NCN Solar: The current state of things

Last week I asked NCN Solar, a trader closely following & trading the Solar space give us an overview of the current state of the things. I talk to NCN Solar almost every morning going over the most important developments - a great help to undestanding the rapidly changing sector.

I also regularly paste his best comments to other Notable Calls Network (NCN) members.


NCN Solar:

I put some thoughts together more to educate you as to what is happening, and perhaps will make it easier to capitalize on coming news in 2008. It will continue to be choppy and unpredictable, so its best to just be prepared for what may happen and to know how to react.

There seems to be more private equity money going into alternative energy than in any other sector. The high oil prices of the last few years as well as climate concerns, has led to a quest to reach grid parity with electric rates. Most of the ways to play the growth in the US markets involve stocks in the Solar sector. There are 2 well known technologies: Thin Film which includes First Solar (NASDAQ:FSLR), Energy Conversion Devices (NASDAQ:ENER), and many exciting private companies and Silicon which is led by SunPower Corp (NASDAQ:SPWR), Suntech Power (NYSE:STP) and many others.

Let us take a closer look at both these groups. FSLR is the clear cost leader. They developed Thin Film CDTE technology which doesn't require the currently expensive polysilicon, and is a quick production process which FSLR has successfully copied at their other facilities. There are certain geographies, such as areas of Germany, where no other product can come close to comparing. As they increase their conversion efficiency to 12% of the sunlight to power, and continue to increase production and yields, they appear well in the lead towards grid parity, at a point which this growing market expands to incredible levels. There are a number of private companies, NanoSolar, Miasole etc. as well as ASTI and DSTI which are working on Thin Film CIGS technology in a well financed drive to reach what FSLR has accomplished. There are various challenges in scaling this technology, and its certainly hard to know exactly how close these companies have come. The Thin Film amorphous technology, is a bit difficult to understand, because the conversion efficiency achieved so far, does not seem high enough to compete.

As we enter 2008, no one comes close to FSLR in terms of cost per watt. So why is there strong interest in anyone else? In the residential market, it does not appear that FSLR will be a player, and I’m not sure they are even suitable for that. Because FSLR has lower efficiency, they require more panels, which means the amount of roof space, or cost of land, can tilt the economics. There are also various geographies, where perhaps the amount of sunlight or heat, can work better for a silicon company. As we stand right now, the costs for silicon panel companies are much higher, but they are greatly influenced by the inflated level of polysilicon prices. The current poly demand dwarfs the supply. This affects the companies in different ways, and its worth looking at which solar stocks have most of their polysilicon at contract rates, and which need to purchase their required poly at spot prices. At some point, the additional supply from China will come online, and one would expect the prices to drop significantly. A company like WFR which benefits from selling polysilicon in the market, will have to deal with the lower prices in the future, though at this time, they are doing very well. Once these prices do come down, the buyers of polysilicon, STP SPWR etc. will see their costs dropping and can become more competitive with FSLR in more locations, and can start the move towards grid parity. At this point SPWR is a technology leader with their high efficiencies, and tracking systems, and STP is a leader helped by their low cost operation and low taxes. We will see if anyone else can make the leap to the top tier.

The important thing to understand is that what is good for one solar company may not mean much for another. We recently saw FSLR blow away estimates for the quarter and guide higher. This may not mean that the silicon players will have a good quarter. But it does show what can be achieved, when your costs are low, and when you run the operation smoothly. A future drop in polysilicon prices would be a big help for a polysilicon company that buys at spot prices, but may not mean as much for a silicon company that has a great supply, and would probably be negative for FSLR because other companies will become more competitive in some markets.

What I look for in 2008, is that we will see the winners and the losers start to emerge. The same way that many tech companies did not emerge from the internet boom, many wont succeed in solar. But the ones who will, meaning the ones that achieve grid parity, or assist companies in achieving, will be continued winners. We should begin to see more poly supply come on line before the end of the year, and a drop in poly prices will help the industry. At a certain point, the silicon players may decide they would rather not sell a panel even if there is demand, because they don’t want to pay up for poly. But that would lead to this coming drop in prices. Utility solar deals will be big news this year. FSLR has suggested that there will be multiple pilot projects for utility solar deals in the United States and a number of companies will be in the race for utility deals. This may be helped by the expected extension of solar tax credits which should take place before the end of the year. There is bypartisan support for these credits, and once the politics get played out, it seems clear that the bill will get passed. We may hear more about other solar technologies. EMKR is a player in CPV (Concentrated PhotoVoltaic) which has high conversion efficiency, and concentrates the sunlight on to a cell. There is also strong potential from solar thermal technology. We should also here more about the progress on Nanosolar and other new entrants. There likely will be more ups and downs then we saw in 2007, which was virtually all up. But there should be some big winners once again from some old and perhaps some new names.


Best regards,

NCN Solar

Feedback: Chipotle Mexican Grill (NYSE:CMG)

After I read your post this morning prior to the open, I put in an order for FEB 100 Calls at .25 cents. I picked up 100 contracts around the time the price was 97$ and sold them for 3$ each at 2 p.m. when CMG was over 103$. Thanks for the excellent information. I wish every option expiration day was like this....

J.F.

Notablecalls: Love it. Stuff like this keeps me ticking.

Chipotle Mexican Grill (NYSE:CMG): Bounce?

Chipotle Mexican Grill (NYSE:CMG) is getting defended by several firms this morning after missing ests last night:

- Baird is upgrading CMG to Outperform from Neutral based on positive view of internal fundamentals andvaluation; would use expected weakness related to Q4 results as buying opportunity; believe 2008 EPS estimates have upward bias, even if difficult macro backdrop continues; consider valuation (prospective NTM P/E 35X; PEG 1.2X) attractive for powerful long-term growth story with robust operating trends. Reits $140 tgt.

- Piper Jaffray reits their Buy and $200 (!) tgt saying that should the market penalize the company for 60% earnings growth (i.e. stock is trading down after market following in line results) they suggest investors use the pullback as a buying opportunity.

Despite difficult market conditions, Chipotle continued to (at least) meet expectations as fourth-quarter earnings increased 59.6% to $0.53 per share; in line with PJ's estimate. Restaurant profit margin increased 210 bps to 22.1% due primarily to the company's ability to effectively manage expenses as well as sale leverage, or the 10.6% same-store sales result.

- Cowen vigorously defends CMG shares on likely weakness this morning after CMG posted '+$0.04 better-than-they-expected' 4Q07 EPS of $0.54 (ex. $0.01 charge) vs. their $0.50E and in-line with mgt's inference at The Cowen and Company Consumer Conference that "4Q07 EPS growth will likely be about in-line with current Consensus' $0.54E'). The headline here is 4Q07's EPS performance of $0.54 was CMG's best operating quarter of 2007 and any model to the contrary is simply intellectually challenged. As such, they would view a sub-$100 CMG share-price open today as an historic buying opportunity for 'the next 5,000+ unit global restaurant company' at such an exciting, early stage in its development.

Notablecalls: What can I say. Buy the stock. It's going to bounce. Would not be surprised to see $100+ level as soon as today! (stock traded as low as $92 in after hours action).

Note there's a 40%+ short interest in the name. The shorts will probably not attempt to chop it down but rather use the weakness to cover! The stock is down from $150.

RUMOUR MILL: Synchronoss (NASDAQ:SNCR)

There are variation of Ericsson (NASDAQ:ERIC) or Amdocs (NYSE:DOX) for Synchronoss (NASDAQ:SNCR) rumor making rounds today and I'd like to share my initial thoughts on the topic. First of all, Synchronoss does make a great acquisition target for a number of reasons:

- Despite lowering the bar at the last earnings conference call, the co is still growing revenue 25% this year.

- Attractive margin profile: 56-58% gross margins and 30% operating margin with operating margin expanding over time.

- Co would greatly benefit from added scale when acquired by bigger player with presence at the telecom operators.

Despite its internal struggles, Ericsson does fit the profile of potential suitor. ERIC acquired LHS AG in June 2007, making entry to the OSS (operations support systems) space. Adding SNCR would give Ericsson another fitting piece to restore growth.

Amdocs is also making push to the OSS mkt and SNCR would be logical tgt for them, with margins already above those of DOX. Also, the AT&T link is there with both cos having AT&T as a major customer. And think of all the cross-selling possibilities the deal would provide.

Why would either company make an offer? First and foremost, the margin profile of SNCR that would be even more impressive on larger scale.

On an interesting sidenote, IPO bookrunner Goldman Sachs still owns 4.5% stake in the company.

Hope it helps,


NC

Hansen Nautral (NASDAQ:HANS): Actionable Call Alert!

- Longbow Research is out with a nice call on Hansen Natural (NASDAQ:HANS) saying the co ikely experienced a material volume boost during late 4Q07 ahead of January 2008 price increases. They are raising 4Q07E EPS by $0.02 to $0.39 in order to account for this volume lift.

According to their C&G survey findings during 4Q07, Monster continued to improve its position on the shelves and market share blips from Red Bull's 16.9 ounce launch simply represented a numbers squeeze.

For 2008, firm's distribution channel checks indicate HANS's ~6% price hike on Monster 16 ounce stuck at the first of the year, which could drive $0.20+ of upside versus 2008 EPS estimate of $2.20. On the cost front, HANS is less exposed to negative trends facing the Coke and Pepsi bottlers in higher PET costs.

With the stock down 25% since Q307 earnings, the firm recommends purchase. Their price tgt is $66.

Notablecalls: Man, Longbow's 2008 EPS est is above consensus & now they are saying they see upside to it! The stock has been crushed lately and I think this call will generate strong buy interest.

Actionable call alert!

What I like this morning: MDRX, GPRO

Couple of notable stocks:

- Allscripts (NASDAQ:MDRX) is down 25% in pre mkt trading after reporting results that were below expectations. There is some pretty nasty analyst commentary out there with Deutsche cutting their rating and Piper Jaffray cutting their tgt to 19.45 from $29 (also removing from Alpha List, keeps Buy).

The backlog didn't look good but I suspect that here @ $11.70 it's all discounted (and then some). So I have made a small purchase there.

Going against consensus here like I did with NILE yday.

The stock is a mean bouncer and has a close to 25% short interest.

- General Probe (NASDAQ:GPRO) is down following earnings but given very positive analyst commentary this morning I think it's a good bounce candidate.

BofA is out with call titled: GPRO: Go! Go! Go! Go! Go!; Buy With Conviction. Their tgt is $74.

Firm notes GPRO's operating cash flow surged 39% in 4Q07, to $38 million, which topped our $32 million forecast. Free cash flow = 1.6 times net income.

Also, Cowen & DB are very pos on the name. It's down 3+ pts in the pre mkt and I suspect it's a good buy point.

NC

Baidu.com (NASDAQ:BIDU): A short here?

Several firms are commenting on Baidu.com (NASDAQ:BIDU) this morning after the co issued in-line results and weaker guidance last night:

- RBC Capital is upgrading their rating to Outperform from Sector Perform, while lowering tgt to $361 from $400 tellin investors to look through the 1Q08 guidance and focus on what is important. They believe 1) the long-term investment thesis remains intact, 2) the company continues to dominate the Chinese search market, and 3) over the longer-term should add another growth driver as it monetizes its nonsearch traffic through display and other formats. 1Q08 guidance was lower than expected, but as we exit 1Q and enter 2Q very few companies on the Internet enjoy every secular, macro, and seasonal factor working in their favor and fewer have Baidu's growth profile.

- Citigroup notes that early last month when they took Baidu off our Top Picks list and downgraded it to Hold, their concern was primarily that incremental spend on Japan and C2C would hit margins, but we were also concerned about the potential of slowing rev growth as well. Some of those fears came to fruition today as Baidu guided for between US$25m and US$35m in "P&L" impact from Japan+C2C in 2008. Combined this with disappointing rev guidance for 1Q, and the firm expects Street estimates have to come down.

The headline EPS beat is US$0.17, but the firm estimates that US$0.20-0.23 of this is due to: 1) a one-time tax rebate; 2) positive current effects from RMB appreciation; and most significantly, 3) the company's under-spent by ~US$5m on Japan vs. their 4Q guidance (and which is offset by the huge 2008 Japan spend guidance). Maintains Hold and $350 tgt.

- Goldman Sachs is lowering their tgt to $280 from $310 saying they believe the law of large numbers, rather than snow storms, could be the primary reason why Baidu is guiding for a decelerating yoy growth rate in 1Q08 versus 4Q07.

Notablecalls: Looks like RBC Capital's Stephen Ju was right on the money when it came to Q1 guidance. He was wrong on the sentiment side, though. And so was I. BIDU ended up 20 pts in after market despite a 20+ pt run during mkt hrs.

Which now pegs the question- is there any upside left here?

With GSCO cutting their tgt to $280 and most of the EPS upside coming from non-operating sources, it's sure a strech here.

I suspect shorting around $280 this AM represents a good risk/reward scenario.

Blue Nile (NASDAQ:NILE): Bounce @ $40?

I see nothing but cautious comments on Blue Nile (NASDAQ:NILE) this morning after extremely cautious guidance provided by management last night.

The stock is trading around $40 this morning after Citigroup and Lehman cut their ratings to Hold and several other firms are cutting their ests and tgt's.

Must say I'm a bit of a contrarian in NILE this AM as one could see this one coming a mile away. We have a close to 30% short interest in the name, which pretty much proves my point.

From Citi:

What keeps NILE as a Hold vs. a Sell are: 1. Clear market share gains, 2. Long-term international growth opportunity, 3. A 6% '08 FCF yield with buyback potential; 4. Unique supplier relationships; and 5. A strong execution track record.

So I'm buying small NILE here around $40 betting that:

- Management is being overly cautious

- Shorts will want to bag at least part of the huge gain they are sitting on

Let's see what happens.

NC

Baidu.com (NASDAQ:BIDU): RBC Capital cuts ests ahead of earnings

- RBC Capital is out with a cautious piece on Baidu (NASDAQ:BIDU) noting the co reports its 4Q07 after the close, and 1Q08 will be the main focus given recent concerns around the possibility for a conservative outlook due to the 1) change in senior management and 2) recent snowstorms affecting power and access. Firm says they had expected 1Q08 to post a sequentially positive comp given that the company is not executing its way through a ranking algorithm change or a major sales force reorganization like last year, but they believe 1Q08 guidance could call for revenue flat to down 2%-3% sequentially.

They are tweaking their 1Q08 as well as out year estimates given the likelihood for conservative guidance. However, they remain positive on the long-term fundamentals of the company given its dominant share of the search market in China as well as the secular and macro benefits it continues to enjoy. Maintains Sector Perform.

Notablecalls: Phew, imagine what will happen to BIDU stock in case of conservative (below consensus) guidance. RBC's Q1 rev est used to be at $451 mln yet now it stands at $431 mln.

Take First Solar (NASDAQ:FSLR) as an example. The stock got killed yesterday. Was it because of the negative yield rumours? No way! The yield rumors accounted for not more than 5pts of downside (Which we caught on NCN, btw!). It was because we had Broadpoint out with a call yesterday morning saying there likely wouldn't be much upside to ests. In this market people tend to sell first and ask questions later.

Well, Broadpoint is looking a bit stupid this morning after nice numbers out of FSLR (stock up close to 15% pre-mkt). But hey, they kept their Buy rating so it's not that embarassing.

Still, it shows we're in a shoot-first-ask-questions-later market. Plus, we're gradually getting overbought. Not a nice combo.

Expect at least some early weakness in BIDU following RBC's call.

Oppenheimer is slashing their 1Q08 estimates on the brokers by 40%

- Oppenheimer is slashing their 1Q08 estimates on the brokers by 40% on average to reflect a sudden and material decline in levered loan valuations. Firm estimates that the banks and brokers under their coverage have a combined carrying value of levered loan commitments of close to $200 billion, and that such will lead to $10 and $14 billion of negative corresponding marks or write-downs to the banks and brokers under coverage.

Third quarter 2007 broker earnings were dismal due largely to sizable write- downs on leverage loan inventories after the market seized up in July/August and values declined materially. Even worse fourth quarter 2007 earnings saw few write-downs related to levered loan commitments but staggering write- downs related to CDO values. Firm believes 1Q08 earnings will be impacted by both but materially by another round of write-downs to carrying valued of levered loan commitments.

1st quarter 2008 results will likely be worse than those seen in well over a decade and will surely be worse than even the lowest of the existing current estimates.

Downgrades Morgan Stanley (NYSE:MS) to Peer Perform from Outperform; Other names mentioned include: LEH, GS, BSC, MER.

Notablecalls: I heard some rumours yesterday saying Lehman (NYSE:LEH) will pre-announce soon. Not sure if this was due to the negative call made by BofA yesterday (cut LEH tgt to $60 from $65) or because LEH is really going to pre-announce. Must say the source of the rumor has a good track.

I know I was positive on MER the other day but it's sure starting to look like I was too early. I would not be surprised to see another round of selling in the brokerage space.

Not sure people want to bottom fish here given the possibility of a large pre-announce & OpCo cutting Q1 ests by 40%.

BioMarin (NASDAQ:BMRN): Cowen raising Kuvan ests way above consensus

- Cowen is out very positive on BioMarin (NASDAQ:BMRN) following a survey aimed at tracking the uptake of co's Kuvan. Physicians expect to test the vast majority (79%) of their patients for Kuvan sensitivity in 2008, and expect nearly one-half (45%) to remain on long term therapy. Just as important, this survey suggests likely upside to Kuvan's price. Physicians report a 55kg average patient weight, 94% compliance, and 19.5mg/kg average dose. These figures imply an average annual price per patient of $107K, well above BioMarin's guidance ($57K) and firm's estimate ($72K). It is increasingly clear to them that BioMarin will likely be one of the most attractive growth stories in biotech for the next several years.

The responses imply 2008 Kuvan revenue of over $100MM, above Cowen's $80MME, and that Kuvan will enter 2009 at a U.S. revenue run rate of over $250MM, above their FY 2009 estimate of $200MME. Moreover they imply a peak U.S. opportunity of $625MM, above their 2012 U.S. estimate of $375MM.

Cowen considers BMRN a top small-cap biotech pick.

Notablecalls: Well, it sure looks like Cowen's biotech team is on to something big here. Their estimates are now well above the consensus.

Just for comparison, Jefferies was out with a call on BMRN yesterday saying that based on their survey, they are increasing their average dose used from 15 mg/kg/day to 17 mg/kg/day, which results in an increase in the average annual cost of Kuvan from $57K to $66K. As a result, the firm increased their FY08 U.S. Kuvan revenue estimate from $61M to $71M. (Yet, Cowen stands at $100M).

I think the upside pressure in this name is just too strong to resist. These two calls will likely cause some serious buy interest as soon as today.

One to watch!

Early Morning Tidbits:

- Bear Stearns reits Outperform and $150 tgt on Research in Motion (NASDAQ:RIMM) saying oppty's offset near-term economic risk.

- Piper Jaffray's Gene Munster is out on Apple (NASDAQ:AAPL) after he and his team spoke with 20 Apple specialist resellers. Interest in the MacBook Air is high, but demand is less than the MacBook launch in May of 2006. Firm believes the MacBook is the most popular Mac.

On average, resellers are expecting a sequentially flat qtr for Macs in March vs. PJ's ests of -18% q/q.

- Broadpoint comments on First Solar (NASDAQ:FSLR) saying they recommend sitting out quarter due to excessively high investor expectations, but would be buyers on any weakness after results are announced

Firm expects strong results and guidance, but believe plans for an additional factory, a large 100MW+ system contract, or significantly higher 2008 guidance are necessary to move shares higher.

Merrill Lynch: Revenue opportunities could result in a $100+ share price - Citigroup

- Citigroup is out with a major positive call on Merrill Lynch (NYSE:MER) saying they think the co can double earnings power over the next couple of years. They anticipate that the franchise could earn in the $10b-$12b range (vs firm's 2008 forecast in the $5b range) by capitalizing on several billion-dollar revenue opportunities in each of its major businesses.

Firm's analysis deconstructing Merrill's ROE shows that the franchise could generate 20%+ ROEs over the cycle, which could result in a $100+ share price.

Wealth Management could add $6b of revenue over the next 5 years, comprised of $4b from the US franchise and $2b from growing the international franchise.

John Thain, Merrill's new CEO, is the catalyst to unlock the earnings power of the franchise which would then result in meaningful value creation. In Citi's view, Merrill will successfully execute on 1) creating a risk management infrastructure / culture that won't result in outsized losses, 2) execute on top line growth initiatives across the major businesses, 3) leverage the untapped earnings power inherent in Merrill's franchise by removing silos and building bridges across the wealth management and institutional businesses.

Reits Buy and $75 tgt.

Notablecalls: This is bound to generate substantial interest, given the overall negative sentiment in the financials. I suspect we have started climbing the "wall of worry" in many of these names.

All of these names have written down most of their CDO/subprime assets and aggressive writedowns may potentially lead to write-ups down the road. Call me an optimist but these write-ups could come as soon as over the next couple quarters. Imagine Merrill suddenly beating estimates by a mile. Wanna be short the name when this happens? Thought so.

Expect a nice upside move in MER stock today.

Early Morning Tidbits:

- Apple (NASDAQ:AAPL) is added to Citigroup's Top Picks Live list with a $212 tgt. AAPL is the first addition to the list by the PC & Enterprise Hardware team.

- Morgan Stanley is positive on Dry Bulks.

Firm sees upside in the dry bulk sector into a likely firming in the BDI over the next couple of months. The conclusion of iron ore contracts with China continues to loom as a catalyst for the Dry Bulk group. In their view, anticipation of stronger vessel demand on the back of contract settlement may continue to lead shares to shrug off pressure from incremental negative economic data points. In addition to GNK, they also highlight QMAR as an attractive way to gain exposure. In the tanker sector, valuations remain below liquidation values, while the market outlook in firm's view remains relatively robust from ship owners.

- RBC calling for a surprise in Applied Material's (NASDAQ:AMAT) orders/order guidance.

MSFT/YHOO: Quick colour

It sure looks like Mr. Softee (NASDAQ:MSFT) is going after Yahoo (NASDAQ:YHOO) with a vengeance.

Given the recent colour on the deal, I think MSFT paying $40 per sh. has now a much stronger probability of happening than before.

Henry Blodget: Yahoo's "AOL Talks"--Another Brilliant Play By Yahoo's Advisors

I expect YHOO stock to trade over the $30 mark today.


NC

Paperstan (MSFT may sweeten its offer; MOT and NT in talks)

The WSJ reports that Motorola (MOT) and Nortel (NT) are in talks to combine their wireless-infrastructure units in a joint venture. The talks, which are separate from efforts also under way at Motorola to possibly shed its handset division, show the steps Motorola's new CEO, Greg Brown, is contemplating to restructure the telecom giant.

According to the WSJ, Yahoo’s (YHOO) rejection of Microsoft (MSFT) buyout bid will test whether the software giat is willing to pay a lot more for the Internet co, or risk a truly hostile takeover attempt. Microsoft may sweeten its offer, say people familiar with the matter. But any increase is likely to fall short of what Yahoo's directors believe would fairly value the co, setting the stage for a protracted battle. Ppl close to Microsoft say the co is reluctant to launch a proxy fight to push out Yahoo's board. A fight could increase the odds that key Yahoo employees will leave the co. It is more likely to pursue less-hostile options, such as recruiting big shareholders to put pressure on Yahoo to negotiate with Microsoft for an acceptable price.

The Financial Times reports that Microsoft had been willing to pay $43 a share a yr ago, when Yahoo was trading at about $28. Steve Ballmer has already signalled his co’s determination not to take “no” for an answer. In his letter making the offer, he said his co “reserves the right to pursue all necessary steps”. Microsoft has a team of advisers in place for any proxy fight. It includes Alan Miller of Innisfree, the proxy solicitation firm, and Joele Frank, the New York M&A public relations specialist, as well as financial advisers from the Blackstone Group and Morgan Stanley.

“Heard on the Street” discusses Cardinal Health (CAH), saying that the co appears to be getting back on its feet, and that could give a shot to its ailing share price. The New Year has brought some hope: Last month, Cardinal appointed George Barrett as vice chmn and CEO of its drug and medical-supply distribution division. In addition, the co has renewed a contract with one of its biggest customers and has a generic version of a cardiac drug about to hit the shelves. Relative to its competitors, Cardinal has had a weak generic-sales program, a situation almost certain to improve with Mr. Barrett's arrival. "He's a solid exec who has incredibly strong independent supply-chain relationships," says Randall Stanicky, of Goldman Sachs. Mr. Stanicky recently reaffirmed Buy rating.

Barron's Summary (SPWR could double; PCL - Timber!; AKAM, JDSU)

Barron’s cover discusses food producers, with P/E ratios below the median P/Es of the past 10yrs, and most have secure and growing dividends. Nestlé (NSRGY) and Kellogg (K) are standouts owing to attractive valuations and solid growth prospects. (CPB, CAG, GIS, HNZ, HSY, KFT, WWY)

The stock of International Speedway (ISCA), which has skidded badly since last summer, could jump about 20%, to 50, as the company leaves some problems behind and benefits from long-term TV contracts.

At 38.70, or 17 times earnings, Femsa's ADRs (FMX) are cheap. Some fans think the stocks could be worth about 50, while a sum-of-the-parts analysis suggests a price of 64.

According to the Barron’s, in a one year span, best stock picker is Bear Sterns, with 2007 return of 21.98%. In a 6mo span, also Bear Sterns beat others with 12.08% return. While Goldman Sachs leads 3y and 5y lists with 55.39% and 150.91% returns, respectively. Morgan Keegan focus list lost a painful 17% in the 2H07.

SunPower's (SPWR) stock was cut in half after the solar bubble burst. Now it could double, with earnings growing 40-50%. The US Senate tried to attach an extension of the solar tax credit to the economic stimulus bill, but it failed to pass. While an extension could be reintroduced anytime, it most likely will be part of a package considered in the 4Q that would extend the wind and solar tax credit and the R&D tax credit, and apply a "patch" to the dreaded alternative minimum tax. "There's so much bipartisan support for the wind and solar package" that there's an 85-90% chance it gets passed by yr end, says Daniel Clifton, of Strategas Research Partners.

“The Trader” column highlights Plum Creek Timber (PCL), saying that the co’s 4.1% yield is not too shabby in an era of declining bond yields and slashed interest rates. Decimated demand has hurt lumber prices, but Plum Creek was able to sell land to prop up profits. New construction and remodeling use up about 40% of timber volume produced, but nearly 2/3 of it in dollar value, and a prolonged housing slump will hurt. Yet Street analysts seem to have factored in only a brief blip in profit growth, expecting EPS to pull back to $1.26 this yr before promptly rebounding to $1.52 by ‘09. The board recently announced a 42c qrtrly dividend, but option prices have begun to anticipate a possible trimming of the payout to 29-37c by mid-Aug. Jim Grant, of Grant's Interest Rate Observer, recently tried to steer timber-REIT investors toward smaller rival Potlatch (PCH) instead. Among other things, Plum Creek has "much greater exposure than Potlatch to the vicissitudes of real estate development," he notes. Plum Creek looks expensive by any measure. Grant calculates the adjusted EV for each core timberland acre and finds Potlatch offers the better bargain. At 41, Plum Creek shares also trade at 3.8x book value, compared with 2.6 for Potlatch. Shares are also perched precariously at 30x cash flow, compared to about 17x for Potlatch. These numbers yell out a warning: Timber!

Fund manager holds GOOG, DKS, SCHW, CSCO, VPRT, HPQ, GILD, CTSH, UTX and MON.

“Technology Trader” column discusses Akamai (AKAM), whose stock is down 45% over the past 12 mo’s from concerns over increased CDN competition, in particular price-cutting by some rivals. But Akamai last wk reported a blowout DecQ. Demand for the co's service is running high, thanks in no small measure to the proliferation of network-TV shows being streamed over the Internet. Recession? Not in Akamai's universe. "I don't think ppl can afford to cut back on Internet strategies," CEO Paul Sagan said in an interview. "My guess is that if we see a downturn, it won't have a significant impact on us." Growing at about 40%, and trading at about 20x estd ‘08 earnings, this one looks cheap.

“Technology Trader” also highlights JDSU (JDSU), whose shares are down 90% since they peaked in early 2000. Now there are signs JDSU's turnaround is finally taking hold. In an interview last week, CEO Kevin Kennedy said the co has hit 4 key milestones. First, in Dec the co won a jury trial over allegations of stock fraud related to the mammoth swoon by its stock after the bubble popped. Second, the co hit GAAP profitability for the first time without the aid of one-time asset sales. Third, the co has had 4 qrtrs in a row of positive FCF and EPS growth. And fourth, the DecQ was what Kennedy calls "the first I can remember with simultaneous improvement in GM and revs in all of our businesses." The mkt has finally sucked up most of the existing capacity that was built out during the bubble yrs. "Operators continue to respond to capacity needs and network build-outs," Kennedy says. "There is not a lot of excess capacity. Ppl are not spending money speculatively. They are spending when they can monetize it, or when they are responding to shortages." It's a fiber-capacity play, just like the old days, except now JDSU trades for well under 2x rev. With a P/E of about 20x estd '08 results, it doesn't look cheap. But it is an interesting speculative play on bandwidth growth.

Terra Nitrogen (NYSE:TNH): Follow-up on the TRA conf call

Follow up to Thursday's Terra Nitrogen (NYSE:TNH) piece:

Was listening to the Terra Industries (NYSE:TRA) call and about 27 minutes into the call a guy from First Capital Alliance partners asked management about the change in the partnership distribution profit sharing arrangement.

He seemed to approach it from the perspective that it would be positive for TRA (as opposed to a negative for TNH). He kept pressing management for about 5 minutes... but management danced around the question and continued to regurgitate what was released in the press release.

FINALLY the analyst said.. well... I dont want to take up any more of your time.. perhaps someone else can get to the bottom of it (and of course no one else did).

Net net..I think that the drubbing in the fertilizer stocks had more to do with the decline in TNH on Thursday than the fact that their dividend is going to be reduced.... But ultimately... going forward... investors aint gonna get the kinds of distributions that they have come to expect from recent quarters.

Gotta be one of the most boring calls I have ever been on.


The author is short TNH.

Terra Nitrogen (NYSE:TNH): Heads up from a NCN member

Got this from a NCN member & thought to share:

Terra Nitrogen (NYSE:TNH) reported its earnings and its distribution this morning. More importantly they reported the “threshold “ level where a massive profit split change (negative for TNH) will kick in. It goes from 99:1 split to 50:50 (after the first $1.045)

First, TNH is ridiculously overpriced. It's the classic case of an unknown/unfollowed stock that stumbles out of the dark ages into a hot sector and has very little float or intelligence. It's a daytraders dream as folks go to chat boards searching for info.

TNH is an MLP . It was spun off by TRA back in 1994 . Its a single factory that churns out nitrogen based fertilizer product (UAN and ammonia byproduct). Terra Industries (NYSE:TRA) retains 75% ownership (needed to control an MLP vs 50.1% for a corp) and is the general partner running TNH. Because they lost money a few years back, profit sharing dropped to just 1% until losses in past were earned back . Those losses are very getting close to being earned back and then profit sharing soars in TRA favor with the big number being 50% of everything over $1.045 cents .

Refer to their last 10-Q where TRA management reposted this ancient profit split

It is all right here on page 9 of their last 10Q

The Limited Partners receive 99% of the Available Cash and 1% is distributed to the General Partner, except when cumulative distributions of Available Cash exceed specified target levels above the Minimum Quarterly Distribution (“MQD”) of $0.605 per unit. Under such circumstances, the General Partner is entitled, as an incentive, to larger percentage interests. As of September 30, 2007, the cumulative shortfall on quarterly distributions to holders of Common Units that must be paid before the General Partner receives an incentive payment was $152.9 million, or $8.18 per unit



Well, today it was announced that after the next $2.86 in distributions is paid out, (next Qtr)… the profit split will kick back in to the old profit split levels of 50:50 after the first $1.045 cent distrib.

By way of fundamentals, TNH runs at 100% production all the time so it can't produce more and if NatGas soars , its margins can crater (yes , this $130 stock traded at $3+ 5yrs ago)

I see folks on chat boards referring to TNH as a 'locked in dividend forever' and a way to cash in on the agriculture boon.

The problem of course is that TNH is no different today than it was at $3. That plant can be replicated by a competitor most anywhere NG is available.

It's a daytraders dream but I suspect 70% have no clue of underlying fundamentals. With a YoY change in avg daily volume going from 27k shares to 638k shares, short interest ratio is under 2.

I think TNH can trade below $100 as people figure this out. I will be listening to the conf call to gauge the level of investor awareness. Been painfully short awhile on this one and I have tried a paired trade (short TNH against TRA) but there really isn't any trading correlation between the two.

The author is short TNH

Neustar (NYSE:NSR): Bounce?

We have two major firms defending Neustar (NYSE:NSR) this AM:

- Morgan Stanley notes they are surprised by the magnitude of the sell-off in NSR shares – down 25%. While they were disappointed by the 2008 guidance, mainly as it pertains to transactions volume, they believe the stock is oversold at these levels -- particularly relative to Neustar’s 20% long-term sustainable growth and unique industry positioning.

The stock is now trading at roughly 17x the low-end of management’s EPS guidance of $1.29 for 2008. This multiple is clearly below the company’s long-term growth rate of 20%. MSCO thinks the right near-term price target for the stock is $25-26, with further upside likely over the course of the year as the company executes. This near-term target assumes a P/E multiple of 20x baseline 2008 EPS of $1.29.

In their view, the guidance is very conservative -- they know that this management team is adept at the ‘beat-and-raise’ strategy. Reits Overweight and $40 tgt.

- Deutsche Bank reits Buy and lowers tgt to $35 from $42 saying they maintain their rating on the strength of its competitive position and view that the market is negatively overreacting to conservative first guidance for FY08.

Notablecalls: With the stock down 8+ pts yesterday and these defenses, we're going to see a nice bounce today. Could be 2+ pts worth.

Garmin (NASDAQ:GRMN): Morgan Stanley calling for a rally

- Morgan Stanley is yet again out positive on Garmin (NASDAQ:GRMN) saying they believe that Garmin can rally from oversold levels, potentially reaching $80-85 near term. NAVTEQ results should be positive for Garmin as NVT saw revenue upside driven by PND volumes (NVT provides almost all of Garmin’s maps). Garmin has traded down almost 9% since SiRF reported worse than expected results and is down 35% YTD.

Firm says they believe that NVT provides a better read on Garmin’s 4Q07 results than SiRF as SiRF is facing several company specific issues regarding weakness at other customers and in its newly acquired Centrality business.

Notablecalls: This is now the 2nd time Morgan Stanley has called for a rally in GRMN. The stock is currently trading around $63 and I suspect we will get the bounce the firm is talking about in the N-T. The PND space has too many bears eyeballing it and that's always a good sign.

Note that MSCO has been a bear on GRMN for quite a while and only recently turned positive.

Cisco Systems (NASDAQ:CSCO): Leap of faith?

Several firms comment on Cisco Systems (NASDAQ:CSCO) this morning after the co released its Q4 results and guidance last night:

- Goldman Sachs notes that given its poor outlook for the April quarter, they were clearly too positive on the ability of Cisco's non-enterprise line of business to offset weakness in
its enterprise business. Cisco's outlook suggests a much greater degree of uncertainty than the market expected. As a result, the firm believes it will take at least another quarter or two of solid results before the stock can regain sustained positive momentum.

With that said, the stock is trading with a 7% free cash flow yield (a level that typically attracts value buyers) and 14x PE new lowered forecasts. Reducing 6-month price target to $28 from $32.

- RBC Capital notes it's not looking pretty with US enterprise customers and Cisco is pointing to top line growth of just 10% for the current April quarter vs. most views of 15%. RBC was estimating 15-16%. The outlook translates into $9.8B vs. prior consensus of $10.2B. Cisco missed its internal bookings targets for the first time in five years highlighting the magnitude and speed of the deterioration in tech spending. Projects are not being cut but deals are being pushed out and it's getting harder to get purchase orders signed.

RBC's CY08 non-GAAP EPS declines from $1.65 to $1.54 while CY09 EPS declines from $1.81 to $1.70. Shares may be close to a bottom now trading at 13-14X firm's CY08. Their FY08 revenue growth estimate is now 13%. In terms of future revenue revisions, though the environment remains uncertain, Cisco may be taking one big reduction as opposed to multiple iterations. Product book to bill was approximately 1.0

The guidance is not what we had anticipated but we believe there is an extra level of conservatism built into the outlook by Cisco. At current price points, no change to Outperform rating. Believes Cisco may retrench and begin to rebuild its backlog during these uncertain times. Tgt is lowered to $26 from $29.

Notablecalls: Not pretty, although somewhat expected, considering what the likes of Ericsson and Alcatel-Lucent had to say. With the stock trading around 7x FCF, downside is limited. What is missing is the upside. But maybe a leap of faith is needed here. Ready to take it?

I am. But not willing to pay more than $21.

RUMOUR MILL: Viacom looking at Take Two Interactive (NASDAQ:TTWO)?

I'm hearing some Street chatter saying Viacom's Sumner Redstone has expressed interest in acquiring Take Two Interactive (NASDAQ:TTWO).

As always, I have to remind you all that market rumors must be taken with a fair dose of skepticism. Most of them never add up to anything. Out of the about 10 rumours I hear daily, 1 or 2 (at best) intrigue me enough to stop and pay attention. I'm not even going to guess how many actually come to fruition. Should be a low figure.

The Take Two (TTWO) rumor caught my attention for several reasons:

- Firstly, it's likely to co is up for sale. A group of shareholders representing close to 50% of outstanding common sacked the management in 2007 and retained ZelnickMedia to manage Take Two pursuant to a management agreement.

Considering the holders include OppenheimerFunds, SAC Capital Management & Tudor Investment, I'd guess that at least some of them are bored waiting for the stock to recover and are willing to sell, provided a good price.

- Secondly, while TTWO has been plagued by several delays (namely, GTA 4 & Manhunt 2), there is some light at the end of the tunnel. It was only couple of weeks ago when TTWO announced a firm launch date for GTA, their largest revenue contributor.

- Thirdly, Viacom wants a piece of the game publishing pie. They have been buying some gaming assets over the past couple of years and recently struck an interesting deal with Microsoft that included a gaming component. Not to mention Redstone's personal investment in Midway Games (MWY).

The thing is a media conglomerate just can't go and buy any game publisher it fancies. The problem is the acquired firm could lose revenue from licensed games that are based on properties from rival media companies. Many such licensing arrangements have provisions that allow the property's owner to take the license elsewhere if the publisher gets sold to a competitor.

Take Two (TTWO) does not have that problem. Most of its games are developed internally. That's why its operating expenses have always been higher than industry average.

So, in that sense it would be a perfect fit for Viacom.

The price?

Who knows, TTWO is currently trading at a hefty discount to other large publishers. Think it goes without saying current large holders know how to bargain.

One to watch I think,

NC

Btw: I'm showing a close to 40% short interest in TTWO. With buyout rumors starting to swirl, I suspect at least some of the shorts will start feeling uncomfortable.

FormFactor Inc (NASDAQ:FORM): And Thy Shall Be Called....

FormFactor Inc (NASDAQ:FORM) is likely going to be in focus this morning after reporting its CQ4 results last night. We have two firms out with downgrades and two major firms out with wonderful defenses:

- Broadpoint is lowering their rating to Neutral from Buy saying they expected the company to at least maintain its position in DRAM while taking share in the NAND Flash advanced probe card market in 2008. However, the company's failure to ramp volume production of its new Harmony probe card family has resulted in missed opportunities in both market segments. These missteps are exacerbating an already weak outlook for DRAM customer spending in 2008.

- Piper Jaffray is also lowering their rating to Neutral from Buy saying protracted the Harmony ramp delays in 2H07 have resulted in market share losses that will likely not rebound until the DRAM industry regains profitability and restarts capacity expansions and design transitions. The good news is that customer design transitions occur frequently and FORM has an opportunity to win back share in 2H (albeit at potential lower ASPs). Recommends sidelines until they see signs of improving DRAM market conditions. Expects better DRAM supply demand balance exiting 08 and continued strong Flash. Tgt is lowered to $18 from $23.

- Cowen notes FORM will likely get killed on the significant reduction in the outlook and their admission that there's been some share loss. Only time will prove that there is a secular competitive issue here or if this is simply a cyclical phenomenon. After hours the stock was indicated at $~18 or about 1.5x cash. Given that they don't expect FORM to burn cash beyond Q1, tomorrows opening will likely be a very attractive entry point but this market has yielded many cheap stocks -- some with less moving parts than FORM. Firm notes they rode this one down and we're not going to downgrade here but until visibility improves a bit they think there's little reason for most investors to play unless they are longer term value investors who can wait for this market. Growth investors (this has been a strong growth name) might punt....

- Morgan Stanley maintains their Overweight rating on FORM despite a more aggressive cyclical near-term slow-down in demand for their products given cutbacks in DRAM customer spending patterns. They remain confident in their FORM thesis as they see the company well positioned to grow in a fast growing market ~ 20% y-y (over a multi-year period) as the secular trend of improving test efficiency (through test parallelization), enabled through the use of FORM’s proprietary technology, drives above peer average growth inrevenues and profitability. Firm would be buyers of the stock on any weakness as they believe the market is overestimating the magnitude of the near-term slowdown. Their global memory team’s view on memory supply/demand indicates an improving fundamental outlook in 2H08 for memory suppliers and for FORM. Lowers tgt to $30 from $43.

- The most wonderful defense comes from Citigroup saying they suggested a month ago this wasn't going to be pretty and cut #s, but this was an unmitigated disaster and worse than they ever could have imagined. In checks around the industry post-call, in the past few weeks DRAM makers are in all-out desperation to save $ and, in some cases, are just not testing any more (thus not buying any probe cards). While pricing is also a factor here, MJC has been the only game in town at the high-end for full wafer contact and thus, FORM has been forced to concede pricing at the low-end - however, Citi thinks it's now regaining quals at high-end for Harmony DRAM. While difficult to defend the stock on near-term fundys, they think design activity at DRAM makers has accelerated in recent wks and - if it holds - adds a much stronger fundamental case for FORM as it would drive big upside to CQ2:08 revs. While massively cutting numbers (C08 from $1.62 to $0.20 and C09 from $2.14 to $1.49) due to guide, they're sticking w/the Buy given ~$14 in tang. book and ~$10 net cash (even after 1H:08 charges/losses) and ~$0.70/shr in trough ('08) EBITDA (incl. options) suggesting strong val'n support at ~$15-16 (or <10% style="color: rgb(255, 0, 0);">Notablecalls: I think that after going over the comments, most of you agree this is a very interesting situation.

Notablecalls: In a normal tape, I'd be all over FORM, calling for a multi-point bounce. Yet, the action in SIRF has made me a bit more wary.

Here's how I see it:

- Weakness in DRAM is no surprise, given the decline in spot prices and results/comments issued by several DRAM players.

- On the other hand, several DRAM makers have been producing below cash cost, which has historically been a sign of bottoming in the sector. A kind of a Darwinian appoach. Micron (MU) stock has been on the rebound lately, if you haven't noticed.

- FORM management was smart enough to raise cash when the stock was still trading close to $40, so they have $10-12 bucks worth it on their balance sheet. It's kinda surprising we didn't get a buyback announcement last night but I bet we will see one in the n-t. This would surely help the stock.

- FORM continues to be an analyst darling and a mean bouncer. It's now trading a tad below its 5 yr (all-time) lows. My gut tells me it's a keeper at around 17. Let's see how it works out.

Paperstand (Apple's OS-X is 'crap')

The WSJ reports that 2 yrs after Google (GOOG) began a big push in China, Baidu.com (BIDU) continues to dominate the country's search mkt, thanks in significant part to a controversial and legally risky offering: searches for free, unlicensed music downloads. Now, Google is preparing a counterstrike. The co is in the late planning stages of a joint venture with a Chinese online music co that would permit it to provide free, licensed, music downloads in China. The service, which is likely to offer access to tunes from three global music co’s as well as dozens of smaller players, could start in the next several wks barring any last-minute hiccups.

“Heard on the Street” column discusses Lennar (LEN), saying that the co has found a way to salvage something from the huge losses it incurred by overpaying for land during the housing boom. Late last yr, the co sold a big swath of land for $525m to a partnership that it formed with Morgan Stanley. At first glance, the deal seemed terrible for Lennar, which had the land valued on its books at about $1.3bn. But the deal's structure allowed Lennar to recognize a big loss that it applied against taxes paid the previous 2 yrs. The result: Lennar is expecting a tax refund of more than $800m. As an added bonus, b/c of the way Lennar and Morgan Stanley structured their partnership, Lennar still effectively owns 20% of the land. It also has a 50% voting interest in the partnership, meaning it will have a say in how the land is developed. That means Lennar gets the tax loss, but still holds an interest in the land on its books. "That's the holy grail," said Robert Willens, of Robert Willens LLC. "The accounting is saying that they're not really selling it, whereas the taxes are more formal in the way they look at it."

“Inside Track” section reports that the purchase of $2m of E*Trade (ETFC) shares by co insiders reflects their confidence in the online broker's potential to turn itself around. Ten E*Trade insiders, including its chmn and its acting CEO, bought 474K shares of the co last wk. The purchases show that the insiders "have confidence in the turnaround plan we laid out and the future of the franchise," E*Trade spokeswoman Pam Erickson said.

Barron’s Online discusses Macrovision (MVSN), whose shares are down almost 37% since Dec. 6, the day before the co announced it would acquire Gemstar-TV Guide for $2.8bn, twice the mkt cap of Macrovision itself at the time. Clearly, some investors wonder whether the deal, which will saddle Macrovision with lots of debt, is a case of a co biting off more than it can chew in a bold effort to reinvent itself. But the deal, which is expected to be voted on by shareholders in April, is better financially than some suspect. And it may yet help Macrovision become an important player in the coming age of digital downloads and Internet streaming video. "The combined business will become one of the largest technology intellectual property plays in the public mkts," wrote Jefferies analyst Ross MacMillan in a recent note.

The Financial Times reports that Temasek, the sovereign wealth fund, and Germany’s Tui are in talks to merge their shipping operations in a deal that could see the Singaporean group take a stake of more than 20% in the travel group.

According to The Inquirer Uber Geek Linux Torvalds said that Apple's (AAPL) latest version of its OS-X operating system Leopard was 'crap' and in many places much worse than Microsoft's Vista.

Feedback:

Fyi... only sharing

Went long on SIRF at $ 9.00. Lost $1500.00 at $8.46. Stock never really stabilized and slid further.

However, was able to recover same amount on long - SNCR stock.

Thanks,

C.S.


Notablecalls: Yeah, messed up on SIRF. Looking back, I should have issued a short sell call on it when it was trading around $10 in the pre-mkt. Going against 6-7 downgrades is just foolish. Sometimes is just doesn't pay to be a contrarian.

It's pretty tough out there.

Cutting back average position size is usually the best way to survive periods like this one. It all comes down to money management, believe it or not.

Synchronoss Tech (NASDAQ:SNCR): Actionable Trading Call Alert!

Couple of firms comment on Synchronoss Tech (NASDAQ:SNCR) this morning after the co issued its Q4 results and guidance last night:

- Goldman Sachs notes that while the headline revenue guidance will disappoint, they would be buying the stock on weakness for the following reasons:

1) They believe the vast majority of the changes relate to the company's support of the iPhone where automation rates have been higher than expected (benefit to margin), but activation volumes a bit light and more uncertain than expected (causing more caution on revenue).

2) hey believe the stock's significant underperformance into the quarter (down 34% YTD) already anticipated weaker 2008 numbers, and while the revenue was light, the gross and operating margin outlook are stronger than expected and are a direct offset to the revenue softness.

GSCO's rating remains Buy with a $38 tgt.

- ThinkEquity reits Buy but lowers tgt to $48 from $55 saying they anticipate that the stock will fall initially before focus returns to the continued strong results and remarkably strengthened margin profile. Ramping Sprint revenues and business-grade services (small business and enterprise) round out the current consumer-centric profile, and should bring greater revenue diversity by late 2008.

Firm notes they previously reduced their revenue expectations for 1Q and full year 2008, anticipating guarded guidance; they were surprised at how soft the actual revenue guidance was, with 1Q at $30-32M and the year at $151-160M. Interestingly, primary blame was fixed on the sunset of some premium SLA payments, which the firm expected to reduce margin expectations. Rather, full-year margins were guided up: GM at 56-58% and OM at 31-33%.

Notablecalls: I listened to the conference call last night and the mgmt sounded very optimistic about the L-T future despite what might be viewed as disappointing revenue guidance. The main reason for the revenue shortfall seems to be change of revenue mix with some of the transaction no longer needing SLA (service level agreement) treatment. SLA transactions have higher transaction prices, but lower gross margins. As a result, the revenue is lower than previously expected, but higher gross margins will result with no change to the bottom line.

The stock has been killed into the earnings so I suspect at least some of the shortfall was expected. I believe the initial knee-jerk reaction to revenue guidance will provide an excellent opportunity for bounce play. After all, the shortfall of SLA transactions might be viewed as a reminder of just how good software company Synchronoss really is. No service needed, it's automatic!

Lack of international business an slow ramp of Sprint may be viewed as a slight negative, but that shouldn't come as a surprise. Change of the platform is a major move and cannot be done in a breath. Mgmt still sounded really optimistic about both opportunities in addition to seeing still huge upside to the AT&T.

Be early and buy it for the bounce. I suspect it will go green today. 22% short interest sure will help.

Actionable Trading Call Alert!

Some thoughts on SiRF Tech (NASDAQ:SIRF)

- I have counted about 6 downgrades on SiRF Tech (NASDAQ:SIRF) this morning. The stock is down 40% after not meeting estimates and guiding down last night. Most analyst tgts now stand around $10.

I have a few points I wanted to make:

- First, this can't be a total surprise considering what Harman (NYSE:HAR) had to say about navigation devices.

- I was talking to a wireless/GPS analyst just yesterday who indicated that the SiRF chip may be designed into Google's phone.

- GPS functionality will be widely available in handsets sooner or later.

I think SIRF is a bounce candidate here @ around $9.

Research in Motion (NASDAQ:RIMM): Citi's investor call highly supportive of their bull case on RIM

- Citigroup is out positive on Research in Motion (NASDAQ:RIMM) after hosting an investor call on Feb 4th with the head of Citi's BlackBerry Program that yielded valuable insights from a key decision-maker within one of RIM's largest customers. Reiterates Buy and $140 tgt.

Key Takeaways - 1) Productivity benefits shelter RIM from layoffs as RIM increasingly is viewed as a non-discretionary spend. 2) Penetration rate of 10% does not suggest saturation. 3) Replacement rate is surprisingly low (avg. useful life is about 2 years). 4) Very low re-deployment of deactivated devices (~5%) further mitigates risk from financial services. 5) MSFT Exchange 2007 not a material threat for some time. 6) Competitive solutions from MOT and NOK do not seem compelling currently.

Firm believes the recent volatility and pullback in RIM shares has been largely due to macro uncertainty and stock market jitters. They note that RIM posted strong Nov-Q results and guidance in Dec despite a similar same macro backdrop.

Overall, they believe the points brought up during the call are highly supportive of their bull case on RIM.

Notablecalls: I think this call warrants some attention as the stock looks to be bottoming here. There has been lots of neg chatter regarding RIMM's fin. exposure (12% of revs) but the stock is refusing to go down. That indicates to me that at least a s-t bottom is in.

Now the attention will turn to growth opportunities in Europe and Asia.

Paperstand: YHOO mgmt believes MSFT bid too low

The Boston Globe reports that Yahoo (YHOO) mgmt is considering revisiting talks it held with Google several mo’s ago on an alliance as an alternative to Microsoft's bid, which, Yahoo mgmt believes undervalues the co, the source said. A second source close to Yahoo said it had received a procession of preliminary contacts by media, technology, telephone, and financial co’s.

The WSJ reports that there are signs that some of the biggest new places where consumers are flocking on the Web, social networking and video-sharing sites, are yielding ad rev slower than some Internet co’s had hoped. The latest warning that the hottest Web properties are proving difficult to make money from came from Google. While announcing disappointing 4Q earnings, Google execs said the co was having a harder time than it expected generating ad rev on social-networking sites and figuring out the best ad formats for YouTube. Facebook also has been publicly grappling with how to make money amid its massive spurt in usage. Microsoft, which owns a 1.6% stake in Facebook, has a long-term deal to sell ads that appear on the site, and analysts est that arrangement is losing money for Microsoft. "It's taken longer than I thought for us to find the right combinations" of ad formats, said Google CEO Eric Schmidt last wk, referring to advertising on YouTube. But, he said, he believed it "will ultimately be very, very successful for [Google] and the industry."

According to the WSJ, in an acknowledgment that the system it used to rate billions of dollars of mortgage-related securities was potentially flawed, Moody’s (MCO) said it is considering a new way of rating those and other sometimes-volatile structured finance vehicles. The credit-rating firm is considering an overhaul of its rating procedures that could include new labels to help investors distinguish collateralized debt obligations and other structured-finance investments from corporate bonds and Treasury securities. One of the most significant changes being considered by the parent of Moody's Investors Service: a new, 21-point numerical scale to rate structured securities. Moody's familiar letter grades, from triple-A to single-C, would continue to be used for corporate and govt bonds. More broadly, the ratings firm is trying to decide whether to add warning labels that essentially acknowledge the limitations of its ratings. "We've been taking a hard look at the things we do," said Richard Cantor, of Moody's.

“Heard on the Street” column out saying that at first glance, General Motors (GM) has gotten off to a relatively good start in ‘08. While other auto makers' sales slipped in Jan, GM bucked the trend and posted a gain. Fears have eased about a possible bailout for the mortgage arm of GMAC. Rather than hit the accelerator, however, investors would be wise to tap the brakes. GM still has serious kinks in its core automotive business in N-America, and, despite some big cost cuts, it may be challenged to come close to breaking even this yr. The rise in Jan sales in the US came in part as a result of a surge in rebates and incentives, which erode profit margins. GM may have to keep incentive levels high through the yr to lure buyers into showrooms. Sales of its most-profitable products, trucks and SUVs, are declining, while sales of cars, which generate less profit, are increasing. "To be an attractive stock, they've got to get N-America above break-even and in the 2% margin range," said Lehman analyst Brian Johnson.

RUMOR MILL: B.A.S.F for Albemarle (ALB)? - Colour

I'm hearing some chatter saying BASF A.G., one of the largest chemical companies in the world is close to making a $4.9 billion offer for Albemarle (NYSE:ALB).

Since I've been following ALB for quite some time, I thought to give some quick colour on the topic. While one has to treat all market rumors with a fair dose of skepticism, there may be some truth to this one. Why?

- First of all, ALB does have a very good petroleum refining catalyst business, which they bought from Akzo Nobel back in 2004. One of the main products is a hydroprocessing catalyst that removes sulfur from heavy crude oil, turning it into more expensive light sweet crude. The deal proved to be a brilliant one as demand for refining catalysts surged. Customer list includes Exxon, RDS, Chevron as well as many independent refiners like VLO & TSO. Today the business accounts for about 40% of total revenue (and 50%+ of profits).

This is definitely something BASF would want to have complementing their existing refinery catalysts business.

- Secondly, BASF has a history of making acquisitions in the space. They bought Englehard, another big player in the refining catalysts business in 2005/2006. If my memory serves me correct, the deal was a hostile one.

- Third, BASF sure has the firepower to do the deal. The co has around EUR10 billion available for deals and the management is on record saying they have identified catalysts as an area of potential interest.

So there you have it,

Hope it helps.

NC

USANA Health (NASDAQ:USNA): Expecting a short squeeze - Jefferies

- Jeffco is out positive on on USANA Health (NASDAQ:USNA) saying operating momentum should continue as Average Active Associate growth has been accelerating recently. Therefore, they believe upside is possible to 4Q results, which could lead to a further short squeeze on the shares. In addition the firm believes mgt has been conservative in its 2008E outlook, which may be revised upward.

Gross margins should continue to expand nicely with the disposition of the lower-margin contract mfg business. However, SG&A has been up as a % of sales due to expansion of its infrastructure to support recent growth and due to added legal costs as a result of 3rd party allegations which mgt deems defamatory.

Firm expects mgt to update its outlook for 2008E. In its original outlook, co suggested 2008E sales and EPS would each grow +10-13%, which they believe to be conservative, particularly in light of the acceleration in Average Actives and the currency tailwind, particularly from the Canadian and Australian dollars. Combined, those markets accounts for almost 1/3 of sales and are currently up double digits vs the US$. Jeffco's EPS forecast for 2008E is $3.10, up +16.7% and above the upper end of mgt's implied 2008E outlook of $2.93-$3.03, as is consensus of $3.04.

USNA is still among the most shorted stocks with 7.0 mil shares still short as of January 15th, which is almost 100% of the free float.

Reit Buy and $56 tgt.

Notablecalls: Worth watching I think, as USNA can be an explosive mover. These comments may put some fire under the shorts.

RealNetworks (NASDAQ:RNWK): Thoughts on the Yahoo deal.

- It looks like RealNetworks (NASDAQ:RNWK) has struck a major deal with Yahoo! this morning:

Internet media company Yahoo Inc said on Monday its music service will now be handled by Rhapsody America, an on-demand subscription service run by RealNetworks Inc and Viacom Inc.

Yahoo, which previously said it would replace its in-house built Yahoo! Music Unlimited service, said it would migrate customers to Rhapsody over the coming months, while allowing subscribers to access their music library from a new Rhapsody account.

The strategic partnership was announced after Microsoft Corp made a $44.6 billion bid on Friday to take over Yahoo. It raises questions about whether RealNetworks and Yahoo will be able to execute their new partnership if Microsoft succeeds in buying Yahoo.

Like Microsoft, RealNetworks sees the value of a partnership with Yahoo as a way to get in front of more than 23 million monthly Internet users. "This really works to make Rhapsody much more available to a much wider audience," said Sheeran, a senior vice president at RealNetworks.

Yahoo Music's monthly subscribers, who currently pay around $9 a month will eventually have to pay around $12.99 a month for Rhapsody when their existing contracts expire. (VIA REUTERS)

Notablecalls: RNWK has currently something like 2.7 million subscribers. The Yahoo deal would bring in 20 million more. The margins would not be as good (cut to YahooSoft) but still, this may be a major breakthrough for RNWK.

Yahoo Music's was once thought of as the Rhapsody killers but now it looks like fate had other plans.

I expect to see a strong upside reaction in RNWK stock today and in the coming days.

Btw, I can't believe Briefing missed the news. Is it just me or are these guys asleep at the wheel lately?

Kohl's Corp. (NYSE:KSS): Some colour on analyst action

We have couple of firms out with interesting comments on Kohl's Corp. (NYSE:KSS):

- Goldman Sachs is adding Kohl's to the Americas Conviction Buy List, upgrading the stock from Neutral. Department store stocks look more compelling on the heels of firm's economists' upwardly revised GDP and consumer spending 2H forecasts due to aggressive Fed cuts and a larger-than-expected fiscal stimulus package. KSS has remained flat ytd while most department store stocks have rallied 8%-10%. KSS should not only catch up as it is poised to capitalize on the same fiscal and monetary benefits, but they see mean reversion opportunity across its multiple and margin to drive 15% upside potential to our new 12-month $53 price target (from $43 previously).

- Piper Jaffray notes Kohl's ended FY09 with three consecutive months of price compression. The month of January marked the end of a difficult holiday season with KSS advertised apparel prices down 1.0% with similar declines in Nov. and Dec. Firm noticed price declines on roughly 11% of the items in our survey for the month of January offset by 4% of items with price increases.Notes specific weakness in women's performance apparel bottoms, private label denim and men's sport coats. While prices on comparably priced items were down slightly, they believe clearance markdowns were the story for the month of Jan. Initial read for the month of Feb. and FY09 shows Kohl's maintaining page counts and improving prices modestly.

- Thomas Weisel downgrades KSS to Market Weight from Overweight.

Notablecalls: Now, while my brain is telling me GSCO is a tier-1 firm with lots of big clients ready to jump into their Conivction List calls, my gut tells me the tiny TWP has potential to kill the rally. So, my game plan would be to look for a quick shorting oppy if the stock opens up more than say $1. GSCO may be right L-T but the N-T movements will not be based on fundies.

Everyone jumped into retailers for the refinancing rally and the time to bail is when the big guns go positive. Hope you get my drift.

Paperstand

The WSJ reports that Google (GOOG) CEO Eric Schmidt called Yahoo (YHOO) CEO Jerry Yang to offer his co's help in any effort to thwart Microsoft’s (MSFT) unsolicited $44.6bn bid for Yahoo. The approach Fri from Google came as Yahoo is assessing its options for responding to Microsoft's aggressive "bear hug" bid, which has sent aftershocks through the media and technology industries. Ppl familiar with the matter say Yahoo's board, which conferred by telephone Fri, hasn't taken a position so far and no rival bids have emerged yet, though it remains possible some will. It is considered unlikely that Google would itself bid for Yahoo b/c of regulatory concerns related to their large shares of the search and online ad mkts. But the ppl familiar with the matter say Google could play a role in attempts by others to outbid Microsoft, or by Yahoo to remain independent. Google could potentially offer money, or guaranteed rev in return for a Yahoo advertising outsourcing pact, under that scenario.

“Heard on the Street” column out saying that it is looking less likely that outfits such as ITT Educational Services (ESI), Career Education (CECO) and Corinthian Colleges (COCO) will be able to withstand the impact of a credit crunch and a possible recession. Even bullish analysts have trimmed earnings expectations to reflect these dangers. Shares of these co’s took a big hit two wks ago after Sallie Mae (SLM) told them it was pulling back from lending to some of their students. Private lending accounts for 10-30% of rev at these schools. Sallie Mae's retrenchment, resulting from a renewed focus on credit quality, could force prospective students to scramble for loans and pay more when they get them. The move "came as a surprise and suggests that tightening in the student-loan mkt will have more of an impact on some co’s than previously expected," Merrill Lynch said in a recent report.

The Financial Times reports that the leveraged loan mkt begins the week in “disarray” following the collapse of efforts to syndicate $14bn of the debt used to finance the $30bn buy-out of Harrah’s Entertainment (HET), bankers say. The group of banks backing buyers Apollo Mgmt and Texas Pacific Group are having trouble selling on the LBO debt to 3rd parties. With the bulk of the debt remaining on their books, the banks are sitting on a sizeable loss. The freeze in the debt mkt means they now face larger potential losses on other big buy-outs, such as BCE (BCE) and Clear Channel Communications (CCU), and will be more desperate to get out of the financing commitments on those deals. Banks are already saddled with more than $150bn of unsyndicated debt, most of it LBO-related, according to S&P data.

The Globe and Mail saying that according to the credit-default swaps (CDS) mkt there's at least a 70% chance that the $35bn BCE (BCE) buyout deal succeeds. Many stock mkt investors clearly believe the deal is likely to fail. The stock finished Fri at $36, well below the $42.75 that Ontario Teachers' Pension Plan and its partners agreed to pay. CDS prices are near “levels that are all-time highs for BCE bonds, which is indicative of the fact that the credit mkt still expects that BCE will be a highly leveraged entity and therefore the deal will be consummated,” said Dan Barrett, of Tradition Group.

San Jose Mercury News reports that Yahoo plans to turn off its subscription music service and refer customers to RealNetworks' (RNWK) Rhapsody, the co’s are expected to announce today. Music remains an important area for Yahoo and its users; its music site gets about 22m unique visitors each month, noted Ian Rogers, VP of video and media applications at Yahoo. But in the fall, the co decided to de-emphasize its service, he said. Yahoo decided it could have a music interest and information site without actually running a music store or subs service. "This is about focusing in the right places," Rogers said. "The whole point is we wanted to get resources for working on different things." RealNetworks currently has just 2.75m subs for all its various music offerings, including Rhapsody.

Barron's Summary (CHKP, TXT, MOT)

Barrons’ “The Trader” column highlights CheckPoint Software (CHKP), which was among those to beat ests recently, but its pop was short-lived. Worries about a spending freeze have pared its mkt value by 20% since Oct. Yet Check Point remains a sound defensive bet. Computer security is no less a priority for most businesses even in tough economic times. With its conservative forecast, mgmt had chosen to play it safe and has factored softer demand into its rather beatable guidance. At about 21, shares trade at 11x forward earnings, and its debt-free balance sheet and suite of firewall products make Check Point a viable acquisition tgt should buying return to favor again.

Fund manager likes GLD, GDX, DNA, GILD, CELG, BMRN, ISRG, ALDN, PRGO, VDSI and DD.

Microsoft's (MSFT) offer is a great one for Yahoo (YHOO) shareholders. And it creates a buying opportunity for Microsoft stock, which could jump by a third.

If the electricity market tightens as expected, Dynegy (DYN) could see its stock, now 7, jump to 12 or more, 80% of the estimated replacement value of its power-generation assets.

Blackstone (BX) bulls think the stock is cheap at 18, or 12 times estimated earnings. But the shares could fall to 15 if several deals sour and cost Blackstone its incentive fees.

The shares of Vail Resorts (MTN), which have fallen sharply in the past three months, look poised to climb by 40% or more.

“The Trader” discusses Textron (TXT), whose shares have fallen 21% in Jan. While 4Q profits jumped 31% and beat ests, a tempered outlook sent the Street scrambling to cut projections. As a result, Textron shares are trading at 13.9x ‘08 earnings. Yet the combined backlog at Bell, Cessna and Textron Systems had grown from $12.9bn in ‘06 to $18.8bn at the end of last yr. Textron also benefits from the weak dlr and increasingly global demand for business jets and airplane equipment. Cessna, for example, is nearly sold out of business jets through ‘09. Commercial helicopter demand also is strong, with replacement orders and persistent interest from booming oil and gas, mining and utility industries, notes Citigroup analyst Jeffrey Sprague. Among other things, Sprague thinks a recent moderation of Textron's book-to-bill is driven less by waning demand than by limited supply available for delivery.

“Plugged In” column out saying that it's no secret that Motorola (MOT) was shopping the handset unit. But going public not only told the world there were no serious suitors, it also alerted the co's talented engineers to update their resumes and bail. If there's no buyer, there will be little to spin off. It might be the beginning of the end for that division, if not the entire co. Investment in the unit will get slashed and higher losses for the group are nearly certain. "Why work nights and weekends on a crash course to bring a company-saving new phone platform to mkt when a new boss will probably sack you or a new manager could kill your concept?" asks Charter Equity research analyst Ed Snyder. It's unlikely that any of the major handset makers will try to buy the business. There is so little value left in the unit that the major handset manufacturers are going to be thrilled to grab mkt share at little cost. The biggest winners are Samsung and LG. They're both strong in the American mkt and sell CDMA handsets, the more prevalent standard in N-America and Motorola's forte. Nokia (NOK), which is on fire, will benefit a tad. It sold only 8m CDMA handsets worldwide last yr and has relatively weak relationships in the US. Sony-Ericsson is also a small player in the US and doesn't concentrate on CDMA handsets. Motorola's CDMA handsets wouldn't overlap with Sony-Ericsson's products or geography, but that probably wouldn't be enough attraction for the co to buy damaged goods. Ericsson CEO Carl-Henric Svanberg said last wk that Ericsson "would take a very cautious view on such a thing b/c we do believe you are better off doing it on your own."

Notable Calls Network (NCN): UggTrader & Tilt

As most of you on Notable Calls Network (NCN) probably have noticed, I have started highlighting some prop calls made by a couple of traders, namely NCN UggTrader(1) and NCN Tilt. Combined, these two traders have over 30 years of experience in the field. Most of their calls have so far been intraday in nature. Here are a some examples:

*Jan 31

- (10:12:41 AM) NCN UggTrader: RL might be a short here. Stock could not hold pos on the day.. ran too fast too quick.

- (10:21:56 AM): NCN UggTrader: Covering half RL at $59.00.. stop to entry on remainder. This so such a typical trade for me, dude. I love this sh*t.

- (10:24:49 AM): NCN Tilt: ABK and MBI ignoring bad news flipped green, seems like squeeze very possible with 50 cent stop might be ok long trade intraday only.

- (10:37:20 AM): NCN UggTrader: MNST acting heavy here.. Stock more than a point off lows, has a resistence at $27.60, an area that marks the intraday high. Watching very closely.

- (11:47:20 AM): MBI earlier stopped me for 50 cent loss. ABK held, just sold half +1.00 and rest have stop mid 11s and letting it run intraday.

- (12:19:32 PM): NCN UggTrader: MNST coming in, the stock is not participating in the market strength here.. I hope some take advantage of the $27.60 area for a point profit. Stock is trading $26.88.

- (12:20:58 PM): NCN UggTrder: MNST made a high of $27.86 and is now delivering a point on a golden platter.


* Feb 1

- (07:32:53 AM): NCN UggTrader: Shorted YHOO at $30.75. Risking pennies.

- (07:43:14 AM): NCN Tilt: BIDU up $20 seems very tempting for a fade on weak GOOG results.

- (07:52:08 AM): NCN UggTrader: Took off some YHOO at $30.10.

- (07:55:03 AM): NCN Tilt: Shorted tiny BIDU $299.65 will add higher if need be every 5-7 points. Looking for 9-10 point fade.

- (08:05:58 AM): NCN Tilt: Covered BIDU at $291 +8.65.

- (08:07:24 AM): NCN UggTrader: Just took off remaining YHOO at $29.65.

- (08:26:43 AM): NCN UggTrader: I think Kaufman Bros. will kill AVID today, they are downgrading the name to a Sell rating, and reducing their target to $15.00 from $28.00.

- (09:01:32 AM): NCN UggTrader: Shorting KBH at $27.45 on the ML downgrade.. stock is only down $0.05.. Stock has had a huge run, coming from $18 just a week ago.

- (09:32:43 AM): NCN UggTrader: Covered KBH at $26.55 for a $0.90 gain.

- (09:38:33 AM): NCN UggTrader: Shorting COLM at $40 risking a point.

- (09:44:19 AM): NCN UggTrader: Scratching the COLM trade for a small loss.. will revisit if & when it breaks $40. Seeme like I was a little early here.. Am continuing to watch the name for first sign of weakness off this bounce.


I left the timestamps on, so you can go over the trades for yourselves.

So, my question to NCN members is the following: After getting a taste of the action by these two, do you wish to keep receiving the alers? Ugg & Tilt seem to make about 1-3 calls like this each day so it's no burden for me to keep disting these to you guys intraday. I know some of you are far to big to be flip-flopping around on anything less than 25,000 share blocks but on the other hand I also know there are people that really appreciate these calls.

Just give me some feedback on this. I'll let the majority to decide.

Enjoy your Sunday,

NC



Footnote: (1) UggTrader got his name after admitting of buying a pair of UGG's. While he claims he bought the slippers, I know better. It was these!

Avid Tech (NASDAQ:AVID): Kaufman downgrades to Sell with $15 tgt

- Kaufman is lowering their rating on shares of Avid Technology (NASDAQ:AVID) to SELL from HOLD as management sees 2008 as a transition year. Firm does not doubt that 2008 will be a transition year, but 2007 and 2006 were as well and that is just too long to ask investors to be patient. Their new price target is $15 (previously $28), which is based on 2008 EPS expectation of $0.90 and a 17x multiple. Firm's universe is trading at a median multiple of 17x.

Notablecalls: I think this call has the potential to kill AVID stock today and over the next week. New lows are coming.

Some thought s on the YHOO + MSFT news

I suspect YHOO may be a nice shorting oppy around $30.50 as I think the prem. won't draw any other bidders. On the other hand, MSFT shareholders may not be happy with the deal.

The prem is large enough to put some shorts out of biz so expect to see some bizarre short covering action early on - a perfect shorting oppy.

Hope it helps,

NC

Apple (NASDAQ:AAPL): Asian Checks from BofA

- Banc of America is out with a call on Apple (NASDAQ:AAPL) saying their Asian checks indicate recent production levels are increasing for Macs, iPod production is being cut, and iPhone is volatile.

Both desktop and notebook production numbers have moved up by 20%+ from expectations in early January, indicating potentially solid demand thus far in the March quarter, as well as some inventory replenishment. Firm believes production numbers should continue to move up throughout the quarter. MacBook Air orders also increased slightly for March, contributing to the upside. They continue to believe that desktops and notebooks are the key driver of the story.

iPod order cuts confirm BAC's conservative stance on unit growth. iPod March quarter production numbers appear to have been significantly reduced, down 10- 20% from early January and down 30%+ from early December. Current production expectations for March imply 5-10% Y/Y unit decline, versus firm's expectation for 5% Y/Y unt growth during the March quarter, implying an inventory correction and sluggish sales.

iPhone production bounces back, although still lackluster. After severe production cuts in December and early January, our recent checks reveal that production plans for the March quarter have bounced. Firm remains concerned that iPhone production and demand are lackluster.

Stock oversold and valuation attractive. They would be buyers of the stock at these levels, given our Asian checks on Mac production, and especially given they believe the main driver for the company and its stock near-term is notebooks and desktops. Reit Buy and $180 tgt.

Notablecalls: Not making a specific call here, just letting you know it's out there.

Does Microsoft Yahoo? - Goldman Sachs

You won't believe this but Goldman Sachs was out with a note yesterday after close that titled:

Goldman Sach: Does Microsoft Yahoo!? Thoughts ahead of analyst briefing

The note contained just a preview of Mr Softee's Feb 4 briefing for financial analysts and shareholders in New York.

Funny, nonetheless.

NC

Paperstand (MOT, BUD, TTI, LUV)

The WSJ reports that Motorola (MOT) said it may spin off or sell its flagship handset division. The decision is a stunning setback for an American technology icon and offers a parable for other industries. The decision comes as the mobile-device mkt, which shipped 1.1bn units globally last yr, is undergoing sweeping change. Consumers are demanding easy-to-use devices with Web and multimedia capabilities. Mobile use of the Web is expected to grow even faster in coming yrs as carriers increase the bandwidth of their cellphone networks by adding new radio spectrum. "We think they are moving in the right direction, but they still have a lot of moving to do," Carl Icahn said, noting that he wants new mgmt at the handset division.

“Heard on the Street” column out saying that after mo’s of courting, beer giants Carlsberg and Heineken last wk finally talked Scottish & Newcastle into selling itself in a $15.4bn deal. Now other titans in the fast-consolidating brewing industry may be looking for dance partners. One enticing possibility: Belgian-Brazilian InBev and Anheuser-Bush (BUD). InBev and Anheuser already have held discussions. Although reports of the talks surfaced as long as a yr ago, they have become more serious, and a deal is possible this yr.

Barron’s Online highlights Tetra Technologies (TTI), whose shares are down 48% since last summer. The co sits atop a massive mkt. Billions of dollars worth of cleanup efforts are still on tap in the hurricane-ravaged Gulf of Mexico. But the Gulf of Mexico work has been slow in coming, and a series of managerial missteps and insurance battles set Tetra back in ‘07. The unexpected detour has forced improvements that should pay dividends for investors. Tetra has restructured its decommissioning strategy to better allocate equipment resources. The co has also taken write-downs for unpaid insurance claims and expedited a contract on better-priced ingredients for its fluid line. "We think it's a hidden value play," says Mark Madsen, of Wasatch Advisors. He thinks Tetra shares, trading at around $16 a share, could fetch $25-26 by the end of the yr.

“Inside Scoop” section reports that 2 insiders at Southwest Airlines (LUV) have sold $725K in the co's stock. On Mon Chmn of the Board Herbert Kelleher sold 50K shares for $604K. Also on Mon Pres and dir Colleen Barrett sold 10K shares for $121K. "The selling isn't as bad as it looks from the headline," says Jonathan Moreland, of Ladenburg Thalmann Asset Mgmt. "The chmn still owns a lot of shares and the president did have an options exercise earlier in the month." "However, given the decline the stock has seen, I'm surprised there isn't more buying," Moreland says. "Yet this is a pattern you see at airlines over the yrs: The stock goes down and instead of buying we see more selling, [perpetuating] a negative insider profile. Add to that rising fuel costs, cutthroat competition and a potential decrease in demand…and the macro aspects of this industry have not been attractive."