Daily Archives: June 20, 2008

This Week’s Top 10 Issues For Next Week

The week ended on a really sour note after the DJIA broke under that 12,000 mark and then proceeded to close under 11,900.  Here is a list of ten key individual issues we think traders will want to know to take into next week.

The oil patch just keeps going.  With Israel threatening to bomb Iran and conducting exercises, what do you expect?  Over in the oil patch, you had T. Boone Pickens trying to tell Congress that oil speculators aren’t driving oil prices and that more regulation is a waste of time.  Many oil companies are feeling pain from their oil hedges.  Goldman Sachs lifted many names in the patch and lifted its oil targets.  A weird options trade went off in SandRidge Energy (NYSE: SD), one thatwas odd enough to make you think something is brewing there.

Alternative Energy… Solar tax credits may have been canceledbut there is still good news.  A huge win came this week over atEvergreen Solar Inc. (NASDAQ: ESLR) after the company announced two neworders totaling $600 million and putting the backlog up huge. We saw very unusual volume in A-Power Energy Generation Systems (NASDAQ: APWR).

52-WEEK LOWS GALORE…. Friday’s 52-week low stocks was a huge list with more than 400 hitting intraday lows on that 52-week list. (WTR, BMY, CELL, DDS, EK, EXPE, GCI, GE, HST, NOK, PFE, Q, VLO, WY, WGO)
Thurday’s 52-Week Lows
Wednesday’s 52-Week Lows

Next week we have a Mini Tech Earnings Season for ORCL, RHT, RIMM, MU, & PALM

Are you as tired of Microsoft-Yahoo! as we are?  Yahoo! Inc. (NASDAQ: YHOO) is considering a huge reorganization while Microsoft Corp. (NASDAQ: MSFT) said it isn’t shopping for other web players.

IPO’s may be in trouble.  We saw two crummy performances this week.

Short sellers are targeting financials (C, LEH, AIG, WB, WM, ABK, JPM)

Satellite radio troubles brewing? Sirius & XM were both killed on a downgrade at Goldman Sachs.

Rumors persist….. Advanced Micro Devices Inc. (NYSE: AMD) is said to be considering a $1 Billion cash infusion.

Trouble in electronics land?  If you saw the earnings report and the important verbiage out of Philip Schoonover this week, you’d think Circuit City (NYSE: CC) thinks it should go it alone.  Best Buy (NYSE: BBY) beat earnings projections and gave strong guidance for a weak economy, yet shares slid.

Have a great weekend!
-The 247WallSt.com team

Posted on: June 20, 2008 – 3:21 pm in The Week

52-Week Low Club (WTR, BMY, CELL, DDS, EK, EXPE, GCI, GE, HST, NOK, PFE, Q, VLO, WY, WGO)

If you thought this was a bad day for the market with the DJIA trading well under that 12,000 psychological level, there were some 400 stocks that hit 52-week lows today when you include the closed end funds, preferred stocks, and ETF’s.  Today was ugly enough that we won’t even add our little personal prodding on these.  Here is just a partial list of fifteen active stocks on this list today that aren’t airlines, autos, or financials:

  • AQUA AMERICA INC (NYSE: WTR)
  • BRISTOL MYERS SQUIBB (NYSE: BMY)
  • BRIGHTPOINT INC (NASDAQ: CELL)
  • DILLARD’S INC (NYSE: DDS)
  • EASTMAN KODAK CO (NYSE: EK)
  • EXPEDIA INC. (NASDAQ: EXPE)
  • GANNETT CO INC (NYSE: GCI)
  • GENERAL ELECTRIC CO (NYSE: GE)
  • HOST HOTELS & RESORT (NYSE: HST)
  • NOKIA (NYSE: NOK)
  • PFIZER INC. (NYSE: PFE)
  • QWEST COMMUNICATIONS (NYSE: Q)
  • VALERO ENERGY (NYSE: VLO)
  • WEYERHAEUSER CO (NYSE: WY)
  • WINNEBAGO IND INC (NYSE: WGO)

Jon C. Ogg
June 21, 2008

Posted on: June 20, 2008 – 2:21 pm in HI/LOW, , , , , , , , , , , , , , ,

Midwest Floods & Fifth Third Hit Cincinnati Financial (CINF, FITB)

Cincinnati Financial Corporation (NASDAQ: CINF) issued its preliminary 2008 guidance after yesterday’s close.  Based upon its insurance target market, you probably already know it is one of the stocks that has been a victim of the Midwest flooding.  Recent reports put 16% of Iowa’s crops out for the year, and that is one of its target markets.

Based on current and lower market values of common stock holdings, the company noted that its book value at June 30 could be at least 10% under the $33.40 book value reported for March 31, 2008.

To make matters worse, Fifth Third Bancorp (NASDAQ: FITB) is the company’s largest common stock holding and it has been cut in more than half since March 31.   That alone will contribute about $3.00 to the decline in book value.

The company  gave its preliminary estimates, but the problem with this metric is that it is through June 12 and many claims will have been filed since then.  Its catastrophe losses for Q2 are already $115 million. The combined ratio saw a hit of 15%, compared with 5.6% of catastrophe losses reported in the first quarter.  The company further noted that Q1 was even above normal storm activity.  To compares this to last year, its Q2-2007 catastrophe losses were atypically low at $11 million and 1.4%, while Q2-2006 catastrophe losses were $64 million and 8.0%.

The company expects a record level of catastrophe losses for the first six months of 2008 and it believe catastrophe losses net of reinsurance could contribute as much as 9 percentage points to its full-year 2008 combined ratio.  This will be an all-time high according to its projections.

If you think it is all gloom and doom, don’t.  Shares are actually back up in positive territory after opening down today.  Shares are up 1% at $28.89, and the 52-week trading range is $27.51 to $45.04.

Jon C. Ogg
June 20, 2008

Posted on: June 20, 2008 – 12:43 pm in Earnings Warning, Financial Stocks, ,

EU’s Cuba Sanctions Lifted, Partial Win For Herzfeld Caribbean (CUBA)

There have been numerous news reports that the European Union has lifted diplomatic sanctions against Cuba.  While the lifting does include some imposed tough conditions to maintain sanction-free relations, this is probably the first of many such steps.  Some of the conditions include including the release of political prisoners, granting Cubans access to the Internet, and allowing all EU delegations arriving in Cuba to meet opposition figures and members of the Cuban government.

Herzfeld Caribbean Basin Fund Inc. (NASDAQ: CUBA) is actually the investment angle for this as far as U.S. investors are concerned.  The fund invests in companies that are perceived to benefit from normalized relations down the road.  Shares are up over 4% today at $8.37.  The volume is frequently light, and today’s 13,761 shares show that.  It has not seen a single trading session of more than 100,000 shares trade hands since February. 

The company’s web site also lists its Net Asset Value as $7.62 as of June 19, 2008.  The current market cap is listed as $31 million on NASDAQ, although we would caution that a fairly recent offering might make the number slightly different.

Jon C. Ogg
June 20, 2008

Posted on: June 20, 2008 – 11:46 am in International Markets, Mutual Funds,

Mini Tech Earnings Season Next Week (ORCL, RHT, RIMM, MU, PALM)

Next Wednesday we will have what almost feels like a tech earnings season, although it’s really just the end of the road before the earnings flurry picks up in mid to late July.  We have Oracle Corp. (NASDAQ:ORCL), Red Hat Inc. (NYSE: RHT), and Research In Motion Ltd. (NASDAQ: RIMM) all reporting earnings.  To make matters even more interesting, we have Palm Inc. (NASDAQ: PALM) and Micron Tech (NYSE: MU) reporting earning on Thursday.  We have included estimates out of First Call and average analyst targets for each, but keep in mind that these estimates will change slightly after the weekend.

Oracle Corp. (NASDAQ:ORCL) is going to to be the most important for determining th strength of enterprise business operations for tech.  The enterprise software giant is expected to post $0.44 EPS on $6.86 Billion in revenues in its year-end report for Fiscal May 2008.  For the year ahead, its May-2009 estimates are expected to be $1.50 EPS on $25.67 Billion in estimates.  Average analyst targets are roughly $25.00.

We will also get earnings out of Linux software maker Red Hat Inc. (NYSE: RHT) with First Call estimates of $0.18 EPS on just over $153 million in revenues.  The next quarter after this for August will also maek its fiscal year end and estimates are $0.19 EPS on $163.36 million in revenues.  As far as average analyst targets, this one is very close with targets being around $23.00 to $24.00.

The entire cell phone and electronic gadget market is going to brace for Research In Motion Ltd. (NASDAQ: RIMM) earnings on Wednesday.  The company is expected to to post $0.85 EPS on $2.27 Billion in revenues.  For the next quarter estimates are $0.90 EPS on $2.43 Billion in revenues, and the estimates for Fiscal Feb-2009 are $3.88 EPS on $10.35 Billion in revenues.  Analysts have an average of target range of between $160.00 and $165.00, although some newer and raised targets have recently taken this one over $200.00 for a year out.

To make matters even more interesting, we have Palm Inc. (NASDAQ: PALM) and Micron Tech (NYSE: MU) reporting earning on Thursday. 

With today being options expiration date we are not including any options expectations to the stocks.  We’ll also follow up ahead of earnings with more detailed analysis on what the charts and other key metric expectations are for each company.  It may be a slow summer, but not every day.

Jon C. Ogg
June 20, 2008

Posted on: June 20, 2008 – 11:22 am in Earnings, Technology Companies, , , , ,

Ford (F) Says It Will Never Make Money Again

What about the idea that The Ford Motor Company (F) will never make money in North America again?

Ford told Wall St for the second time in as many months that things at the company and in its home market were getting much worse..The firm’s shares promptly dropped another 6%.

According to Reuters, "Ford said it would post lower results for its core automotive business this year and said it would be difficult to avoid a loss in 2009." It will delay the new version of its flagship F-Series pick-up. No one was buying them anyway.

Ford says the US market may only produce 14.7 million vehicle sales this year. That is still wildly on the high side. Some analysts see a year when the number is unlikely to 14 million. The idea that the situation will get better next year is also just a pipe dream.

There evidence that oil prices will be lower in 2009 is terribly thin. So is any hope that the housing market will improve. A loaf of bread is likely to cost more than a pack of cigarettes.

Ford is not just in trouble. It is in a position where it has been pole-axed in its own market. It brought the ugliness on itself, but that does not keep it from being a shame.

Douglas A. McIntyre

Posted on: June 20, 2008 – 11:03 am in Autos,

Syntroleum & Tyson Get Tax-Free Bond Status for Dynamic Fuels Venture (SYNM, TSN)

Syntroleum Corporation (NASDAQ: SYNM) has announced that Dynamic Fuels LLC, a 50-50 joint venture between Syntroleum and Tyson Foods Inc. (NYSE: TSN), has received final approval from the Louisiana State Bond Commission for $100 million in tax exempt Gulf Opportunity Zone (GO Zone) Bonds. 

This will be used to fund the building of the venture’s renewable synthetic fuels facility located in Geismar, Louisiana. This $100 million is the maximum amount that can be granted for a project under policy guidelines adopted by Louisiana’s Bond Commission.  The companies are planning on initial production starting in early 2010.

Dynamic Fuels was set up to convert low-grade inedible fats and greases into renewable synthetic diesel, jet and military fuel.

If you are flying a plane in 2011 or beyond and you think you keep smelling fried chicken, you might be a Dynamic Fuels client.

Jon C. Ogg
June 20, 2008

Posted on: June 20, 2008 – 8:54 am in Alternative Energy, Bonds, Oil & Gas, ,

Mosaic Looks To Unload Nitrogen Fertilizer Venture (MOS)

The Mosaic Company (NYSE: MOS) and Investment Saskatchewan have announced that they are seeking a buyer for Saskferco Products Inc.  This is a joint venture of Canadian government and Mosaic.

Mosaic says that this will allow it to focus on core operations in potash and phosphates and to reach its goal of 5.1 million tonne potash capacity expansion initiative over the next 12 years.

Saskferco Products Inc. produces nitrogen fertilizer owned by Mosaic and Investment Saskatchewan.

Jon C. Ogg
June 20, 2008

Posted on: June 20, 2008 – 8:28 am in Agriculture,

Arlington Tankers Hires Jefferies To Explore Alternatives (ATB)

Arlington Tankers Ltd. (NYSE: ATB) has decided to review and evaluate the company’s strategic alternatives, with the hope of enhancing shareholder value.  The company said its review will focus on the following:

  • the purchase of another company;
  • the sale of the company;
  • a merger of the company;
  • other strategic transactions;

……. or the continued execution of the company’s current operating plan. 

Arlington has retained Jefferies & Company, Inc. as its financial advisor in connection with this process.  It is important to note that as of now Arlington has no commitments or agreements in place and there are no assurances that this review will lead to any transactions.

The company is trading up 7% at $25.25 on thin volume trading this morning.  Its 52-week trading range is $18.93 to $29.90.

Jon C. Ogg
June 20, 2008

Posted on: June 20, 2008 – 7:45 am in Transports,

Detroit: To Make Matters Worse… (GM)(TM)

The car companies may be on a treasure hunt by the end of the year to improve their balance sheets with new cash. North American car and SUV sales are that and.

If all that negative news was not enough, Lehman now says the two companies may have to write off bad loans at their financial units.

According to Reuters, the two company’s "financial arms may need to write down $1.1 billion and $1.5 billion, respectively, said a Lehman Brothers analyst."

Douglas A. McIntyre

Posted on: June 20, 2008 – 7:30 am in Autos, ,

Perma-Fix Scores Nuclear Clean-Up Subcontract (PESI)

Perma-Fix Environmental Services, Inc. (NASDAQ: PESI) has been awarded a subcontract through its East Tennessee Materials & Energy Corporation subsidiary for waste management and facility operations at the Department of Energy Hanford, Washington Site.

M&EC is a small team member of the CH2M Hill Plateau Remediation Company team led by CH2M Hill Constructors, Inc., which has been awarded the contract by the DOE for the Plateau Remediation Contract at Hanford. The total contract awarded to the group is a cost-plus contract valued at approximately $4.5 billion over 10 years, which is a 5-year base period with the option to extend it for another five years.

While this will be a strong award for the company, this is a subcontract and the exact amount is not known until we see the actual quarterly or annual reports.

Perma-Fix is a very small company with its entire revenues being $54.1 million in all of 2007 and $87.9 million in 2006.

Jon C. Ogg
June 20, 2008

Posted on: June 20, 2008 – 7:01 am in Nuclear,

Top 10 Pre-Market Analyst Calls (APOL, BZH, CB, CTSH, FITB, IRF, PBG, SNDK, SY, SYMC, WES)

These are ten of the analyst calls we are focusing on this Friday morning:

  • Apollo Group (NASDAQ: APOL) Raised to Outperform at Credit Suisse.
  • Beazer Homes (NYSE: BZH) Raised To Neutral at UBS.
  • Chubb (NYSE: CB) Raised to Equal-Weight at Morgan Stanley.
  • Cognizant Technology (NASDAQ: CTSH) Cut To Neutral at Goldman Sachs.
  • Fifth Third Bancorp (NASDAQ: FITB) Raised to Outperform at KBW.
  • International Rectifier (NYSE: IRF) Cut to Sell at Citigroup.
  • Pepsi Bottling (NYSE: PBG) Raised to Neutral at JPMorgan.
  • SanDisk (NASDAQ: SNDK) Cut to Hold from Buy at Citigroup.
  • Sybase (NYSE: SY) Cut to Neutral at Banc Of America.
  • Symantec (NASDAQ: SYMC) Cut to Market Perform at FBR.
  • Western Gas Partners (NYSE: WES) Started as Hold at Citigroup.

Jon C. Ogg
June 20, 2008

Posted on: June 20, 2008 – 6:43 am in Analyst Calls, , , , , , , , , , ,

Raising Rates At The Fed, Bernanke’s Limo

"We have nothing to fear but fear itself."–FDR

The Fed can now fear inflation or it can fear a worsening credit crisis. The conventional wisdom is that it can only fix one.

As things stack up now, problems in the financial industry are not going to be helped much by lower rates. The Fed can keep its "free money" discount window open and hand out cash like candy on Halloween. Since lower interest rates are not being passed on to consumers because banks don’t want to take the risk, lowering rates does nothing for the man on the street.

Inflation is hurting the modest citizen. He can’t afford gas, food, and his mortgage. Higher interest rates mean little to him. Rising prices mean everything.

The conventional wisdom is that the Fed does not have the guts to make a bet about inflation, and that it will do nothing with rates. That assumes Bernanke balances inflation and the credit crisis and finds they weigh about the same. But, they don’t.

The Fed is faced with helping bank executives or the average man. There are no populists on the agency board, but all of the members can count. Bank executives are outnumbered in the equation by about a million to one. The Fed can help the many or the few.

It is an election year. It would be cynical to think the Fed wants to help voters over fat cats.

But, Bernanke may be having trouble paying the $5 a gallon to fill up his limo.

Douglas A. McIntyre

Posted on: June 20, 2008 – 5:23 am in Economy

Microsoft (MSFT) Does Not Plan To Buy Anything

Now that Microsoft (MSFT) has lost its bid to buy Yahoo! (YHOO), all of the acquisition managing directors on Wall St. are hoping to get a chance to help Redmond use that $45 billion to pick-up some other internet companies. High on that list are Facebook, Digg, and Time Warner’s (TWX) AOL.

The head of Microsoft sent a signal that no one should hold his breath. According to the FT, Steve Ballmer, chief executive, scotched talk that Microsoft would turn to a “plan B” of other acquisitions to boost its online presence

Ballmer gets it. Owning inventory in the display ad world is not worth much. The price of most display advertising is falling. Large networks of websites auction off this space. The higher bidders know there is a lot of inventory, so they do not pay much. Efforts to make display ads more targeted have met with only modest success.

Search advertising is where the money is. Because it is so substantially targeted, marketers will pay a large premium

Ballmer is clearly prepared to take some big portion of his $45 billion and attempt to build a better search engine platform of his own. If he is successful he can deploy in through Windows and get it onto most of the world’s PCs. If the product is good, some people may use it. If not, they will turn back to Google (GOOG).

Ballmer may fail, but he is not going to start out by failing through M&A.

Douglas A. McIntyre

Posted on: June 20, 2008 – 5:04 am in Mergers and Buy Outs, , , ,

Reorganizing Yahoo! (YHOO) To Death

Most of the financial papers have stories about a big management reorganization at Yahoo!. A number of the top people are already hitting the doors like patrons fleeing a burning theater. According to The Wall Street Journal, "Yahoo executives are discussing a plan to centralize numerous product groups, such as its mail, search and home-page divisions, into a global-product organization."

Yahoo! may not be paying close attention to what is going on over at the internet. Its share of the search market in the US is down to 20%. Google’s (GOOG) is over 60%. Microsoft (MSFT) is not going to give up on the search market, even if it has to dump billions of dollars into the effort like it did with the Xbox. At least the Xbox works.

Yahoo! has decided to put its money down on the display ad market. Most of the evidence this year points to the fact that growth in display advertising is slowing. That is not just because the economy is weak. Like any business that has grown large, it has lost the ability to grow fast. And, display advertising is not very effective. New targeting and ad serving techniques are in the market to solve that, but there is no reason to believe that they will work.

Yahoo! has become a company which cannot be fixed anymore. In that regard, it looks like other losers in industries with dominant firms like Toyota (TM) in cars and Intel (INTC) in PC chips.

For Yahoo!, there is no chance to be in second place, because there is no second place. Last place is all that is left.

Douglas A. McIntyre

Posted on: June 20, 2008 – 4:53 am in Most Actives, , , , ,

Who Will Kerkorian Sell Ford (F) To?

Ford (F) management believes that Kirk Kerkorian and his mob of friends are hanging around the car company because they think CEO Alan Mulally is doing a fine job. Ford may want to have a look. All the new guys have blackjacks in their suit pockets.

Kerkorian now has over 6% of the Ford common. He knows as well as anyone that the Ford family has voting shares which effectively control the company. He also knows that maintaining the car firm’s operations in untenable. Ford does fairly well in Europe and Latin America, but the drag from its US auto business is eating cash much faster than the company’s management could have imagined. With a line-up of SUVs and pick-ups still dominating the product mix at the operation, unit sales could drop off another 15% to 20% this year.

Ford cannot cut expenses fast enough or far enough to offset that level of carnage.

Like many large families several generations removed from a founder, most of the fruit of Henry Ford’s loins does not give a damn about what happens to the company. They have seen the value of their trust funds lose a third of their value recently. Even if they have not been educated at Ivy League schools, they know that is about to get worse. Rich people hate to get poor.

If Ford’s fortunes deteriorate as the year wears on, the share price is going to sell down and the company may need to raise more money. That kind of dilution would be ruinous. Wall St. is gambling that there will be further big drops in Ford. It is the most shorted company on the NYSE.

All Kerkorian has to do is wait now. As Ford’s world falls apart, he is in a position to help the company and the Ford family unload the company as a fairly nice profit. VW has said it would like 15% of the US car market. It cannot get their on its own. Renault and Nissan, already blood brothers, would like a larger presence in the US as well. Any of these companies could take major costs out of Ford’s management, marketing, and development costs.

Kirk has a "For Sale" sign on Ford. The people inside company headquarters just don’t know it.

Douglas A McIntyre

Posted on: June 20, 2008 – 4:42 am in Autos,

Short Sellers Make Huge Bets US Financials Will Tumble As Citigroup (C) Sees More Write-Downs (LEH)(AIG)(WB)(WM)(ABK)(JPM)(GM)(F)(GE)(WMT)(MOT)(DAL)(EMC)(Q)

Citigroup’s (C) CFO says he see write-downs through the end of the year. The head of hedge fund Paulson & Co,says bank losses will hit $1.3 trillion. Write-downs at Lehman (LEH) and AIG (AIG) were much larger than were expected.

It may well be a long, hard second half for the bank, insurance, and brokerage sectors.

It is any wonder that short sellers have upped their bets against big financial companies. As of June 15, the short interest in Wachovia (WB) rose 26.2 million shares to 177.3 million. Share short in Washington Mutual (WM) were up 50 million to 254.8 million. The short interest in Citigroup (C) was up 20 million to 135.7 million. Shares short in Ambac (ABK) rose 12.3 million to 74.5 million. The short interest in JPMorgan (JPM) was up 11.9 million shares to 63 million and shares short in AIG (AIG) moved up 12.6 million to 67.4 million.

Car stocks were also hit hard by shorts. Shares short in GM (GM) rose 14.9 million to 120.2 million. Shares short in Ford (F) rose 31.3 million to 317.6 million.

Short sellers also made large increases in their positions in GE (GE), Wal-Mart (WMT), Motorola (MOT), and Delta (DAL)

Shorts moved out of EMC (EMC) and Qwest (Q).

Douglas A. McIntyre

Posted on: June 20, 2008 – 3:09 am in Short Interest, , , , , , , , , , , , , , ,

Media Digest 6/20/2008 Reuters, WSJ, NYTimes, FT, Bloomberg

According to Reuters, the fuel price increase in China may bolster consumption.

Reuters writes that the Fed’s policy on inflation is starting to hurt the housing market.

Reuters writes that the Bank of America (BAC) buy-out of CountryWide (CFC) may be done next month.

Reuters reports that the CFO of Citigroup (C) said the bank will take more write-offs.

Reuters writes that Washington Mutual (WM) cut 1,200 jobs.

The Wall Street Journal reports that Yahoo! (YHOO) is planning a reorganization.

The Wall Street Journal reports that the chairman of Live Nation will leave the company.

The Wall Street Journal reports that Continental (CAL) and United (UAUA) have formed a broad marketing alliance.

The Wall Street Journal writes that high gas prices are beginning to cut consumer consumption.

The Wall Street Journal writes that the decision by the Air Force to review its fuel tanker decision is drawing criticism from overseas.

The New York Times writes that the market for small cars is so great the auto companies cannot keep up.

The New York Times reports that Kirk Kerkorian has raised his stake in Ford (F) again.

The FT writes that Microsoft (MSFT) will not go on a buying spree after losing its bid for Yahoo!.

Bloomberg writes that UBS (UBS) is accused of helped US clients hide $20 billion in assets.

Douglas A. McIntyre

Posted on: June 20, 2008 – 2:52 am in Press Digest, , , , , , , , , ,

Asia Markets 6/20/2008 (CN)(CHU)

Markets in Asia were mixed.

The nikkei fell 1.3% to 13,942. Hitachi fell 2.3% to 776. KDDI fell 3.5% to 654000.

The Hang Seng rose .1% to 22,812. China Netcom (CN) fell 2.7% to 21.45. China Unicom (CHU) fell 3.1% to 14.40.

The Shanghai Composite rose 3% to 2,831.

Data from Reuters

Douglas A. McIntyre

Posted on: June 20, 2008 – 2:32 am in International Markets, ,