Wednesday, August 30, 2006


Barron's Online discusses Eaton Vance (EV), saying that the co's execs can stand on mountaintops to brag about the performance of their mutual funds. But investors have kept the stock in the valley below. Over the past year, Eaton Vance stock only inched up 4%, while a Thomson Financial index of asset managers gained 16% in the same period. Yet the co has an expanding palette of funds, separately managed accounts, and institutional relationships. It also has an enviable debt-free balance sheet for possible acquisitions. In its Q3 ended in July, a period when the S&P's 500 index sank nearly 3%, Eaton Vance increased its assets under mgmt by 14% to $120bn. The industry boosted assets by roughly 10% in the same period compared to a year ago. That's why Eaton Vance could surprise investors with earnings growth and stock price appreciation in the coming months, even if the stock mkt cools. With shares trading at a slight discount to competitor Nuveen Investments, and a possible dividend hike this fall, the shares look attractive. "If [Eaton Vance] can continue to generate 10% organic growth [in assets], the stock will continue to be revalued up, and earnings will continue to surprise despite mkt action," says Ryan Caldwell, of Waddell & Reed.

"Inside Scoop" section reports that 3 longtime Medtronic (MDT) directors purchased shares of the medical-devices maker, which has been giving investors heart palpitations amid concern over the health of the defibrillator mkt. 5 days ago, Jack Schuler, Michael Bonsignore and William Brody collectively spent $1.34m to buy 29K shares in the first open-mkt purchases by Medtronic insiders in over 2 years. With the stock hammered, Ben Silverman, director of research at, says "the directors' buying is a nice show of confidence." "It's a good long-term signal," he adds. "When you look at buying like this with 2 years of guidance, these [directors] feel very comfortable with the guidance and position as to where the co is going."

The NY Times reprots that Altria (MO) board will meet today to discuss Kraft Foods (KFT) spinoff. Wall St. analysts who follow Altria say they expect the co, which has been planning an overhaul since '04, to take its time in making a final decision on the timing of what would be one of the largest tax-free corporate spinoffs. "This board is highly conservative and they will exercise caution in every way you can imagine," said Christine Farkas, of Merill Lunch. One possible concern for Altria’s board is the risk that tobacco plaintiffs’ lawyers may try to get an injunction blocking a spinoff of Kraft, arguing that a disposition of the food company’s assets would represent a "fraudulent conveyance." Altria is expected to spin off its 88% stake in Kraft by giving its shareholders 1.46bn Kraft shares; stockholders would receive 0.70 share of Kraft for each share of Altria that they own.

The NY Post reprots that another large investor in Bally Total Fitness (BFT) has been granted access to the co's confidential financial information, fueling further speculation that the nation's largest health club chain could get a last-minute cash infusion before it tumbles into bankruptcy. Liberation Investment Group, which owns 11.2% of Bally, said it had executed a confidentiality agreement with the ailing health club and was interested in arranging "an extraordinary corporate transaction" such as an acquisition, sale of the co, reorganization or recapitalization. Pardus Capital Mgmt, Bally's largest shareholder with a 14.8% stake, last week entered into a similar confidentiality agreement with the co.

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