Paperstand (BMY, SNY)

The WSJ’s ”Heard on the Street” colum out saying that Bristol-Myers’ (BMY) days as an independent co may be numbered. The smartest bet to place on a possible takeover, however, might be to sell the co's shares now. Bristol-Myers's pipeline of promising new drugs has made the co an attractive tgt. Moreover, problems that had kept bidders at bay appear to be lifting. A federal patent trial on the Plavix appears to be breaking Bristol’s way, and strict federal oversight of the co in the wake of an accounting scandal several years ago is on the verge of ending. Analysts also note the co's interim CEO has a reputation for making deals. Still, some investors say the bulk of any transaction premium already is priced into the stock. Bristol-Myers shares recently rose about 10% after a report in the media said Sanofi-Aventis (SNY) may be taking steps to make a deal. "The stock has had a huge move in the last 2 weeks on takeout speculation, not on fundamentals," says Jami Rubin, of Morgan Stanley. "What if Bristol announces a new CEO in the next month?" Ms. Rubin asks. "That means the likelihood of a deal coming down is reduced, and then the mkt starts to view Bristol from a purely fundamental perspective." She rates Bristol-Myers Equal-Weight.

“Ahead of the Tape” column discusses hedge fund industry, saying that some recent research reports point to trouble lurking for the $1trln hedge-fund industry. Hedge funds generally charge their clients fees amounting to 2% of assets under mgmt and 20% of profits. Add in trading costs, and funds need to generate gross annual returns of 18-19% to deliver a 10% return to investors, according to a Dresdner Kleinwort. These days that is no easy task. One worry relates to hedge-fund trading strategies, which look low-risk but could be dangerous if the mkt turns quickly. Many hedge funds employ strategies that involve betting on one asset against another asset. One catch. Brett Gallagher of Julius Baer Investment Mgmt has shown that the difference in annual returns across stock sectors around the world has narrowed recently. James Bianco of Bianco Research has shown the same is true across world stock and bond mkts. That suggests it is become harder to make money on hedge fund "relative value" bets. Moreover, emerging-mkt and corporate-bond prices have run so high, it is hard to push them further. "If you're trying to impress on people that you deserve '2 and 20,' it's really hard to do in this environment," Mr. Bianco says.