Friday, July 06, 2007

Paperstand (BX, FORM, CYMI)

The WSJs ”Heard on the Street” column discusses Blackstone (BX) acquisition of Hilton Hotels, saying that it comes at an uncertain juncture for the business. With new construction jumping sharply and room demand softening, it isn't clear how long the upward trend can last. Before Blackstone's agreement to acquire Hilton was announced, Moody's downgraded the hotel industry to "stable" from "positive." The ratings firm cited a potential glut of hotel rooms b/c of slowing travel. PKF Hospitality Research says the damping effect of the housing-mkt slowdown on construction and labor prices could unleash a wave of hotel-room starts beyond those already planned. That combination of factors could help the current hotel boom end as most lodging cycles do, on a wave of oversupply, sooner than expected. And that could weigh on share prices.

Barron’s Online out saying that these are tricky times for the investor in semi equipment makers. The group is way up in the last 12 mo’s, but it's mostly on the strength of a few large co’s that have very particular reasons for outperforming. That means it's time to dig deeper into chip-equipment stocks as many of the larger, better-known names seem priced to perfection. Among these smaller co’s worth considering: Formfactor (FORM) and Cymer (CYMI). Best approach now is simply buying underperforming stocks of smaller equipment makers whose earnings should rise sharply next year. Although chip makers have tightened their spending on new equipment, the sense among Wall St. analysts is that chip-equipment spending will come on strong again in ‘08.

“Inside Scoop” section reports robust selling by insiders at Coventry Health (CVH). Since the latest round of selling that began May 1, 14 senior execs and directors at Coventry sold nearly 430K shares on the open mkt for $25.6m. Ben Silverman, of, says insider sentiment at Coventry "is always bearish" b/c selling is the norm at the co. But the collective action by insiders calls the valuation into question and suggests the stock "might not move much higher in the near term."

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