Allstate Corporation (NYSE: ALL) Started as Outperform at Credit Suisse.
Amazon.com Inc. (NASDAQ: AMZN) Started as Hold with $225.00 price target “due to low margins through 2012″ at Canaccord Genuity.
The Blackstone Group LP (NYSE: BX) Raised to Buy with $20.00 price target at Argus.
CenturyLink, Inc. (NYSE: CTL) named as value stock of the day at Zacks.
Chubb Corporation (NYSE: CB) Started as Outperform at Credit Suisse.
Darden Restaurants Inc. (NYSE: DRI) Cut to Hold from Buy at Argus.
Freescale Semiconductor Inc. (NYSE: FSL) Reinstated as Outperform at Credit Suisse.
GeoResources, Inc. (NASDAQ: GEOI) Started as Buy with $43 price target “on a concentrated Eagle Ford/Bakken exposure” by Canaccord Genuity.
Google Inc. (NASDAQ: GOOG) was initiated with a ‘Buy’ rating and $725.00 price target “on robust growth and great value” by Canaccord Genuity.
JDS Uniphase Corporation (NASDAQ: JDSU) Started in new coverage as Buy with a $14.75 price target at Jefferies.
LinkedIn Corporation (NYSE: LNKD) Started as Buy with $85 price target as “growth trumps valuation” by Canaccord Genuity.
Peabody Energy Corporation (NYSE: BTU) Downgraded to Neutral from Buy with $43 price target by Goldman Sachs.
Public Service Enterprise Group Inc. (NYSE: PEG) Downgraded to Neutral from Buy with $33 price target at Goldman Sachs.
Quest Diagnostics Inc. (NYSE: DGX) Started as Hold with $51 target at Auriga.
The Talbots, Inc. (NYSE: TLB) maintained Neutral with $3.00 fair value by Janney Capital Markets.
Travelers Cos. Inc. (NYSE: TRV) Started as Outperform at Credit Suisse.
Unisys Corporation (NYSE: UIS) Raised to Outperform as Bull of the Day at Zacks.
UnitedHealth Group Inc. (NYSE: UNH) added to the US Focus List at Credit Suisse.
Urban Outfitters, Inc. (NASDAQ: URBN) Maintained Neutral with $23.00 price target at Janney Capital Markets.
Willis Group Holdings, PLC (NYSE: WSH) named Bear of the Day at Zacks.

Your email address

subscribe

terms and conditions

Question: What is your investment process and how do you derive value today?

Our process seeks to uncover value stocks in virtually any market, including the volatile markets of today. The process includes three steps:

• 1. Screen for financially sound large cap companies with rising revenues, rising earnings, low debt to equity, favorable price to earnings, and favorable price to book ratios.
• 2. From that group, select only dividend paying stocks.
• 3. Add a covered call strategy on all stocks in the portfolio, to supplement cash from dividends.

Question: How does covered call strategy help in volatile market?

Our covered call strategy is more art than science. What it does is protect the downside somewhat at the expense of full participation in a large upside. We write calls on about a third of each of the stocks in our portfolio. We track our stocks to see if their movements reflect what the wider market is doing or if a stock is really going down on its own. In the latter case, we may dump the stock, but our loss is buffered by the covered calls we have issued in the past.

Question: When you screen for value, which two sectors are you finding to be the best?

The insurance sector and the consumer products sector present good value today. The energy sector is also displaying several stocks with good value.

Question: What are three of your top value stock picks and why?

We like Chevron Corp. (NYSE: CVX), Public Service Enterprise Group Inc. (NYSE: PEG), and Raytheon Co. (NYSE: RTN). Each of these stocks meets all our criteria (rising revenues, rising profits, low debt-to-equity, favorable P/E ratio and favorable price/book ratio) and each pays a nice dividend. Chevron’s dividend yield is 3.0%, Public Service Enterprise’s yield is 4.2%, and Raytheon’s is 3.4%.

Question: Raytheon seems like a risky recommendation, given the proposed cut of $400 billion in defense spending over the next 12 years.

We think that Raytheon is a good solid value, though perhaps more a tortoise than a hare. Its P/E is around 10 and its price-to-book is less than 2. We’re comfortable with those numbers.

Question: The fund also invests heavily in oil field services stock, which had a blowout year in 2010. This year the sector is doing considerably less well. Do you see some changes to the portfolio because of that?

Because we do a bottom-up analysis of our stocks, we don’t consciously try to overload on one sector or another. We hope for diversity, but we don’t push it. The oil field services sector is still a bread and butter area for us and we’ll stay with the stocks as long as they continue to pay dividends and as long as we don’t feel that they’re hurting our investors.

Question: With second quarter’s earnings season due to start next week, we’d like to know where you stand on second-quarter earnings and what’s your outlook on guidance?

We believe that corporate earnings will continue to show strength as a result of belt tightening, cost cutting, and debt reduction by many well-managed companies. Earnings will not reach record levels, but steady improvement will gradually lead us out toward full recovery — although we still have a long way to go.

Question: Value stocks fell victim to the recession just like the growth stocks, but do you expect them to hold up better than growth stocks and broader indexes (DJIA and S&P500) if the market rolls over again?

Value stocks will definitely hold up better in downside markets and volatile markets, especially stocks in those companies that pay dividends. When full recovery comes, growth stocks will probably be leaders on the upside. But as I said, we still have a long way to go before full recovery occurs.

Question: . Are there any special situations (M&A, spin-off, reorganization, etc.) out there that the market is either discounting entirely or has overlooked?

We assume continued market volatility for the forseeable future. We don’t know what will by the next Greek economic crisis, the next Japan earthquake disaster, the next Egypt or Libya political unrest, or how the politicians in our own country are going to handle the debt ceiling crisis, as well as the continued need for economic stimulus.

Therefore, we choose to stay the course and find good financially sound companies, who pay dividends and control their own debt. Special situations worry us because they involve too many unknown factors, which could be adversely impacted by the volatility flowing from whatever might be the next crisis.

Question: What do you mean when you say that more economic stimulus is needed?

I don’t necessarily mean a third round of quantitative easing. That’s a political question, and I don’t have a crystal ball that gives me any special insight into how that kind of question will be resolved.  But I will say that the future of the US economy depends on creating new jobs in the private sector. That will require capital investment on the part of US companies, and that will create more jobs and more spending.

Interview by Paul Ausick

Apple Inc. (NASDAQ: AAPL) Reiterated Overweight and $340 target at Barclays.
Applied Materials Inc. (NASDAQ: AMAT) Cut to Underperform at First Global.
Avago Technologies Limited (NASDAQ: AVGO) Reiterated Buy and $30 target at Gleacher.
China Medical Technologies Inc. (NASDAQ: CMED) Started as Buy with $16 target at Deutsche Bank.
Dominion Resources, Inc. (NYSE: D) Cut to Underweight at Morgan Stanley.
Family Dollar Stores Inc. (NYSE: FDO) Cut to Market Perform at BMO.
Intuitive Surgical, Inc. (NASDAQ: ISRG) Raised to Outperform at Wells Fargo.
Medtronic, Inc.(NYSE: MDT) Cut to Market Perform at Wells Fargo; Cut to Market Perform at William Blair.
Online Resources Corp. (NASDAQ: ORCC) Raised to Outperform at Oppenheimer.
Public Service Enterprise Group Inc. (NYSE: PEG) Cut to Underweight at Morgan Stanley.
Qlik Technologies, Inc. (NASDAQ: QLIK) Started as Buy at Jefferies.
RealD Inc. (NYSE: RLD) Started as Outperform By BMO; Started as Overweight at Piper Jaffray; Started as Overweight at JPMorgan.
Research in Motion Ltd. (NASDAQ: RIMM) Cut to Hold an $48 target at GMP.

You can join our free daily email distribution list to hear more about dividend trends, analyst upgrades and downgrades, top day trader and active trader alerts, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

Affymetrix Inc. (NASDAQ: AFFX) Cut to Underweight at Piper Jaffray.
The Andersons, Inc. (NASDAQ: ANDE) Raised to Buy and $41 target at BB&T.
Charm Communications Inc. (NASDAQ: CHRM) Started as Outperform at Credit Suisse.
FirstEnergy Corp. (NYSE: FE) Cut to Hold at Citigroup.
The Mosaic Company (NYSE: MOS) Maintained Hold but Target cut to $45 from $57 at Soleil.
OpenTable, Inc. (NASDAQ: OPEN) Cut to Hold at Citigroup.
Potash Corp. of Saskatchewan (NYSE: POT) Maintained Hold but Target cut to $89 from $100 at Soleil.
ProLogis (NYSE: PLD) Raised to Market Perform at Wells Fargo.
Public Service Enterprise Group, Inc. (NYSE: PEG) Added to Conviction Buy List at Goldman Sachs.
QuinStreet, Inc. (NASDAQ: QNST) Raised to Overweight at Thomas Weisel.
Wimm-Bill-Dann (NYSE: WBD) Added to Focus Sell List at Goldman Sachs.

You can join our free daily email distribution list to hear more about dividend trends, analyst upgrades and downgrades, top day trader and active trader alerts, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

Petra Solar is a South Plainfield, New Jersey-based company which designs and manufactures the SunWave™ solar electric system for utility, commercial, and residential installations. These systems scale from a single panel to multi-megawatts, and the company calls this “the most deployable, cost effective and intelligent solar solutions in the industry.” Petra said that the contract is about $200 million to it over a three-and-a-half year period with PSE&G, and it will make the units for the 200,000 poles under the agreement.

This effectively doubles New Jersey’s solar capacity.  The agreement was reached in its” Solar 4 All” filing, and PSE&G noted that it expects to complete the installations by the end of 2013.  It shall come in two segments of 40 megawatts each. The first segment consists of installing a solar unit on some 200,000 utility poles in PSE&G’s service territory, including New Jersey’s six largest cities and roughly 300 rural and suburban communities.

Petra Solar will be producing 200,000 smart solar systems for installation on the PSE&G utility poles and street light poles.  This is said to be the largest pole-attached solar installation in the world.  Petra is creating more than 100 green jobs from this pact.  The company called this a transformational contract that will triple its size.

Interestingly enough, this is a grid-connected solar system that will more easily enable PSE&G to delivery of electricity to customers.

JON C. OGG
JULY 29, 2009

The new OUTPERFORM rated stocks are American Electric Power Co., Inc. (NYSE: AEP), Duke Energy Corporation (NYSE: DUK), Exelon Corporation (NYSE: EXC), PG&E Corp. (NYSE: PCG), Public Service Enterprise Group Inc. (NYSE: PEG), UNITIL Corporation (NYSE: UTL), Xcel Energy Inc. (NYSE: XEL).

The new more cautious PERFORM rated stocks are Consolidated Edison Inc. (NYSE: ED), FPL Group Inc. (NYSE: FPL), Pinnacle West Capital Corp. (NYSE: PNW), Progress Energy Inc. (NYSE: PGN), SCANA Corp. (NYSE: SCG), and Southern Company (NYSE: SO).

There are others that may not be included in the list today, but this is a brief summary from early this morning.  To show how the lot of utilities has performed, we looked at the iShares Dow Jones US Utilities (NYSE: IDU) ETF that tracks the sector. It closed at $67.25 yesterday, and its 52-week range is $53.15 to $100.98.

While the number of houses being foreclosed or are vacant has stayed high, that should start to abate over the next six months.  And if the economy’s green shoots start to turn into some small visible growth toward the end of the year or into next year, then the power consumption from major corporate and industrial clients should start to pick back up as well.

Many of these utilities have also underperformed in the ‘defensive stocks’ category.  This recession led to enough home foreclosures and power reduction from the industrial and manufacturing sector that it took out at least some of the stability or safe harbor characteristics of the past.  It looks like Oppenheimer expects this to improve at least some from here on out.

Jon C. Ogg

The results of the auction were released yesterday, and more than 12million credits were auctioned at a clearing price of $3.07/credit, fora total of nearly $39 million. Demand for the credits totaled almost 52million credits. Only six states – Connecticut, Maine, Maryland,Massachusetts, Rhode Island, and Vermont – participated in the auctionbecause the others had not yet finalized their auction rules. Proceedsfrom the auction will be invested in energy efficiency and renewabletechnologies, and to provide protection for consumers from higherenergy bills as a result of the cost of the credits.

There is good news and not-so-good news in the results. The not-so-goodnews is that the clearing price was very low. The European Union’scarbon credit price is around $34/metric ton. A second issue is thatthe 188-million-ton cap is very generous, equaling more than the totalamount of CO2 emitted in 2007. If the goal is to reduce emissions, thensetting a cap that high is unlikely to do the trick.

The good news is that demand for the credits was more than four timesthe number of credits available. Power companies have three years tocomply with their caps, so subsequent auctions ought to see more actionand higher prices. And once New York sorts out its auction plan thebiggest player in the region will certainly influence the market.

In the context of what’s happening in the financial markets today, thisis pretty small beer. But dealing with carbon emissions is somethingthat faces the new President and the new Congress. If the country fallsinto a substantial recession, will a commitment remain to reduce carbonemissions even if prices have to rise to meet that commitment? Arecarbon emission reductions a nice-to-have or a must-have? Should theyremain off the books of the power generators or should a price be seton emissions, just like any other cost of doing business? These issuesdon’t yield a simple answer regardless of politics and ideologies.

Paul Ausick
September 30, 2008