Christine Benz of Morningstar has a model portfolio, or a model portfolio makeover, for those who are close to retirement.  One such instance is a soon-to-be retiree who owns his house outright and with a personal goal for his investment portfolio to leave a legacy for his children rather than to fund near-term living expenses. 

This investor has far too much in cash (about 70% of assets) due to being nervous about the markets, there are CDs, and bonds.  Some funds held before the makeover are Vanguard Dividend Appreciation (VDAIX), the Vanguard Inflation Protected Securities (VAIPX) fund, a Vanguard Intermediate-Term Tax-Exempt (VWIUX) fund and the Vanguard Wellesley Income (VWIAX) fund. Needless to say, the income is extremely low.

Christine Benz argues that retiree portfolios with this goal in mind can have far more stock-heavy and longer-term asset portfolios if the day-to-day living expenses are not really an issue.  The portfolio maker still includes the funds mentioned above.  The difference is that the Vanguard Dividend Appreciation (VDAIX) fund is now more than 29% of the portfolio weighting versus only about 10% before. 

One fund which also added in to the portfolio is the Vanguard Total International Stock Index Admiral (VTIAX) fund, which invests in equity markets outside of the United States. 
Another addition is the Harbor Unconstrained Bond Fund (HAUBX), which invests in intermediate and longer-term bond issues, and it invests internationally and in junk bonds.

There is a key admission here that every investor has to consider with any large protfolio reallocation.  There is an understanding admission that both stocks and bonds are not cheap at the moment, so making shifts should be done over a long period of time rather than just all at once. 

More details on this portfolio makeover can be found here for Morningstar and there is also a coming event for a “Do Your Own Portfolio Makeover” as well.

JON C. OGG

We have compiled information on the catalyst for each stock, an outlook where applicable, added in color for traders where applicable and given specific news and background data on each situation.

Barnes & Noble, Inc. (NYSE: BKS) is turning into a nasty proxy fight as billionaire Ron Burkle is appealing a poison pill anti-takeover measure from the company as his 18.8% stake (second highest behind Riggio) as he is trying to install 3 directors next month.  Here is the obvious… Burkle needs to either cry uncle or he needs to go split a fifth of scotch after a round of golf with Riggio and they can work out a fair price.  Being an activist in a closely held company is not the smartest of targets, even for billionaires.  Friday’s CALL options trading was “off the charts.”

Brocade Communications Systems, Inc. (NASDAQ: BRCD) was one of this week’s “stocks that could double” that we prepared for InvestorPlace.com.  The current catalyst is the post-3PAR interest after HP beat out Dell as the companies fight for more unified offerings between networking and storage now that Cisco has declared war on that lineup of billions in revenues.  This highlights Brocade now that it has merged with Foundry and sets this up t be the low-cost provider or “the poor man’s Cisco” for Dell, HP, IBM, or a whole host of other companies that need to fend off the Cisco threat.  With a $2.5 billion market cap, its market cap is now only 25% more than 3PAR and it is expected to have about 9-times the equivalent revenues (almost $2.1 billion) for the year as a standalone player.  If the tech consolidation continues, this is a highly viable candidate for a buyer to compete against Cisco on price.  The company’s big problem is that on a standalone basis it just can’t stand up to much of the larger competition and that gives it very choppy results.

China Sky One Medical, Inc. (NASDAQ: CSKI) got crushed after lowering guidance due to: “Management’s reduced guidance reflects the termination of relationships with certain private distributors, who after several rounds of discussions, chose to end their cooperation with the Company after learning that their business information was disclosed in the Company’s public SEC filings and would continue to be disclosed in such documents as required by SEC regulations… has led to increased scrutiny of their financial performance by government authorities within China. “  The integrated Chinese pharma player lowered 2010 revenue guidance to $128 to $136 million versus a prior target of $160 to $164 million; lowered 2010 adjusted net income guidance to $26 to $31 million from $40 to $41 million.  China Sky One became China Die One as shares fell a sharp 27.76% to $7.00 in the after-hours session on a sharp 187,000 shares after the 4PM bell.  This marks a 52-week low under the prior range of $8.82 to $25.45. Ouch.

CIENA Corp. (NASDAQ: CIEN) is on deck for earnings on Wednesday morning.  The communications equipment and systems company is at $13.29 and the 52-week range is $10.53 to $19.48.  A portfolio manager just labeled it as a new technology providing long-term value for investors.  Thomson Reuters has estimates of -$0.33 EPS and $387.04 million in revenues.

First Niagara Financial Group Inc. (NASDAQ: FNFG) is something that just does not make sense at the current time.  The bank is acquiring New Alliance Bancshares Inc. (NYSE: NAL) and this will set it up to be the next potential super-regional bank.  Shares hit yet another 52-week low of $11.23 this last week before closing out the week at $11.80 versus a 52-week range of $11.23 to $14.88.  On a forward earnings basis, its multiples are neither dirt cheap nor excessive.  What is a mystery is that the Attorney General from Connecticut is probing this merger.  New Alliance trades at an implied discount to the 1.1 shares, but the arbitrage is harder to play because the merger may be stock or it could be cash and stock.  Our angle here is on First Niagra, as it has been a safer bank that does not have all of the same baggage as many of the other big boys.  Even with the concern of CT-state charters versus Federal charters, the AG probe just doesn’t make much real sense.

Genzyme Corporation (NASDAQ: GENZ) closed down 0.44% at $70.49 and is still above the $69.00 implied buyout price from Sanofi-Aventis (NYSE: SNY).  Reports from both Bloomberg and IBD indicate that CEO Henri Termeer may be close to capitulating and accepting a buyout.  Our guess is that Termeer is probably telling them, “Please just offer $1 or $2 more so we look good to our holders who are stuck in Genzyme at slightly higher prices.”  This saga may soon come to an end.  After all, Sanofi has bragged over and over that it has the cash.  It can afford another buck, or two, if it wants.

So, it is especially surprising that a senior Russian official is predicting that oil will fall again after advancing above $50 recently.

According to the AP, the nation’s finance minister Alexei Kudrin referring to oil prices said, “This is most likely to be a temporary improvement.”

Fortunately for Russia, he may be wrong. Although OPEC did not cut production at its last meeting, it said it would enforce production cuts already in place. That should keep the supply of crude stable.

The signal from the global stock markets is that the recession may be bottoming. There are a number of reasons that the assumption may not be true, but, if it is, demand for oil could begin to rise again as early as this summer. Crude futures should begin to reflect that now.

China, which is one of the largest oil consuming nations, says that its GDP will rise 8% this year. Data on its exports would seem to undermine that notion, but the communist central government is spending over $500 billion to increase the nation’s demand for goods and services. If China’s rapid economic growth does continue, its appetite for oil could actually pick up.

Russia may do better than its finance minister thinks.

Douglas A. McIntyre

We kept hearing about this woman named Karen Weaver, a top Wall Street analyst, who correctly sounded the alarm three years ago about the subprime mortgage crisis that has shaken the global economy (PDF) to its core. If only Wall Street and the banking industry had listened.

Today, Weaver is a Managing Director and the Global Head of Securitization Research, responsible for Deutsche Bank’s research on securitized fixed-income products. She also manages Deutsche Bank Research-Americas, which has 300 professionals covering economics, debt and equity markets. Weaver joined Deutsche Bank from Credit Suisse First Boston in 2000. Prior to joining CSFB, she was a portfolio manager active in the ABS and MBS markets.

We asked Weaver — who everybody listens to now — for her thoughts on the economy and the future:

The interview continues here.

• Barrier Therapeutics (NASDAQ: BTRX) ran way up after first quarter results reported yesterday showed a 207% increase in revenues from last year at $8.4 million, driven by growth in sales of Vusion and Xolegel. Shares closed up 18% at $2.29 on a 52-week range of $1.90 to $7.60.
• BioMarin Pharmaceutical Inc. (NASDAQ: BMRN) showed a first quarter positive profit or $0.02 EPS on a net income of $1.7 million. Analysts expected losses of $0.05 EPS. Earnings were driven primarily by sales of enzyme replacement therapy Naglazyme. Shares closed up almost 8% at $36.46. The 52-week range is $15.99 to $41.00.
• Discovery Labs (NASDAQ: DSCO) trading up in anticipation of FDA approval for lung surfactant, Surfaxin, a treatment for premature infants suffering from respiratory distress. The company communicated confidence that any regulatory concerns have been ironed out and this third FDA result will be positive. Shares rose 17% to $2.87. The 52-week range is $1.75 to $3.75.
• Endo Pharmaceuticals (NASDAQ: ENDP) settled a proxy battle with shareholder D.E. Shaw by nominating William Spangler to the board. They posted earnings today showing a net income of $59.53 and $0.44 EPS. Shares closed down 0.7% at $24.83. The 52-week range is $22.62 to $35.85.
• Mannkind Corporation (NASDAQ: MNKD) up over 16% in anticipation of earnings release Monday. Shares up $0.37 at $2.60 at the close. The 52-week range is $1.86 to $14.71.
• Molecular Insight Pharma (NASDAQ: MIPI) up almost 7% today on no news, although some just may be the thin volume and wide bid/ask spread. The oncology molecular imaging pharmaceutical company is sitting at $7.83 on a 52-week range of $5.66 to $12.95.
• Questcor (AMEX: QSC) down despite posting strong first quarter results showing a positive net income of $6.5 million compared to a loss of $3.8 in first quarter 2007. The company also amended agreement Acthar distribution discount prices, positively impacting Questcor cash flows. Shares closed down 2.5% at $4.24. The 52-week range is $0.21 to $6.60.
• Techne Corp. (NASDAQ: TECH) up after third quarter profit jumped 24% to $29.6 million or $0.76 EPS, beating estimates. Shares closed at $72.52, up 1%, on a 52-week range of $54.49 to $72.00.

Rachel Lopez
April 30, 2008