Big Lots Inc. (NYSE: BIG) Raised to Outperform at Wedbush.
Chico’s FAS Inc. (NYSE: CHS) Cut to Neutral at Citigroup.
Delta Air Lines (NYSE: DAL) Raised to Outperform as Bull of the Day at Zacks.
Energy Recovery Inc. (NASDAQ: ERII) Started as Neutral at Credit Suisse.
PPG Industries, Inc. (NYSE: PPG) named as Value stock of the Day at Zacks.
Plexus Corporation (NASDAQ: PLXS) named Bear of the Day at Zacks.
Randgold Resources Limited (NASDAQ: GOLD) Cut to Hold at Canaccord Genuity.
Royal Gold, Inc. (NASDAQ: RGLD) Cut to Sector Perform at National Bank.
SandRidge Energy, Inc. (NYSE: SD) Cut to Hold at Stifel Nicolaus.
Stanley Black & Decker Inc. (NYSE: SWK) Raised to Buy at Argus.
SunPower Corporation (NASDAQ: SPWRA) Cut to Underperform at Macquarie.
Transocean Ltd. (NYSE: RIG) Cut to Underperform at Macquarie.
Trina Solar Limited (NYSE: TSL) Cut to Neutral at Macquarie.
Vical Inc. (NASDAQ: VICL) Started as Outperform with $7 target at Credit Suisse.
VIVUS, Inc. (NASDAQ: VVUS) Started as Outperform with $15 target at Credit Suisse.
YRC Worldwide Inc. (NASDAQ: YRCW) Raised to Hold fro Sell at Stifel Nicolaus.

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JON C. OGG

Icahn Enterprise was thumped after it made a bid for Clorox, which was rejected. Boeing was hit because large customer American may buy jets from rival Airbus.

Microsoft sold off, probably because of news that smartphone partner is in more trouble

The Flame Index started as a research tool in 2008 at the NY Innovation Design Lab (nyidlab). It was used as a general metric to evaluate companies and their risk in the media. Publicly traded Fortune 500 companies are used as a measure to calculate an overall market of negative news and the companies are ranked within that market

Data and ranking provided by the Flame Index.

Before just considering book value, we always look for more.  We looked for companies which are still expected to have respectable earnings growth.   Analysts expect next year earnings expansion ranging from Raytheon’s 12.8% to Kennametal’s 23.5% growth.  We have also considered a consensus price target from analysts for those companies which have implied upside for investors, and this group ranges from 16% to 33% upside.  We also only consider liquid issues, and the floor for this group was average daily trading volume exceeding 750,000 shares. Except where otherwise noted, the source for all performance and financial data is Finviz.com.

Eaton Corporation (NYSE: ETN) has a price to book value of 2.1  to 1.  Eaton’s market cap is almost $17 billion, ranking it second among these companies.  Its forward PE is about 10.5, placing it in the top-tier of these companies.  With a consensus target price of $60.96 from Thomson Reuters, Eaton has an implied upside exceeding 24%.  In Thursday trading Eaton’s shares closed at $48.85 and the 52-week price range is $30.65 to $56.12.  The power management company is now larger than what we would expect as an acquisition target as its market cap is north of $16 billion, so if you like Eaton it better be for its own merits. If analysts are right, that $60.96 would be an all-time high.  Our caveat in Eaton is that a substantial portion of its “value” in equity is tied to intangible assets and goodwill.

Kennametal Inc. (NYSE: KMT) posts a 2.2 to 1 price to book value.  This is sometimes a bit high by our count, but the specialty materials and metalworking outfit is one that has the right size and the right angle for many value investors.   Its market cap is $3.3 billion, making it the smallest company discussed here.  Its forward PE is less than 12.  With a consensus target price of $48.45, Kennametal has an implied upside of 19%.  In Thursday trading Kennametal shares closed at $40.63 and the 52-week trading range is $23.75 to $43.84.

Republic Services, Inc. (NYSE: RSG) boasts a 1.5 to 1 price to book value, best among these companies.  Imagine, value in garbage.  Its market cap is almost $12 billion.  Its forward PE is slightly less than 14.5 With a consensus target price of $36.17, Republic has an implied upside of 16%.  In yesterday’s trading Republic’s shares closed at $31.1, down 0.06%.  The 52-week price range is $27.33 to $33.10.  What is interesting about Republic is that its screened criteria made this one a stock which we said was one of our Ten Stocks To Own For The Next Decade.  Its rival Waste Management, Inc. (NYSE: WM) is often in the same boat and much of the value analysis is relative between the two companies.  This was also formerly a Warren Buffett stock, but it was still a Bill Gates holding when we last looked.

Raytheon Co. (NYSE: RTN)  sports a 1.7 to 1 price to book value. Its market cap exceeds $17 billion, largest among these companies.  Its forward PE is lower than 9, ranking it first among this list of companies.  With a consensus target price of $56.41, Raytheon has an implied upside of 16%. In Thursday trading Raytheon shares closed at $48.39, down 1.49%.  The 52-week price range is $41.60 to $52.67.  This defense stock was one of our higher-yield dividend defense stocks reviewed as the fighting in Libya escalated.  The maker of the Patriot Missile system and many other defense and war technologies also carries a large amount of goodwill and the reason it has low earnings multiples is because the Department of Defense is under significant budget pressure which is not going to go away.

Stanley Black & Decker, Inc. (NYSE: SWK) posts a 1.7 to 1 price to book value, placing it in the top-tier of these companies.  We do want to make the reminder that this tool-maker for builders and carpenters (and for you around your house) is now the “newly amalgamated” Stanley and Black & Decker after the merger.  The company is also still considered by many investors to be searching for acquisitions as well.  Its market cap is almost $12 billion and it carries a forward P/E ratio of less than 12.  With a consensus target price of $86.13, Stanley Black & Decker has an implied upside of 21%. In trading yesterday the company’s shares closed at $71.06 and the 52-week trading range is $47.64 to $77.75.

Timken Co. (NYSE: TKR)  posts a 2.3 to 1 price to book value. Its market cap is less than $5 billion, ranking it one of the smaller companies listed here.  The company is part of America’s core manufacturing as it makes bearings, seals, and many other internal components for machines and machinery.  Its forward PE is slightly greater than 10, placing it in the top-tier of these companies.  With a consensus target price of $64.86, the machine tool manufacturer has an implied upside of 33%.  In Thursday trading Timken’s shares closed at $48.65, and the 52-week price range is $24.45 to $57.60.  If the target price is realized by analysts, that will mark an all-time high.

While many companies have high balances of goodwill and intangible assets, we are currently looking for value among peers.  We are not considering liquidation values and therefore are not using the analogy that “You can’t pay your rent with goodwill.”

Warren Buffett was quoted back in the 1990s saying, “Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business whose earnings are virtually certain to be materially higher five, ten and twenty years from now.”  We don’t go along with the Buffett model of forever any longer, but you get the idea.

This is also not a value review digging through the garbage heap.  As one investment manager said at The Value Investing Congress when asked about how she starts her screens for finding value stocks, “Actually, I usually start my screens by seeing which stocks have been hitting 52-week lows for a while.”  There would not be a value category of the growth trajectory was never interrupted and if problems had not arisen.

Elsewhere in recent value picks looking for book value discounts:

• Looking for Deep Value in Basic Materials
• Banks, Tech, and Others close-to or under book value

JON C. OGG & JIM BERDOU

Advanced Micro Devices, Inc. (NYSE: AMD) Reiterated Buy and $12 price target at Gleacher & Co.
Brookfield Asset Management Inc. (NYSE: BAM) Started as Outperform with $38 target at Credit Suisse.
Genzyme Corporation (NASDAQ: GENZ) Cut to Hold at Jefferies.
Kinross Gold Corporation (NYSE: KGC) Cut to Hold at TD.
NetApp, Inc. (NASDAQ: NTAP) Cut to Hold at Canaccord Genuity; Cut to Neutral at Piper Jaffray; Cut to Hold at Citigroup.
NVIDIA Corporation (NASDAQ: NVDA) Cut to Hold at Citigroup.
Orbitz Worldwide, Inc. (NYSE: OWW) Cut to Underweight at Piper Jaffray.
Pan American Silver Corp. (NASDAQ: PAAS) Cut to Hold at TD.
Sara Lee Corporation (NYSE: SLE) Cut to Underperform as Bear of the Day at Zacks.
Shutterfly, Inc. (NASDAQ: SFLY) Cut to Neutral at Zacks.
Stanley Black & Decker, Inc. (NYSE: SWK) Raised to Outperform as Bull of the Day at Zacks.
Starwood Hotels & Resorts Worldwide Inc. (NYSE: HOT) Reiterated Buy and raised target to $74 at Argus.

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

JON C. OGG

The Black & Decker Corporation (NYSE: BDK) rallied close to 30% to a yearly high of $61.79  following news that the tool makers has agreed to be purchased by Stanley Works (NYSE: SWK) in an all stock deal valued at $4.5 billion.

Cognizant Technology Solutions Corp (NASDAQ: CTSH) rose over 8% to a yearly high of $42.40.  The computer services and technology consulting company announced that its 3Q 09 profit rose roughly 21%, beating analyst estimates.  The company also raised its 2009 profit estimate to $1.88 per share from $1.78 per share.

Landry’s Restaurants (NYSE: LNY) rose over 25% to a yearly high of $13.99.  The restaurant, hospitality and entertainment company following rose on news that the company’s chief executive, Timothy J. Fertitta has agreed to purchase the company for $14.75 per share, or $1.2 billion.

Garrett W. McIntyre

Reuters:   Executive pensions rose despite drops in stock prices.

Reuters:   Lloyds will make a large stock offering.

Reuters:   Stanley Works (NYSE:SWK) bought Black & Decker (NYSE:BDK) for $3.46 billion.

Reuters:   CIT’s (NYSE:CIT) exit from bankruptcy is not clear.

Reuters:   UBS (NYSE:UBS) posted a loss and wealth management clients continued to leave.

Reuters:   Ford (NYSE:F) posted a surprise profit.

Reuters:   Manufacturing and pending home sales both rose.

Reuters:   Volker said the economy could not rely on consumer spending.

Reuters:   The commercial real estate business is still in deep trouble.

WSJ:   Toyota (NYSE:TM) expects a monthly sales decline.

WSJ:   IllyCaffè SpA will work with local coffee shops to compete with Starbucks (NASDAQ:SBUX).

WSJ:   The head of the IMF says financial firms are going back to old practices.

WSJ:   Blu-ray makers are becoming more involved with web video.

WSJ:   Research-in-Motion (NASDAQ:RIMM) is the focus of a number of bearish comments.

WSJ:   Schwab (NASDAQ:SCHW) is making a push into ETFs.

WSJ:   GM’s board will revisit the Opel sale.

WSJ:   Microsoft (NASDAQ:MSFT) Office faces inexpensive versions of similar software.

WSJ:   Sears (NASDAQ:SHLD) may need to get cash from its Canadian operation which presents challenges.

WSJ:   Problems are beginning to appear in the financials of Chinese banks.

WSJ:   Business bankruptcies rose 7% in October.

NYT:   The US will allow GM to use federal money to put into Delphi.

NYT:   The Supreme Court is looking at fees advisors charge mutual funds.

NYT:   The Senate is pushing insurance companies on the amount of premiums they actually spend on care.

NYT:   Goldman Sachs (NYSE:GS) may buy tax credits from Fannie Mae (NYSE:FNM)

FT:   The Fed has asked banks to adopt it new pay rules early to cover 2009 compensation.

FT:   Ebay’s (NASDAQ:EBAY) PayPal has opened doors to outside developers.

Bloomberg:   The next head of Bank of America (NYSE:BAC) may be based in NYC.

Douglas A. McIntyre

The transaction has already been approved by the boards of directors of both companies, and the deal would be expected to be completed in the first half of 2010.  The terms call for an implied premium of 22.1% to Black & Decker’s share price as of Friday, October 30, 2009. After the closing, Stanley shareholders would own about 50.5% of the equity of the combined company.

Also noted in management is that the nine members of the current Stanley board of directors will be joined by six new members from Black & Decker’s board of directors.  John F. Lundgren, Chairman and CEO of Stanley, will be President and CEO of the combined company.  Nolan Archibald, Chairman, President, and CEO of Black & Decker will become executive Chairman of the combined company for a period of three years.

Stanley was founded in 1843 is a diversified industrial company with hand tools and strong construction and do-it-yourself, security and industrial businesses with well-known brand names such as Stanley, FatMax, Bostitch, Facom, Proto, Mac Tools, Sonitrol, Stanley Security Solutions, Best, and Vidmar.

Black & Decker has roots dating to 1910 and brings in power tools and a diverse product offering under the brands of Black & Decker, DeWalt, Porter-Cable, Emhart Teknologies, Kwikset, Baldwin and Price Pfister.

This is effectively an acquisition by Stanley for Black & Decker.  Both companies are trading up on the news, with Black & Decker up 20% at $56.82 and Stanley Works up 2.3% at $46.20.  Before the buyout was announced, the market cap of Stanley was $3.2 billion and the market cap of Black & Decker was $2.8 billion.  With these companies being under $5 billion each, it is hard to imagine that antitrust regulation would come down too hard on the companies.

The merger only includes these two companies, but it has shares of Snap-On Inc. (NYSE: SNA) trading up 1.4% at $36.60 in after-hours trading.  Its market cap is $2.08 billion as of the close.

Jon C. Ogg

AstraZeneca (AZN) Raised to Buy at UBS.
BioMed Realty Trust (BMR) Raised to Outperform at Oppenheimer.
Entergy (ETR) Raised to Buy at Jefferies.
3M (MMM) Raised to Equal-Weight at BVarclays.
Netflix (NFLX) Raised to Buy at Citigroup.
Novo Nordisk (NVO) Raised to Buy at Citigroup.
Stanley Works (SWK) Raised to Outperform at Baird.

JON C. OGG

• Constellation Energy (NYSE: CEG) Downgraded to Underperform at Jefferies.
• Fidelity National (NYSE: FIS) Cut to Perform at Oppenheimer.
• Fiserv (NASDAQ: FISV) Cut to Perform at Oppenheimer.
• Genentech (NYSE: DNA) Raised to Overweight at Lehman.
• KBW (NYSE: KBW) Cut to Market Perform at FBR.
• Nike (NYSE: NKE) Cut to Neutral at HSBC.
• Pearson plc (NYSE: PSO) Cut to Sell at Deutsche Bank.
• Satyam Computer Services (NYSE: SAY) Cut to Equal Weight at Morgan Stanley; Cut to Underperform at Credit Suisse.
• Sherwin Williams (NYSE: SHW) Cut to Sell at Goldman Sachs.
• Sierra Wireless (NASDAQ: SWIR) Target cut to $20 from $25 at CIBC.
• Stanley Works (NYSE: SWK) Cut to Hold at Deutsche Bank.
• Werner Enterprises (NASDAQ: WERN) Cut to Sell at UBS.
• WIPRO (NYSE: WIT) Cut to Underperform at Credit Suisse.

Jon C. Ogg
July 21, 2008

• American International Group (NYSE: AIG) Raised to Buy at Banc of America.
• Cintas Corp. (NASDAQ: CTAS) Raised to Equal Weight at Morgan Stanley.
• KBW (NYSE: KBW) Cut to Market Perform at FBR.
• NetEase (NASDAQ: NTES) Raised to Outperform at Credit Suisse.
• Nike (NYSE: NKE) Cut to Neutral at HSBC.
• Satyam Computer Services (NYSE: SAY) Cut to Equal Weight at Morgan Stanley; Cut to Underperform at Credit Suisse.
• Sherwin Williams (NYSE: SHW) Cut to Sell at Goldman Sachs.
• Stanley Works (NYSE: SWK) Cut to Hold at Deutsche Bank.
• Teva Pharmaceutical Ind. (NASDAQ: TEVA) Raised to Buy at Deutsche bank.
• Whole Foods Markets (NASDAQ: WFMI) Raised to Equal Weight at Morgan Stanley.

Jon C. Ogg
July 21, 2008