Friday, February 23, 2007

Paperstand (MSFT, IBN, HDB, PAYX, MCD, PRU, ENER)

The WSJ reports that a federal jury ordered Microsoft (MSFT) to pay $1.52bn to Alcatel-Lucent (ALU) for infringing patents on a fundamental technology for digital music. The decision found that Microsoft's Windows Media software had infringed two patents related to MP3. The patent verdict could have broad repercussions b/c of the widespread use of the MP3 audio format in technology and electronics products. Devices that employ the technology include Apple's iPod, software from Macromedia and Internet services from Yahoo. Daniel Harris, an intellectual-property attorney, said the decision "has great consequence for the industry as a whole, not to mention every co that implements MP3 technology."

“Heard on the Street” column out saying that as international interest in India's stock mkt has soared along with the country's economy, foreign investors have snagged more than half of the shares of India's 2 largest private-sector banking co’s: Icici Bank (IBN) and HDFC Bank (HDB). Stock prices for both co’s have tripled in the past 3 years. But recently some investors have called a time-out on the bull run as India's central bank has taken tougher steps to rein in lending growth and stanch inflation. Some investors say the fundamental prospects that made these banks smart investments in the first place haven't changed and that they remain attractive stocks. "India's largest bank is still only as big as China's 5th- or 6th-biggest bank," says Andrew Foster, of Matthews International Capital Mgmt. Mr. Foster says the fund's holdings included several Indian banks, including HDFC. Without being specific, he added that the fund hasn't recently changed the percentage of Indian banking shares in its portfolio. Like Chinese banks, Indian banks look expensive compared with other foreign financial institutions, he said, but may be worth buying b/c of their potential growth. Foreign banks are kept from expanding rapidly in India through acquiring Indian banks or opening many of their own branches.

Barron’s Online discusses high dividend yield stocks, saying that dividends have contributed more than 40% of the S&P's 500’s returns since 1926. Today, co’s with modest dividend yields, but a strong cash position and business model, can offer better total returns over the long term than stocks that simply beckon b/c of their fat yields. Examples include Paychex (PAYX), McDonald’s (MCD) and Prudential (PRU). All 3 have modest dividends but great outlooks for both their future dividends and their shares. "You will get more total return from a lower-yielding stock with a strong [business] outlook," says Richard Helm, of Cohen & Steers Dividend Value Fund.

“Inside Scoop” section reports that small-cap hedge fund Coghill Capital Mgmt is charging into Energy Conversion Devices (ENER), boosting its stake and taking an activist stance. Coghill has dillydallied as a passive investor in Energy Conversion since late ‘03. But news that the co will not be able to achieve "sustainable profitability" by the end of the fiscal year in June during the 2Q conference call earlier this month appears to have jolted Coghill into a more activist stance. Late Wed, Coghill disclosed that it has acquired warrants and options for a potential 8.6% stake, or more than 3.4m shares, in the co. The fund held 323K shares valued at nearly $11M at the end of ’06. Jonathan Moreland, of InsiderInsights.com, mulls the current political support behind alternative-energy co’s. "We all love to be green investors," he says, "but there's got to be some green in it for you."

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