According to the WSJ, TD Ameritrade Holding (AMTD) and E*Trade Financial (ETFC) are holding merger discussions. A merger of the 2 online brokers would create a dominant player in what has been a highly fragmented industry, with dozens of smaller co’s battling for mkt share. As a result, it could reduce some of the fierce competition that has benefited consumers by driving down the cost of online trading but has squeezed the industry by chipping away at its profit margins. As of the end of June, E*Trade had 4.7m brokerage and banking accounts, TD Ameritrade had 6.3m such accounts. A spokeswoman for E*Trade said the firm's management team has consistently stated it believes there is "tremendous value in consolidation that aligns business strategy and operational synergies and will do what is in the best interest of its customers." A TD Ameritrade spokeswoman said, "We have talked and continue to talk to peers in the industry."
“Heard on the Street” column out saying that insurers’ stocks starting to look cheap. Insurance stocks have been hit hard by the mortgage-mkt tumult, and that has created opportunities for investors willing to overlook some dings and scratches in co’s that should generate healthy profits over the long term. Among the stocks trading at attractive prices are Genworth (GNW), Allstate (ALL), Hartford Financial (HIG), Chubb (CB) and ACE (ACE). True, some of these stocks could be hurt one way or another by subprime mortgages gone bad, but any losses could be minor compared with their overall profits. Genworth sells mortgage insurance, which puts the co on the hook to make good on home loans if borrowers default. Genworth and the other insurers hold mortgage securities in their investment portfolios, and some include subprime loans. "It's got the mortgage word in it, and that's a bad word these days," says Andrew Kligerman, ofUBS. Genworth has taken the biggest hit of the 5 co’s, and is now down about 20% from its high price for the year. Mr. Kligerman says the stock is now "dirt cheap," and earlier this month he upgraded it to a Buy rating.
The WSJ’s “Inside Track” section reports that despite the mkts' concern that tightening access to easy credit could derail LBOs, two Avaya (AV) insiders appear confident that their co's planned acquisition by private-equity firms will materialize. Francis M. Scricco, Avaya's sen. VP of manufacturing, logistics and procurement, and director Richard F. Wallman recently disclosed buying a total of $1.4m worth of the co's stock, even as Avaya's shares traded well below the $17.50-a-share price that a private-equity group has agreed to pay for the co.
Barron’s Online discusses South Jersey Industries (SJI), which is picking up new customers at a faster clip than the national avg. It's the co's innovative approach to providing on-site energy to Borgata Hotel Casino & Spa that has vaulted this local-utility operator onto the national scene. The co is in the midst of developing an even bigger facility to meet the heating and cooling demands for Echelon Place, a Las Vegas Strip resort scheduled to open in 2010. The stock's 3% dividend yield offers moderate stability, but its low payout, which falls below the co's minimum tgt of 50% of earnings, means there is considerable room for dividend growth. William H. Reaves, of WH Reaves, calls South Jersey "a fine little co" that is moving to a stage that will make it eligible as a holding for larger investment funds once it firmly stays above the $1bn mkt-cap level. Taking a long-term view, his firm has been an investor in South Jersey for several years and is the utility's 3rd-largest shareholder. Reaves says, "We think mgmt is exceptional and they just know how to grow value" with fiscal discipline and strong regulatory relationships.
“Inside Scoop” section reports that Jarden (JAH) insiders have bought more than $3.3m in the co's stock since July 31, even with the consumer-products co's shares falling along the way. Chmn and CEO Martin Franklin most recently bought shares on Fri, when he paid $465K for 15K shares. In total, he has spent nearly $2m on Jarden stock over the last month. Meanwhile, Jarden Vice Chmn and CFO Ian Ashken bought stock on two occasions in the last month, spending a total of $815K.
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