Daily Archives: November 11, 2009

When The News Is Not The News: The AIG CEO Story

bankRobert Benmosche, the CEO of AIG (NYSE:AIG) is known for being hot-headed, mercurial, self-centered, brilliant, ill-tempered, and gifted. He is just the sort of executive who threatens to quit his job several times a year. He probably likes to hear his board and colleagues say how much they need him.

The Wall Street Journal reported that Benmosche told his board that he was ready to quit because pay czar Kenneth Feinberg would not go along with requests from AIG to allow key employees to have base salaries above those Feinberg was prepared to approve. AIG claimed that it could not retain its best talent with the prospect of only modest compensation. There is nothing unusual about that. The chairman of GM made a similar statement about  the difficulty of hiring and retaining talent at the car company when the federal government is unbending in its plan to keep pay scales low at firms with TARP investments. Read More »

Posted on: November 11, 2009 – 8:25 pm in Compensation, Financial Stocks,

Maybe The Search Engine Business Isn’t So Great (YHOO)(GOOG)(MSFT)

TVSeveral studies show that Microsoft’s (NASDAQ:MSFT) Bing search engine picked up market share in October. Combined with Yahoo! the two companies could end up with clost to 30% of the industry in the United States. The firms believe that the deal will be final in the first quarter of next year. Google (NASDAQ:GOOG) will still have two-thirds of the market, but perhaps second place is not so bad.

The value of first place is hard to argue. Google has a market capitalization of $180 billion and had operating income of $2 billion on revenue of slightly less than $6 billion last quarter. Yahoo! serves about 20% of the searchs made in the US but has a market cap of only $23 billion and made a very modest $70 million on $1.78 billion in revenue in the period ending September 30. Microsoft does not break out its search revenue or expense, but its online operations are small and lose money. Read More »

Posted on: November 11, 2009 – 7:58 pm in Internet, , ,

SIRIUS Cautious Praise At S&P (SIRI)

SIRIUS LOGOSIRIUS XM Radio Inc. (NASDAQ: SIRI) has been reaffirmed on its corporate debt rating at “B-” late in the day.  While this is still very deep in “junk bond” territory at S&P, the outlook has been revised to positive from stable.  This is after the earnings that we called mostly headed in the right direction last week, but it follows a relatively recent mid-August upgrade by S&P and it is fairly rare to see another call this fast on a controversial stock (and company) like Sirius.  Still, there are some mixed notions in the call as the rating is so far from investment grade status.
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Posted on: November 11, 2009 – 5:41 pm in Analyst Calls, Bonds, Media, Satellite,

Housing Speculation On The Rise

According to a recent survey conducted by Move.com the some people interested in purchasing real estate as an investment has doubled since March 2009.  The results show that this growth has been driven by falling housing prices and increased foreclosures.  According to the survey the number of homebuyers that plan to buy an investment property has risen to 12.1%.  A significant number of these purchases are happening in the foreclosure market, with 42% of purchases of foreclosed homes being speculative.

houseSpeculative buying in the housing market is an important force in the effort to put a bottom on home prices.  However, the number of homes available on the foreclosure market continues to rise.  Areas of the country that were the biggest drivers of the housing boom are now seeing record levels of home foreclosures.  In September, home foreclosures reached a record level of 8,800, up 90% from a year ago. Without adequate funding, it’s almost certain that the buying power of speculators will be insufficient to sop up the increasing number of foreclosed homes hitting the market.

Even if the number of people investing in real estate continues to rise, their presence in the housing market may cause some bumps as the market begins its recovery.  The Move.com survey indicates that close to 60% of speculators expect to buy their foreclosed homes for around 20% below value.  If this turns out to be the case, sellers of foreclosed homes will probably in a position to sell as a profit well before other market participants.  They are likely to turn over real estate quickly for a rapid return. Depending on how large of a portion of the market speculators represent, their selling may have a depressing effect on the market just as recovery gets underway.

Garrett W. McIntyre

Posted on: November 11, 2009 – 4:56 pm in Economy, Housing

Tech Strangeworld: 3Com Bought by H-P (COMS, HPQ, CSCO, IBM)

HO LogoSometimes the unimaginable happens, and that is today.  3Com Corporation (NASDAQ: COMS) is being acquired, and in a deal that won’t run regulatory risk at least over China having access to core technology.  Hewlett-Packard (NYSE: HPQ) is the surprise buyer.

H-P is buying the networking and routing company for a price of $7.90 per share in cash, which comes to an enterprise value of about $2.7 billion.   The deal has also been approved by the boards of directors at each company.  Based upon Cisco Systems Inc. (NASDAQ: CSCO) expanding its reach further out into data centers and beyond and based on some recent moves from IBM (NYSE: IBM), this is actually a lower surprise than had this been announced a year ago.  That would make one wonder what moves those companies will make.
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Posted on: November 11, 2009 – 4:30 pm in Earnings, Mergers and Buy Outs, Technology Companies, , , ,

52-Week High Club (NCST, SMD)

NUCRYST Pharmaceuticals Corp. (NASDAQ: NCST) rose over 70% to a yearly high of $1.70.  Its rise was driven by the news that Smith & Nephew Plc (NYSE: SNN) has agreed to buy nearly all of NUCRYST’s assets.  

Smithfield Foods Inc. (NYSE: SMD) rose over 9% to a yearly high of $17.34.  The pork processor was raised to a “buy” by analysts at Deutsche Bank AG.

Garrett W. McIntyre

Posted on: November 11, 2009 – 4:21 pm in Biotech, Food, ,

Bing Captures More Search Share (MSFT, GOOG, YHOO, IACI)

It is usually questionable if Microsoft Corp. (NASDAQ: MSFT) and its new Bing.com search engine is stealing from Google Inc. (NASDAQ: GOOG) or from Yahoo! Inc. (NASDAQ: YHOO) when it comes to gains in the share of internet search.  Or maybe it was IAC/InteractiveCorp. (NASDAQ: IACI) and its Ask.com distant #4 search product.  Hitwise is only one source which measures U.S. searches, but a reading of searches conducted in the four weeks ending Oct. 31, 2009 showed a gain for Bing. Hitwise showed that Bing is clearly taking more from Google and some from Yahoo!.  Even Ask.com got a little lift this time.  Hitwise gave the following data:
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Posted on: November 11, 2009 – 1:23 pm in Internet, Research, , , ,

How Much is Benmosche Really Worth to AIG? (AIG, MET)

AIG LogoAmerican International Group, Inc. (NYSE: AIG) is under pressure today after its new CEO Robert Benmosche, who has not even had a full three months yet on the job, has effectively threatened to walk out as CEO of AIG. The reasoning is over the intense restrictions of being under the government, particularly as it pertains to compensation limits.  What is interesting is that this may be a strong CEO throwing the gauntlet at the government.  But we also want to explore what Benmosche is actually worth in real dollar terms to AIG today.  Chances are it is far more than just this 4% we have seen the stock drop today.
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Posted on: November 11, 2009 – 1:00 pm in Compensation, Editor's Picks, Financial Stocks, Insider Activity, Management Change, Regulation, Rumors, Shareholder Issues, Turnarounds, ,

Applied Materials 360-Degree View Before Earnings (AMAT, SMH, USD)

AMAT LogoApplied Materials Inc. (NASDAQ: AMAT) is on deck for earnings this afternoon right after the market closes. The chip equipment giant, and relatively new solar player, is the king of its sector to most traders and investors and will potentially have an impact on all the chip equipment stocks in the sector.  Estimates from Thomson Reuters are $0.03 EPS and $1.32 billion in revenues for its October quarter, which is also its year-end with estimates of -$0.14 EPS and $4.80 billion in revenues.

Applied Materials does represent about 13.55% of the Semiconductor HOLDRs (NYSE: SMH) ETF, but only represents about 5% of the Ultra Semiconductor ProShares (NYSE: USD) ETF.  We will be looking to its fiscal-2010 comments more than this last quarter.
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Posted on: November 11, 2009 – 12:12 pm in Alternative Energy, Earnings, Semiconductor, Technology Companies, , ,

Macy’s Highlights Value-Performance Conundrum in Dept. Stores (M, JWN, KSS)

Bull and Bear ImageMacy’s Inc. (NYSE: M) is showing just how much of a conundrum there is between today’s retail stock valuations and the reality of what to expect from earnings ahead.  Macy’s had a narrower loss in the last quarter of $35 million, or -$0.08 EPS; but outside of items its earnings were -$0.03 EPS.  Revenues were down over 3% to $5.28 billion. Thomson Reuters had estimates at -$0.07 EPS and $5.25 billion in revenues.    The company did manage solid inventory management controls and its ongoing localized merchandise by region was part of why it raised its sales and earnings guidance for the year.

Still, there are issues between today’s share price versus valuations and where it came up from.  This also highlights issues that lie ahead for Nordstrom Inc. (NYSE: JWN) and Kohl’s Corp. (NYSE: KSS) ahead of their earnings this week.
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Posted on: November 11, 2009 – 10:12 am in Apparel, Earnings, Earnings Warning, Retail, , ,

Top Day Trader Alerts (AIG, AONE, MBI, PALM, SIGM, REGN, CADX, TRA, CF, AGU, BRCD)

These are this morning’s top day trader and active trader alerts seen in the pre-market trading hours.  We also included some options color from yesterday.  A link has been provided for more detailed analysis and data for each stock over at VSInvestor.com:

American International Group, Inc. (NYSE: AIG) is down only about 2% after reports that the company could find itself leaderless again.

A123 Systems, Inc. (NASDAQ: AONE) is trading down 3% after earnings and concerns over a partnership.

MBIA Inc. (NYSE: MBI) is trading up over 3% this morning after getting crushed yesterday, M.J. Whitman’s Third Avenue took a stake.

Palm Inc. (NASDAQ: PALM) is running over 3% on an analyst call.

Sigma Designs, Inc. (NASDAQ: SIGM) is down 8% on a downgrade.

Regeneron Pharmaceuticals, Inc. (NASDAQ: REGN) is trading up 10% after Sanofi-Aventis expanded its antibody pact substantially.

We have many options on watch as well:

  • Cadence Pharmaceutical Inc. (NASDAQ: CADX) is one to watch with a huge binary volatility trade ahead of the 11/13 PDUFA date for Acetavance as a treatment for acute pain.
  • There was some interesting options trading seen yesterday in the trifecta fertilizer merger war via Terra Industries Inc. (NYSE: TRA), CF Industries (NYSE: CF), and Agrium (NYSE: AGU).
  • Brocade Communications Systems, Inc. (NASDAQ: BRCD) gave a stock and option alert yesterday, but it went even more active in options with the NOV09 $9 CALLS seeing 24,450 contracts and the NOV09 $10 CALLS seeing 17,432 contracts.

You can join our open email distribution list which goes out several times per week to be notified of key merger news, key analyst calls, top early morning day trader alerts, along with news of IPO’s, key offerings, guru investor data on Buffett and others, mergers, and more.

JON C. OGG

Posted on: November 11, 2009 – 9:09 am in Pre-Market Activity, Trading Alert, , , , , , , , , , ,

Today’s Best Market Rumors (11/11/2009) (AMR)(INTC)(GE)

magazinUpdated throughout the day.

11:45 AM EST: Motorola Inc. (NYSE: MOT) may seek to sell its Home & Networking division for about $4.5 billion according to WSJ. -Jon Ogg

American Air (NYSE:AMR) may team with private equity firm TPG to make an investment in Japan Air.  (Bloomberg)

AIG (NYSE:AIG) CEO Robert E. Benmosche may resign. (WSJ)

Google (NASDAQ:GOOG) plans to release a new programming language called Go that can help computer coders improve efficiency  (CNET)

China may benchmark the yuan against currencies other than the dollar. (CNBC)

Intel (NASDAQ:INTC) may hold a critical edge against the EU in the antitrust battle.

General Electric (NYSE:GE) is in talks to sell its security systems unit to United Technologies (NYSE:UTX) for over $1.5 billion. (FT)

Douglas A. McIntyre

Posted on: November 11, 2009 – 8:41 am in Rumors, , , , , ,

Wal-Mart (WMT) Give RIM (RIMM) A Hand

WMTRIM (NASDAQ:RIMM) has been under seige these last few weeks. Investors are concerned that the Blackberry maker is losing market share to the Apple (NASDAQ:AAPL) iPhone and a new group of handsets using the Google (NASDAQ:GOOG) Android mobile operating system. Motorola (NYSE:MOT) launched its Droid just last week.

RIM shareholders are also nervous the Palm (NASDAQ:PALM) Pre sales could take a very modest but still damaging piece of the Blackberry market.

Wal-Mart (NYSE:WMT) means to help save RIM. Read More »

Posted on: November 11, 2009 – 8:15 am in Wireless, , , , , , ,

Top Analyst Upgrades, Downgrades, Initiations (ADBE, BCS, STV, FPL, FLR, GME, PCLN, TOL, TSN, TROW)

These are this Wednesday’s top 10 analyst upgrades, downgrades, and initiations seen in Wall Street research calls:

Adobe Systems NASDAQ: ADBE) Cut to Perform at Oppenheimer.
Barclays plc (NYSE: BCS) Cut to Hold at RBS.
China Digital TV (NYSE: STV) Cut to Neutral at Piper Jaffray.
FPL Group (NYSE: FPL) Raised to Buy at Citi.
Fluor (NYSE: FLR) Raised to Hold at Citi.
GameStop (NYSE: GME) Removed from Convition Buy List at Goldman Sachs (still Buy rated).
Priceline.com (NASDAQ: PCLN) Cut to Neutral at Credit Suisse.
Toll Brothers (NYSE: TOL) Raised to Outperform at Wells Fargo.
Tyson Foods (NYSE: TSN) Cut to Neutral at JPMorgan.
T. Rowe Price (NASDAQ: TROW) Raised to Outperform at Credit Suisse.

You can join our open email distribution list which goes out several times per week to be notified of key merger news, key analyst calls, top early morning day trader alerts, along with news of IPO’s, key offerings, guru investor data on Buffett and others, mergers, and more.

JON C. OGG

Posted on: November 11, 2009 – 8:11 am in Analyst Calls, Pre-Market Activity, , , , , , , , , ,

Private Equity Takes To The Sky

airplaneAmerican Airlines (NYSE:AMR) is competing with Delta (NYSE:DAL) to form a close partnership with financially troubled Japan Air. Both US carriers would like ready access to JAL’s tremendous network of flights around Asia, where air travel is expected to rise rapidly over the next few years.

American got some help in its quest to be JAL’s preferred partner. US private equity firm TPG may be ready to put up several hundred million dollars that could shore up JAL’s faltering financial state. Read More »

Posted on: November 11, 2009 – 6:08 am in Airlines, ,

China’s Artificial Recovery

chinaChina’s industrial production was up more than 16% in October. Retail sales were up by about the same percentage, oddly enough. No one was shocked that exports fell a sharp 13.8%.

The Chinese recovery is no recovery at all. It is the product of a $585 billion stimulus package for a nation that has a GDP of $4.4 trillion. The US stimulus program, by way of contrast, is $787 billion against a $14. 3 trillion GDP. The totalitarian communist central government can push its investment in the economy quickly. The American democratic system is burdened more substantially with red tape. Read More »

Posted on: November 11, 2009 – 5:55 am in China, Economy, Editor's Picks

Apple (AAPL) Moves To Conquer Its Next Frontier

appleThe Holy Grail of consumer electronics is still a smashing success in the video game industry. Tens and tens of millions of Sony (NYSE:SNE) PS2s and PS3s were sold over the last decade. Microsoft (NASDAQ:MSFT) has turned its game console business into a real success. Nintendo has become the darling of the Japanese consumer electronics market because of huge sales of its portable DS and Wii consoles.

Apple (NASDAQ:AAPL) has done remarkably well in the computer, handset, and multimedia player sectors of electronics, but its has little or no place in the gaming industry. Read More »

Posted on: November 11, 2009 – 5:41 am in Video Games, ,

The New Economy: Up 3% From Nothing

hersheyThe CEO of American Express (NYSE:AXP) Kenneth Chenault said that credit card spending by his customer was up 3% in October compared to September and up 1% from October of last year. That is barely a rounding error. Amex shares rose on the news.

Fedex (NYSE:FDX) said it expects shipping traffic to move up during the holidays. One executive at the company said, “The levels of expectation are a bit higher.” But, that is only a bit Read More »

Posted on: November 11, 2009 – 5:24 am in Economy, Editor's Picks, , ,

NBCU CEO Will Stay On As Will Problems

carNBCU CEO Jeff Zucker was well-educated at Harvard. He is well liked by his managers at GE (NYSE:GE). He is well-regarded within the entertainment history. And, NBCU has done almost nothing to distinguish itself within its industry while he has been at its head.

Sources have told Reuters that Zucker will keep his job when Comcast (NASDAQ:CMCSA) buys a majority interest in NBCU from GE. That means that the “tone at the top” will change very little and makes it a further mystery of why Comcast wants NBCU at all. Read More »

Posted on: November 11, 2009 – 5:01 am in Entertainment, ,

Dodd’s Follies: The Most Complex Financial Regulatory System In The World

bankSenator Christopher Dodd put out his draft bill which calls for the most significant overhaul in government financial regulation is over a century. The “Restoring American Financial Stability” document has 1,136 pages, but one of the first major statements in the bill should make the balance of the proposal academic. The new legislation, among other things, means to “Enforce Regulations On The Books.” Those who drafted the bill describe this as allowing “regulators to aggressively pursue financial fraud, conflicts of interest and manipulation of the system that benefit special interests at the expense of American families and businesses.” Read More »

Posted on: November 11, 2009 – 4:48 am in Banking, Regulation