Notable Calls

The WSJ’s “Heard on the Street” column out saying that some investors have begun circling retailing stocks like shoppers clawing at the bargain bin. Activist investor Nelson Peltz boosted a stake in Tiffany (TIF) to 7.9%, mostly with purchases since the yr began. Richard C. Breeden bought more shares in Zale (ZLC) and then joined the co's board. William Ackman, an activist investor with stakes in Sears (SHLD) and Target (TGT), has increased his exposure to Target through stock swaps that let him rack up gains or losses on the stock without actually holding shares. Icelandic retail behemoth Baugur Group and its billionaire exec chmn, who hold 8.5% of Saks (SKS), are preparing a bid for the entire co. Carl Icahn announced at an industry dinner Jan. 14 that, with their shares falling off the rack, retailers are attractive investments. Mr. Icahn acknowledges that his timing could be off. "I am not bullish on the economy, and it certainly could get a lot worse before it gets better," he said in an interview, adding that retail shares, in particular, "might well go lower" before they go up. Yesterday, Barington Capital Group and Clinton Group reported that they have snapped up a 5.32% stake in Dillard’s (DDS). Barington chastised the co and called for change. Last week, Sanford C. Bernstein upgraded the US retail sector to the equivalent of Buy from Hold, saying retailing stocks have underperformed the broader mkt for the last 3 yrs. Many retail stocks, including Macy’s (M) and JC Penney (JCP), rose last week. Part of the reason investors are piling in is that the retail sector has been battered more than other stocks. Some retailers, including Coach (COH) and Target, now have forward P/E ratios near their historic lows. Retailers also tend to generate strong cash flow, and some have attractive real-estate holdings.

“Inside Track” section reports that President and CEO of Luby’s (LUB), Christopher J. Pappas, and his brother, COO Harris J. Pappas, bought a total of $5.4m in shares of the co last week, just one week after shareholders favored mgmt-backed board nominees over candidates supported by an activist hedge fund. After the latest stock purchase, the brothers hold a combined stake of 28.6% in Luby's.

Barron’s Online highlights Intel (INTC), saying that though its shares have lost a quarter of their value in just 3 mo’s, it is actually sitting pretty. Despite its hefty size, Intel will likely generate double-digit annual earnings growth over the next 3-5 yrs. And its main competitor, AMD (AMD), is on the ropes. It's a good bet that Intel will extend its already sizable lead in PC microprocessors at the expense of AMD, especially if the economy weakens further. If Intel does gain share against AMD, it could offset a weakening outlook for PCs and lead to upside in Intel's earnings. At a recent price of about $20, Intel trades at just about 12x ’09 EPS. If Intel can achieve the earnings multiple closer to the 15x that the S&P500 garnered most of last yr, its shares would appreciate by about 20%. After cutting headcount by 14% in 2 yrs, shaving costs and moving to more efficient manufacturing of its chips, Intel is a leaner machine that's poised to benefit as rapid growth in emerging mkts help PCs grow at double-digit rates this yr. "So far we haven't seen any evidence that suggests that PCs are falling off a cliff," says Paul Wick, of J&W Seligman.

posted by notablecalls  # 4:19 AM 1 comments

The WSJ reports that the board of Altria (MO) is expected tomorrow to approve a long-awaited decision to split PMI from Philip Morris USA. The move would free the tobacco giant's international operations of legal and public-relations headaches in the US that have hindered its growth. Marlboro Intense is likely to be part of an aggressive blitz of new smoking products PMI will roll out around the globe once the co becomes a standalone entity. The idea behind Intense is to appeal to customers who, due to indoor smoking bans, want to dash outside for a quick nicotine hit but don't always finish a full-size cigarette. Pointing to his lit Intense, the CEO Andre Calantzopoulos says there are "possibly 50 mkts that are interested in deploying it." The separate entity, for example, would be exempt from U.S. tobacco regulations and out of reach of American litigators. Importantly, its practices would no longer be constrained by American public opinion, paving the way for broad product experimentation. By as early as March, PMI could be operating as an independent co.

Barron’s highlights tech fund top 10 holdings: SNPS, BMC, DOX, MFE, QCOM, CHKP, ORCL, CSCO, MRVL, MXIM.

“Inside Scoop” section reprots that one longtime director at AT&T (T) has made a bullish call on the co's future, increasing his holdings by more than 35%. On Fri Director August Busch III purchased 63K shares for $2.3m. He now holds 139K shares directly, 94K non-voting stock units in a benefit plan, and 6K shares indirectly through trusts. “This buy is unusual in the sense that you don't see a lot of [insider] buying at the former Bells, or at the large-cap telecoms like AT&T, Verizon and Sprint in general," says Ben Silverman, of InsiderScore.com. Busch, along with former director and billionaire Carlos Slim, is one of only 3 insiders at the co to make open-mkt purchases of AT&T stock in the past 5 yrs. "The buy is also intriguing in the sense that there's been a real sea change in attitude toward the remaining big telecoms," says Silverman. "Historically they were viewed as safe income-generating investments that could weather economic downturns b/c of the [stability] of the landline business. Now that the telecom sector has changed, it's the first time the new business models [based on] wireless and broadband are being tested during a recessionary economy."

LightReading reports that Infinera (INFN) has scored another win with a sales pitch centered around "bandwidth virtualization" -- what the vendor is calling its equipment's unique ability to decouple services from optics. The co is announcing today that it won the favor of data center specialist Equinix (EQIX) largely on the density of the equipment and its ability to enable the quick provisioning of new services. Equinix CTO Lane Patterson says his co picked Infinera b/c traditional Wavelength Division Multiplexing (WDM) equipment, clocking in with 32 wavelengths of 10-Gbit/s bandwidth, was not enough for some Equinix customers. "The density of that equipment wasn't where it needed to be," Patterson says. With Infinera equipment, Patterson notes, Equinix can deploy "80 waves before we have to acquire dark fiber." On the provisioning side, Patterson says: "It's helpful that they have point-and-click provisioning and an easy-to-use self-managing platform."

posted by notablecalls  # 4:17 AM 0 comments

Barrons’ “The Trader” column discusses Apple (AAPL), whose shares are down 35% in a month. At 130, shares trade at 20.7x forward earnings, the cheapest in a while. Stripping out its big cash stash, the stock trades at about 13x FCF. While the Street frets about slowing iPod sales, it's easy to forget Apple’s range. Mac revs grew 47% last qrtr. Unit sales are expected to increase at a pace more than double the industry's 11.6%, and Apple continues to gain share in the computer and phone mkts. Investors moaning about the 4m iPhones sold so far forget that Apple had no mobile-phone presence just a yr ago. Margins near 35% should improve with cheaper component prices, and Apple is rolling out its new operating system and iPhones overseas. In fact, Apple's knack for packaging aspiration and creating things ppl feel compelled to own will stand it in good stead in a spending slowdown. The new "MacBook Air," for instance, has inspired lust among existing laptop owners, and the buzz among young media types means consumer magazines will pant after it in print for mo’s to come. If history holds true, profit taking in Apple will exhaust itself about 21 days after the earnings report. Last week, Citigroup analyst Richard Gardner called the sell off "overdone." Deutsche Bank analyst Chris Whitmore has a 225 price tgt.

Barron’s cover out saying that the downdraft in the market may not be over, but some stocks already look inexpensive and worth a long-term bet. "These are some of the best opportunities that I've seen in the past seven yrs," says Mark Boyar, of Mark Boyar & Co. Co’s worth a look include: BAC, WB, WFC, C, PFE, LIZ, HOG, DOW, MET, TWX, CBS, FNM, GCI, IACI, CB, COP, FCX, BA, GE, CMI, DIS, MO and MOT.

Barron’s Roundtable members like WMI, ROH, INTC, XLNX, EUM, FXP, SCJ, FIS, HAFC, BAC, LNC, PAY, CHK, HIG, DVN, ESV, AVT, ROST, ZINC and ELRN. Shorts include: XLY, FXI and DRYS.

Buyers of Chinese IPOs beware. A research house finds many of these US-listed issuers still offer poor governance and accounting, as well as lower-quality earnings. "The results are quite striking," says Victor Germack, of RateFinancials. "And these are from the documents of record, b/c Regulation FD says they have to reveal public information through their filings. This is what investors rely on, not puff pieces from the co." The five are GA, LDK, NPD, YGE and GRO.

If Systemax's (SYX) high gross margins have been fattened by failure to pay out manufacturer rebates, then an end to that alleged behavior might crimp profits, and the share price. "Having a business model that heavily involves rebates, there's nothing inherently wrong in that, as long as you play it fair," says Matthew R. Wilson, a class-action lawyer who's suing TigerDirect and Systemax in a NY federal district court.

The shares of Helmerich & Payne (HP), up nearly 45% since the start of 2007, look poised to climb by at least another 40%, even as rivals with older gear are punished. "What we are seeing is an opportunity to take market share...in a softer environment, because there is such a need for reinvestment and retooling,'' says CEO Hans Helmerich.

According to “The Trader” column, Dan Frascarelli, of Lord Abbett, thinks the 1990 slowdown, with its troubled banks and anemic capital ratios, offers a better comparison than 1998. Then, it took yrs for banks to rebuild their balance sheets. While cyclical stocks do well when the Fed cuts rates, he thinks it's "too early" to take an aggressive stance, partly b/c "we haven't seen the worst of the economic data yet." Frascarelli favors PG, CL, CVS, K, KFT, ABT, JNJ, MRK, FPL and D.

“Follow Up” section highlights Under Armour (UA), saying that the selloff has given long-term investors a chance to snap up a quality, fast-growing sports-apparel franchise at its lowest price in more than a yr. Barron’s thinks the potential reward outweighs the risks. But if its foray into non-cleated footwear is a hit, Under Armour's stock could move back into the low-40s within a yr. The co has made its pricey apparel and football cleats must-haves among young jocks, and bulls think it can work similar magic with cross-training sneakers. Cross-trainers could add $40-50m in rev beginning in the 2Q, and eventually $1bn of sales and more than $2 a share of profits. Says Matt Powell, of SportsOneSource. "I wouldn't be surprised if Under Armour takes a 10% share of the cross-training mkt in the first yr."

“Plugged In” column discusses Apple’s (AAPL) iPhone sales. Last week, AT&T (T) revealed that as of yr-end it had only 2m or so active Apple subs. That's a disconnect b/c Apple just announced with great fanfare at MacWorld that is has sold more than 4m phones. Considering that 3.75m units were sold through Dec31 and assuming about 350K of those were sold in Europe, that leaves about 1.4m US iPhones missing in action, says Bernstein analyst Toni Sacconaghi. "We were anxious about inventory b/c Apple was so reticent about it," Sacconaghi told. Unaccounted inventory "was a little bigger than we thought," he says. There are two things that can account for the missing handsets: carrier inventory and unlocked phones. iPhone owners who didn't want to use AT&T or Apple's European wireless carriers have cracked open the phones to use with unauthorized networks. Nobody knows how big this number is except for Apple and the carriers. Sacconaghi ests that about 20% of all iPhones sold are improperly unlocked, which, he says, means at least 670K iPhones are sitting on the shelves of AT&T and the euro-carriers.

“Technology Trader” highlights Avnet (AVT) that sells thousands of products to more than 100K customers. That makes Avnet a canary in a coal mine for IT spending, semiconductors and hardware. Still, the stock seems to discount any coming weakness. Distributors don't carry high multiples; as CEO Roy Vallee notes, they tend to have relatively low margins and no patents or intellectual property. But Avnet seems to be an underappreciated growth machine. For 7 yrs, he says, it has been increasing its return on capital and cash flow, then using the cash to do "value-creating acquisitions," which boost rev and profit growth. It's also strengthened "core operations, improving scale and scope as we go." But Vallee complains that the Street gives the stock zero respect. Avnet trades at a PEG ratio around 0.5. It trades at a P/E of less than 10x estd ‘09 EPS, and fetches just 0.3x last yr's sales. Says Vallee: "The Street is either not getting our story, or not believing it yet." For tech investors, not a bad place to hide.

“Technology Trader” also discusses Sprint Nextel (S), which has some very valuable unused spectrum, which it intends to use to build out a wireless broadband network. And now Sprint has a new, attractive feature: a stock down 31% this yr. The rumor mill is spinning wildly. The co has often been rumored to be an acquisition tgt for Comcast (CMCSA), but that's a long shot. A more intriguing notion has the co cutting a deal with Google (GOOG), which is currently playing a key role in the 700 MHz bandwidth auction under way. Some think that Google could take a significant equity stake in Sprint, which would be a lot cheaper than building a new service provider. Another theory: Sprint could be bought out by private-equity investors. In Nov Sprint had rejected a proposal from SK Telecom and Providence Equity Partners to invest $5bn in the co and to install Sprint's former chmn, Tim Donahue, as CEO. That was with the stock north of $15. Now it's barely over $9. But the spectrum gets only more valuable over time, the current auction will provide a good gauge of what it's worth. The stock, in short, is simply too cheap to ignore.

posted by notablecalls  # 10:43 AM 2 comments

According to the WSJ, Citigroup (C) is abandoning a push to open as many as 100 branches a yr in the US, concluding it had little chance to dislodge entrenched rivals in several mkts. Barely 2 yrs after introducing the strategy, execs at the bank now intend to sell or close some of the newest Citigroup locations. The most likely locations to disappear are in places such as Tampa., Fla., where Citigroup's small presence is dwarfed by rivals. Citigroup will focus on several large US metropolitan areas where its mkt share of deposits is strong or growing. "This is about optimizing the use of our resources," said Steven Freiberg, head of Citigroup's US consumer group.

The WSJ reports that Ford (F) will announce as soon as today that it has reached an agreement with the UAW union on terms for a new wave of buyouts that could trim thousands of jobs. The auto maker's goal in offering the companywide buyouts will be to cut as many as 11K hourly jobs and as many as 2K salaried positions, on top of the some 44K jobs the co has shed since the beginning of ‘06. Ford, which may announce the new round of buyouts during its yr-end earnings conference call today, hopes to part with most of the additional workers by the end of the 1Q. Hourly union workers who accept a buyout could be allowed to depart as soon as March 1, while salaried employees could leave by April or May.

“Heard on the Street” column questions, where have buybacks gone? In past mkt stumbles, investors could count on one thing to help stabilize the situation: a round of share buybacks. This time around, there are even higher hopes for such repurchases, given that the stock-mkt rout has made prices cheaper and falling interest rates make it less expensive to borrow money to buy stocks. But most co’s aren't biting. Many bought back shares in recent yrs when they were much more expensive, leaving them with less ability and leeway with their investors to jump back in now. "Co’s are realizing that you can't fight the mkt with buybacks," said Howard Silverblatt, of Standard & Poor's. "It's like using your fist to hit a brick wall. You just keep hitting and hitting, and it just doesn't move."

The Financial Times reports that Societe Generale said on Thu it had discovered almost €5bn ($7.3bn) of losses caused by a rogue trader dealing in European stock futures, which had forced the French bank into an emergency €5.5bn share issue. Daniel Bouton, SG’s long-standing CEO and Chmn, has seen his offer to resign turned down by the board after unveiling the colossal losses, including €2.05bn of writedowns on its structured credit activities. The rogue trader, likely to trigger comparison’s with the UK’s Nick Leeson, who caused the collapse of Barings Bank in 1995, had “deep knowledge” of risk-control procedures from his time at the bank’s middle-office activities, which SG said had allowed him to disguise his positions. The bank said it had no more exposure to the trader’s positions, which were identified and analysed on January 19 and 20, just before stock mkts crashed unexpectedly around the world on January 21.

posted by notablecalls  # 4:03 AM 0 comments

The WSJ discusses Sears (SHLD), saying that the co confirmed that it will reorganize its operations into 5 major units in a bid to give mgmt teams more autonomy and control over their groups. Sears identified its real-estate holdings as one of those units. Investors long have speculated that Sears's chmn Ed Lampert may sell some or all of the co owned Sears and Kmart locations to raise capital and then lease them back from the buyer. The trouble is, the continuing credit crisis has sapped the value of residential and commercial real estate alike in recent mo’s. Credit Suisse ests the value of Sears' real estate has "declined materially" in recent months to nearly $4.7bn. CS analyst Gary Balter noted that motivation to sell Sears's real estate could be undermined by the costs of vacating some of Sears's least-desirable locations. Those costs could exceed the amount those properties would bring in a sale. Most of Sears's store sites are of "C" or "D" quality, meaning they are avg or below avg. "We still believe that Sears and Kmart have some excellent locations that will command premium prices should the co decide to sell," CS's Mr. Balter wrote in a research report. "However, the mkt has recently dropped significantly, and...there is a cost, not a benefit, to getting out of weak locations."

“Heard on the Street” column discusses US banks, saying that the Fed's tonic hasn't worked so far. Before the latest move, the Fed chopped rates by one percentage point -- and those reductions didn't appear to have a big immediate impact on bank lending. "It's not clear that this cut will have much of a stimulus, given that the previous cuts didn't have a significant effect," says Joseph Mason, of Drexel University. Of the many worries still facing banks, the biggest is that they will likely have to set aside more money than expected for soured loans on autos and credit cards. These loan-loss provisions soared in the 4Q, and this expense could be higher than bank execs are forecasting. "Banks are in complete denial about the losses that are coming," says Paul Miller, of FBR. Mr. Miller ests that large US banks could book $100-120bn in provisions.

Barron’s Online discusses Siemens (SI), whose shares, recently at $124, trade at a relatively modest 14x estd ‘08 earnings, giving the stock a PEG ratio of just 0.56. Siemens is the number one or number two player, globally, in most of its businesses. Indeed, it was the telecom business that got Siemens in hot water when it was revealed in ‘06 that the firm had paid hundreds of millions of dollars in bribes to win contracts in Saudi Arabia, Nigeria and Russia. Since then, top mgmt has been cleaned out, and last July Peter Loescher was brought in as CEO. John Maloney of M&R Capital Mgmt, who has been buying the stock, tells Barron's that he thinks Siemens could earn $12.73 per share by F’10. Another plus: The co said last yr that it would repurchase up to 10bn euros ($14.6bn) worth of stock by 2010, which could shrink the share count by 10% or more.

“Inside Scoop” section reprots that ValueAct Capital on Fri disclosed it now owns 36.2m shares, or a 5% stake in Sara Lee (SLE), making it the co's 3rd-largest shareholder. "It looks like the fund is out hunting for value again," says Lon Juricic, of StreetInsider.com. "They are long-term investors who take large, concentrated positions in co’s. They are making a bet that going forward the co is worth more than what the mkt's pricing it."

According to the Barron’s Online, one healthcare fund holds: MHS, HOLX, ABT, SONO, TMO, AET, BAX, MRK and WLP.

posted by notablecalls  # 4:39 AM 0 comments

“Streetwise” section out saying that United Rentals (URI) is the kind of co that would be hurt by a recession. The stock has collapsed to around 16. Though much of that derives from the dissolution of a proposed buyout of UR by Cerberus Capital Magmt, the stock is down to ‘03 levels. What's odd is that even though analysts have cut ‘08 EPS ests, UR recently announced preliminary ‘08 guidance of $2.80-3.00. That's based on rental rev growth of 3%, to $2.71bn, and margin improvement that is more than double '07's rise. In a recession, that guidance may prove optimistic, but UR has $2 a share in cash, a decent balance sheet, and trades at a P/E of less than 6x. If its earnings were to fall 50%, it would trade at a P/E around 12. Short of a nasty recession, UR's stock drop may present a long-term opportunity.

Barron’s cover discusses bloodshed on the mkt. Among the few prescient Street seers is veteran Byron Wien, the chief investment strategist at Pequot Capital. At the start of ‘08, Wien predicted that the S&P 500 would drop 10% this yr, that earnings would decline and that the country's first recession since ‘01 would prompt the Fed to cut short-term rates to below 3%. "We're beginning to see some bottoming signs," he said Fri. "We've switched from complacency to concern but not to capitulation yet." Value-oriented investors are getting excited because there are now plenty of inexpensive stocks, measured either by earnings or book value. CB, ALL, TSO, SUN, JCP, M, LEH, MS, LEN, PHM, TOL, DHI, CTX, NVR, KBH, MDC, WB, WFC, BAC, C. JPMorgan (JPM), which has been relatively unscathed by credit problems, is one of few potential buyers of any size in the battered financial sector. That gives CEO Jamie Dimon plenty of leverage if he decides to pursue a deal. Potential targets include WaMu, SunTrust (STI) and even Bear Sterns (BSC).

Barrons’ Roundtable members picks include UPL, WFR, QCOM, FMCN, AMX, GFA, GLD, AEM, MHK, WHR, AEO, GPC, ENSI, DISH, DTV, CSG, GAP and TVL. Pair trade Long FXY – Short GBP. Short ideas include RIMM and AMZN.

MBIA's (MBI) shares were savaged anew last week, and now its stock looks cheap. It trades for about 8, well below a conservative liquidation value above $30 a share.

Acorda Therapeutics (ACOR), whose stock has been in the low 20s, could hit 28 in the next 12 months if clinical trials go well. And, ultimately, the company could be a takeover target.

“Sizing Up Small Caps” column highlights Shutterfly (SFLY), saying that pricing pressure in the digital photo-print business is clouding the picture at Shutterfly. Even at that level, the shares, up 45%+ in the past yr, sell at 96x trailing earnings and 35x ‘08 profit ests. Prudent investors should balk at paying up for this consumer play just as US economic growth is dimming. VistaPrint (VPRT), a fast-growing and profitable Internet printing and graphics-design services firm that some analysts consider a peer to Shutterfly, trades for 26x ‘08 earnings. Awarding Shutterfly a multiple of 28, a premium to VistaPrint's and to Street's avg est of its long-term profit-growth rate, would value Shutterfly at 16, about 20% below the current price. "We've differentiating ourselves through quality, ease of use, the breadth of our product and design," CEO Jeffrey Housenbold recently said. "If Ford cuts prices on slow-moving cars, Lexus doesn't need to respond." But Shutterfly did reduce prices in ‘05, and some analysts think the co, along with Kodak Gallery will do so again, perhaps by mid-yr.

“The Trader” column discusses Express Scripts (ESRX), saying that investors searching for a recession-resistant growth stock have bid the shares up 120% in the past yr, and at about 69, the stock trades at 24x ‘08 profits, compared with 23.7 times for the larger Medco (MHS) and 21x for other health-care-services co’s. ES pulled back last wk after Medco clinched a contract to provide mail-order drugs for HIP Health Plan. JPMorgan analyst Lisa Gill downgraded the stock, worried that certain contracts due to be renewed in mid-‘08 "could be at risk." The discounting of generic Protonix, for example, also may prove less dramatic, and the takeover premium in the stock may prove optimistic. The CEO of Walgreen (WAG), for one, recently said he has no plans to buy a pharmacy-benefits manager. ES' valuation also is a deterrent. So is its hefty debt load. Long-term debt is about 76% of capital, well above the 18% avg of its peers. Benefit-mgmt profits should grow, but upside for ES may take longer to arrive.

“Up And Down Wall Street” column discusses IHOP (IHP), whose stock is down 40% on continued weak Applebee's results and high costs for the debt. The co is really a financial and operational turnaround in progress, led by a CEO Julia Stewart. The co has a mkt value just under $800m, and took on $2bn in debt to buy Applebee's. The IHOP chain has performed well, showing steady SSS growth, following a menu and ad revamp. A similar plan is slated for Applebee's. There are 1,976 Applebee's locations worldwide, 510 owned by the co. The plan is to sell 475 of those to franchisees at a pace of about 40 per qrtr. That could yield $500m in the end. The co will also be selling and leasing-back Applebee's corporate HQ and other real estate, for perhaps $450m. All of this will pay down debt. Charles Kantor, of Neuberger Berman, points out that Stewart is beloved by Applebee's franchisees, which remain loyal to the brand, given still-decent single-store cash-flow dynamics. Kantor notes the dramatically positive benefits of reducing debt over the next several qrtrs in the form of FCF. Some buy-side ests peg FCF per share at more than $4 in ‘09, up from something more than $2 this yr, and then rising above $6 in 2010. This presumes no store expansion and nothing heroic on SSS results. Even a conservative multiple of 14 on next yr's FCF could place the stock at $60. A 15 multiple on a projected $3.91 in '09 earnings gets you to about the same place.

posted by notablecalls  # 7:07 AM 0 comments

Barron’s Online out saying that Apple (AAPL) should pass economic stress test. If the US economy goes into a recession, any public co with an uncanny knack for generating outsize growth may find its shares highly prized by investors. One such co could be Apple, which despite sales of $24bn last year, sells just a fraction of the world's PCs and less than 1% of all cellphones. That tiny mkt share presents plenty of upside for Apple as it makes inroads in both fields. Apple's iPhone has quickly seized significant share of the small but fast-growing mkt for the most expensive phones, putting to shame cellular stalwarts Nokia and Motorola. And all indications are that Apple had a boffo holiday season in computer sales, which could give the shares some support when earnings are announced next week. On Tue, CEO Steve Jobs displayed the kind of chutzpah that keeps Apple in the papers and keeps pushing the co into new mkts, announcing the world's thinnest laptop, the "MacBook Air," and a revamped version of its computer for the living room, AppleTV. It's that doggedness with respect to emerging product categories that keeps adding new chapters to Apple's story as a growth stock. Sales and profit should both grow better than 20% next FY. At a recent price of $158, Apple shares have had a "20% off sale." "Apple's not immune to the cycles of PC buying, but they have a lot of room to grow, and they're doing a lot of things right," says Tony Ursillo, of Loomis Sayles. Ursillo expects Apple's Macintosh computer unit sales to rise 25% this yr, more than double the 11.6% rate of the PC industry overall projected by research firm Gartner. "The story with Apple continues to be how far ahead of their competitors the products are," says Glen Kacher, of Integral Capital Partners. "There is a multiyear path for Apple to gain mkt share in the PC business," says Kacher.

“Inside Scoop” section reprots that the famed activist investor, Nelson Peltz, bought 3.6m shares of Tiffany (TIF) on Tue and last Fri, jumping in after the jewelry retailer's stock tumbled 11% on disappointing holiday sales and a lowered ‘07 profit forecast. Peltz's Trian Fund Magmt now owns 7.9% of Tiffany, or 10.7m shares.

The WSJ’s “Heard on the Street” column discusses Delta Air (DAL) merger plans. As Delta pursues merger talks with Northwest (NWA) and UAL's (UAUA) United Airlines to form the world's largest passenger carrier, a potential linchpin is thousands of miles away in Paris: Air France-KLM. The European airline already is an ally of Delta and Northwest in SkyTeam, one of the 3 major international airline groupings. Air France-KLM also could provide strategic or financial backing in a Delta bid for Northwest, the airline most likely to emerge as Delta's preferred partner. Delta CEO Richard Anderson traveled to Paris after his meeting with Delta directors Fri, at which the board authorized him to formally begin merger talks with the No. 5 and No. 2 US airlines by passenger traffic.

posted by notablecalls  # 4:47 AM 0 comments

The WSJ reports that Boeing (BA), already 6mo’s behind schedule on its 787 Dreamliner jet program, is close to announcing more delays that might hurt its ability to deliver as many planes as promised in the initial yr of production. The aircraft maker continues to experience problems on a variety of fronts. It has had difficulty getting the first plane ready to fly, and now the 787 may not make its first flight until June. Boeing also has made slow progress in overcoming parts shortages and other issues at suppliers' factories. An announcement that would include a new time schedule might come as soon as today. Further delays would likely make it impossible for Boeing to meet its goal of delivering 109 airplanes by the end of ‘09. If that occurs, the co may have to pay millions of dollars in penalties to airlines for missing delivery deadlines.

“Heard on the Street” column discusses financials, saying that Citigroup (C) now holds the distinction of sustaining the biggest hit of any bank or broker related to the mortgage mess and ensuing credit crunch, easily topping write-downs of $10bn at UBS and $9.4bn at Morgan Stanley. But bears say there is more bad news to come, meaning it is still too early to go bargain hunting among many financial stocks. Citigroup itself practically said so, these investors add, by going out and raising more capital than would be needed if the crisis were passing. "The financials aren't out of the woods yet," says Thomas Vandeventer, of Tocqueville Asset Mgmt. "Other than brief bear-market rallies, it doesn't look like there's a compelling reason to buy these stocks now."

The WSJ highlights Synchronoss Technologies (SNCR), which has seen its share price surge in the past yr on its connection to the Apple smartphone. But Synchronoss is looking beyond the iPhone toward its contracts with several wireless and Internet phone-service providers and the launch of its European operations to fuel long-term growth. "If you look at Synchronoss 2 yrs from now, you will say the iPhone was great," said Eric Kainer, of ThinkEquity. "It really helped the co's mkting efforts and proved what it could do for customers. However, it's not going to be a huge chunk of their business." Yet 25% of the stock's float is held by investors betting it will decline. And with a large portion of its rev coming from AT&T, concerns that the co is too reliant on one customer continue to weigh on its shares. "What brought us there was the completion of AT&T's merger with BellSouth and the launch of the iPhone," said Synchronoss Chmn and CEO Stephen Waldis, responding to critics. "Our business outside of AT&T remains strong."

“Inside Track” section reports that Jana Partners and 5 insiders bought a combined $2.73m in shares of Coleman Cable (CCIX), but co's stock is still just above its all-time low. Jonathan Moreland, of Thalmann Asset Mgmt, said the recent purchases constitute a "solidly bullish insider signal," but he cautioned that only investors with a long-term horizon should look to follow the insiders' lead. "Clearly, this is not something you have to jump into today," Mr. Moreland said. "But I think these are perfectly good indications of longer-term value: both a slew of insiders and a smart value investor."

posted by notablecalls  # 4:18 AM 0 comments

“The Trader” column highlights Hhgregg (HGG), whose shares have already tumbled 29% this yr. But the co may not be guilty of anything worse than bad timing. For a start, Hhgregg targets a higher-end clientele that appreciates same-day delivery, installation and some personal coddling. Sales and cash-flow growth have been healthy, and it even raised its forecast in Nov. Exports remain one part of the US economy that is still thriving, and fears about the demise of Hhgregg's rust-belt client base may be overblown. "The Midwest didn't participate in the recent economic boom in equal proportion, and I don't think it'll suffer in a recession to the same extent," says Jeff Lick, of Galt Investments. Analysts expect the co to earn $1 a share in F08, guidance Hhgregg recently affirmed. The street, clearly, is worried about ests for it to earn $1.24 for F09. Also, stock selling could pick up after Jan. 15, after its post-IPO lock-up period expires. But longer-term investors buying after that stand to pick up shares of a well-run, growing co at a discount. At about 9.80, shares trade at 9.8x ‘08 profits. Compared with Best Buy, Hhgregg boasts better growth and higher gross margins, Lick says. Hhgregg should rebound heftily if the consumer slowdown proves shallow. But even in a contraction, Lick thinks it is unlikely that EPS next yr will fall below $1.05.

Barron’s out saying that Foster Wheeler’s (FWLT) surge is overdone and suggests investors taking money off the table. Success has made the shares start to look pricey. They trade at 21x estd ‘08 earnings. Also, this is a cyclical co. Earnings multiples are supposed to contract as profits rise in anticipation of the cycle's downside. But that doesn't appear to be happening. If the cycle runs longer than expected, such exuberance will have been justified. If not, the stock could quickly correct. Foster doesn't give earnings guidance, but has said the engineering and construction business should enjoy organic growth, potentially bolstered by an acquisition in 2008. The co's business backlog may be signaling that the cycle is in the late innings. Investors look to the backlog, though lumpy, to predict future earnings growth. The backlog grew 98% and 47%, respectively, in the 3rd and 4th quarters of '06, and slowed to 25%, 11% and 3% in the 1st, 2nd and 3rd quarters of '07, notes John Rogers, an analyst at DA Davidson.

Barron’s Roundtable members like MDVN and WYN. Fund manager top holdings include JNJ, TV, GSK, IBB, MER and ADM.

Terex (TEX), now around 54, could hit 80 in a yr. If it becomes a takeover candidate, a winning bid might reach $100 a share. "Terex is absurdly cheap vs its peers," says Robert Marcin, of Defiance Asset Mgmt.

At 17.25, First Horizon (FHN) is selling for just under book value owing to mortgage woes. Bulls think the attractive state franchise is worth at least twice that. "I think with the recent announcement [about write-offs], we've finally hit bottom in this stock and it should bounce back," says Jerome Dodson, of Parnassus Investments.

posted by notablecalls  # 9:51 AM 0 comments

Good morning,

I'm hearing two Solar calls this morning:

- First Solar (NASDAQ:FSLR) initiated at Merrill Lynch with Buy and $300 tgt

- Evergreen Solar (NASDAQ:ESLR) tgt upped to $30 at Think Equity

posted by notablecalls  # 7:26 AM 0 comments

The WSJ reports that McDonald’s (MCD) is setting out to poach Starbucks (SBUX) customers with the biggest addition to its menu in 30ys. Starting this yr, the co's nearly 14K US locations will install coffee bars with "baristas" serving cappuccinos, lattes, mochas and the Frappe, similar to Starbucks' ice-blended Frappuccino. Internal documents from ‘07 say the program, which also will add smoothies and bottled beverages, will add $1bn to annual sales.

According to the WSJ, Microsoft (MSFT) will get to use movies and TV programming from several large entertainment co’s under new deals that may help it better compete with Apple's iTunes and rivals such as Adobe (ADBE). Microsoft said it reached agreements with NBC Universal, Walt Disney, Metro-Goldwyn-Mayer Studios and CBS' Showtime Networks to contribute entertainment content to the software maker's Xbox Live and MSN online services. Mr. Gates also plans to say that Microsoft has sold 100m licenses for Windows Vista.

The NY Times reports that a consortium of prominent investment funds has amassed a 21% stake in Cnet (CNET) and is seeking to oust the co’s directors and take over a majority of its board. The consortium sent a letter about its plan to the CNet board 2 wks ago, which the co has yet to disclose. The consortium is led by Jana Partners. It also includes Sandell Asset Mgmt as well as Spark Capital and Paul Gardi.

posted by notablecalls  # 4:02 AM 0 comments

Barron’s cover out saying that AllianceBernstein's (AB) shares are off 22% from their 52w highs, making them cheaper than their peers. And the firm's growing foreign business should provide some upside.

Fund manager likes CLP, ARE and KIM.

Many depressed shares are trading at or near book value, a level that often provides a floor under prices. When investors sense a bottom in a stock, the turnaround can come quickly. Those include: AIG, BSC, CMCSA, CMA, GCI, KSS, LM, MU, LUV, SBUX, STI and TWX.

S&P materials stocks have risen 19% annually, and industrials 15%, for the past five years. Both sectors could see steep declines if the US economy enters a recession. Ed Shill, CIO of QCI Asset Mgmt, is underweight industrials and owns no materials stocks. "Virtually any commodity price is trading well above its cost of production," he says. JEC, CMI, DE, FLR, MON, FCX, X, PX.

Investors have unfairly dumped shares of ProLogis (PLD), along with other real-estate plays. The stock could rally to around 70 this year from the mid-50's If the global economy keeps growing. "From an operational standpoint we expect to outperform in '08, given our international platform," says CEO Jeffrey Schwartz. "Hopefully, it'll be reflected in the stock price."

“The Trader” column discusses MRV Comm. (MRVC), saying that one hedge fund after another has been drawn to the glimmer of its optical-equipment business. Some have argued that the sum of its parts deserves a richer value. Yet the stock is mired where it was nearly 6ys ago, at $2.11. Yet, the co finally plans to take public its optical- equipment business, Source Photonics. It's a tangible sign MRV "finally is going to force the street to value the separate entities at their respective multiples, which we believe will unlock tremendous value," says Leo Saraceno, of Sun Life Financial. MRV has 3 key businesses: the fast-growing optical unit, a core network-products business, and a 3rd-party network- integration unit. According to the prospectus, Source Photonics will combine MRV's optical- equipment business with a recently-acquired Fiberxon. This will expand the unit's technology platform and allow it to tap Fiberxon's cheaper China-based manufacturing facilities. Rev for Source Photonics is expected to grow 25% to about $225m this year. Applying a multiple of 1.5x ‘08 sales would value it at $338m, or $2.11 for each MRV share, Saraceno argues. He reckons the core network-products unit might be worth another $230m, while the 3rd-party network-integration unit is good for $95m. Add net cash and MRV, he says, should fetch $4.50 a share.

“Plugged In” column out saying that 2 of the most outrageously priced software stocks around are Salesforce (CRM) and Concur (CNQR). Both are vastly more expensive than Apple (AAPL) and Microsoft (MSFT). That's partly b/c the 2 upstarts have big growth ahead of them, with analysts projecting 49% rev growth this year for Salesforce and 25% for Concur. But it's also b/c until recently, their stocks were the only game in town for investors who wanted a piece of the action in "software as a service." But suddenly, there's company. Joining Salesforce and Concur are Netsuite (N) and SuccessFactors (SFSF). Both Netsuite and SuccessFactors sell programs very similar to Salesforce's. And there's no shortage of hopefuls who've filed with the SEC to join Salesforce and Concur in the mkt. Among them: Varolii. It claims six of the US' 10 largest banks as customers. It filed in September to go public. In a sign some are already trying to specialize in a crowded mkt, Convio is aiming its customer-relations software specifically at nonprofits, whose "customers" are their donors. Its IPO prospectus lists Goldman as leading the deal. Even if there are many ways to slice the pie there's still going to be fierce jockeying among these Web-software firms to claim title to the best on-demand investment. Pacific Crest analyst Brendan Barnicle on Mon initiated coverage of SuccessFactors with an Outperform rating, saying that with 2 million users, SuccessFactors is "the world's largest on-demand application provider." Eventually, a good chunk of commercial-software programs, perhaps even most of them, will follow the model set by Salesforce and Concur. As that happens, the imprimatur of the two co’s as the "pure plays" will come to mean less and less. No doubt both stocks will still seem attractive as acquisition tgts for Oracle or SAP as they continue their rapid growth. And both are profitable, something neither Netsuite nor SuccessFactors can claim. But their days as exclusives in this particular genre of investment are numbered, a fact that is sure to make investors take a closer look at the rich premium baked into their shares.

posted by notablecalls  # 5:51 AM 0 comments

The WSJ’s “Heard on the Street” column out saying that while the Warren Buffett hasn't been charged with any wrongdoing, the Jan. 7 criminal trial of 4 former insurance execs of General Re, a reinsurance unit of Berkshire Hathaway (BRKA), and one former exec of American Intl. Group (AIG), could be as much about Mr. Buffett as it will be about a 7-yr-old reinsurance transaction that federal prosecutors said was a fraud. The case, to be heard in federal court in Connecticut, is the culmination of a nearly 3yr inquiry into what prosecutors said was a sham deal that helped AIG boost its loss reserves in 2000 and 2001 by about $500m, misleading analysts and investors about the amount of losses AIG could absorb and buttressing its stock price. The trial will likely cast an unflattering light on the alleged inner workings of General Re and renew questions about the involvement of Mr. Buffett in the transaction. Several of the defendants will assert in the trial that Mr. Buffett knew about the deal, giving it the stamp of legitimacy.

New Year's Day was only 18 minutes old when it became clear 2008 would bring more pain for Wall Street's top deal makers. PHH (PHH) announced minutes after midnight yesterday that the deadline for completion of its acquisition by Blackstone Group and a unit of General Electric (GE) had lapsed and the deal terminated. PHH said the $1.7bn deal had fallen apart b/c Blackstone couldn't come up with the needed funding. Blackstone owes the co a $50m break-up fee.

Barron’s Online “Inside Scoop” section reports that one Lennar (LEN) exec sold shares purchased in Aug at a $300K loss. On Thu VP and head of investor relations Marshall Ames sold 30K class A shares for $540K. On Aug. 16 Ames had purchased 30K shares for $845K. The stock has continued to fall and when Ames sold the 30K shares they were worth $305K less than the purchase price. "I think the sales accurately reflect most investors' sentiment toward the home-building space right now," says Ben Silverman, of InsiderScore.com. "Aside from being a buyer in August, it's also interesting b/c as head of investor relations he is in charge of speaking to the investment community. I certainly don't think anyone's willing to call a bottom to the home-building cycle yet."

The NY Post reports that Apple (AAPL) scored with another big Christmas of iPod gift-giving this year, but the reign of dedicated music players may have peaked as competition mounts from cellphones that play tunes and video. Overall sales growth of gadgets that play media, but that don't make calls, is expected to slow sharply over the next 5ys after a decade of double-digit gains, according to iSuppli. The party is about to be over, as the firm expects global growth to slow to just 3.5% to $20.2bn in ‘08. Sales growth is forecast to virtually flatten to $20.7bn by 2011. The slowdown in the next 24mo’s is due to the "long-term threat" from multi-media devices that make calls, says iSuppli analyst Chris Crotty. Ross Rubin, of NPD, says the handwriting is already on the wall, as music-capable phones now outnumber portable music and video players, even if owners are not actively using them as iPod replacements right now.

posted by notablecalls  # 4:19 AM 1 comments