul Allen

Wal-Mart (WMT) $44.32; -2.63%
    The Walton Clan: Jim, Christy, S. Robson, Alice

Microsoft (MSFT) $28.42; -3.8%
    Steven Ballmer

As you can see, not all of these are up.  But out of the shortened list  on a net-net basis you would have done well chasing the wealthiest in 2007.  No wonder so much attention is paid to when they invest in companies, but then everyone already knew that.  If you’d like to review the full list, you can link it here on the Forbes.com site.

Jon C. Ogg
September 21, 2007

Posted on: September 21, 2007 – 8:04 am in Buffett, Insider Activity, Media, , , , , , , , , , , , , ,

Texas Instrument Buy-Back Moves Shares Up

Texas Intruments (TXN) announced this morning that it would add $5 billion to a share buy-back program and would raise its dividend 25%. Shares are up 2% to $36.50. The company currently has a market cap of just over $50 billion.

The company issued very modest guidance for the current quarter and investors have been concerned that the second half of the year might be slow for the company.

Douglas A. McIntyre

Posted on: September 21, 2007 – 7:42 am in Dividend,

Pre-Market Analyst Calls (September 21, 2007)

AUY cut to Sector Perform at CIBC.
BGH cut to Hold at Deutsche Bank.
BPL raised to Buy at Deutsche Bank.
CC cut to Peer Perform at Bear Stearns.
DSX raised to Outperform at Bear Stearns.
FDO cut to Underweight at JPMorgan.
HPY started as Mkt Perform at Morgan Keegan.
MAT raised to Buy at Oppenheimer.
MOS raised to Hold at Citigroup.
MT started as Overweight at Lehman.
NDAQ cut to Mkt Perform at FBR.
PMI raised to Outperform at Piper Jaffray.
PNM raised to Buy at Jefferies.
POS cut to Neutralat JPMorgan.
RFMD started as Neutral at UBS.
SWKS started as Buy at UBS.
STP started as Buy at Jefferies.
WBD started as Overweight at JPMorgan.
XJT cut to Sell at Soleil.

Jon C. Ogg
September 21, 2007

Posted on: September 21, 2007 – 7:02 am in Analyst Calls

What Would Recession Do To Already Weak Ad Market?

GM (GM) cut advertising 28% in the first half of the year. The FT writes that Nielsen Monitor reports "overall spending in the first half of the year fell by 0.5 per cent with the biggest declines in network radio, down 8.5 per cent, and national and local newspapers, down 5.9 and 8.0 per cent, respectively."

Among the 10 biggest advertising spenders in the US, seven cut their budgets in the first half of 2007.

Internet advertising was the only category with strong first half growth over last year, up 23%. But, this is below recent growth rates and will probably continue to slow as the total base of online dollars gets bigger.

All of this relatively bad news for the advertising industry happened in the first half of the year, when overall GDP improvement was relatively strong.

What happens in the second half of the year, if the economy hits a recession.

First, newspaper advertising which is running down 5% to 10% most months at large companies like The New York Times (NYT) and McClatchy (MNI) may start to fall in the low double digits. Classified revenue is already off nearly 20% at some of the chains. A faster decline in newspaper numbers should put pressure on stocks in the sector, and could lead to a default at an over-leveraged firm like Journal Register (JRC).

On the internet, large portals, especially Yahoo! (YHOO) have seen declining growth rates for display ads. At the big online company, revenue growth is already in the 10% range. A severe ad recession could push Yahoo! topline growth to close to zero. That would almost certainly take its shares below $20.

For the ad markets, it was tougher in the first half than most on Wall St. believed. The next act could be bloody.

Douglas A. McIntyre

Posted on: September 21, 2007 – 6:01 am in Economy, , , ,

Mattel Apologizes To China?

It is hard to imagine that Mattel (MAT), under pressure for recalls of toys from Chinese factories, would apologize to the Chinese government, but it has. According to Reuters, a senior company official said "Mattel takes full responsibility for these recalls and apologizes personally to you, the Chinese people and all of our customers who received the toys."

To get its problems behind it, Mattel, with its CEO suffering withering criticism in Congress and damage in the toy retail marketplace, seems ready to say it is sorry to anyone. The company is even taking public responsibility for the flaws in its products: "But it’s important for everyone to understand that the vast majority of those products that we recalled were the result of a design flaw in Mattel’s design, not through a manufacturing flaw in Chinese manufacturers."

Perhaps Mattel is now worried that, because it has damaged China’s reputation for quality control, it may be banned from building toys in the country, where labor is cheap.

And, quality control is low. No matter what Mattel says.

Douglas A. McIntyre

Posted on: September 21, 2007 – 5:37 am in Consumer Goods,

Europe Markets 9/21/2007

Markets in Europe are up modestly at 6.20 AM New York time.

The FTSE rose .4% to 6,458. BP (BP) is up 1.1% to 596.5. Northern Rock is up 7.5% to 199.

The DAXX moved up .3% to 7,755. Daimler (DCX) is up 1.6% to 67.83. Siemens (SI) is up 3.5% to 87.72.

The CAC 40 rose .2% to 5,698. Renault rose 2.4% to 99.13. Societe Generale rose 1% to 122.07.

Data from Reuters

Douglas A. McIntyre

Posted on: September 21, 2007 – 5:27 am in International Markets, , ,

News Corp’s Fox To Offer Free Shows On Apple iTunes

Not to one to be out-flanked by NBC (GE) or ABC (DIS), News Corp’s (NWS) Fox unit will offer some of its most popular shows free on Apple (AAPL) iTunes.

According to the LA Times, it is "a move that highlights the TV industry’s race to harness the Internet and try out potential business partners."

The new effort by Fox seems a bit misguided. The ability to watch first run TV on an iPod could actually pull audience away from TV viewership and put pressure on ad rates. The idea of charging some nominal fee, like $.99, would at least put a level of value on the shows.

Fox may be gambling that allowing the free downloads will promote TV viewership, by adding "buzz". But, what consumer is going to check out the show on an iPod and then watch it on home television as well?

Douglas A. McIntyre

Posted on: September 21, 2007 – 5:19 am in Media, , , ,

September NYSE Short Interest: Housing And Retail Under Pressure

The September short interest for NYSE stocks is out, and a number of big names in mortgages, retail ,and housing say bets against them move up. The figures compare shares short on September 14 compared to August 15, 2007.

Among the companies with the largest increase in short position were Jones Apparel (JNY), DR Horton (DHI), and Thornburg Mortgage (TMA),

Ford (F) topped that short list with 191.1 milion shares short, little changed from August. Countrywide, Home Depot, and Best Buy were also in the top ten.

Below is the short interest in selected companies.

Largest Short Positions

Company                                       Shares Short

Ford (F)                                          191.1 million shares short

Qwest (Q)                                        85.9 million shares short

AMD (AMD)                                     84.4 million shares short

Counrtywide (CFC)                           78.7 million shares short

Time Warner (TWX)                          64.9 million shares short

Home Depot (HD)                             63.8 million shares short

Best Buy (BBY)                               62.8 million shares short

GE (GE)                                          59.7 million shares short

GM (GM)                                         56.3 miillion shares short

Altria (MO)                                       50.1 million shares short

Sprint (S)                                         47.8 million shares short

Largest Increases In Short Position

Company                                         Increase

Marsh & McLennan                           Up 20.2 million

Jones Apparel                                   Up 19.9 million

Rolm & Haas                                    Up 16.1 million

Rite Aid                                            Up 10.7 million

DR Horton                                        Up 8.4 million

Delta                                                Up 6.8 million

Thornburg                                         Up 5.7 million

Texas Instruments (TXN)                    Up 5.3 million

MBIA                                                Up 4.1 million

Largest Decreases In Short Position

Company                                          Decrease

Tenet                                                Down 16.1 million

Wells Fargo                                       Down 15.6 million

CVS                                                  Down 15.5 million

Schering-Plough                                 Down 15.2 million

Fannie Mae                                        Down 14.6 million

Wachovia                                           Down 13.8 million

Bank of America (BAC)                       Down 9.5 million

Valero                                                Down 9.2 million

News Corp (NWS)                               Down 7.8 million

JP Morgan (JPM)                                 Down 7.7 million

Data from WSJ and NYSE

Douglas A. McIntyre

Posted on: September 21, 2007 – 4:13 am in Short Interest, , , , , , , , , , , , , , , , , ,