Paperstand (BSC, ITY, SHLD, GGP, BDK)

According to the WSJ, investors in two troubled Bear Sterns (BSC) hedge funds that made big bets on subprime mortgages have been practically wiped out. Bear said one of its funds was worth nothing and another worth less than a 10th of its value from a few months ago after its subprime trades went bad. The Wall Street investment bank has had to put up $1.6bn in rescue financing.

The WSJ reports that Spanish cigarette-and-cigar maker Altadis has agreed to be acquired by Imperial Tobacco (ITY) for about $17.9bn. The deal is expected to be announced as early as today. The deal, if completed, would create a European tobacco co with leading mkt shares in the UK, France, Spain, Germany and many Eastern European countries. An acquisition of Altadis would also give Imperial the world's largest cigar business by sales, a fast-growing niche of the tobacco industry that operates at much higher profit margins than cigarettes.

“Heard on the Street” column discusses Sears (SHLD), whose investors got a reminder of the retailer's precarious state last week. Shares had climbed sharply earlier this year on the belief that the co's Chmn, E. Lampert, could turn the retailer into a Berkshire Hathaway-like investment vehicle. But the stock price tumbled 10% after the retailer warned that profit this qrtr would be half that of a year ago. Some investors think the stock has further to fall. At its current price, Sears carries a significant premium to the value of its underlying retail business, they say. Sears trades at about 18x projected earnings for the next 12mo’s, richer than rivals JC Penney, which has a P/E ratio of almost 14, and Wal-Mart's multiple of about 15. "This got to a valuation that had nothing to do with retail," says Peter A. Sorrentino, of Huntington Asset Advisors. Some believe that what is keeping Sears's valuation afloat is the "Lampert premium," a confidence among investors that the Chmn will spin gold from Sears's threads.

“Inside Track” section reports that investors have abandoned REITs lately, but REIT insiders have been rushing in. REIT execs and directors spent close to $60m on their co’s stocks in the 2Q, the largest amount in the past 26 qrtrs. After performing strongly in recent years, REITs have come down sharply this year. The result is that REIT stocks are trading at a significant discount to the value of their underlying real-estate assets, said John Lutzius, of Green Street Advisors. "There is a big disconnect between prices on Wall St., REIT prices, and prices on Main St., private mkt pricing, and I think that to the extent that insiders are buying, that's probably what they're looking at," he said. The bulk of last qrtr's purchases were made at 5 co’s, with General Growth (GGP) leading the pack with $38.4m of stock purchases. The other four are Colonial Properties (CLP), Alesco (AFN), Ashford Hospitality (AHT) and Capital Trust (CT).

Barron’s Online discusses Black & Decker (BDK), saying that investors may now want to lock in some profits and avoid getting hammered. The US housing mkt will take much longer to recover than many initially expected. Cash-strapped homeowners are postponing renovation projects, while orders from retailers could take a hit. And investors betting on a takeout by GE or some other co may get disappointed. "For the next 18mo’s, the environment surrounding most of Black & Decker's end-mkts appears weak," says Alex Roepers, of Investment Mgmt. "Power tools will sell, but the question is how many. The home-improvement mkt looks soft. I do not see much of an earnings-growth story near term."