Thursday, May 31, 2007

Paperstand (KO, DELL, LNG)

The WSJ reports that Coca-Cola (KO) and Cargill have teamed up to mkt a new calorie-free natural sweetener they hope will appeal to health-conscious consumers and shake up the global sweeteners mkt, but they face serious regulatory and production challenges. Today, the multibillion-dollar global sweetener mkt is dominated by sugar, high-fructose corn syrup and synthetic sweeteners such as aspartame and sucralose. But with consumers increasingly eager for healthy foods and beverages of natural origin, Coke and Cargill may have found a sweet spot for rebiana, which is derived from a S-American herb called stevia.

According to the “Ahead of the Tape” column, Dell’s (DELL) earnings report today is unlikely to alter Street's view that the former PC champ is getting clobbered by its rival, H-P (HPQ). World-wide PC shipments by Dell fell 7.8% in the 1Q, and its share of the global mkt dropped to 13.9% from 16.4%. H-P's PC shipments, meanwhile, surged 29% in the qrtr and its mkt share rose to 17.6% from 14.9%. Dell's F1Q earnings, the first full qrtr after Chmn Michael Dell reassumed the CEO spot in Jan, should reflect that drop. Analysts expect the co to post earnings excluding 1x items of 26c a share, a 21% decline. Profit margins could be a rare bright spot. The price of computer chips has plunged this year. In April, cheap chips used in iPods helped Apple post strong quarterly margins. A similar decline may also help Dell. But Dell is grappling with many more issues, including an SEC investigation into its accounting practices. In June, the co will start selling PCs at Wal-Mart (WMT), a shift from its low-cost direct-sales model that could sap margins. With so many clouds hanging over Dell, any sunshine could light up its shares. But its storm is far from over.

Barron’s Online suggests that tech investors might consider options contracts as a way to make money off the sluggish stock performance of communications-equipment (CE) vendors this summer. This group within the S&P's 500 is one out-of-favor area that could pick up with such a surge in prices between now and the end of Sep. Shares of Ciena (CIEN), Alcatel-Lucent (ALU) and other components of the S&P CE group have lagged the mkt, on avg, this year, rising only 6.3% compared to 7% for the S&P 500. But the trick is, it may not pay to be long-term holders of the stocks if a correction follows the meltup. These shares could easily show up for less money after the summer. For that reason, selling options could be a way to make some money off the short sellers' "capitulation" without having to take a long-term bet on co’s through outright stock purchases. 3 different strategies present themselves. Investors who already own CE stocks can make money by selling "covered" calls this summer. Investors who don't own shares can sell put options, making a little money while waiting for the possibility of the mkt meltup. Lastly, investors willing to forego income in return for less risk may sell shares of Nokia (NOK) or other stocks they already own while buying calls, which give the investor an opportunity to get back into the stock later on if shares do, indeed, experience a "meltup."

“Inside Scoop” section reports that an offshore mutual-fund manager is snapping up soaring shares of Cheniere Energy (LNG) well ahead of the opening of its first liquefied-natural-gas (LNG) facility along the Gulf Coast. Orbis Investment Mgmt crossed the 10% ownership threshold on May 10 and then purchased another 112K shares on the open mkt for $4.05m. Ben Silverman, of, says Orbis "came in strong here both in terms of what they bought in the last 5 months and with the stock rising."

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