Notable Calls
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Friday, August 24, 2007
Paperstand (HD, TEL, COV, DFS, FRPT, THC)
According to the WSJ, Home Depot (HD) last night was close to accepting about $1.2bn less for its wholesale distribution business in the sale to three private-equity firms. But there were still substantial doubts about whether the deal would close before a deadline yesterday night, as three major banks continued to balk over the financing. The situation was becoming increasingly ugly, people familiar with the matter said, with some of the most senior figures on Wall St. trying to manage their exposure to a deal beset by twin crises in both the housing and credit mkts.
“Heard on the Street” column discusses spinoffs. Savvy investors have been playing this game for years, snapping up spinoffs after their share prices fall. Today, with investors valuing safety above potential returns, the current crop of spinoffs has been beaten up even more than usual, and that has created some bargains. "Given the timing of these spinoffs during this mkt volatility, the selloff has been more severe," said Michael Winter, of Otter Creek Mgmt. Among them, Tyco Electronics (TEL), Covidien (COV) and Discovery Financial (DFS). "You often see these spinoffs overlooked or shunned by the mkt b/c they're underfollowed by Wall St., and often they've got great business models," Mr. Winter says. "As an investor who doesn't really care about whether a co is a large cap or a midcap, you can buy them cheap."
Barron’s Online discusses Force Protection (FRPT), saying that since delivering the first MRAP vehicles to Iraq in ‘03, Force Protection has sparked a burgeoning program that the DoD now calls its "highest acquisition priority." Despite the military's push for as many vehicles as it can get, Force Protection stock looks attractive thanks to investors who have nervously sold off shares as competitors sought a piece of its lucrative mkt. Force Protection has the only battle-tested vehicles in Iraq and Afghanistan, with new entrants just beginning to deliver MRAP trucks under the Pentagon's program. "Force Protection defined the mkt in the US," Thomas Weisel analyst David Gremmels says. If the military has its way, the US govt will spend over $10bn on MRAPs between this year and next. And industry observers say ‘08 spending alone could ultimately approach $8-12bn, as the armed services look to order as many as 23K vehicles. Lawrence Korb, of Center for American Progress and an assistant secretary of defense from ‘81-‘85, calls the program's rapid growth "unprecedented." "Usually it takes a decade for something like this to happen," he says. "There is no member of Congress who opposes increased funding for this program," says SunTrust analyst Chris Donaghey, "even if they're opposed to our presence in Iraq."
“Inside Scoop” section reports that trouble in Florida has cast a dark shadow over Tenet Healthcare (THC), but now significant insider buying may indicate that the hospital operator's rehabilitation is going well. Over the past two days, CEO and President Trevor Fetter and independent director J. McDonald Williams spent an aggregate $486K to buy 129K shares on the open mkt. Although the dollar amount looks small, the number of shares purchased make ‘07 the largest buying year since ’99. Ben Silverman, of InsiderScore.com, says, "I think these guys are trying to call a bottom" to their stocks, but he doesn't think anyone is really bullish about this space right now. It's more of a valuation question. It's worth taking a look at Tenet, Silverman says, because "even though we saw more aggressive buying elsewhere, [Tenet's] cash flow stands out against the pack."
“Heard on the Street” column discusses spinoffs. Savvy investors have been playing this game for years, snapping up spinoffs after their share prices fall. Today, with investors valuing safety above potential returns, the current crop of spinoffs has been beaten up even more than usual, and that has created some bargains. "Given the timing of these spinoffs during this mkt volatility, the selloff has been more severe," said Michael Winter, of Otter Creek Mgmt. Among them, Tyco Electronics (TEL), Covidien (COV) and Discovery Financial (DFS). "You often see these spinoffs overlooked or shunned by the mkt b/c they're underfollowed by Wall St., and often they've got great business models," Mr. Winter says. "As an investor who doesn't really care about whether a co is a large cap or a midcap, you can buy them cheap."
Barron’s Online discusses Force Protection (FRPT), saying that since delivering the first MRAP vehicles to Iraq in ‘03, Force Protection has sparked a burgeoning program that the DoD now calls its "highest acquisition priority." Despite the military's push for as many vehicles as it can get, Force Protection stock looks attractive thanks to investors who have nervously sold off shares as competitors sought a piece of its lucrative mkt. Force Protection has the only battle-tested vehicles in Iraq and Afghanistan, with new entrants just beginning to deliver MRAP trucks under the Pentagon's program. "Force Protection defined the mkt in the US," Thomas Weisel analyst David Gremmels says. If the military has its way, the US govt will spend over $10bn on MRAPs between this year and next. And industry observers say ‘08 spending alone could ultimately approach $8-12bn, as the armed services look to order as many as 23K vehicles. Lawrence Korb, of Center for American Progress and an assistant secretary of defense from ‘81-‘85, calls the program's rapid growth "unprecedented." "Usually it takes a decade for something like this to happen," he says. "There is no member of Congress who opposes increased funding for this program," says SunTrust analyst Chris Donaghey, "even if they're opposed to our presence in Iraq."
“Inside Scoop” section reports that trouble in Florida has cast a dark shadow over Tenet Healthcare (THC), but now significant insider buying may indicate that the hospital operator's rehabilitation is going well. Over the past two days, CEO and President Trevor Fetter and independent director J. McDonald Williams spent an aggregate $486K to buy 129K shares on the open mkt. Although the dollar amount looks small, the number of shares purchased make ‘07 the largest buying year since ’99. Ben Silverman, of InsiderScore.com, says, "I think these guys are trying to call a bottom" to their stocks, but he doesn't think anyone is really bullish about this space right now. It's more of a valuation question. It's worth taking a look at Tenet, Silverman says, because "even though we saw more aggressive buying elsewhere, [Tenet's] cash flow stands out against the pack."
posted by notablecalls # 3:48 AM 
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