Daily Archives: December 17, 2007

Cramer’s Third Pick For Five Years Out: Transocean (RIG)

On tonight’s MAD MONEY on CNBC, Jim Cramer said he wanted to reviewsome picks that you might want to own with a 5-year time horizon forthe future.  He wants to look beyond the current markets and thevolatility, so he wants to look at earnings visibility for a multi-yearperiod.  So that way he can look past a major market swing or againstan analyst panicking over a stock drop.  He has three picks that have5-years worth of visibility and his THIRD PICK is as follows:

  • Cramer’s third pick with 5-years visibility is Transocean (NYSE: RIG) that just bought GlobalSantaFe in an $18 Billion merger.  This one gets great prices for deep water oil rigs that are in short supply and its deepest water rigs are under contract on great rates out to 2010 and 2012.  Despite this on getting hit every time oil drops, he thinks that shouldn’t happen because its 38 rigs of that sort are under long-term pacts.  Even the deeper water over 10,000 feet have far longer contracts with huge rates locked in.  Now that Transocean bought its largest competitor it has pure pricing power.  Since it takes so long to build a giant rig they won’t have any serious competition for a ways out.  High oil prices will continue to benefit it.  These have been hit with the pullback and can be bought now.

His first pick was First Solar and you can see that here.

His second pick MedcoHealth Solutions and you can see that here.

Cramer’s TOP PICKS FOR 2007.

Here is our own open email distribution list where we highlight some other Cramer picks, buyouts, break-ups, spin-offs, value stocks, merger-arb, and more.

Jon C. Ogg
December 17, 2007

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

Posted on: December 17, 2007 – 6:50 pm in Cramer, Oil & Gas, , , ,

Cramer’s Second Pick For Five Years Out: MedcoHealth (MHS)

On tonight’s MAD MONEY on CNBC, Jim Cramer said he wanted to review some picks that you might want to own with a 5-year time horizon for the future.  He wants to look beyond the current markets and the volatility, so he wants to look at earnings visibility for a multi-year period.  So that way he can look past a major market swing or against an analyst panicking over a stock drop.  He has three picks that have 5-years worth of visibility and his SECOND PICK is as follows:

  • Cramer’s second pick for 5-years out tonight was MedcoHealth Solutions, Inc. (NYSE:MHS).  Cramer loves the visibility on, and the drops recently allow you to get it cheaper.  The pharmacy benefit manager is one of the healthcare cost containment companies and that sector has huge visibility.  They even make more when big brand drugs lose their patents, and $77 Billion worth of blockbuster drugs are coming off patent in the coming years.  This allows MedcoHealth to pit the drug sellers against each other and it gets to make more off customers than you’d expect.  The growth is visible and he thinks there is a $6 Billion gain coming in profits.  Cramer also loves its higher margin tailored drug program and its mail order business, but he really loves the visibility to 2012.

His first pick was First Solar and you can see that here.

Here are some other Cramer highlights:

Here is our own open email distribution list where we highlight some other Cramer picks, buyouts, break-ups, spin-offs, value stocks, merger-arb, and more.

Jon C. Ogg
December 17, 2007

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

Posted on: December 17, 2007 – 6:32 pm in Cramer, Healthcare, Medical, , ,

Cramer’s First Pick For Five Years Out: First Solar (FSLR, SPWR)

On tonight’s MAD MONEY on CNBC, Jim Cramer said he wanted to review some picks that you might want to own with a 5-year time horizon for the future.  He wants to look beyond the current markets and the volatility, so he wants to look at earnings visibility for a multi-year period.  So that way he can look past a major market swing or against an analyst panicking over a stock drop.  He has three picks that have 5-years worth of visibility and his first pick is as follows:

  • FIRST SOLAR (NASDAQ:FSLR) is major, despite today’s 7% sell-off; up over three-fold since his recommendation in March 2007.  This one avoids the silicon wafer shortage in solar power.  He likes the contracts that are signed for over $6 Billion out to 2012 and that is now a baseline for the next five years.  He also likes that they produce for less and increase capacity.  Even over $200, Cramer said it trades at 24-times 2010 earnings.  He thinks that the forecasts may end up being too low.

In a call-in from a viewer, Cramer said his second favorite solar power stock is SunPower Corp. (NASDAQ:SPWR).

Here were Cramer’s TOP Picks for 2007.
He also recently stuck with the new "Horsemen of Tech" into year-end.
He’s even reviewed some Warren Buffett stock picks.

Here is our own open email distribution list where we highlight some other Cramer picks, buyouts, spin-offs, break-ups, merger-arb spread, and other special situations.

Jon C. Ogg
December 17, 2007

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

Posted on: December 17, 2007 – 6:16 pm in Alternative Energy, Cramer, , , ,

Barron’s Berkshire Hathaway Bashing Could Be Your Gain (BRK/A, BRK/B, BRK-A, BRK-B)

Berkshire Hathaway (NYSE:BRK/A) (NYSE:BRK/B) shares fell today after Barron’s called for investors to sell Warren Buffett’s growth machine.  This seemed like a long time since Berkshire Hathaway had gone down this much in a single session and it appears that this is the worst day in about 3 years.

Barron’s noted roughly a 30% rise since August 1 and a pre-drop market cap of about $220 Billion as the sixth largest US company.  Barron’s noted:

  • "Its stock now appears overpriced, reflecting a sizable premium for the skills of the 77-year-old Buffett. What’s Berkshire worth? Our estimate, based on several valuation measures, is around $130,000 a share – about 10% below the current quote."

We do agree with Barron’s that Wall Street (and us) would like to see his "whale of a deal" and we even went as far as to cover which stocks could fit the profile and take up some 75% of the cash positions at Berkshire Hathaway.   

The A-Shares closed down 4.6% at $136,400.00, and its 52-week trading range is $103,800.00 to $151,650.00.  The B-shares, the Baby-Buffetts, fell some 4.8% to $4,525.00.  The 52-week trading range is $3,460.00 to $5,059.00.  This now represents a 10% correction in Berkshire Hathaway stock from its yearly highs.

But where we disagree with Barron’s is that Berkshire Hathaway is done or overvalued.  Every time throughout Berkshire Hathaway’s history that shares have pulled back 10% it has represented a buying opportunity.  On days that the market rises, Berkshire Hathaway tends to rise.  On days the market is weak, traders tend to look to Berkshire Hathaway as a safe bet stock to hide money.  Even if Buffett is 77 years old and no heir has been declared, it’s just too hard to bet against the old guy.  He’s too down to earth and too forward about maintaining everything above the table.

Berkshire Hathaway has a lot riding on insurance and reinsurance, and Buffett makes no secret that the company has been lucky enough to avoid two straight hurricane seasons with any major US damage. 

The hit from Barron’s may have just opened up another opportunity for those whom have wanted to own Berkshire Hathaway stock.  Barron’s is right and we are wrong OR we’re right and Barron’s is wrong.  We’ll know down the road.

Jon C. Ogg
December 17, 2007

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

Posted on: December 17, 2007 – 5:40 pm in Buffett, , , , , ,

Adobe Beats, But Some Wanted More (ADBE)

Adobe Systems Incorporated (NASDAQ: ADBE) reported results for its fourth quarter and fiscal year ended Nov. 30, 2007 (Q4 2007):

  • Adobe posted record revenue of $911.2 million versus its revenue target range of $860 to $890 million and a First Call estimate of $887.3 million.
  • Adobe’s GAAP diluted earnings per share for the fourth quarter of fiscal 2007 were $0.38; Adobe’s fourth quarter GAAP earnings per share target range was $0.35 to $0.37.
  • Earnings per share for Q4 2007 on a non-GAAP basis were $0.49; Adobe’s fourth quarter non-GAAP earnings per share target range was $0.46 to $0.48; First Call was at $0.48.

NEXT QUARTER GUIDANCE:

  • For the first quarter of fiscal 2008, it is targeting revenue of $855 million to $885 million; targeting a GAAP operating margin of 30% to 31%; targeting non-GAAP operating margin of approximately 40% based upon 586 million and 588 million shares outstanding; First Call has estimates $835 million.
  • Q1 2008 GAAP earnings per share target range of $0.34 to $0.36 and it is targeting $0.44 to $0.46 non-GAAP EPS; First Call has $0.42 as consensus.

FISCAL 2008 GUIDANCE:

  • For fiscal 2008, Adobe reaffirmed it is targeting annual revenue growth of approximately 13%, which brings an interpolated estimate of $3.568 Billion in revenues.  First Call has estimates at $3.55 Billion.
  • Adobe is targeting a GAAP operating margin of approximately 30%, and a non-GAAP operating margin of approximately 39%.

Adobe is also adding 30 million shares to its buyback plan, which makes the total share buyback plan up to 50 million shares.  To date, Adobe has retired 17.7 million shares under the existing share buyback plan.

Shares closed down 2.8% at $40.90 today in normal trading, and shares have been teetering between being positive and negative in after-hours trading.  The 52-week trading range is $37.20 to $48.47.

Jon C. Ogg
December 17, 2007

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

Posted on: December 17, 2007 – 4:33 pm in Earnings, Software,

The 52-Week Low Club

Bearingpoint (BE) Still dropping after loss earlier in the month. Down to $2.53 from 52-week $8.56.

General Growth Properties (GGP) REIT stocks are getting killed. Falls to $41.93 from 52-week high of $67.43.

Delta Financial  (DFC) Files for bankruptcy. Falls to $.07 from $13.60 at 52-week high.

Peregrine Pharmaceuticals (PPHM) Contract with US government halted. Falls to $.35 from 52-week high of $1.40.

Douglas A. McIntyre

Posted on: December 17, 2007 – 4:08 pm in HI/LOW, , , ,

The Business Day in Global Warming (LDK, FSLR, CPST, XOM, ALTI, XSNX, OPTT, ASTI, ASYS, NMX)

LDK Solar Co.Ltd. (NYSE: LDK) shares were up 20% late Monday after an independent audit report put the inventory errors that had been in question at zero.

Shares of First Solar (NASDAQ: FSLR) gave up 7% falling almost $20.00 per share on Monday.  The company announced today that John Gaffney will join the company as its Executive Vice President and General Counsel, effective January 15, 2008.  The market is more to blame than this, although some may consider this legal advisor more of an M&A advisor.

Capstone Turbine (NASDAQ:CPST) was down almost 6% late Monday at $1.44, although this one is still up from being included in our "10 Stocks Under $10" weekly newsletter.  The good news came last week, although the run in share prices looked a bit high.

ExxonMobil (NYSE:XOM) Research & Engineering Company (EMRE) announced today that its MTG technology for converting methanol to gasoline has been selected by DKRW Advanced Fuels (DKRW) as part of DKRW’s coal to liquids (CTL) project in Medicine Bow, WY. The approximate 15,000 barrel per calendar day unit will be based on commercially proven MTG technology which incorporates improvements since the technology was originally commercialized by ExxonMobil 20 years ago in New Zealand.

Altair Nanotechnologies Inc. (NASDAQ: ALTI) announced today that Dennis “Kilowatt” Berube has set the National Hot Rod Association’s world speed record for electric dragsters driving an electric vehicle powered by Altairnano battery packs with a a speed of 153.6 mph on Saturday, December 15, covering a quarter-mile in 8.10 seconds.

XSunX Inc. (OTC-BB: XSNX) has been rated Speculative Buy with a price target of $1.50 by Beacon Equity Research Analyst, Lisa Springer, CFA.  Beacon Equity Research was directly compensated a total of $15,000.00 directly from the company for enrollment of XSNX in its research program and other services.  This stock rose a whopping 63% today to $0.48 late Monday.

Ocean Power Technologies (NASDAQ: OPTT) saw shares rise 2% to $12.63 in late day trading after the company posted earnings.  Its revenues were up 204%, but only to $1.7 million and it posted a net loss of $1.9 million.

Ascent Solar Technologies, Inc. (NASDAQ:ASTI) saw its shares slide 17% late Monday to under $17.00 after it announced the successful and on-time delivery and installation of all equipment required to complete the integration of its 1.5MW production facility:

  • Testing, integration and qualification of the new manufacturing line is set to begin in January 2008.
  • Product qualification and certifications are planned to commence once the line completes integration and achieves initial operating capacities.

Amtech Systems (NASDAQ: ASYS) fell some 6% to under $12.00 late Monday after it announced receipt of $8.9 million in additional Solar orders.

Last week, Nymex Holdings Inc. (NYSE: NMX) and a group of Wall Street trading houses plan to launch an exchange for trading carbon emissions and other environmental products.  This is being dubbed the Green Exchange. 

Also last week were some favorable research calls from Wall Street analysts covering GREEN STREET (AMSC, CLNE, ESLR, FSLR, ITRI, SPWR)

Less than one week ago, oil magnate T. Boone Pickens was still calling for $100 oil and said high prices are going to be the new norm.

Jon C. Ogg
December 17, 2007

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

Posted on: December 17, 2007 – 3:48 pm in Alternative Energy, , , , , , , , , ,

Not Everyone Is Broke: Goldman Sachs (GS) Starts $10 Billion Hedge Fund

Goldman Sachs (GS) has raised $10 billion to start a new hedge fund.

According to Bloomberg: "Goldman Sachs Investment Partners, set to open Jan. 1, is being run by traders who previously worked on the New York-based company’s proprietary equity desk"

Bloomberg adds: "The company calculates that if the current fund, which will use borrowed money to double the assets under management, had operated since the beginning of 2004, it would have returned 18 percent a year on average through August 2007."

Twenty-twenty hindsight is always best. It worked at the Goldman Global Alpha Fund which lost 37% of its value through November 30.

Douglas A. McIntyre

Posted on: December 17, 2007 – 2:40 pm in Financial Stocks,

Will Best Buy Escape The Retail Earnings Hangman? (BBY, CC, WMT)

So far shares of Best Buy (NYSE:BBY) have managed to escape the retail woes seen at many specialty retailers.  It does after all have a huge selection of PC’s, smartphones, iPods, video games, LCD TV’s, and much more.  But it also has a substantial part of its floor space tied to other durable goods like appliances, fixtures, and some furniture that have not been doing well economy-wide during a housing best.

Analysts according to First Call are at $0.41 EPS on Revenues of $9.43 Billion.  For the coming quarter analysts are expecting $1.82 EPS on $13.67 Billion in revenues.

Wal-Mart (NYSE:WMT) is becoming a formidable competitor, although we still believe that hard core retail electronics buyers are going to head to a Best Buy instead of Wal-Mart if it is a targeted outing for electronics alone.  Circuity City (NYSE:CC) has managed to do so poorly in comparison to Best Buy that one could argue that Best Buy has won over more tech-savvy loyalists since Circuit City let go of higher-waged knowledgeable salespeople.

But the last thing that could be an impact is the discounting, particularly from larger chains that are paring down their stores and inventory on close-out sales.  The good news is that CompUSA, who many believe are selling electronics below-cost (true or not is another story), doesn’t have enough stores to drastically put a dent in a Best Buy.

Analysts have an average share price target of almost $57 on Best Buy stock.  It is hard to call options a day out, but options traders appear to be expecting a price move of up to $1.75 or $2.00.  That number is more subjective because it is a day ahead and because expiration is this coming Friday.  Best Buy’s stock chart was on a tear upwards until the last few days and now you could make the same argument that it is a failed break-out stock, or that it has about $2.50 in either direction before running into hard support or resistance.

Jon C. Ogg
December 17, 2007

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

Posted on: December 17, 2007 – 2:21 pm in Earnings, Retail, , ,

2008 Guidelines For Turnarounds That Haven’t Turned Around

This week 247WallSt.com is featuring many stocks of active small cap stocks and mostly of larger mid-cap or outright large cap stocks that we feel are still viable turnaround candidates.  This list will not be focused on companies that have only recently run into issues, and we are not assigning any set probabilities that management will make the turn in the right direction.  We are focusing on stocks that have been turnaround candidates for quite some time that have either:

  • failed to turn around at all;
  • or started to turnaround but then failed to turn their turnaround the right direction.

These are also not part of a separate list of "stocks that could double in 2008" as these are all in different categories and under their own merits.    While it would be easy to include a myriad of companies tied to housing or tied to weak retail segment, we have mostly eliminated the following categories:

  • housing
  • suppliers to housing
  • mortgage lending
  • banks and credit cards
  • specialty retail
  • bond and exposure insurers
  • autos

Sure, there are some of our turnaround stocks which are tied greatly to one of these troubled sectors.  But if they are in there it is because these have failed for quite a long time at conducting a successful turnaround.  In short it isn’t just a sector issue because then you could literally cover the sector issues across the board.

There are many companies which are also in new turnaround situations, but this is a list of habitual offenders whose stocks could see radical gains if they are able to turn the battleship.  Some of these routinely appear in our own "10 STOCKS UNDER $10" weekly newsletter and some may even be screened for our special situation investing newsletter.

We have also in most cases left off our "10 CEO’s THAT NEED TO LEAVE IN 2008" to avoid overlaps.  Those are in an entirely different boat and some of those companies may have a remedy as simple as a new action team. The following CEO’s made the list of CEO’s that need to go in 2008 (with links to the full story):

We were originally going to run this as a list of Ten companies, but our screen of steady candidates blew past that number.

Jon C. Ogg
December 17, 2007

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

Posted on: December 17, 2007 – 1:51 pm in Turnarounds

Turnarounds That Haven’t Turned Around: Rite Aid (RAD, WAG, CVS, WMT)

Rite Aid (NYSE:RAD) is a turnaround story that frankly has never ceased being a turnaround story.  Can you remember the mid to late 1990’s stock trading?  One great stock in the drug store arena that had a fresh look and feel was Rite Aid.  But then in 1998 and 1999, this one went to hell in a hand basket.  During the pinnacle it traded north of $40.00, but this entire decade has been the decade of wrong-aid.  It hasn’t seen $10.00 the entire decade.  It has made several recovery attempts and failed. 

Its new Co-Chairman and President & CEO Marry Sammons is well thought of and deemed a winner for this company.  Jim Cramer has been behind her naming this his #2 Speculative Pick for 2007 , as have other media pundits.  This summer everything was seeming to go right at the company and the stock was above $6.00.  The new plan was working on the surface.  Then it posted a net loss and that was that.  Shares have only moderately recovered after posting a slightly wider loss in September.

It recently lost its chief marketing officer in early November and its most recent same-store-sales have been moderately higher.   With a $3.2 Billion market cap and expected sales north of $24 Billion, it is dirt cheap on a price/sales ratio.  Even after a poor performance out of Walgreen’s (NYSE:WAG), its market cap is $36.5 Billion on an expected $60 Billion in annual sales. 

So if Rite Aid can ever get the "E" back in its P/E this one has major room for upside.  It’s just too bad that this has been the case every year in recent history.  Maybe some turnarounds take longer than others in a competitive space, but some turnarounds at troubled companies seem to stay….. umm, troubled.  There is always the argument that Wal-Mart’s (NYSE: WMT) new program and increased pressure from CVS Caremark (NYSE: CVS) are stronger than before, but at the end of the day the stock market players only want to own established companies that can prove they have steady earnings power and steady dependability.  Rite Aid needs to consider this,  even if it means a lower top-line.

Shares still sit around $4.00 and the 52-week low is $3.44.  Rite Aid was just featured with a bit more detail in our "10 Stocks Under $10" weekly newsletter.  This is also featured from time to time on our Open Email Dustribution List.

Jon C. Ogg
December 17, 2007

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

Posted on: December 17, 2007 – 1:15 pm in HI/LOW, Shareholder Issues, Turnarounds, , , ,

10 Turnarounds That Haven’t Turned Around: Eastman Kodak (EK)

Eastman Kodak (NYSE:EK) is about as unexciting as it gets, and its long-term turnaround plan has been met with the same excitement.  How many times can one company stay on a long and slow restructuring path?  The digital age started being a problem for Kodak in the late 1990’s and its stock actually managed to hang on through the early 2000’s.  But now this has been a dead fish and it hasn’t transformed enough away from print photography. 

It has tried doing more digital offerings but hasn’t been aggressive enough in making strategic acquisitions that could drastically throw it into more of a digital company.  The company had the pole position in a duopoly with Fuji and managed to not win in the digital age to the extent that it could have. 

In late 2006 we named Antonio Perez as one of the top CEO’s who needed to go, but he’s still there.  He’s a nice guy but hasn’t been effective and shareholders should keep the pressure on him.  It needs someone who can come in and be aggressive as hell.  If not, send send Perez at least to the CEO toughening-up rehab camp.  The company has been far too slow to make the inevitable cuts that it will ultimately need.

This company needs to help its balance sheet as well and what it has tried and done there on its own just hasn’t worked.  Shareholders haven’t seemed as impatient as we would have guessed and we really wonder how the company can justify everything today.  At $22.00-ish, it is at the bottom of a $20 to $30 long-term trading range. 

It will take a miracle to turn this one around in a mere year, particularly as the analysts are looking for a slight drop again in 2008.

Early this week we are running a list of stocks that have been in a turnaround plan, yet the stocks and the businesses haven’t turned around.  Could these be the stocks to watch for 2008?  Sign up for our own open email distribution list covering buyouts, spin-offs, unusual options activity, special situation previews, merger-arb spreads, and more.

Jon C. Ogg
December 17, 2007

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

Posted on: December 17, 2007 – 11:11 am in HI/LOW, Management Change, Shareholder Issues, Turnarounds,

Starbucks (SBUX): Give Shareholders A Free Gift Card

Any investor who held Starbucks (SBUX) shares last November and still has them today has lost about half of his or her money. SBUX hit $40.01 on November 16, 2006. After a downgrade from RBC today, the stock moved to $20.54.

There is a way to compensate those shareholders for their faith in the company. Give each one of them a free Starbucks charge card worth $20, prepaid by the company. At least the shareholders can go enjoy a beverage. It won’t really cost SBUX $20 because they mark up their drinks and other inventory so much. It might get the people to come back as paid customers, if they enjoy the experience.

The company has a float of 712 million shares, so there would be a one-time charge. Founder Howard Schultz could pass on taking his free cards and save the company some loot.

The RBC downgrade mirrored recent Wall St. reports on the stock. US expansion it too rapid. Same-store sales are being hurt. Commodities prices are moving up. McDonald’s (MCD) is taking premium coffee customers. The "hot" company is not "hot" anymore.

There’s nothing wrong with a little something extra for the poor shareholders. It is the holidays.

Douglas A. McIntyre

Posted on: December 17, 2007 – 11:01 am in Retail, ,

10 Turnarounds That Haven’t Turned Around: Pfizer (PFE, MRK, BMY, JNJ)

Early this week we are running a list of stocks that have been in a turnaround plan, yet the stocks and the businesses haven’t turned around.  Could these be the stocks to watch for 2008?

Pfizer (NYSE:PFE) is perhaps the most troubled Big Pharma.  It has been in a turnaround that just hasn’t turned.  Many expect the pressure to stay into 2008 as well.  This has patents expiring sooner rather than later, competitors still taking market share in some of its historical key winning blockbuster drugs, and a lack of any serious drug pipeline.  Hey, that is Pfizer.  Its CEO is still fairly new but hasn’t ever made a dent here.  This is VERY hard to turn because its market cap is $157 Billion so the law of large numbers is a hitch.   

Pfizer sold off its consumer products unit for some $16 Billion to J&J (NYSE:JNJ) to be a pure drug company.  That hasn’t managed to help and may have in fact been the wrong play since its drug growth seems limited.  Maybe that consumer products company was one of the more steady businesses after all.  Pfizer is going to need to do not one big biotech deal, but may need two or three key deals so that it can transform and show some more promise ahead.  Analysts aren’t looking for anything in 2008, so any upside might be the difference.

Troubled drug companies can overcome adversity, even when things are mounting against them.  We wouldn’t even be surprised if the company issues more pink slips and cost cutting measures.  Merck (NYSE:MRK) was thought to be in the same boat a few years ago and it has come screaming back with a vengeance.  Even Bristol-Myers Squibb (NYSE:BMY) managed to get off of its low-$20’s base.  Yet Pfizer is just stuck in the low-$20’s to mid-$20s and it’s been a pig for over 3-years now.  If the company can find a few deals with promise for growth into 2009 and beyond, investors may start to take cash out of Merck and direct it the way of Pfizer.

Sign up for our own open email distribution list covering buyouts, spin-offs, unusual options activity, special situation previews, merger-arb spreads, and more.

Jon C. Ogg
December 17, 2007

JOn Ogg can be reached at jonogg@247wallst.com; he produces the SPECIAL SITUATION newsletter and he does not own securities in the companies he covers.

Posted on: December 17, 2007 – 10:49 am in Drug companies, HI/LOW, Turnarounds, , , ,

Loews Sends Lorillard to Carolina As New Stock (LTR, CG)

Loews Corporation (NYSE:LTR) has approved a plan to spin off its entire ownership interest in Lorillard, Inc. to holders of its Carolina Group (NYSE: CG) stock and Loews common stock in a tax free transaction. The deal is expected to close in mid-2008.  Lorillard, presently a wholly owned subsidiary of Loews, would become a separate publicly traded company on the New York Stock Exchange.

The Lorillard shares distributed in the redemption of the Carolina Group stock would constitute approximately 62% of Lorillard’s outstanding common stock.  Loews would effect a redemption of all of the outstanding Carolina Group stock in exchange for shares of common stock of Lorillard, in accordance with the terms of the Carolina Group stock contained in the Restated Certificate of Incorporation of Loews. Holders of Carolina Group stock would receive one share of common stock of Lorillard for each share of Carolina Group stock they own.

Loews would dispose of the remaining 38% of Lorillard’s outstanding common stock in an exchange offer for shares of outstanding Loews common stock if Loews determines that market conditions are acceptable for an exchange. If Loews determines not to effect the exchange offer or the exchange offer is not fully subscribed, the remaining shares of Lorillard would be distributed as a pro rata dividend to the holders of Loews common stock. 

Loews currently has two classes of common stock outstanding:

  • Carolina Group stock, which is intended to reflect the economic performance of a group of assets and liabilities called the Carolina Group, principally consisting of Lorillard and its subsidiaries; and
  • Loews common stock, representing the economic performance of the remaining assets of Loews, including the interest in the Carolina Group not represented by outstanding Carolina Group stock.

Sign up for our own open email distribution list covering buyouts, spin-offs, unusual options activity, special situation previews, merger-arb spreads, and more.

Loews Corp. (LTR) is seeing its shares indicated down almost 6% around $44.00 pre-market, its 52-week trading range is $40.21 to $53.46. 

Jon C. Ogg
December 17, 2007

Posted on: December 17, 2007 – 9:00 am in Mergers and Buy Outs, Shareholder Issues, Tobacco, , ,

National Oilwell Varco Growing Via Grant Prideco Buyout (NOV, GRP)

National Oilwell Varco, Inc. (NYSE:NOV) and Grant Prideco, Inc. (NYSE:GRP) have announced today that they have entered into a definitive merger agreement where National Oilwell Varco will acquire all of the outstanding shares of Grant Prideco. 

The total consideration will equate to $58.00 per share in cash and stock. Based on December 14, 2007 closing share prices for each company, the $58.00 per share consideration represents a premium of 22% for Grant Prideco holders.

The breakdown is being put at $23.20 in cash and 0.4498 shares of National Oilwell Varco per share of Grant Prideco.  National Oilwell Varco, Inc. will be the larger parent here as it will hold roughly 86% of the value of the new combined company.  Based on National Oilwell Varco’s closing price on Friday the combined company will have an equity market capitalization of approximately $32 Billion.

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NOV shares are down 3% at $74.99 pre-market and GRP shares are up 17% at $55.70 pre-market.

Jon C. Ogg
December 17, 2007

Posted on: December 17, 2007 – 8:41 am in Mergers and Buy Outs, Oil & Gas, ,

Pre-Market Stock News (December 17, 2007)

Below is a highlight of the top pre-market news affecting individual stocks:

  • Acacia Research (ACTG) entered into a retroactive license agreement with Polo Ralph Lauren.
  • Amtech Systems (ASYS) announced receipt of $8.9 million in additional Solar orders.
  • Anesiva (ANSV) gets an additional investment from Alta Partners for $25 million more.
  • Covidien (COV) is selling its retail products business to First Quality Enterprises for about $335 million.
  • Ingersoll-Rand (IR) is acquiring Trane (TT) for $48 per share In Cash & Stock.
  • KBR (KBR) announced preliminary 2008 earnings guidance at $1.30 to $1.60 EPS, analyst expectations are $1.51.
  • Kosan Biosciences (KOSN) announced meaningful anti-tumor activity in Tanespimycin Trials; showed 55% clinical benefits.
  • Loews Corp (LTR) announced it will spin-off Lorillard tobacco unit.
  • Monaco Coach (MNC) announced a $30 million stock buyback plan.
  • MGI PHARMA (MOGN) said Aquavan NDA was accepted for review by FDA.
  • PPG Industries (PPG) agreed to acquire bodyshop distribution business of Unipart Automotive.
  • Rambus (RMBS) entered into Toshiba license agreement for Rambus XDR(TM) memory architecture for HDTV chipset.
  • Silicon Motion (SIMO) put its Q4 revenues at the high-end of prior guidance.
  • Take-Two Interactive (TTWO) has announced the formation of 2K Marin, a new development studio under its 2K publishing label.
  • Telular Corp. (WRLS) appointed Joseph A. Beatty as its new CEO.
  • Trane (TT) is being acquired by Ingersoll-Rand for $48 per share in Cash & Stock.
  • Ultralife Batteries (ULBI) announced a $62 million order.
  • Yum! Brands (YUM) appoints Roger Eaton as Chief Operating and Development Officer-Designate.

Jon C. Ogg
December 17, 2007

Posted on: December 17, 2007 – 8:29 am in Pre-Market Activity

Top 10 Pre-Market Analyst Calls (ABK, AEO, KR, OWW, PCLN, SD, SBUX, TSO, BAC, CFC, JPM, WB, WFC, COF, USB)

These are not the only analyst calls moving stocks today in pre-market trading, but these are the top calls that 247WallSt.com is reviewing this morning:

  • AMBAC Financial (ABK) raised to Outperform from Market Perform at FBR.
  • American Eagle Outfitters (AEO) raised to Outperform at Bear Stearns.
  • Kroger (KR) raised to Outperform from Neutral at Credit Suisse.
  • Orbitz (OWW) raised to Overweight from Equal-Weight at Lehman.
  • Priceline.com (PCLN) cut to Hold at Citigroup.
  • SandRidge Energy (SD) initiated after quiet-period: Banc of America at Buy; Bear Stearns at Peer Perform; J.P.Morgan at Neutral; Lehman Brothers at Overweight; RBC at Outperform.
  • Starbucks (SBUX) downgraded to Sector Perform at RBC.
  • Tesoro (TSO) raised to Buy at Citigroup.
  • Citigroup makes lage downgrades in Financial Stocks: Bank of America (BAC), Countrywide (CFC) First Horizon (FHN), JPMorgan Chase (JPM), MGIC (MTG), PNC Bank (PNC), Wachovia (WB) and Wells Fargo (WFC) ALL CUT TO HOLD; Capital One (COF), Comerica (CMA), M&T Bank (MTB), Radian (RDN), and US Bancorp (USB) ALL DOWNGRADED TO SELL.

Jon C. Ogg
December 17, 2007

Posted on: December 17, 2007 – 8:04 am in Analyst Calls, , , , , , , , , , , , , , ,

The Case Against A Recession

Most of the data lining up now say that a recession has either begun or will early in 2008. Alan Greenspan thinks the economy may be headed for stagflation. The credit markets may get worse with further big write-offs at financial institutions. Consumer spending for the holidays appears to be weak. Fuel prices and food prices will take a larger piece out of everyone’s wallet.

It seems that there is not case at all for the economy to keep growing. But, that is not entirely true.

The oil minister of Algeria has indicated that OPEC may increase production as early as February. Certainly the cartel is not anxious to see a financial disaster in the West and in China. A significant up-tick in oil production could drive crude down very fast. That might allow the US to catch the falling knife of ruin in the airline and car industries.

The Fed has to be getting nervous. Who wants to see a blood bath on their watch? The agency has the chance to reduce rates again in January. If things are looking bad, they could go a half a point. They could also take the inter-bank lending rate down more aggressively and "open the window" further for big money center banks that may need the cash at year-end.

Housing is still the most likely straw to break the camel’s back. The government’s effort to freeze rates on some mortgages that are about to reset might save an many as 1.2 million homes from foreclosure. That is about 1% of the households in the US. It might not seem a lot at first blush, but hundreds of thousands of foreclosures would be a fairly big shock to the financial system.

China also has to worry about a sharp downturn in the US. The central government has as much as admitted that an American flu would give China a cold. The Chinese government might decide to make an adjustment to the yuan, as the US Treasury has been begging for. Even a modest adjustment could make a difference. A reset back toward $.12 per dollar on the exchange is certainly possible.

Will all of these things happen in the next quarter? No. But, it may not take all of them to repair much of the damage done over the last six months.

US GDP was stronger than expected in Q3, so it has some momentum. A little more gas might keep it running.

Douglas A. McIntyre

Posted on: December 17, 2007 – 6:57 am in Economy

Europe Markets 12/17/2007

Markets in Europe were down at 6.30 AM

The FTSE was down 1.2% to 6,319. BHP Billiton (BHP) was off 2.6% to 1505. Vodafone (VOD) was off 1% to 181.4.

The DAXX fell 1.3% to 7,842. Commerzbank was off 2.1% to 26.15. Siemens (SI) was off to 103.64.

The CAC 40 was down 1.4% to 5,526. Alcatel-Lucent (ALU) was down 4.8% to 5.18. Societe Generale was off 2.3% to 98.32.

Data from Reuters.

Douglas A. McIntyre

Posted on: December 17, 2007 – 6:37 am in International Markets, , , ,