The Unusual Suspects (BP, DNDN, ETFC, GE, JNJ, NFG, PALM, BPOP, POZN, SIRI)
Next week is still a deep earnings week, but we tried and tried to keep this weekend’s edition of The Unusual Suspects as free and clear from earnings as we could. There are some macro-issues as well, but the Unusual Suspects this weekend include BP plc (NYSE: BP), Continental Airlines, Inc. (NYSE: CAL), UAL Corporation (NASDAQ: UAUA), Dendreon Corporation (NASDAQ: DNDN), E*TRADE Financial Corp. (NASDAQ: ETFC), General Electric Co. (NYSE: GE), Johnson & Johnson (NYSE: JNJ), National Fuel Gas Co. (NYSE: NFG), Palm, Inc. (NASDAQ: PALM), Popular Inc. (NASDAQ: BPOP), POZEN, Inc. (NASDAQ: POZN), and SIRIUS XM Radio Inc. (NASDAQ: SIRI).
Each is laid out in detail below.
BP plc (NYSE: BP) might as well hire someone named Valdez to run the disaster here, because this Gulf oil spill is only getting worse and worse than expected. Now, The Lanier Law Firm is suing it in a class action suit alleging that BP, Transocean Ltd. (NYSE: RIG), Cameron International Corporation (NYSE: CAM) and Halliburton Company (NYSE: HAL) were negligent in failing to properly operate, inspect, and maintain the Deepwater Horizon rig. BP’s US listed ADRs were at $60.00 just on April 21, and by Friday’s close the stock went out at $52.15 and it traded about 60 million shares. This drop has caused a technical violation on the charts as the 50-day moving average is $56.98 and the 200-day moving average is $54.66. This weekend’s edition Barron’s said that BP and RIG have been overly punished. Here is the latest on the spill map.
Continental Airlines, Inc. (NYSE: CAL) and UAL Corporation (NASDAQ: UAUA) have reportedly agreed to the share exchange ratios for their proposed no-premium merger. This is one of those “good for them, bad for you and me” scenarios where they get to ultimately fire thousands of overlapping job positions, consolidate providers, and simultaneously be able to charge more and more where they see fit for airline tickets and all the nickel-and-dime service fees.
Dendreon Corporation (NASDAQ: DNDN) had a huge week after the FDA has finally approved Provenge for advanced prostate cancer. Shares hit a high of $57.67 on Friday, but closed down at $54.06 (still up 7.7%) on over 46 million shares traded. We gave a detailed 2010 outlook for Dendreon this weekend showing the ups and downs, the analysts, the charts, and more at BioHealthInvestor.com.
E*TRADE Financial Corp. (NASDAQ: ETFC) may have looked or felt bad from the Citadel 172 million share secondary offering at $1.75 per share. If underwriters exercise that 25 million share overallotment option, Citadel will own about 26.5% of E*TRADE. Some dilution is good and some dilution is bad, but this was good dilution. Investors want Citadel out of there, particularly so that E*TRADE can eventually get back the rights to its order flow that Citadel has such an influence over. More importantly, Citadel is a hurdle for any would-be takeover and there is still chatter that one or both of the two giant competing online-discount brokers would want to buy it out. As long as Citadel is this dominant, the deal is much more difficult to do. This hit $1.99 last Monday after a $1.90 close, yet shares closed down almost at the lows of the week at $1.69. This will be one to watch, particularly since it fell well under that secondary offering price.
General Electric Co. (NYSE: GE) had its annual meeting this last week. 24/7 Wall St. got an exclusive interview with Chairman & CEO Jeff Immelt, and in this interview Immelt committed to a higher dividend, discussed the GE portfolio and spin-offs, expected hurdles for return on capital and more. The issues we discussed are long-term issues that will still be relevant in a week, month, and longer.
Johnson & Johnson (NYSE: JNJ) is the cover story at Barron’s this weekend. The article is titled “Liftoff at J&J” and the thesis is that earning will get a lift in coming years from the economy, its product pipeline, and a great balance sheet. The bearish case that J&J is fairly valued at the current mid-$60’s price is a big mistake, and the financial bible article notes that shares should be up 10% to 20% within a year or two. This will probably be good for up to a 2% pop on Monday morning, at least in a static market scenario.
National Fuel Gas Co. (NYSE: NFG) was brought on CNBC’s MAD MONEY in an interview with Jim Cramer on Friday, and he called this one the best nat-gas play you’ve never heard of. It has a massive upside in the Marcellus Shale play that is underfollowed and almost unknown. The company has raised dividends many years and it has many operations around natural gas via transport, exploration, utility, and production. Cramer called this the most undervalued nat-gas play in Marcellus. The 52-week range is $30.56 to $54.42; shares closed down 0.6% at $52.02 Friday and traded up 1.1% to $52.58 in Friday’s after-hours session. If the weakness in oil and gas doesn’t clip the sector endlessly, this could open up a percent higher or so.
Palm, Inc. (NASDAQ: PALM) is one to watch. Now that Bono and Jonathan Rubinstein have showed how cheaply they will buckle at a $5.70 takeout price versus a 52-week range of $3.65 to $18.09, there is always a chance that Palm could get a competing offer from a competing suitor. This is pure speculation of course, but not based solely on guesswork nor on hope and prayer. There is an optionszone.com options trade set-up here from yours truly that shows a speculative bet. There are investments, there are trades, and there are bets… this one is the latter, with a low-premium and a high-risk and high-reward possibility.
Popular Inc. (NASDAQ: BPOP) has already been a winner with shares up big in the last 3 months. Shares closed up 4.5% at $3.95 on Friday, but shares rose b 8.6% to $4.29 in the after-hours session on more than 900,000 shares. Westernbank Puerto Rico was seized by the FDIC on Friday with about $11.9 billion in assets; Banco Popular agreed to acquire Westernbank’s deposits and about $9.4 billion of its assets, with the FDIC keeping the rest for future sale. The old 52-week high is $4.23, so this could mark a 52-week high.
POZEN, Inc. (NASDAQ: POZN) isn’t about standing around and looking cool in night clubs. Shares closed down 10% on Friday at $10.85, but the shares rifled higher in after hours trading after the FDA approved the its arthritis treatment Vimovo. Pozen is now due a $20 million milestone payment from AstraZeneca (NYSE: AZN), its marketing partner on the drug. Shares went out in the after-hours session up 21% at $13.15 on over 5.9 million shares combined in regular and after-hours trading. The prior 52-week range is $5.16 to $12.68, so watch to see if the 52-week will hold here.
SIRIUS XM Radio Inc. (NASDAQ: SIRI) is far from the largest company and far from the most market-moving stock on deck for earnings, but the earnings are due Tuesday morning. If any single stock on deck is a true cult stock, this is it. Shares closed at $1.18 on Friday and the 52-week high is only $1.22. The company already gave some guidance but the outlook here on new cars with conversions and sign-ups is going to be crucial here. Estimates from Thomson Reuters appear to be roughly a break-even quarter on $671.3 million in revenues.
Our technical analysis affiliate is Adam Hewison of INO, and he has a short and quick audio-video presentation showing a lot of caution here on the DJIA. This lists 11,254 as the problem area of the DJIA based upon a 61% retracement, and that 50% retracement is down all the way around 10,350… Still, Hewison is taking more of a ‘tread carefully’ approach versus a ‘bail and short’ strategy.
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JON C. OGG
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