Reuters noted that the company is in the process of hiring a financial advisory firm after having received some indications of interest from other travel outfits and from private equity shops.  Which firms this would be is anyone’s guess but the company is now easily affordable as its market cap was $336 million as of Tuesday’s close.  Expedia Inc. (NASDAQ: EXPE) is worth about $4.2 billion in market cap priceline.com Incorporated (NASDAQ: PCLN) is worth almost $37 billion in market cap, which would imply that either company could easily make this acquisition.  Orbitz Worldwide, Inc. (NYSE: OWW) is worth only $318 million, so that might be a stretch.

Travelzoo’s consensus earnings estimates are $1.55 EPS and $166.3 million in sales for 2012 according to Thomson Reuters.  less than 20-times expected earnings and 2-times expected sales is cheap for the growth of the online travel sector when you start comparing this to peers today but the $21.06 close on Tuesday compares to a 52-week range of $20.68 to just over $100.00 at the peak of the last year.

This merger news is something we would consider to be a rumor for now and it might even seem suspect on the surface, but shares are indicated up 30% at $27.50 on the news.

JON C. OGG

U.S. brokerage firms pay increasingly higher bonuses to get top producers. (Reuters)

Alcoa (NYSE: AA) has a surprising first-quarter profit. (Reuters)

Travelzoo (NASDAQ: TZOO) may put itself up for sale. (Reuters)

The Department of Justice will sue Apple (NASDAQ: AAPL) over the way it helps price e-books. (Reuters)

Shareholder Starboard tells AOL (NYSE: AOL) that it will continue its proxy fight despite the company’s sale of patents. (Reuters)

Carlyle will try to get an $8 billion valuation as it goes public. (Reuters)

Best Buy’s (NYSE: BBY) CEO resigns because of a board investigation into his “personal conduct.” (WSJ)

Fears of financial problems in Spain push down global markets. (WSJ)

Retailers cannot stop buyers from looking at merchandise in stores and then buying online. (WSJ)

SAP (NYSE: SAP) makes a large investment in its efforts to compete with Oracle (NASDAQ: ORCL). (WSJ)

American International Group (NYSE: AIG) will return to the property investing business. (WSJ)

Fannie Mae and Freddie Mac could save $1.7 billion by writing down some loan balances, according to a regulator. (WSJ)

The Institute of Medicine suggests a new tax on medical care. (WSJ)

The National Federation of Independent Business says small businesses are less optimistic because of energy costs. (WSJ)

Officials in India express concerns about energy prices. (WSJ)

The International Monetary Fund will cut its forecasts of China’s current account surplus. (WSJ)

CareerCast says the most desired job last year was software engineer. (WSJ)

China’s oil imports reached 5.55 million barrels a day in March, up 8.7% from last year, according to the China’s General Administration of Customs. (WSJ)

The Federal Reserve may change the way it stress tests large banks. (WSJ)

The falling prices of real estate likely will hurt Chinese property investment firms. (WSJ)

Some economists believe that subsidies for U.S. service firms to do business overseas could sharply improve sales. (NYT)

Gross domestic product may improve, with wholesale inventories as a sign. (NYT)

U.S. states that have tried to change retirement benefits begin to face court actions. (FT)

Prime Minister Mariano Rajoy says his nation’s future may ride on its ability to bring down bond yields as it presents austerity plans. (Bloomberg)

The Journal of the American Medical Association says auto crashes rise before Tax Day. (Bloomberg)

Douglas A. McIntyre

Dendreon Corporation (NASDAQ: DNDN) is up 3.12% before market open to $11.22, relative to a 52-week range of $9.22 – $43.96. The company announced it would be laying off approximately 1/4 of its workforce in the coming months.

Lululemon Athletica inc. (NASDAQ: LULU) is down 2.25% premarket to $56.37, relative to a 52-week range of $17.81-$64.49.

McDonald’s Corporation (NYSE: MCD) is down 2.5% premarket to $88.61, relative to a 52-week range of $72.14 – $91.22. Revenue for stores open at least 13 months rose, but missed expectations.

TravelZoo In. (NASDAQ: TZOO) is up 9.4% to $35.30, relative to a 52-week range of $20.41 – $103.80. Shares of the company fell more that 7% after being downgraded yesterday.

Amgen Inc. (NASDAQ: AMGN) Started as Outperform at BMO.
Ariad Pharmaceuticals Inc. (NASDAQ: ARIA) Started as Outperform at BMO.
Biogen Idec Inc. (NASDAQ: BIIB) Started as Underperform at BMO.
Celgene Corporation (NASDAQ: CELG) Started as Outperform at BMO.
China Life Insurance (NYSE: LFC) Started as Underperform as Bear of the Day at Zacks.
Cisco Systems, Inc. (NASDAQ: CSCO) Raised to Buy at Auriga.
Darden Restaurants, Inc. (NYSE: DRI) Raised to Outperform at Wells Fargo.
Fusion-io Inc. (NYSE: FIO) Started as Sell at Merriman.
Global Payments Inc. (NYSE: GPN) Started as Buy at Citigroup.
Humana Inc. (NYSE: HUM) named value stock of the day at Zacks.
Lennar Corporation (NYSE: LEN) Started as Outperform at FBR.
Motorola Solutions, Inc. (NYSE: MSI) Raised to Outperform as Bull of the Day at Zacks.
The Talbots Inc. (NYSE: TLB) Raised to Neutral at Piper Jaffray.
Travelzoo Inc. (NASDAQ: TZOO) Cut to Market Perform at Morgan Keegan.

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JON C. OGG

One warning we have made is that everyone may be competition ahead. Just a few are Google Inc. (NASDAQ: GOOG), Amazon.com Inc. (NASDAQ: AMZN), Travelzoo Inc. (NASDAQ: TZOO), ReachLocal, Inc. (NASDAQ: RLOC), Local.com (NASDAQ: LOCM), and more.  The social couponing website said that it now has over 7,000 employees offering more than 1,000 daily deals, and it offers those to more than 83 million subscribers in 43 countries.  More statistics are as follows:

• Revenue rose from $3.3 million in the second quarter of 2009 to $644.7 million in the first quarter of 2011; 2010 revenue was over $713 million.
• Gross profit in 2010 was $279.9 million versus $270 million for the first quarter of 2011; the net income appropriate for common holders was a loss of -$456 million in 2010 and -$146.5 million for the first quarter of 2011.
• It expanded from five North American markets as of June 30, 2009 to 175 North American markets and 43 countries as of March 31, 2011.
• It increased its subscriber base from 152,203 as of June 30, 2009 to 83.1 million as of March 31, 2011 and the number of merchants featured in its marketplace from 212 in the second quarter of 2009 to 56,781 in the first quarter of 2011.
• Groupon sold 116,231 Groupons in the second quarter of 2009 compared to 28.1 million Groupons in the first quarter of 2011.  The company also noted that has sold over 70 million “Groupons” since its inception in just 30 months.
• Employees grew from 37 as of June 30, 2009 to 7,107 employees as of March 31, 2011.

The only underwriters so far as listed as Morgan Stanley, Goldman Sachs, and Credit Suisse.  As of March 31, 2011, Groupon had some $208.68 million in cash and cash equivalents.  The latest valuation we have seen is somewhere in the $20 billion range.  Whether or not you trust that value is something we will let you decide upon for yourself.

There are a few things that investors need to know here.  There is a CEO letter attached from Anrew Mason that notes, “Our customers and merchants are all we care about…..” and then it also notes, “We don’t measure ourselves in conventional ways.”  Whoops, that may not work for investors and valuation.

The letter goes on to note… “There are three main financial metrics that we track closely. First, we track gross profit, which we believe is the best proxy for the value we’re creating. Second, we measure free cash flow—there is no better metric for long-term financial stability. Finally, we use a third metric to measure our financial performance—Adjusted Consolidated Segment Operating Income, or Adjusted CSOI. This metric is our consolidated segment operating income before our new subscriber acquisition costs and certain non-cash charges; we think of it as our operating profitability before marketing costs incurred for long-term growth.”

Experian Hitwaise also just sent us over some key statistics….

• Groupon.com was the 64th most visited site in the US (out of 1mm+) for the week ending May 28th.
• It captured 14 million+ total US visits for the week ending May 28th.
• The market share of US visits was up 564% comparing last week versus the same week in 2010.
• Groupon captured 76% of visits among a category of 81 Group Buying sites for the week ending May 28th.
• Searches for “groupon” in the US have increased 462% comparing last week vs. same week in 2010.

Also noted by Experian Hitwise was the following: Regarding the Expedia.com deal – Group Buying sites sent 5% of visits to Travel sites last week. That represents a 16% increase in referral traffic from Group Buying sites to Travel sites comparing last week vs. same week in 2010.

The full S-1 IPO filing is here.

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JON C. OGG

First and foremost, Google Inc. (NASDAQ: GOOG) tried to acquire the company but the $6 billion or so offer was said to undervalue the company and no deal was reached.  With recent values being put in the $20 to $25 billion, we just do not expect Google to stay hidden.

Travelzoo Inc. (NASDAQ: TZOO) may have been pounded this week as the stock went from over $100 to under $85.00 this week alone.  What has helped to drive shares before that was the growth of its LocalDeals unit. This was a $66.00 stock at the end of March.

The Knot, Inc. (NASDAQ: KNOT) may have been given a small William boost (or is it really a Kate Middleton boost?), but it has also been migrating for some time to more local deals.

Amazon.com Inc. (NASDAQ: AMZN) did a coupon offer of its own through LivingSocial, which it reportedly invested $175 million in December.  As large as Amazon is, there is no way in hell that Groupon was going to be allowed to not run into the beast of online retail.

Facebook has also jumped on the bandwagon here with deals in a limited city launch of local discounts through prepaid vouchers.  How this ultimately plays out is something we are not certain yet, but one thing is for sure… Those Facebook loyalists would let Mark Zuckerberg put a Facebook logo on their front doors if he’d think about offering it.  OpenTable, Inc. (NASDAQ: OPEN) is up over $110.00 again ahead of next week’s earnings and it has a deal with Facebook. 

ReachLocal, Inc. (NASDAQ: RLOC), a fairly recent IPO, saw its shares surge 30% at one point this week after earnings and after it reported a partnership with Google.  Google may have wanted it more for its four key international market presence, but it will be a partner in the search engine’s AdWords system.

Rediff.com India Ltd. (NASDAQ: REDF) has magically resurfaced after having been mostly forgotten by most investors.  The India website has seen its stock effectively triple in just the last 45 days.  The company’s announcement on April 26 that it was launching a “group deals service” in 40 Indian cities called “Rediff Deal Ho Jaye!” has driven shares further.  Last Friday this was a $11.25 stock, but now shares are up around $16.25 and its market cap is about $455 million.

Local.com (NASDAQ: LOCM) was given some attention in December when the Groupon deal was running shares.  It has since had an earnings warning and the shares are still under $5.00 now after having risen to over $6.00 in December.  Another winner at the time was SuperMedia Inc. (NASDAQ: SPMD), which has SuperYellowPages, had doubled at one point in the last weeks of 2010 to over $9.00 but its shares are back down close to $5.00 again.  Both of these were featured by many as “alternatives” that could grow in this space.

Even Wal-Mart Stores Inc. (NASDAQ: WMT) has gotten into the game when it acquired Kosmix for social and mobile commerce initiatives. 

Before you think that Groupon is dead, it isn’t.  It still has loyalists and it is still going to grow whether we have some caution or not.  That doesn’t mean that its valuation will not come under fire.  It also does not mean that Groupon is automatically assured a successful life indefinitely. 

There is literally no barrier to entry for any company with enough reach to compete with Groupon.  Can Groupon claim that it invented coupons? Can it claim that it is the only social networking play out there?  Can Groupon even claim that it invented online coupons?  The answer is no.

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JON C. OGG

priceline.com Inc. (NASDAQ: PCLN) is down almost 2.5% to $329.45, Expedia Inc. (NASDAQ: EXPE) is down about 2.3% at $27.10, and Orbitz Worldwide Inc. (NYSE: OWW) is down 3% to $6.18.  The smaller destination is Travelzoo Inc. (NASDAQ: TZOO) and its shares were down almost as much as 5% at $25.20 today.

MakeMyTrip Limited (NASDAQ: MMYT), a hot IPO of late, is also seeing a 2.7% slide and shares are down at $37.57.  This is an Indian travel agency that started out as a  destination site for travel options in India.  India is far from the E.U., but the Mumbai terror attacks have left the minds of very few.

Universal Travel Group (NYSE: UTA) has already had a very tough year as shares of the travel service provider offering air ticketing and hotel booking services have fallen from over $16.00 to under $5.00 and its shares are down 1% to $4.74.

Orient-Express Hotels Ltd. (NYSE: OEH) is well-known for its luxury hotels, train and cruises, and shares are down 4.8% at $10.56 versus a 52-week range of $6.80 to $15.54.

Carnival Corp. (NYSE: CCL) was noted in our E.U. ties piece with its latest annual report noting, “Our European brands represent 33% of our total capacity at November 30, 2009, and we expect them to increase to 37% of our total capacity by 2012, assuming no new acquisitions, transfers or withdrawals are announced other than as previously discussed.”  Carnival shares are down only 1.2% at $37.93 today versus a 52-week trading range of $28.71 to $44.21.

United Continental Holdings, Inc. (NYSE: UAL) is the new combined Continental-United merger stock and it has many daily flights to and from Europe from major US cities.  Its shares are down only 1.3% at $24.38.  The Guggenheim Airline ETF (NYSE: FAA), formerly the Claymore/NYSE Arca Airline ETF, is down 2.06% at $37.05 versus a 52-week range of $21.98 to $38.14; and it does have international carriers in its weighting.

Of course, terror alerts do far less damage than actual terror attacks. However, they give travelers the right to change their travel plans often without paying any of the normal penalty or fees travelers pay for making any last-minute changes to their itineraries.

JON C.OGG

Dotcom Travel Stocks have gained 22.7% in the past month. The best performing stocks in the sector are priceline.com Incorporated, (NASDAQ: PCLN) up 32.2%, eLong Inc., (NASDAQ: LONG) up 26.9%, and Travelzoo Inc., (NASDAQ: TZOO) up 18.9%.

Chinese Solar Stocks have gained 19.8% in the past month. The best performing stocks in the sector are JinkoSolar Holding Co. Ltd., (NYSE: JKS) up 75.8%, Trina Solar Ltd., (TSL) up 16.5%, and ReneSola Ltd., (NYSE: SOL) up 15.4%.

IT Security Stocks have gained 15.9% in the past month. The best performing stocks in the sector are ArcSight Inc., (NASDAQ: ARST) up 55.5%, McAfee Inc., (NYSE: MFE) up 42.5%, and CommVault Systems Inc., (NASDAQ: CVLT) up 35.6%.

Biosante Pharmaceuticals, Inc. (NASDAQ: BPAX) is up over 10% this morning after announcing that it has entered into an option agreement with an undisclosed large multi-national pharmaceutical company to obtain a non-exclusive worldwide license for the use of its 2A/Furin technology in the expression of antibodies.     Shares are up over 10% at $2.37 on over 100,000 shares.

Dearborn Bancorp, Inc. (NASDAQ: DEAR) is up not on news but on continued momentum as it was the best turnaround bank earnings report from last week as noted in our Unusual Suspects.  Shares are up 7% at $4.25 on almost 100,000 shares.

Digirad Corporation (NASDAQ: DRAD) has management saying “Rad!” this morning.  The company announced that it has received FDA approval for Ergo Large Field-of-View, solid-state, general imaging nuclear medicine camera.  Shares are up 37% at $2.83 on over 1 million shares.

Guess? Inc. (NYSE: GES) is indicated up between 2% and 3% after Barron’s gave it a feature article over the weekend.  Barron’s noted that Guess could rise another 25% even after a 100% gain in the last year.

Humana Inc. (NYSE: HUM) is up on earnings… $1.52 EPS versus $1.14 estimates;  Revenue rose almost 10% to $8.4 billion versus $8.3 billion expected.  Shares are indicated up 3.5% at $47.10 on almost 50,000 shares.

PMI Group, Inc. (NYSE: PMI) is down over 10%.  The company posted a wider loss and announced over the weekend a secondary stock offering and convertible note offering.  Shares were down almost 12% at $5.84 on almost 245,000 shares.

Thomas Weisel Partners Group, Inc. (NASDAQ: TWPG) is up big by over 65% at $7.32 this morning on word that Stifel is acquiring the company for some $300 million.

Travelzoo Inc. (NASDAQ: TZOO) is up on earnings: revenue rose 24% to $28.5 million, $0.15 EPS vs. $0.02 EPS a year ago.  Shares are up over 12% at $18.50, although volume is thin.

Whirlpool Corp. (NYSE: WHR) is up big on earnings: Q1 EPS was $2.13 vs.  $1.33 estimates; Revenue was up almost 20% to $4.3 billion vs. $3.8 billion expected.  Shares are up over 11% at $114.00 on over 75,000 shares.

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

Sponsor: 26 Cheap Stocks to Sell - Cheap stocks have been on a tear recently, but nine out of 10 cheap stocks are circling the drain!

We created a primary list recently (see below), but our screen of stocks that could double yielded over 50  candidates and we wanted to run some of the less active stocks in this category.  Almost all of these are still quite active, so only a few may not ring a bell.  Here is the second list of stock candidates that could double with the explanations if the stars line up right inside each company or if certain outside developments come to fruition:

• Capstone Turbine (NASDAQ: CPST); Dialysis Corp. of America (NASDAQ: DCAI); Palomar Medical Technologies Inc. (NASDAQ: PMTI); Qwest Communications International Inc. (NYSE: Q); Sanmina-SCI Corp. (NASDAQ: SANM); Smith & Wesson Holding Corp. (NASDAQ: SWHC); Travelzoo Inc. (NASDAQ: TZOO); YRC Worldwide (NASDAQ: YRCW);  Websense Inc. (NASDAQ: WBSN);  Xinhua Finance Media Ltd. (NASDAQ: XFML).

Capstone Turbine (NASDAQ: CPST) is one of those stocks which could actually make a significant comeback. This one used to trade many multiples higher.  We’ve covered this one in our "10 Stocks Under $10 Newsletter" for subscribers.  It was at $1.25 or $1.30 at the time and shares now sit close to $1.70.  This company is now producing revenues and its turbines are getting significant interest.  The initial re-screen on this one came to us after Lazard Capital Markets gave this a call for the stock to double to $2.50 in its alternative energy coverage.  After we dug around and reviewed all the past data and put in our own thoughts on alternative energy, we think that instead of this hitting $2.50 that it has a shot at being able to surge past that level.  This is highly dependent upon it announcing new orders, and recent customer order activity has us behind this one.

Dialysis Corp. of America (NASDAQ: DCAI) is another company that has fallen from grace. Shares were north of $30.00 back in 2005 and it’s seen its share of ugliness since then.  Shares are currently close to three-year lows.  A double from today’s prices would barely get it above the $14.16 52-week high.  The $78 million market cap makes this one trade close to three-times book value and under one-times 2008 revenues.  But we think that the company may actually have to go do a dilutive capital raise first so it can open more facilities.  This has severe risks tied to reimbursement rates, so any cuts in that area would drive this lower.  The problem of today’s treatment is that kidney dialysis is really the only option for renal patients with kidney failure and there isn’t another viable alternative widely available to the masses and widely covered by insurance.

Palomar Medical Technologies Inc. (NASDAQ: PMTI) is a risky cosmetic laser maker that could roar or flop in 2008. With shares under $16.00, this stock could double and still be down more than 40% from its $55 highs seen earlier in 2007.  It and P&G (NYSE: PG) recently agreed to extend the Launch Decision of a home-use, light-based hair removal device for women until no later than February 29, 2008 in place since February 2003. Gillette had until January 7, 2008 to make the Launch Decision and it is likely that this will end exclusivity.  Lasers are a competitive business and it will have to really ramp its sales overseas for this to double again.  But if the company gets another critical supply deal and if it secures this current P&G deal in limbo, then this could become one of the explosive growth prospects again.  If not, well then this could slide further down even if many feel the worst has been priced in.

Qwest Communications International Inc. (NYSE: Q) has had a rough time since September and it has only traded above $10.00 for a very brief time period in the last 5-years.  But it recently reestablished its dividend, and the ‘perceived’ yield was actually higher than the dividend of land-line rivals Verizon (NYSE: VZ) and AT&T (NYSE: T).  Shares are also about 75% higher than the mid-point of its old trading range from 2003 to 2005.  It still has a $13 Billion market cap, so it will take many institutional buyers to believe in this one for it to be a double.  But the performance of its two top rivals has not been sustained as far as the stocks go.  Its lack of a wireless offering has also been thought of as a hole in the business plan and analysts would either have to raise their targets or make cuts on valuation if Qwest got back to $10.00.  Any upside would make the valuations on Qwest seem paltry.  If the company wouldn’t have made its recent dividend gesture we would have passed on this one.  But that sure made us think more good news was coming because a dividend is not meant to be a one-time event for companies.

Sanmina-SCI Corp. (NASDAQ: SANM) is an EMS (electronics manufacturing services) company where tech and non-tech companies come to have it manufacture for them.  It owns factories all over the world and it has been in a turnaround for quite some time.  If the company can make that turn then for this to double after a rough week the stock would still not even be at its 52-week highs. We covered this in our "10 Stocks Under $10" and its market cap has dipped back under that $1 Billion mark.  There are some pretty big risks that it won’t be able to turn around, so this one is a real coin toss.  The company has moved from being perceived as a tech-only manufacturer as it serves medical, defense & aerospace, automotive, and more.  Any major win could make this one turn or it could always become a potential acquisition from some of the other larger EMS players.

Smith & Wesson Holding Corp. (NASDAQ: SWHC) is one of the only gun plays in the entire U.S.  That is a bad spot right now as shares are down 75% from their highs.  So for this to double it would still be down 50% from its 52-week highs.  The company had already been in trouble as a stock goes, but then it failed to impress in October and then warned again for 2008 in early December.  Those each took nearly half of the value away each time.  What is interesting is that with a weak consumer and weakening economy expected in 2008, this could scare people about crime if lower-income wage jobs start to dry up.  That could make more homeowners want to buy a gun.  With a presidential election around the corner, we wouldn’t be shocked to see a rush of buyers try to load up on any remote gun desires if they feared that 2009 or 2010 might bring about stronger gun controls.  That HAS happened before.  We don’t know if it will come about again.  That why this is a COULD rather than a WILL.

Travelzoo Inc. (NASDAQ: TZOO) could end up being a Hail Mary pass for 2008 after posting a dismal 2007.  Shares are barely above 52-week lows and this stock would basically have to rise 200% before it took out its 52-week high of $40.68.  It only trades at about 17-times 2008 projected earnings and it is still expected to have revenue gains.  The beast of the sector is Priceline.com (NASDAQ: PCLN) and that stock has risen nearly five-fold over the last 24 months.  The company has what is deemed one of the lower-end online travel package and search features out there, but the beauty of the web is that ANY company can end up with a killer app or major consumer draw that sucks customers back to it.  That might not be the case and we think management isn’t as sharp as at other online travel sites.  But one bit of good news here could make this skyrocket with a flood of day traders, and it has over 25% of its float listed as being in the short interest.  It has also been the subject of takeover rumors in the past.

YRC Worldwide (NASDAQ:YRCW) is one of our favorite trucking stocks as a go-to play in the sector. The problem is that this sector just stinks right now and it has made warning after warning besides its CEO being generally very openly cautious.  But with shares at $17.00 and a trailing P/E of under 10, any upside surprise or even any ‘less bad’ news might make this look like the old flying trucks commercials from the early 90′s.  In fact, if YRCW stock doubled from here it would still be $13.00 short of its 52-week highs.  In January 2005 this even traded north of $60.00.  Are the rest of the bad headlines out? No.  We think times will remain tough. But at some point Wall Street realizes an overreaction and quickly fixes it.  This one may linger and may continue to slide.  So when or from level it doubles off of is anyone’s guess.  If that CEO would just be upbeat on TV once rather than negative, that might send the signal to others to buy as well.  Lastly, this one could actually be a takeover candidate.

Websense Inc. (NASDAQ: WBSN) is one of the old Internet hi-flyers that got sleepy and then became a Rip Van Winkle of a sleeper. With this being back close to $16.00, a double would only take it back to its highs at the end of 2005 and start of 2006.  But the company has still managed to grow while its shares have slumbered and its $400 million market cap is not ridiculous compared to sales estimates of $226 million expected for 2007 or more than $300 million for 2008.  It trades at less than 19-times 2007 EPS and less than 15-times 2008 earnings, yet EPS growth is expected to be 25%.  The company’s strength is also its weakness: it has the best enterprise-wide web filtering mechanism for enterprise Internet and Intranet access out there, but IT buyers have noted over and over how it is also quite expensive compared to second rate services. Is it fair to hint that Larry Ellison & Co. at Oracle (NASDAQ: ORCL) or that his rivals like SAP AG (NYSE:SAP) or Microsoft (NASDAQ: MSFT) might consider buying it?  Probably not.  But if a buyer stepped in they’d be getting a very valuable set of customers.  The company could always make a strategy of creating a more mainstream web filtering product that smaller organizations can afford or justify.  As web 2.0 applications are bandwidth intensive and as they become more and more prevalent, companies with bandwidth intensive businesses may also have to increase their web filtering efforts.

Xinhua Finance Media Ltd. (NASDAQ: XFML) is another stock that could garner a double if it can prove it is worthy. But we want to warn you that it could also see another 50% drop.  It was a runner up on the "Worst IPO’s of 2007" this week and many investors are not convinced that all the bad stuff out there is fully reflected in today’s prices.  But the Chinese financial and traditional media could end up being a major sleeper as media is still very under-penetrated in China where it is located.  Management is also fairly well heeled in the media circles in China and its media properties and ancillary services all hold significant values independently if it wanted to divest into a more focused company (unlikely to us). If Xinhua Finance Media doubled from today’s prices it still would be short of that $13.00 high.  2008 is either going to be a year of forgiveness and acceptance, or it is going to hurt.  This one is risky enough that we might only want to look at long-dated (May) calls to limit any potential downside if there are more land mines in this one.

• Our previous 10 STOCKS THAT COULD DOUBLE is as follows: AMD, BSX, CHTR, ETFC, DNDN, KBH, LVLT, PALM, SIRI, VG.
• Keep in mind that many of these stocks are also risky and might not make a turnaround. We also came up with a list of stocks that COULD FALL 50% IN 2008 under the right circumstances (BIDU, BIDZ, C, CFC, F, JRC, LDK, MU, PMCS, VMW).

Jon C. Ogg
December 28, 2007

You can join our free email distribution list to get previews for other issues around IPO’s, spin-offs, merger-arb, turnarounds, and more.  Jon Ogg produces the Special Situation Investing Newsletter; he does not own securities in the companies he covers.