Major sovereign funds from Singapore and Abu Dhabi have agreed to Boy Scout rules about keeping their investments in the US strictly financial. No political agendas.
This is a copy of the new pact.
Now that putting money into US banks and brokerages is too risky for any entity other than the Fed, it is nice to have governing rules.
Douglas A. McIntyre
Primary dealers borrowed $28.8 billion from the Fed during the first three days a new facility was open.
Reuters writes that "Primary dealers borrowed more than $13.4 billion a day from the U.S. Federal Reserve in the latest week, according to Federal Reserve."
Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS), and Lehman Brothers (NYSE: LEH) all said they took advantage of the facility.
Douglas A. McIntyre
According to Wireles and Mobile News:
"Verizon Wireless (VZ)(VOD) was the biggest winner of the Federal Communications Commission’s 700 MHz auction, winning six large licenses that i will give it air space to provide next-generation wireless broadband service in the C-Block of the spectrum vacated by broadcast television.
AT&T (T) won 227 licenses from the “B” block of regional licenses, but Google, while it submitted a serious bid for the C block, in the end won no licenses.
AT&T winning bids totaled about $6.64 billion while Verizon is paying $9.63 billion."
Google (GOOG) got nothing and saved a lot of cash
Douglas A. McIntyre.
Palm, Inc. (NASDAQ: PALM) just posted a loss that of course missed analyst expectations. The loss of -$31.5 million came in at -$0.30 EPS after items and -$0.16 pro-forma on a near-25% drop in revenues to $312.1 million, while First Call estimates were -$0.14 EPS on $315.7 million in revenues.
Its smart phone sales were $275.4 million, led by the new Palm Centro. We did not get guidance. The good news is that things are just falling off the bus much worse than expected. We also alerted out "Stocks Under $10" weekly subscriber letter about that massive short interest that would keep shares propped up as long as the news wasn’t implosion-oriented.
Palm closed up over 3% at $4.72. Shares had been down almost 2% earlier after the earnings report but are now flat in after-hours.
Jon C. Ogg
March 20, 2008
This week felt like a yo-yo of volatility, and frankly that makes it even better that it was a 4-day work week for the stock market. Despite the huge rally today that was led by the financials, there were plenty of shares that hit the wall of shame on the 52-week low list. Not all of these closed under their 52-week lows, but the list was far larger than one would guess for the way the market acted today.
Next week is a full week, and you know there will be more 52-week lows being put in regardless of what the market does. Stay tuned!
Jon C. Ogg
March 20, 2008
If you think of a retailer hitting a 52-week high during a slowing economy, it seems counterintuitive. It seems a recession or a slowing consumer spending is good for some retailers. Enter Wal-Mart Stores Inc. (NYSE: WMT).
If you are Lee Scott and Co. that cuts prices and goes for lower and lower pricing as your strategy, a weakening jobs picture, a tightening credit environment, a lower spending climate, and just outright uncertainty puts more and more folks over at the biggest retailer in the U.S. Even when things were good they accounted for roughly 10% of all U.S. retail.
The stock market may have seen more gains and financial stocks and retail stocks may have recovered, but Main Street is still getting worse. The market is supposed to start discounting events for one to three quarters ahead depending on whom you speak to. Joe Public can’t act as a discounting mechanism. Most people spend what they have, and when they start running out of credit or start getting scared about their pocketbook they curb their habits. Last time we checked, people still have to buy food, clothes, consumer staples, and other consumer goods whether times are good or when they are bad.
The current environment has saved Wal-Mart and much of the criticism about it. The prior 52-week trading range was $42.09 to $51.57. Shares are up to $53.34 late in the afternoon. This actually looks like the highest point since earlier in 2005. It’s really hard to congratulate the company, but that’s the stock market for you. Foes one day, old pals the next.
Jon C. Ogg
March 20, 2008
No matter how much Detroit would like to change the math, the total always adds to 100%.
Over the course of the last week, management from GM (NYSE:GM), Ford (NYSE:F), and Chrysler have tried to convince the industry and investors that this would still be a year when domestic vehicle sales will hit over 15.5 million. JP Powers recently revised their number down to 14.95 million. High gas prices and a tough economy could make that number worse.
Toyota (NYE:TM) said yesterday that it may not make its global sales goal for 2008, mostly due to poor performance in the US, Europe, and Japan.
Nissan says its market share in the US will incease in March. According to Reuters, Nissan said "U.S. sales were in line with its March targets and it expects to win a higher market share despite increasing concern about the economy."
In the math of the car business, that means someone will lose share. If it is one or all of the US car companies, the dream of 2008 being a good year fades closer to black.
At 14.5 million vehicle sales, the US market produces about $40 billion less in car revenue than it did last year when sales were 16.1 million. GM had a 25% share last year, Ford 15% and Chrysler a bit over 12%.
Shrinking pieces of a shrinking pie.
Douglas A. McIntyre
The acquisition of 3Com Corp. (NASDAQ: COMS) by Bain Capital and Huawei was already questionable, and then regulatory questions turned into trouble, and now trouble has turned into an outright dead deal. An affiliate of Bain Capital has notified 3Com that it is officially ending its merger agreement because CFIUS was going to block the deal because of the involvement and stake that would have been held by Huawei in China.
Frankly, this is no shock here, even if the shares have fallen further on the news. We just noticed this week when 3Com sent a "recommendation for approving the merger" to shareholders ahead of the shareholder vote that the company did make note of a right to pursue a merger break-up fee under certain circumstances. Whether or not 3Com pursues any fees or damages is one thing. Actually getting those is another matter on top of that.
3Com shares are down 13% at $1.91 today on almost 3-times normal volume. That also marks another 52-week low under the prior $2.08.
Another one bites the dust.
Jon C. Ogg
March 20, 2008
3Com has been reviewed for our SPECIAL SITUATION newsletter and for our "10 Stocks Under $10" newsletter. You can also join our open email distribution list. Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.
EPIX Pharmaceuticals, Inc. (EPIX) has seen shares essentially chopped in half today. Early this morning the company announced that it was discontinuing its PRX-00023 clinical development program after Phase IIb trials over a lack of significant efficacy. Ironically enough, this was in patients with major depressive disorder.
Its really too bad this didn’t work out. All of the employees with stock options and all of its shareholders may need a treatment for that today and this weekend. While this is horrible news, the company is no one trick pony like so many small emerging biotechs. The bad news is that isn’t anywhere near its first spate of bad news. It has been public since the late-1990’s and traded north of $30.00 back in 2000 and in 2004.
It does have other programs with Amgen and other major players:
Shares are now down 51% at $1.51 today, which is a new low under its 52-week trading range of $2.63 to $7.28. Its market cap is $62.5 million. On a brief look at the balance sheet its assets and liabilities are inverted as far as deriving any net cash value on the books, although that might not be the case depending upon its partnerships.
Jon C. Ogg
March 20, 2008
Richard Breeden has disclosed in an SEC Filing that he has aggressively bought shares of H&R Block (NYSE: HRB) this week. From the dates of March 18 to March 20, Breeden purchased roughly 2.435 million shares at various prices of $18.84 to $20.76. Prior to this SEC Filing, Breeden and his affiliated entities owned 6 million shares of common stock. The direct reported holdings are now carried as 8.435 million shares.
Richard C. Breeden was elected a director of H&R Block in September 2007 and was then elected as Chairman of the board in November 2007. He is also a former chairman of the Securities and Exchange Commission, which is a highly noted position for a public company. He is the managing member of Breeden Capital Partners LLC, managing member and Chairman & CEO of Breeden Capital Management LLC and the Key Principal of Breeden Partners (Cayman) Ltd. Breeden Capital Partners LLC is in turn the general partner of Breeden Partners L.P. and Breeden Partners (California) L.P. Due to SEC rules he is deemed to be the beneficial owner of all of the common stock owned by these entities. These entities have been an active investor in H&R Block.
On March 17, 2008, H&R Block announced that it was selling its OPTION ONE mortgage servicing business to Wilbur Ross, and the company already got earnings behind it earlier this month. This was the stock that Jim Cramer recently featured as his stock play to win on taxes this year because of Breeden’s involvement and because of selling Option One. Shares are up 1.3% today at $20.59 and have traded as high as $20.94. The 52-week trading range for the last year has been $16.89 to $24.02, but shares have also traded as high as $30.00 over the last five years.
Jon C. Ogg
March 20, 2008
CIT Group Inc. (NYSE: CIT) has announced that it is drawing upon its $7.3 Billion in unsecured U.S. bank credit facilities. The Company will use the proceeds to repay debt maturing in 2008, including commercial paper, and to provide financing to its core commercial franchises.
Interestingly enough, the company also notes that will continue to actively seek additional funding sources over the near-term and "it will explore and execute on the sale of non-strategic assets or business lines."
CEO Jeff Peek noted that this was a result of the protracted disruption in the capital markets as well as recent actions taken by the rating agencies. In addition it should provide it with added flexibility and the ability to finance clients. The company will hold a conference call after the close today to discuss the details.
Shares of CIT Group were already down significantly by more than 30% on financing concerns before being halted today. The good news is that the company seems able to tap that credit facility. The bad news is that investors usually treat companies that drain their credit facilities as being in a pickle.
CIT Group has made many disclosures on overall credit exposures, but it has really taken its toll. Over the last year this was a $60.00 stock. Shares were down at $7.94 before the stock was halted at 11:45 AM EST.
Jon C. Ogg
March 20, 2008
At yesterday’s annual meeting Howard Schultz, founder of Starbucks (NASDAQ: SBUX), said he would fix the company or die with his boots on. He may wanted to be fitted for an extra pair. It looks like he will be waiting a long time.
Mr Schultz said he would do a number of things. Starbucks plans to start a social network. He may want to hire Governor Spitzer’s girlfriend to get a few people to join. All the usual suspects are on Facebook or MySpace.
The company is also going to grind its coffee on the spot. Customers will know it is fresh, which may be important to some of them. Machines will also be built lower to the ground so that the workers and customers can see each other. It also reduces wind resistance and saves on gas.
Starbucks has two very simple problems, and neither was addressed by Schultz. The product is too expensive. The reason people go to McDonald’s (MCD) for coffee is not that it tastes much better. It is just cheaper.
Starbucks also has to do something about the number of stores it has in the US. That figure sits at about 7,400. Doing the math about which ones have low yields is not hard. In some big cities, there are three or four Starbucks within clear sight of one another.
The market knows all of this. The stock is up only 1.5% and still trades near its 52-week low.
Schultz is a gradualist. The company needs someone who can draw to an inside straight.
Douglas A. McIntyre
Lazard Capital Markets has a call out in the fuel cell sector from earlier this morning on FuelCell Energy, Inc. (NASDAQ: FCEL). Analyst Sanjay Shrestha has maintained his Buy rating, but he has also maintained his $15.00 price target.
Shrestha recently hosted investor meetings with senior management of FuelCell Energy and he still believes its outlook remains strong with near-term catalysts, and he thinks it has the best bookings and backlog in its history. Management also noted that it will have financing in place for two upcoming major projects that will add about $43 million to the backlog. Shrestha also believes it will gain more traction from California and from Korea.
The $15 target is based upon a 30x multiple on two potential revenue scenarios and EPS of $0.90-$1.20 over the next 4-6 years, discounted by 20% back four years. Shrestha also noted that it has a solid risk/reward as its current backlog is $84.7 million, not including the above note, and FuelCell Energy has $137 million in cash and equivalents.
On a more conservative side, Shrestha noted, "Given the current market environment, and assigning a low-20s multiple on our earnings scenario, we arrive at a target of about $10, suggesting meaningful upside. Risks: FuelCell Energy is in the early states of commercialization; the company needs to balance cash burn while establishing traction in key strategic markets."
With shares up 1% at $5.85 this morning, this would leave an upside of roughly 70% to his conservative number and some 155% to the $15.00 target. FuelCell’s 52-week trading range is $5.43 to $13.14, so shares are barely above 52-week lows and still have a long ways to go before challenging its 52-week highs.
Jon C. Ogg
March 20, 2008
Vision-Ease Lens Corporation withdrew its IPO filing today,citing the decision is “consistent with the public interest and protection ofinvestors.” The company originally submitted its IPO paperwork to the SEC on October 13, 2006.
The companyplanned to trade on the Nasdaq Global Market under the symbol “VELS.” The underwritersfor the deal were JPMorgan, William Blair and Company, BMO Capital Markets, andRobert W. Baird and Co.
Vision-Ease designs, manufactures, and distributespolycarbonate prescription lenses globally. They have a patent for LifeRx, a lensthat darkens when exposed to UV rays. With its experience and strategy,Vision-Ease believed its competitive place in the prescription lens marketwould be a good investment for shareholders. They are seeing a new worldthrough those patented lenses and changed their mind.
Rachel Lopez
March 20, 2008
Lambert’s Cove Acquisition Corporation, a SPAC, or special purpose acquisition corporation, submitted an IPO filing. The date is march 18 on the filing but the date this became available was this morning. The filing shows a target offer for $100 million for 10,000 units at $10 each. Each unit consists of one common share and one warrant with a strike price of $7.50.
The listed book runners for the IPO are listed as UBS Investment Bank and Morgan Joseph. They plan to apply to list on the American Stock Exchange under the ticker “LCA.”
The filing states that the company will use its blank check to target businesses in the communications, information, technology, entertainment, media, new media in North America. In determining a business combination, the company will utilize the experience and expertise of their management team. The Chairman, Mark A. Pelson, has 18 years of experience in the private investments and acquisitions in their target industry with Providence Equity Partners. The CEO, Jeffery Levy, acted as a manager and entrepreneur in the target industries with his experience at Biltmore Communications and Open Point Networks.
Rachel Lopez
March 20, 2008
Shares of Texas Instruments (NYSE: TXN) are trading lower this morning. The culprit is a downgrade out of American Technology Research. Analyst Doug Freedman has cut the chip maker from a Buy rating down to Neutral as the company’s wireless exposure should keep its P/E multiple from expanding in the face of perceived market share loss in the wireless sector and uncertain demand in 3G handsets.
Interestingly enough, Freeman kept his earnings target fopr 2008 at $1.84 EPS. That is still under First Call targets of $1.97 for 2008 EPS. AmTech’s $28.00 price target reflects a 14-times 2008 earnings, and it sees a year over year drop of 1.6%.
Freedman also notes that it isn’t a bad situation in his report: "Our downgrade should not be viewed as a lack of confidence in the TXN management team, which we continue to view as one of the best in the industry. However, we are looking to bring our rating in-line with our near-term expectations and better reflect ongoing investor concerns. If we could identify a positive catalyst to turn investor sentiment, we would be out defending a longer term view given the recent compressed valuation."
So far shares of Texas Instruments are down about 0.4% at $28.00. This morning’s intraday low is $27.73 and the 52-week trading range is $27.51 to $39.63.
Jon C. Ogg
March 20, 2008
Intel Corp. (NASDAQ: INTC) has just announced that it is hiking its quarterly dividend on common stock. The $0.1275 per share dividend will now be a higher rate of $0.14 per quarter.
At a $21.08 close yesterday, the dividend yield now looks to be roughly 3% on an annual basis. This dividend will be paid on June 1, 2008 to holders of record as of May 7, 2008.
Jon C. Ogg
March 20, 2008
Merrill Lynch has made a key reversal call in the conglomerate sector. It has raised General Electric (NYSE: GE) to Buy from Neutral, and it has downgraded 3M (NYSE: MMM) to Neutral from Buy.
GE shares are up about 1.5% at $36.15 in early pre-market trading, while 3M shares are down 1% at $78.66.
Jeff Immelt is doing rather well on his recent GE share purchases.
Jon C. Ogg
March 20, 2008
FedEx Corp. (NYSE: FDX) has just posted earnings of $1.26 EPS on 9.44 Billion in revenues, while First Call had estimates at $1.23 EPS on $9.148 Billion in revenues.
FedEx’s guidance is a bit of a disappointment, although on the commentary more than the net results seen ahead. It sees next quarter estimates at $1.60 to $1.80 vs. $1.95 estimates. But its guidance is based on the assumption so long as the economy doesn’t weaken further and so long as fuel prices don’t rise further. Those are some interesting assumptions considering the current economic situation.
The company is also cutting its FedEx Kinko’s expansion rates in the U.S. this year, which sounds a lot like a coffee company we all know. FedEx also noted that growth looks very limited in 2008.
So far, shares look limited too in early pre-market trading. Shares are down over 3% at $83.00, close to its $80.00 52-week low.
Jon C. Ogg
March 20, 2008
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