It appears that after today that Bristol-Myers Squibb is finally going to drop off the radar of the most active contracts and open interest in options trading.  So far we have yet to see the trades roll out further on the calendar in 2010 to January, March, or June.

Bristol-Myers has seemed to be one of the routine largest open interest series out there.  The open interest that we reviewed last weekend for the DEC09 $30 CALLS was 633,140 contracts and the DEC09 $30 PUTS was 617,642 contracts.  This has gone opposite of what we expected too.  Rather than that open interest dwindling off, it has grown and was listed at 897,520 contracts in the DEC-2009 $30 CALLS and 908,246 of the DEC-2009 $30 PUTS.   On Thursday there were 95,050 contracts of the CALLS and 106,101 contracts of the PUTS.

Mead Johnson options have been active as well.  The DEC-2009 $50 CALLS traded 23,634 contracts on Thursday versus an open interest of 94,131 contracts.  The DEC-2009 $50 PUTS traded 25,571 contracts on Thursday versus an open interest of 94,256 contracts in the open interest.  The Mead Johnson shares traded over 15 million shares on Thursday versus an average volume of over 2.1 million shares, and that $41.96 share price compares to a 52-week range (less than a year actually) of $25.72 to $50.35.  Mead Johnson has also averaged over 10 million shares this week each day.

This would look like a straddle on a static basis in Bristol-Myers outside of this spin-off and index weighting change.  That 60 million shares on a fully leveraged basis last weekend (from the Bristol-Myers open interest) looks like 90 million shares worth of options volume on a fully-leveraged basis today.  Bristol-Myers traded 33.7 million shares on last Friday, yet Thursday’s trading volume was over 50 million shares and that has seen over 50 million shares on average each day this week.  In September and October this traded closer to 10 million shares.

The new 52-week trading range is $17.23 to $26.17, after the prior 52-week high of $25.97 was violated this week.  They say that active options trading generally makes stocks gravitate toward their closest most active options strike price as expiration gets closer and closer.  If so, Friday’s trading on options expiration date should have an interesting swing to it.

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JON C. OGG

AOL Inc. (NYSE: AOL) Started as Underperform at Credit Suisse.
ARM Holdings (NASDAQ: ARMH) Started as Buy at Deutsche Bank.
ExxonMobil (NYSE: XOM) Raised to Buy at Societe Generale.
Finisar (NASDAQ: FNSR) Raised to Overweight at Piper Jaffray.
Mead Johnson Nutrition (NYSE: MJN) Raised to Outperform at Credit Suisse.
Palm, Inc. (NASDAQ: PALM) Raised to Hold from Sell at Jesup & Lamont.
PMC-Sierra (NASDAQ: PMCS) Cut to Equal Weight at BArclays.
RadioShack (NYSE: RSH) Raised to Overweight at Barclays.
Sterling Bancshares (NASDAQ: SBIB) Raised to Outperform at Oppenheimer.
Visa Inc. (NYSE: V) Raised to Outperform at Baird.

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JON C. OGG

We have compiled detailed data on each company.  For earnings we have offered Thomson Reuters estimates, trend and valuation analysis, as well as other key color on what to watch out for.  On the other event-driven situations, we have offered color on each and assigned a handicapping for what the stocks are likely to do on Monday or at the event.

Adobe Systems Inc. (NASDAQ: ADBE) is reporting earnings on Tuesday after the close and Thomson Reuters estimates are $0.37 EPS and $752.54 million in revenues. This will also be its fiscal year-end with estimates at $1.52 EPS and $2.94 billion in revenues. At $35.38. it is close to 52-week highs versus a range of $15.70 to $37.15.  That gives trailing estimates ratios of 23.2-times earnings and about 6.2-times revenues. There are a few things to consider here which are both wild cards.  The $1.8 billion Omniture buyout closed during the quarter and Adobe said it was laying off 9% of its workforce on top of Omniture cuts.  It last reiterated guidance on October 7: The Company’s Q4 target ranges are the following: revenue of $690 to $740 million and $0.33 to $0.39 non-GAAP EPS.  As analysts are sometimes awful at accounting for mergers in earnings and revenue projections, we are keeping a light watch on this one.

Amazon.com, Inc. (NASDAQ: AMZN) took an old Alan Abelson-esque hit from Barron’s this weekend, although it was written by Andrew Bary instead.  The company is praised, but Barron’s addresses the exact same thing I addressed before over too lofty of valuations.  Barron’s wrote the story “Amazon’s Daunting Challenge” and said “the online retailer deserves Wall Street’s admiration, but its stock is way too rich. Even under the best scenario, the shares could tumble.”  Unless an analyst upgrades or pounds the table or we have a runaway bull market on Monday’s global markets, this stock will probably be opening lower by more than 1%. At $134.15, shares are already down more than $10 from recent all-time highs versus a 52-week range of $47.52 to $145.90.

AXA (NYSE: AXA) is almost hard to love as it is a French insurance giant.  Barron’s gave it the cover story this weekend and called it “Très Bien!” noting that the company is ready to grab market share from its rivals.  Average volume is rather small for its size because of the ADR status at $22.92 its 52-week trading range is $7.20 to $29.50.  We’ll handicap a $23.75 opening price here, but the ADR status and the low volume may keep investors from chasing this one up too much.  Keep in mind that I significantly under-handicapped the gain when Sprint Nextel was given a huge boost from Barron’s, so it may be too conservative of a call here on my part.

Best Buy Co. Inc. (NYSE: BBY) reports earnings on Tuesday morning.  If there is one single retailer that technology and consumer electronics will try to use for a benchmark of sales for makers of MP3 players, PCs, printers, LCD TVs, computers, video games and more, it is Best Buy.  At $44.34, the stock is pennies shy of a year high versus a 52-week range of $22.92 to $44.50.  The thing to consider is that the earnings estimates of $0.43 EPS and $11.98 billion in revenues are almost immaterial.  The only thing anyone cares about is the current quarter we are in now for retailers as the Holy Grail quarter.  Those estimates from Thomson Reuters are $1.73 EPS and $15.51 billion in revenues and the FEB-2010 fiscal estimates are $2.95 EPS and $48.59 billion in revenues.  That gives the stock a P/E of 15 for the current year if it is just met.

Bristol-Myers Squibb Co. (NYSE: BMY) is apparently going to FINALLY drop off the radar of the most active in options trading.  It seems forever that Bristol-Myers has been one of the most active options series for what may be nothing.  This coming Friday will either mark the end of that or the trades will have to roll out further on the calendar.  Friday is quadruple witching date for options traders.  And Bristol-Myers has long been one of the largest open interest series out there.  The open interest for the DEC09 $30 CALLS is 633,140 contracts and the DEC09 $30 PUTS is 617,642 contracts.  Without knowing who or why the trades were put on, on a static basis that effectively represents a straddle trade bet on the price move of over 60 million shares on a fully leveraged basis.  Bristol-Myers traded 33.7 million shares on Friday when trading was light in many issues for a 1% gain to $25.80 versus a 52-week trading range of $17.23 to $25.97 (high was hit Friday too).  There is likely going to be significant options-related trading this week as this position gets cleaned up, assuming the owner(s) do not just let the options expire.  Bristol-Myers Squibb (NYSE: BMY) is splitting off its approximately 83% holdings in Mead Johnson Nutrition Company (NYSE: MJN) and that is probably tied to this event for an index change.

Nike Inc. (NYSE: NKE) is on deck with earnings Thursday as well.  At $63.86, the stock is close to a 52-week high as the range has been $38.24 to $66.35.  Thomson Reuters has estimates of $0.71 EPS and $4.39 billion in revenues, and we may get to hear about what the company will do as far as backing Tiger Woods now that Woods is out of golf until he mends his personal problems.  With so much of Nike sales now outside the U.S., we’ll get to see what a weak dollar before the latest pile into the US Dollar did for the company.  Don’t hold your breath on this happening, but maybe the company will change some slogans to “Just Did It!” or “Just Tap It!”…

Oracle Corp. (NASDAQ: ORCL) is going to be one of the big tech earnings this week.  At $22.78, the stock is almost at a 52-week high with its annual range of $13.80 to $23.00.  What is surprising is that options trading has been somewhat light on the name, and that expiration is on Friday.  Thomson Reuters has estimates at $0.36 EPS and $5.68 billion in revenues.  Its fiscal May-2010 estimates are $1.53 EPS and $23.66 billion, giving this one multiples of 14.9-times earnings and 4.8-times revenues.  The issue of the Sun Microsystems Inc. (NASDAQ: ORCL) has started to become more of a liability, so we’ll probably hear some more data on where that stands.

OSI Pharmaceuticals Inc. (NASDAQ: OSIP) already had its analyst meeting on December 3.  This is one we had marked as December 16 with an FDA advisory committee meeting for Tarceva as a first-line maintenance therapy treatment against non-small cell lung cancer.  OSI says, “Tarceva is the only oral, non-chemotherapy agent shown to provide a statistically significant improvement in both progression-free survival and overall survival in the NSCLC maintenance setting.”  At $34.75, its 52-week trading range is $27.01 to $43.00.  If we use the 4 closest strike prices on put and calls combined, there is only just over 5,000 contracts in the open interest, so it seems that binary event traders in biotech are not giving this much of a grade one way or the other.

PowerShares DB US Dollar Index Bullish (NYSE: UUP) is a very odd pick to watch among our traditional unusual suspects.  Before you accuse me of cheating or looking for filler, hear me out on exactly why an ETF is fair game.  For starters, this is one of the most easy and simple ways for an investor to bet on the recovery of the US Dollar.  We may be entering a new inflation age, but it would be extremely rare for the US Dollar to decline indefinitely.  When global investors see Dubai, Greece, Ireland, and Spain all in trouble, it could end up being the saving grace.  But you don’t even need our word on this when you have the market action telling you something.  The UUP traded over 15.1 million shares, almost 4-times normal volume and the highest volume in shares seen EVER since its March-2007 launch, and it rose 0.8% to $22.68 versus a 52-week trading range of $22.02 to $26.83.  The real kicker is the options trading as Friday had 342,682 contracts trade of the MAR10 $23.00 CALLS versus an open interest of 105,007.  That represents a 34 million share bet on a fully leveraged basis.  The Dollar-Trade was one of the most crowded on the way down, and it will be one of the most crowded on the way back up if that occurs.  Whenever you see long-term currency bets pop up like this, you usually end up with a confused rush in and out and many  uncomfortable investors.  As a day trader friend of mine named Ike called trading for gains and investing with disbelief during the tech bubble of 1999 and 2000 because of the inflows and herd chasing and chasing… PIPO: panic in, panic out!

Research-in-Motion Ltd. (NASDAQ: RIMM) is on deck with earnings this coming Thursday after the close.  We would watch the DEC09 PUT and CALL option activity on Wednesday and Thursday because options expire on Friday and it is almost certain that traders will be making volatility trades to see if R-I-M will pull another 20% up or down reaction.  Unlike other key tech stocks, this $63.84 close on Friday is not at all close to any key tops or bottoms with a 52-week range of $35.05 to $88.08.  But… here is where this gets interesting…. The averages will change slightly by Thursday, but the 50-day moving average is $62.79 and the 200-day moving average is $67.14.  Even with a near 3% drop Friday, R-I-M is up from $58.00 in just over a week and the stock is now crammed right between the two averages.  In short, you could see a major move based upon what R-I-M delivers.  Thomson Reuters has estimates of $1.04 EPS and $3.79 billion for the November quarter.  The fiscal year-end is next quarter, and those estimates are $4.15 EPS and $14.86 billion and that in turn gives implied ratios of 15.3-times earnings.

Visa, Inc. (NYSE: V) is the biggest one to watch this week as an S&P 500 Index addition. Its market cap varies from every source: $63.28 billion at Yahoo! Finance,  Google Finance is $68.65 billion, and Bloomberg is at $60.4 billion; but either way you will have millions of shares which get purchased this week ahead of the addition and particularly on Friday toward the closing bell.  That also coincides with the options expiration date.  Shares rose 3.3% to $84.10 in the after-hours session on Friday evening after S&P made its huge index change announcement after closing down 1.2% at $81.34 versus a 52-week trading range of $41.78 to $83.40.   We would expect a move of 5% or even more in total based upon the market cap.  Visa trades almost 5.5 million shares a day and the stock only traded 64,000 shares in the after-hours session.

Wells Fargo & Co. (NYSE: WFC)…. Will it or won’t it?  That is the question we’ll again be hanging for whether or not the bank will try to get Uncle Sam out of its executive suites by repaying the TARP.  A financial industry leader meeting Monday with the Obama administration may bring more light on the topic.

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Jon C. Ogg
December 13, 2009

Some of these changes will only have minor buy and sell effects from S&P index mutual funds and ETFs, but some will see significant changes.

Mead Johnson Nutrition Co. (NYSE: MJN) will replace MBIA Corp. (NYSE: MBI) in the S&P 500, after Bristol-Myers Squibb (NYSE:BMY) is splitting off its approximately 83% holdings in Mead Johnson Nutrition. MBIA currently ranks 500th in the index and is no longer representative of the S&P 500 index market cap space.  That is called the MBIA boot.

Visa Inc. (NYSE: V) will replace Ciena Corp. (NASDAQ: CIEN) in the S&P 500.  Ciena will move down an index rather than be booted entirely as it will replace Blyth Inc. (NYSE: BTH) in the S&P MidCap 400, and Blyth will replace C&D Technologies Inc. (NYSE: CHP) in the S&P SmallCap 600. C&D was the smallest component of the S&P SmallCap 600, and is now too small for even the small-cap index.

S&P MidCap 400 components Ross Stores Inc. (NASD:ROST), Cliffs Natural Resources Inc. (NYSE:CLF) and SAIC Inc. (NYSE:SAI) will move up an index to replace Dynegy Inc. (NYSE:DYN), KB Home Inc. (NYSE:KBH) and Convergys Corp. (NYSE:CVG) in the S&P 500 Index.   Dynegy, KB Home and Convergys will move down an index and will replace Ross Stores, Cliffs Natural Resources and SAIC in the S&P MidCap 400 index.

S&P SmallCap 600 components Senior Housing Properties Trust (NYSE: SNH), Green Mountain Coffee Roasters Inc. (NASDAD: GMCR) and Atwood Oceanics Inc. (NYSE: ATW) will move up an index to replace Dycom Industries Inc.(NYSE: DY), Kelly Services Inc. (NASDAQ: KELYA) and Callaway Golf Co. (NYSE: ELY) in the S&P MidCap 400.  Dycom, Kelly Services and Callaway Golf will move down an index rather than being eliminated and will replace Senior Housing Properties, Green Mountain Coffee Roasters and Atwood Oceanics in the S&P SmallCap 600 index.

As most of these are index moves, they tend to have less of a formal impact on the stocks.  The big move will be Visa, Inc. (NYSE: V), which will now get to finally join the S&P 500. Its market cap varies from every source: $63.28 billion at Yahoo! Finance, Google Finance is $68.65 billion, and Bloomberg is at $60.4 billion.  Shares rose over 3.3% in the after-hours session to $84.10 after closing down 1.2% at $81.34 versus a 52-week trading range of $41.78 to $83.40.  We will have to make some calculations on Monday, but this will represent a significant buy-in trade for funds that track the S&P500 that will have to buy million of Visa shares.

JON C. OGG

The price of Mead Johnson common stock is to be established by a formula subject to an upper limit of 0.6027 shares of Mead Johnson per share of Bristol-Myers Squibb. For each $1.00 of Bristol-Myers Squibb common stock accepted in the exchange offer, the tendering shareholder will receive about $1.11 of Mead Johnson common stock, subject to the upper limit on the exchange ratio.

The ratio of Bristol-Myers Squibb and Mead Johnson shares will be determined by a 10% discount to the simple arithmetic average of the daily volume-weighted average prices of shares of Bristol-Myers Squibb common stock and Mead Johnson common shares traded on the NYSE over a three-day period currently expected to be December 8, 9, and 10, 2009.  The largest possible number of shares of Bristol-Myers Squibb common stock that will be accepted will be equal to 170,000,000 divided by the final exchange ratio.

Bristol-Myers Squibb owns 170,000,000 shares of Mead Johnson class A and class B common stock, which comes to about 97.5% of the voting interest and 83.1% of the economic interest in Mead Johnson.

Mead Johnson shares are down 4.5% at $43.18 and Bristol-Myers Squibb shares are up 3.5% at $23.00 in pre-market trading.

JON C. OGG
November 16, 2009

Dr Pepper Snapple Group (NYSE: DPS) hit a yearly high of $28.58 as Citigroup gives the company a buy rating in anticipation of the declaration of a dividend or stock buy backs in 2010.

Mead Johnson Nutrition Company (NYSE: MJN) hit a yearly high of $43.68 as rumors of a takeover circulated.  The shares promptly dropped as the rumored purchaser, Danone SA, denied the reports.

Thor Industries (NYSE: THO) hit a yearly high of $30.64 as it reported that its 4Q profits had quadrupled.  

Valassis Communications (NYSE: VCI) hit a yearly high of $25.25, boosted by positive news coming out of Gannett.

Walgreen Company (NYSE: WAG) hit a yearly high of $37.53 after the company’s earnings beat analysts estimates.

Garrett W. McIntyre

Bridgepoint Education Inc. (NYSE: BPI) is being added to Russell 3000 and to the Russell Global.  DigitalGlobal Inc. (NYSE: DGI) is actually trading as a busted IPO and it is being added to Russell 3000 and to the Russell Global.  OpenTable (NASDAQ: OPEN) is being added to Russell 3000 and to the Russell Global.  Rosetta Stone Inc. (NYSE: RST) is being added to Russell 3000 and to the Russell Global.  RHI Entertainment (NASDAQ: RHIE) was a distant IPO but it is being added to Russell 3000 and to the Russell Global.  SolarWinds Inc. (NYSE: SWI) is a very fresh IPO and is being added to Russell 3000 and to the Russell Global.  There is also a list of other key IPOs which were not included for certain issues.

Changyou.com Limited (NASDAQ: CYOU) was not listed in the first preliminary list for the Russell 3000 but that could be from an ADR status, the percentage of the free float to total shares, and the recent spin-off.  Grand Canyon Education (NASDAQ: LOPE) was not listed on the preliminary list, and that may be a free float issue versus total shares.  Mead Johnson Nutrition Co. (NYSE: MJN) was also not on the Russell 3000 preliminary list, but that may be an issue over the total float and spin-off. RackSpace Hosting Inc. (NYSE: RAX) was not on the initial list.

As noted with the speculative energy stocks getting booted off the list, there will be changes and adjustments announced today and next Friday before the final-final lists are posted on Monday June 29, 2009.

Jon C. Ogg
June 19, 2009

• Changyou.com Limited (NASDAQ: CYOU) priced at $16.00 and hit $29.00 today.
• Rosetta Stone Inc. (NYSE: RST) priced at $18.00 and hit $23.80 today.
• Mead Johnson Nutrition Co. (NYSE: MJN) priced at $24.00 and hit    $28.80 today.
• DigitalGlobal Inc. (NYSE: DGI) just last week priced at $19.00 and hit $19.75 today.
• Bridgepoint Education Inc. (NYSE: BPI) is only busted IPO that priced at $10.50    and is trading at $10.29 today.

We tallied up a $10,000 investment in each of these at the pricing to derive what a portfolio would look like from the pricing.  This is only 5 stocks, but this is all we have to work with from 2009 IPOs.  So a $50,000 investment in all of the 2009 IPO’s would be worth $63,541.00 today (pennies rounded down).  That is a gain of 27% on average.

Obviously, it is not fair to say that this portfolio would have netted out secondary market investors the same as many trad up from the IPO pricing.  But this is what drives IPO investors in their decision making, and this may be what gets the investment bankers and private companies off the fence to start issuing more and more IPO’s if the market remains strong or stable.

JON C. OGG
May 18, 2009

Mead Johnson Nutrition Company (NYSE: MJN) was spun-off from Bristol-Myers (NYSE: BMY) and it priced a 30 million share offering at $24.00 while the market was in free-fall and this stock is still up close to 15% since the IPO in early February.  Again, this was a spin-off rather than a new private company coming public.

Grand Canyon Education Inc. (NASDAQ: LOPE) priced its 10.5 million share IPO at $12.00 in November.  That was the only IPO of late 2008.  Despite it being a venture-backed IPO where the backers were cashing out with very little going to the company, this one did very well because it is in online education.  We know how well that has done as a result of the recession.  Shares are at $16.68 today, a again of over 35% despite a monster market correction since the IPO.

A recent study from PricewaterhouseCoopers showed just how bad the IPO market has become.  On the prospects for a recovery of IPO’s in 2009, PWC expects that “the ‘thaw’ is expected to be slow, and significant IPO activity may not return until later in 2009.”

So here is our take.  All of these recent IPO’s have had issues that investors could argue are not necessarily “clean IPO’s” in the historic sense.  Yet they have all actually held up and risen from the IPO levels.  Can we bet that a flood of IPO’s will actually make it to market very quick?  That might be jumping the gun quite a bit.  But we’d expect a wave of new filings in the near-term and amended filings so that companies can come public rapidly if the markets are still strong and holding up into and after the summer.

So, who else is on deck in IPO-land?  Adult-oriented, i.e. ‘hooking-up, social networking site FriendFinder is still in the cue to hook-up for an IPO.  Another recent filing is from OpenTable, the online reservation system for restaurants.  Whether or not these make it to market is one thing, but we won’t be shocked at all if we start to see a wave of S-1 and F-1 filings in the SEC website.

JON C. OGG
April 2, 2009

Grand Canyon Education Inc. (NASDAQ: LOPE) priced its 10.5 million share IPO at $12.00 in November.  The price range for the IPO was lowered and it the original backers sold most of the shares.  This closed at $17.13 Thursday and rose another 10% after the company reported earnings.  It turns out that this one is in the economic sweet spot as it offers online graduate and undergraduate degree programs in education, business, and healthcare.

O’Gara Group Inc. has postponed its pending initial public stock offering indefinitely.  The maker of armored cars and military security systems was supposed to come public this month, but the market has not cooperated.  The original range of $17 to $19 for 8 million shares of stock was cut to $14 to $16, but now this one has been mothballed.

Changing World Technologies Inc., a producer of diesel fuel oil and fertilizers from organic waste, also postponed its IPO this month due to poor market conditions.

Other IPO’s which have been withdrawn this month are Third Wave Acquisition (SPAC, hotel?), Vitamin Shoppe (retail vitamins and health products), Big West Oil Partners, L.P. (independent refiner), TherOx (medical device), and Tensar (construction site solutions).

JON C. OGG
February 20, 2009