Investing

The Unusual Suspects (GT, CTB, S, DT, LOPE, BBY, ORCL, PALM, GLD, CSX, UNP, RGR)

We have a whole host of stocks and sectors to watch throughout this coming week.  We have Goodyear Tire & Rubber Co. (NYSE: GT) and Cooper Tire & Rubber Co. (NYSE: CTB) to watch on some tariff news.  Sprint Nextel Corp. (NYSE: S) will likely be a key mover on Monday on potential merger reports.  Grand Canyon Education Inc. (NASDAQ: LOPE) is supposed to have a secondary offering early this week.  Earnings are coming from Best Buy Co. (NYSE: BBY), Oracle Corp. (NASDAQ: ORCL), Palm, Inc. (NASDAQ: PALM) and others.  $1,000.00 gold is going to be key for the SPDR Gold Shares (NYSE: GLD).  CSX Corp. (NYSE: CSX), Union Pacific Corp. (NYSE: UNP), and Sturm, Ruger & Co. Inc. (NYSE: RGR) are all likely suspects to watch for catch-up trading based on news outside of those companies.  More details are provided on each of these.  Stay tuned this week.

The Obama Adminstration has levied huge import tariffs on Chinese tires claiming that they are exported to the US in a manner which damages the American tire industry unfairly.  Did President Obama just say “Blue Horseshoe loves Goodyear Tire & Rubber Co. (NYSE: GT)” in this call?  You might as well call this the Goodyear gift… You can also look for a benefit for Cooper Tire & Rubber Co. (NYSE: CTB) as well.  Just be advised, this tariff game is a knife which cuts both ways and the one doing the stabbing here often has to get stitches put on some wounds too…. We would also note that that the Cooper Tire pension plan just filed on Friday to sell some 1.5+ million shares of common stock.

Grand Canyon Education Inc. (NASDAQ: LOPE) is on deck with a secondary offering.  The company is selling six million shares expected to price as soon as Monday, although there is a discrepancy as the original filing was for 8 million shares, only 1 million of which were going to be from the company with the rest from private equity holders, but the new indication is a secondary offering of 6 million shares.

On Wednesday we have the return of a top American brand that is no longer American.  In some form, you can say that Budweiser is an import despite the notion that it is still brewed here.  But AB InBev, or Anheuser-Busch, is finally returning to America as a stock.  It is even taking back the old stock ticker of “BUD”

Sprint Nextel Corp. (NYSE: S) may come under attack of a Deutsche Telecom (NYSE: DT) buyout offer if the reports are as advanced as they would lead you to believe.  This would come as almost no surprise other than the notion that it just has never happened.  And with our US dollar getting shelled it makes only more sense that a foreign company would look at this brand to rake in more than 30 million subscribers.    As our friend Joe Kunkle over at OptionsHawk.com said to us, “Very interesting considering that on September 4th, 170,000 call options traded with huge buying of the October $4 calls that traded more than 70,000 contracts.  There was also a lot of traders putting on bullish risk reversals, selling puts to finance the purchase of calls.” In short, Joe is saying that there is some large cash that was quietly put behind this notion.  We would look for a large pop in Sprint shares in the early trading hours Monday unless this is denied.

We have several key earnings this week.  Best Buy Co. (NYSE: BBY) is on deck for earnings on Tuesday, and we have a full preview for the top earnings this week so we can get an idea of just how well the technology and electronics spending by Joe Public is and if it justifies the huge jump this stock has made.  Larry Ellison and friends over at Oracle Corp. (NASDAQ: ORCL) have the CRM giant’s earnings after the close on Wednesday.  Palm, Inc. (NASDAQ: PALM) is going to be on deck Thursday for earnings.  While we would love to be overly cautious here, there is a problem in just panning it blindly because of the short interest.  If our fully diluted calculations are correct, there is roughly 40% of the float short in this one.  Here is a full preview on each of those with the formal estimates as well as much added color for what else to look for.

We hate to single out a commodity ETF as a key stock to watch for the week, but the SPDR Gold Shares (NYSE: GLD) is the most direct trading vehicle on the price of gold as it is solely a bet on the price of gold bullion.  About a week ago, our friends and affiliate over at INO.com made the call with some conviction that Gold was not just going to bust above $1,000.00… but could likely jump much higher in a power-band move.  We are awaiting an update to the call, mainly because this did finally get above $1,000 last week and stayed above $1,000 for the closing price.  The problem is that once that happened there was no major screaming inflows on the shiny yellow stuff to drive it immediately higher.  This will likely be the week that determines the fate of gold for the near-term and the GLD is the easiest way for Joe Public to play it long or short.

Rails need to play catch-up…. When a company the size of FedEx Corporation (NYSE: FDX) raises guidance, we generally expect to see a rally in the other modes of the transportation sector.  That happened in FedEx’s top competitors and it happened in trucking, but the rail giants of  CSX Corp. (NYSE: CSX) and Union Pacific Corp. (NYSE: UNP) were very weak and actually closed down here.  While these are not direct overlays on each other, there is still some delayed correlation here.

Another secondary trade is after Smith & Wesson Holding Corp. (NASDAQ: SWHC) had a good week after blowing away earnings, although the stock did not have a day-two follow-on rally.  It still posted over a 10% gain on the week.  But Sturm, Ruger & Co. Inc. (NYSE: RGR) actually closed down and the only little bump up it had was early on Thursday before getting rifled lower.  There should be and generally is more correlation here than what we saw this week, so watch RGR for a possible under-covered secondary catch-up trade.

You can always join our open email distribution list if you want to be notified of the unusual suspects, key analyst calls, Buffett and other guru investor activity, M&A, IPO’s and more.  This is our first full week back now that Labor Day has come and gone, so that means that the trading desks will be fully staffed and all players will be back.

JON C. OGG
SEPTEMBER 13, 2009

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