Wednesday, January 10, 2007


The WSJ’s „Heard on the Street” column thinks that Wall St. may have been too hard on ConAgra Foods (CAG). In March, CEO Gary Rodkin presented a turnaround plan to investors, vowing to trim his co's disparate portfolio and focus marketing dollars on promising brands such as Healthy Choice frozen meals and soups, and Hebrew National hot dogs. Wall St. was unimpressed. The co's stock price hit a 52w low and most analysts said the moves didn't go far enough. But since then, ConAgra has posted a string of better-than-expected earnings. And its stock has been on a tear, rebounding to more than $27, a nearly 50% gain. Still, 8 of the 12 analysts following ConAgra's stock have maintained ratings of Hold or Sell, unwilling to shake their long-held view of ConAgra as a portfolio of poorly managed businesses and brands that have historically failed to dominate supermarket categories. "The co has a weak portfolio of brands, compared to the rest of the group," says Pablo Zuanic of JP Morgan. Mr. Zuanic says that despite the co's recent progress, "they need to make key investments in marketing and innovation to generate some growth with the type of brands they have. It will be a very slow build for ConAgra." Fans of the stock, however, see potential in the co's long-neglected brands. Investors clearly like what they see, driving the co's P/E ratio to about 30, well above peers.

“Inside Track” section reports that Penn Treaty (PTA) hasn't filed its financial statements for more than a year b/c of accounting issues, but recent stock purchases by 10 insiders indicate that the provider of long-term-care insurance is on the mend, an analyst says. Ben Silverman, of, said the cluster of insider stock purchases shows the co expects to put the accounting problems behind them. "I think it's a sign of confidence from insiders that they think they'll clear up the accounting issues, and that the business will be healthy going forward," Mr. Silverman said.

Barron’s Online discusses Time Warner Cable (TWACAV.PK), whose problems could turn out to be virtues. In the past, such co’s have traditionally lacked investor enthusiasm. But the cable operator has an opportunity to dramatically increase subs in Adelphia's former mkts, as well as to expand the use of higher-margin products. Given that opportunity, it's odd that the stock trades at a discount to Comcast on a per-subs basis, when both co’s have the same 50% penetration rate of their mkt. But oddly enough, Time Warner Cable has a mkt cap equal to just $3,900 per subs. Comcast trades well above that, between $4,200 and $4,500 per subs. Shares of Time Warner Cable will probably move from the OTC mkt to the NYSE next Mon, says Jessica Reif Cohen of Merrill Lynch. When they do, it will be a cable giant whose stock is in short supply. Time Warner Cable may be worth as much as $51 a share, wrote Katherine Styponias, of Prudential, in a recent report.

“Inside Scoop” section reports that hedge fund Coghill Capital Mgmt still sees a world of value in EarthLink (ELNK), even though shares of the co have fallen 40% over the past year. Coghill disclosed that it now holds a 5.1% stake, or 6.25m shares of EarthLink, up from the 469K shares, or less than 1% stake, it owned at the end of the 3Q.

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