Wednesday, March 21, 2007

Paperstand (CMGI, SBUX, JAS)

According to the WSJ, Barclay’s (BCS) talks to buy ABN (ABN) are forcing banks world-wide to evaluate their next moves. Elite global banks such as Citigroup (C) or HSBC (HBC) could emerge as 11th-hour bidders for ABN. HSBC's recent missteps in the US mkt for risky subprime mortgages may sideline the big British bank, but several investment bankers believe that Citigroup Chmn and CEO Charles Prince could use ABN as a chance to show he has the troubled bank moving in the right direction. Several European banks could also bid. ING Groep (ING) says it is "following developments."

“Heard on the Street” column discusses Starbux (SBUX) saying that the shares of the co may have more perk in them than some investors realize. At Starbucks's annual meeting, scheduled for today, execs plan to reaffirm the co's growth plans and shed light on their vision for the future. That usually wouldn't mean much to the co's investors, who have been accustomed to rapid growth and rising shares. But this year is different. "Ppl want to be reassured that there is not a brand problem," says UBS analyst David Palmer. Part of what has always driven Starbucks's stock is the magic surrounding its brand, led by Chmn Howard Schultz’s cheerleading, and investors are sure to get a dose of that at today's meeting. Last year, Mr. Schultz and CEO Jim Donald mixed homespun anecdotes with financial charts showing the co's rapid growth before crooner Tony Bennett appeared on stage for a surprise performance. "To the degree that ppl need to see confidence from Howard," Mr. Palmer said, "we believe that they will see it."

Barron’s Online highlights CMGI (CMGI), saying that recently some of the savviest hedge funds, including Renaissance Technologies, have been buying CMGI stock as the co morphs again. Today CMGI gets paid a fee to streamline the delivery of electronics for firms such as Hewlett-Packard and Eastman Kodak. After a year of little or no attention on Wall St., WR Hambrecht analyst Robert Stimson initiated coverage of CMGI on March 9 with a Buy rating, saying the present value of CMGI's assets is $2.50, 35% above a recent price of $1.85. "Where there has been enormous opportunity in tech is with some of these fallen angels," says Stimson. But after a 40% jump this year in CMGI shares, is there any upside left? Barron’s thinks so. CMGI may be a cheap bet that there's value in the electronics supply chain. Trading below the co's $1bn in trailing 12-mo sales, and with $275m of cash and $2bn of net operating loss carry-forwards, the co may even be an attractive take-out tgt for freight giants such as FedEx or UPS. "As (CMGI) improves its gross profit and operating profit, this is a business whose sales can rise by 20% or more a year," adds Stimson.

“Inside Scoop” section reports that Tennenbaum Capital Partners and longtime insiders at Jo-Ann Stores (JAS) collectively grossed nearly $73m by selling 2.96m shares on the open mkt. Ben Silverman, of, said there may be some concern that Tennenbaum Capital dumped its stake "unceremoniously," but the mitigating factor is that the fund "really bought at the right time." Silverman notes that fellow value investor Olstein Capital Mgmt also reduced its stake drastically a few months ago. In Dec, Olstein sold 1.26m Jo-Ann shares for $30.5m, slipping its holdings below the 5% threshold. It held stakes of 9.1% at the end of ‘05 and 7.9% as of mid-Oct ‘06, notes Silverman. With Jo-Ann rallying, Silverman says "the expectations are high and it's a valuation question now."

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