Allergan Inc. (NYSE: AGN) Raised to Buy at Lazard.
Calpine Corp. (NYSE: CPN) Raised to Buy at Jefferies.
Capital One (NYSE: COF) Cut to Neutral at Goldman Sachs.
Dish Network (NASDAQ: DISH) Raised to Buy at Collins Stewart.
Nordsrom (NYSE: JWN) Raised to Positive at S&P.
Mosaic Co. (NYSE: MOS) Started as Hold at Deutsche Bank.
Myriad Genetics (NASDAQ: MYGN) Started as Sell at Auriga.
Potash Corp. (NYSE: POT) Started as Hold at Deutsche Bank.
Tivo Inc. (NASDAQ: TIVO) Raised to Overweight at JPMorgan.
Wendy’s/Arby’s (NYSE: WEN) Cut to Neutral at Goldman Sachs.

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JON C. OGG

Here is what the news is doing to the sector today:

• Potash Corp. of Saskatchewan, Inc. (POT) is down 5% at $104.00 on over 10 million shares, 52-week trading range is $63.65 to $126.47.
• Mosaic Co. (NYSE: MOS) is down almost 5% at $55.16, 52-week trading range is $34.20 to $68.28.
• Agrium Inc. (NYSE: AGU) is down 4% at 457.22, 52-week trading range is $29.59 to $71.11.
• Market Vectors Agribusiness ETF (NYSE: MOO) is down 2.6% at $41.48, 52-week trading range is $24.14 to $47.90.

Here is the big issue for Potash Corp. and for its competitors… pricing.  There has been international dumping at what seems to be under market prices (sometimes well under) and it has affected real prices.  Contracts in India and China have come in far under what was modeled each time this occurs.  It seems that investors and economists got used to the notion that the old commodity bubble days were here to stay or that they would return immediately once the economy got off the ground.

When commodities were off the chart into record territory in 2007 to 2008, potash traded close to and sometimes through $1,000/ton.  Prices have been closer $350 to $400 depending upon location and terms, but it needs to be recalled that this compares to what used to be closer to $150/ton.  We do not expect that any industry executive will call for those low prices again, but a return to supply side pricing demand seems no closer than last month or a quarter ago.

CEO Bill Doyle has talked up how demand has been deferred on a short-term basis.  How many times can companies in this sector keep saying “it is close, not yet, but close…” and have investors believe it?  It is also understandable how investors can keep trying to discount the news of today for the implications of six to twelve months out.  But the guidance today seems as though there is not any strong demand or at least strong demand coupled with any pricing power for the entire 2010 planting and growing seasons.  I am the first to admit that ultimately farmers have to order more potash and fertilizer products, but the reality is that they can skimp and they can order lower quantities for potentially years before they risk drying out all the nutrients and minerals in the soil.

If we take the highest figure offered by the company, which is optimistic considering that Potash keeps ratcheting down estimates, this stock trades at more than 20-times forward earnings.  The only reason you see this now is because of the old price bubble and the wild card bet that China and India will suddenly bubble up all over again at the same time as the rest of the world and pay whatever prices the giant potash and fertilizer companies want to charge.  No value investors are poking around today unless they are falling for the trick bubble prices of $200 per share for Potash Corp. were fair prices for a continued period of time.

Whatever the new normal is, it is either going to take serious firming of a real prices or a hint of a rapid return to the ‘Chindia Food-Boom’ for 20-times forward earnings to be a fair price.   Either that, or the public has to start investing for a 2011 to 2012 blended earnings blindly.  With the risks in the market and with the forward multiples investors have to pay today for shares, does that seem fair?  Even if ‘fair’ has nothing to do with it, these stocks need to come in further before many investors will be willing to take a poke….

At some point investors will need to see a real hint of a turn rather than having to pay up and up for a promise of a turn in demand.  Brokerage firm analysts have talked these stocks up and up each time the shares go on sale.  Today does not give that feeling, at least not as much.

JON C. OGG

Chattem Inc. (NASDAQ: CHTT) is the biggest gainer on its buyout.

Bristol-Myers Squibb (NYSE: BMY) is likely to see a return to normal volume now that the DEC-2009 options have expired and now that the spin-off and index rebalance trades took place.

Potash Corp. (NYSE: POT) and Mosaic Co. (NYSE: MOS) are both higher after last week’s weakness after Goldman Sachs raised the ratings this morning.  We are watching the Market Vectors Agribusiness ETF (NYSE: MOO) on this as well.

Palm Inc. (NASDAQ: PALM) is up about 1% after an analyst defended it with a valuation-based upgrade.

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JON C. OGG

Had the company taken its regular dividend up to say 1%, it might have been better received.  The issue is that fertilizer companies have not been the biggest dividend stocks out there.  And now that the market death spiral seems over, it seems that many investors might not even be excited over a 1% dividend.

While the company believes that it leaves more than enough operating capital for 2010, this may signal that the $22+ billion market cap fertilizer and potash player is not going to make any big acquisitions.  Anyhow, we do not bash companies for returning cash to shareholders.  It just seems as though the reaction here may be a “thanks for nothing” from its investor base.  Of course, the US stock market and the appreciation of the US Dollar was part of the reason for today’s sell-off.

Mosaic closed down 3.7% at $49.88 and its 52-week trading range is $21.94 to $131.50.  The Market Vectors Agribusiness ETF (NYSE: MOO), where Mosaic accounts for almost 7% of the weighting of the ETF, closed down ‘only’ 1.4% at $40.14 today.

Jon C. Ogg

Adobe Systems (NASDAQ: ADBE) Raised to Outperform at RW Baird.
Broadcom (NASDAQ: BRCM) Cut to Neutral at RW Baird.
eBay (NASDAQ: EBAY) Raised to Buy at Kaufman Bros.
Goldman Sachs (NYSE: GS) Started as Buy at Deutsche Bank.
L-3 Communications (NYSE: LLL) Cut to Conviction Sell List from Neutral at Goldman Sachs.
Morgan Stanley (NYSE: MS) Started as Buy at Deutsche Bank.
Monster Worldwide (NYSE: MWW) Raised to Overweight at JPMorgan.
Mosaic (NYSE: MOS) Started as Outperform at RBC.
Rackspace (NYSE: RAX) Raised to Buy at Goldman Sachs.
Wells Fargo (NYSE: WFC) Started as Sell at UBS.

This top ten includes only some of the top financial sector analyst calls we saw this morning, where many “SELL” ratings were handed out.  You can join our open email distribution list to get updates each morning on analyst upgrades and downgrades, top day trader alerts, IPO’s and secondary offerings, Warren Buffett and other guru activity, M&A and more.

Jon C. Ogg
October 8, 2009

As far as guidance, sales volumes for the Phosphates segment are expected to range from 1.8 to 2.2 million tons for the second quarter of fiscal 2010, while realized DAP price, FOB plant, for the Q2-2010 period should be $265 to $305 per tonne.  The company is not offering any financial guidance in the potash sales until market conditions normalize.

Mosaic said that phosphate sales volumes in the first quarter were comparable to levels a year ago, but noted that the decline in potash sales volumes and selling prices continues to be related to cautious purchasing by customers.

The phosphates segment sales were down to $814.4 million from $2.6 billion a year ago.  Phosphates sales volumes were comparable with a year ago at 2.1 million tonnes but average prices were sharply lower.

Potash segment sales came to $333.3 million for the first quarter from $976.4 million a year ago on a sharp decline in sales volumes, the effects of significantly lower operating rates on fixed cost absorption and a decrease in the average prices.  Mosaic said that it continues to operate at lower production rates and will do so until demand improves.

Its offshore segment sales were down to $468.1 million from $1.0 billion a year ago due to lower selling prices.  Mosaic ended the first quarter with $2.6 billion in cash and cash equivalents, while cash flow from operating activities was $172.4 million (down from $561.5 million a year ago) due to lower net earnings and significant working capital changes. The company said that it cut its debt to about $1.4 billion from $1.5 billion a year ago.

While it tries to offer high hopes ahead, the company noted that farmers have reduced crop nutrient applications globally this season and are drawing down the nutrient levels banked in their soils, but that farmers are likely to boost application rates “in response to high 2010 new crop prices and the need to replenish the large amount of nutrients withdrawn by the record crop this year.”

The good news here is that the after-hours reaction was less harsh than it could have been.  We saw a near-0.5% drop today to $45.96, and shares are trading down only 0.6% at $45.65 in the after-hours session.  With all of the lowered guidance in the sector, it seems this was priced in even if it is under a very low-set bar.

What remains is the notion of a continued global expansion or the notion of a double-dip recession.  The recovery is barely under way and we have seen many calls for the market to roll over again. Despite poor performances compared to the boom, the valuations here when you back out cash seem fair.  But that also takes into consideration a normalization of earnings rather than a resumption of a global decline.

JON C. OGG

Cablevision Systems Corporation (NYSE: CVC) is worth 20% more on its own after the spin-off of Madison Square Gardens in a report, according to Barron’s this weekend.  Based on the way the market was at the close of the week, we’d give this a 3% premium open on a static basis on Friday, and over 4% if the markets are indicated higher.  The article listed a consolidated value of close to $28.00, and remember… even though the premium could not be justified today or in any real world dollars now, this was on old $36 Dolan buyout attempt that got blocked.

CIT Group, Inc. (NYSE: CIT) is up against the ropes and the situation could come to a head this week as most feel it near implosion and as creditors are already making even more fresh moves against CIT.  It traded above Thursday’s lows all of Friday despite the weekend fears.  We would note that a search of options trading showed that the OCT-2009 $1.00 PUTS were the most active with more than 72,000 contracts trading hands.  This continues to be a top day trader alert stock and we feel that a definitive outcome of its future is going to become a demand here sooner than later.  This could be the crucial week for CIT’s future as a stock under the “CIT” ticker.

Local.com Corp. (NASDAQ: LOCM) just went on the radar last week for takeovers in Internet-Land.  The problem is that a press release claiming that Microsoft was buying it was a hoax.  But… we listed this one in recent months as one Internet engine that is growing and focuses in that ‘go-local’ space where so many larger engines have just failed to get entrenched.  The company has an interesting advertising platform based around this as well, and the company would be a solid bolt-on deal with only an $83 million market cap after last week’s 20%+ gain.

Radvision Ltd. (NASDAQ: RVSN) lost roughly one-third of its value last week.  Cisco is its top customer with roughly 40% of its attributed revenues, and Cisco’s acquisition of Tandberg could effectively leave Radvision sniffing glue. We saw at least four firms downgrade the stock last week: Cantor Fitzgerald, RBC Capital Markets, Morgan Keegan, and Oscar Gruss. The Israel-based firm said last week: “RADVISION is in the process of assessing the effect of this proposed transaction on its business over the short and long term and any opportunities it may create.”  In short, it is scrambling as Cisco is its largest customer and RADVISION’s IP is in a range of Cisco’s videoconferencing solutions.  This week will be key to see how traders treat this considering that it closed under its open on both Thursday and Friday but still closed Friday above the intra-day lows of both Thursday and Friday.

The Mosaic Company (NYSE: MOS) is actually set to report earnings on Monday after the closing bell.  Estimates from First Call are $0.35 EPS on $1.54 billion.  The bar is set very low here.  Only three months ago, this one was expected to earn close to $1.00 EPS and only 2 months ago it was expected to post almost $0.50 EPS.  Top fertilizer and agriculture players keep lowering guidance, and over 100% from the late-2008 lows it is still one-third of its price during the Summer-2008 peak agriculture days.

Wells Fargo & Company (NYSE: WFC), Warren Buffett’s biggest bank bet, appears to have pre-earnings season PUT OPTION buying heading into the stock.  On Friday alone in the October-2009 PUTS, there were 89,835 contracts traded of the $24 PUTS versus an open interest of 125,676 contracts and there were 115,055 contracts traded of the $27 PUTS versus an open interest of 102,018 contracts.  The stock has been peaking at the $28+ level, so we would attribute this to downside protection rather than anything sinister.

Yum! Brands, Inc. (NYSE: YUM) is expected to post $0.58 EPS on $2.8 billion in revenues on Tuesday according to Thomson Reuters estimates.  Estimates have come down over the last quarter and its stock has not participated in the rally despite a dividend boost and share repurchase authorization.  As the recession is ending or getting less and less bad, the interest in the fast food sector and casual dining just has not been there in the last quarter.  That being said, we’ll consider using Yum! as a proxy stock to see how traders and investors treat it for the pre-reporting analysis of the sector rather than make any bold decision ahead of time.

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JON C. OGG
October 4, 2009

Delta Petroleum Corporation (NASDAQ: DPTR) is getting whacked and battered today on poor well results.  It was a very bad weekend as shares are down 35%.

Amgen Inc. (NASDAQ: AMGN) is up over 2% and actually close to 52-week highs on positive study data.

Perot Systems Corp. (NYSE: PER) is up huge by 65% or more, but traders are selling as this is a huge premium and above what many would have expected.  Dell Inc. (NASDAQ: DELL) is going to be accused of overpaying.

Lennar Corp. (NYSE: LEN) is down 4% on somewhat active volume after posting wider losses.

Potash Corp. of Saskatchewan (NYSE: POT) is down almost 5% and not as much as it could have been… Lower guidance is hurting shares, look at Mosaic Co. (NYSE: MOS) on this one as well.

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JON C. OGG

Ariad Pharmaceuticals Inc. (NASDAQ: ARIA) is one of the top gainers, up 15%… on positive study data.

Delta Petroleum Corporation (NASDAQ: DPTR) is down almost 8% and should be an active stock like it was last week.

E*Trade Financial Corporation (NASDAQ: ETFC) is up over 5% on an Citi call to “Buy” shares.

First Solar, Inc. (NASDAQ: FSLR) is down over 3% on an analyst cut to Sell.

The Mosaic Company (NYSE: MOS) and Potash Corp. of Saskatchewan (NYSE: POT) are both getting clipped on a key analyst downgrade this morning.

Salix Pharmaceuticals Ltd. (NASDAQ: SLXP) is the biggest gainer this morning with a 50% gain on its key IBS study results.

Sprint Nextel Corp. (NYSE: S) is rallying over 20% on word of a Deutsche Telekom (NYSE: DT) bid coming.  Here wwe noticed the stock is close to resistance, assuming the normal trading takes over after the jump up.

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JON C. OGG
SEPTEMBER 11, 2009

JON C. OGG