Archive for August 9th, 2007Filed under: Economic data
International investing also “screeched to a halt”, as the $2.0 billion in weekly inflows into funds outside of the U.S. have stopped. This morning, short-term lending rates, the rates for financial institutions to do business with each other, shot up in Europe — another sign of tight money. Retailers also released generally weak monthly sales data this morning, with a few exceptions. We blogged yesterday that the Fed’s objective is to control the psychology of inflation expectations, it appears from all the points listed above that the Fed has succeeded. Both the ECB and the Fed announced they are adding reserves to the system. Look for short-term rates to start coming down in September.
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2007
Option update: US Steel’s (X) volatility up on Atticus Capital rumorsPosted by: in Stocks Money NewsFiled under: Brinker Intl (EAT), U.S. Steel (X), Options
TiVo (NASDAQ: TIVO) calls active as TIVO trades near 10-month high. TIVO, a digital video recorder provider, is recently up 64 cents to $7.01. TIVO has a market cap of $682 million. TIVO September 7.5 calls have traded 25 times on transaction volume of 1,300 contracts above its open interest of 435 contracts. TIVO September option implied volatility of 57 is near its 26-week average according to Track Data, suggesting non-directional risk. Brinker (NYSE: EAT) volatility up; EAT talking to investors about selling Macaroni Grill. EAT operates restaurant concepts including; Chili’s, Macaroni Grill, Maggiono’s & On the Border. Goldman Sachs says “EAT reported 4Q operating EPS of $0.57, ahead of our $0.47 estimate. The overage came largely from a lower tax rate, share count, and modest expense variance.” Dow Jones reported EAT “is talking with a ‘number of investors’ about the possible sale of its Romano’s Macaroni Grill chain.” EAT September option implied volatility of 33 is above its 26-week average of 29 according to Track Data, suggesting larger risk. Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
Motor home manufacturer Winnebago Industries Inc. (NYSE: WGO) is currently being squeezed by numerous factors, only some of which are under the company’s control. To the surprise of no one who has recently been hit in the wallet at the gas pump, demand for gas guzzling behemoths remains soft. Costs for labor and raw materials continue to rise. Consumers who do buy motor homes are price conscious so Winnebago must offer cheaper, lower profit margin models, even though selling expenses due to incentives continue to rise. Thus, no one should have been shocked at Winnebago’s recent 3Q 2007 earnings report, which indicated that 3Q profits fell 14% to $11.3 million even though overall revenues were up 5.2% to $231.7 million. Just like with taxes, it is not always about how much you earn. It’s about how much you get to keep. And Winnebago is not getting to keep all that much. Revenues have decreased by 4% over the previous three quarters, but net income has decreased by a hefty 24.6% over that same period. To its credit, the company is responding to concerns over the cost of fuel by introducing a line of more efficient diesel engines in 2008 models. Sales order backlog has increased substantially due to the newer models, although the cost of those sales has also increased. Winnebago repurchased $20 million of its stock during 3Q 2007, but the stock has still lost almost 10% of its value since the beginning of the year. Winnebago stock recently closed at $30.00, up $1.34. While Winnebago’s EPS are significantly above industry average, its P/E is as well.
Filed under: Bad news, Industry, Consumer experience, Competitive strategy, Ford Motor (F), General Motors (GM), Toyota Motor Corp. (TM)
In its conference call for investors Thursday, GM lowered its 2007 sales forecast by 100,000, down to 16.5 million. This news comes a day after its American rival Ford Motor Co. (NYSE: F) made similar estimate cuts. Yesterday, Ford announced that it is now also expecting just 16.5 million cars and trucks to sell this year, down from its previous estimate of around 16.8 million. If we take a look at all automakers, the estimates range anywhere from 16.3 million to 16.7 million vehicles this year. But some industry experts feel that even the low end of that spectrum is going to be out of reach for the year. Autodata, a firm responsible for tracking industry statistics, has said that it is expecting to see auto sales down around 16.2 million during 2007, which is over 1 million vehicles lower than the industry record set 7 years ago. In 2000, the industry sold 17.4 million cars and trucks. The one good side to this sales impact coming from higher gasoline prices is the shift in attitude of American car makers. As buyers are continuing to shift into smaller, more fuel efficient cars, American car makers are starting to make that shift as well, and in the end this can only benefit both drivers and the planet. Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor’s Observer.
Read | Permalink | Email this | Linking Blogs | Comments Filed under: Coca-Cola (KO), Columns, Technical Analysis, Stocks to Buy The market is hot! Everything seems to be moving. After almost four years of a pretty non-volatile market, the recent volatility in the market has taken the interest of all traders. In a more volatile market one has to remember that a looser stop is absolutely necessary to avoid being shaken out of positions. While the risk is greater, in a volatile market return potential increases as well. Several of my recent ideas remain around the opening price while others have been doing very well. However, I have to attribute some of these quick gains to general optimism from the market today. Because I have been very bullish on a variety of momentum names, these shoot up quickly on days like Wednesday. But it’s a double-sided sword — when the market gets hit, these things get hit harder. I believe that if proper risk controls are in place, most importantly a stop-loss, then trading these names is a much more lucrative game than gaming normal stocks. Most of my ideas these days are technically-oriented and there’s a pretty simple explanation for this: the market isn’t cheap enough to turn up tons of value investments — my primary fundamental-based investments. While I’ve managed turn to up a couple value ideas, most notably Earthlink (NASDAQ: ELNK) here, I’ve also managed to turn up several growth-based fundamental ideas such as American Science & Engineering (NASDAQ: ASEI) (which reported great earnings the other day) here.Here are three more trading ideas that I’m looking at these days: As you can see from the chart to the right, the stock has been in a solid uptrend for almost two years as it consistently makes higher highs and higher lows. Just Wednesday, the stock broke out above prior resistance yet again. While I’d advise waiting for a pullback to become involved in this stock, I think that longer-term traders should definitely keep this one on their watchlist.
I added this stock to my watchlist upon a fresh 52 week high on Tuesday but I’ve waited until now to mention the stock because I was looking for a high volume confirmation. Wednesday gave us just that — the stock had another solid day (up almost 4%) but this time it was on much more significant volume — a sign that institutional buyers have stepped up to the plate on this one. For what it’s worth, this stock is also breaking out on a longer-term weekly chart.
This stock first came up on my screens when it made a strong breakout towards the $50 per share level on high volume. I’ve had the stock on my watchlist ever since, waiting for the stock to pullback to the $48 range. However, the stock hasn’t closed below $50 per share since this breakout and I think the stock isn’t going to go back there anytime soon. As a result, when I saw the stock off more than 4% today when the market was up nicely I became interested. In my research, I’ve found no indications of news to cause this sell-off and, as a result, I consider it to simply be a minor correction. While a $52.50 entry price would make more sense, because it’d be a pullback to the 2nd leg of the stock’s recent breakout, I think entering a position here could make sense because a ‘true’ pullback might not come. Investors and traders need to remember that these good times won’t last forever and consequently bearish positions do make sense. I’ve highlighted several negative ideas in recent weeks, most notably CNET (NASDAQ: CNET) here and UnderArmour (NYSE: UA) here. While many will be quick to say my UnderArmour call was way off, I warned readers to hedge the quarter via calls because a short squeeze could occur — which it did. The markets are becoming riskier places to put your money due to a variety of fundamental factors but ideas are still available. Be careful and good luck!
Filed under: Apple Inc (AAPL), Newsletters, iPhone, Stocks to Buy “Get ready for a bumpy ride as the market digests tighter credit, unfavorable future economic policy, and limited options for fighting inflation,” says growth stock money manager Jim Oberweis Jr. Nevertheless, he advises, “But don’t get all depressed on us; valuations for U.S. companies, relative to the rest of the world, are cheaper than we have seen in awhile.” In his The Oberweis Report he sees upside potential in two high tech communications stocks that he considers suitable for risk-oriented investors: Ceragon Networks Ltd. (NASDAQ: CRNT) and Synchronoss Technologies (NASDAQ: SNCR). Ceragon Networks Ltd. he says, is a leading provider of high-capacity wireless backhaul solutions for cellular and fixed wireless operators, enterprises and government organizations. He notes, “Its modular FibeAir product family is recognized as the gold standard for backhaul transmission and is also one of the top solutions chosen by cellular operators for SONET/SDH rings.” In the company’s latest reported second quarter, he observes, sales increased 58% to $37.3 million from $23.6 million in the second quarter of last year. In addition, he notes, Ceragon reported earnings per share of $0.11 in the latest reported second quarter versus $0.04 in the same quarter of last year. Note that for disclosure, Oberweis states that clients of Oberweis Asset Management own 702,200 shares. Meanwhile, Synchronoss Technologies, he points out, is the leading provider of on-demand transaction management solutions to the communication service provider (CSP) market. He explains, “The company’s ActivationNow platform was recently chosen to provide transaction order management for the activation of new Apple (NASDAQ: AAPL) iPhone.” End users, or the consumers purchasing the phones and subscribing, can activate or deactivate services from their own home, without a visit to a retail store, he explains. In the company’s latest reported second quarter, he notes that sales increased 80% to $31.3 million from $17.4 million in the second quarter of last year, while earnings were $0.17 in the latest reported second quarter versus $0.05 in the same quarter of last year. Again, for disclosure, he states that clients of Oberweis Asset Management own 670,000 shares. Each day, Steven Halpern’s TheStockAdvisors.com features the latest investment ideas and market commentary from the financial newsletter community.
Filed under: Deals, Campbell Soup (CPB)
The luxury product should find an eager market, as it has been a solid performer for Campbell with sales increasing by double digits in 2006 on annual sales of approximately $500 million. The company has over 270 retail locations as well as direct sales, and its products are also available in groceries and other stores. Godiva was founded over 75 years ago in Brussels, Belgium by the Draps family. Campbell’s bought a third of the company in 1966, subsequently taking over ownership. They have deftly kept the brand separate from the Campbell’s brand, shaping the Godiva image as a gourmet product and haute culture indulgence. According to The Wall Street Journal [subscription], market analysts speculate that Godiva could bring between $750 million and $1 billion. Centerview Partners LLC has been retained as the financial advisor for the deal.
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2007
Bush tries to avoid his responsibility for housing collapsePosted by: in Stocks Money NewsFiled under: Politics, Presidential elections, Housing The New York Times reports that President George W. Bush is seeking to blame the housing market collapse on excess liquidity and views the current correction as normal. What are his goals? To keep “history” from blaming him for yet another “worst U.S. President ever” accomplishment. As a “recovering alcoholic,” Bush excels at motivating other people to cover up for his inadequacies (this is known as co-dependence). For instance, when his oil company, Spectrum 7, collapsed in 1986, he got Harken Energy to bail him out through his father’s political connections. In the case of the current debt-fueled economic reversal, he has gotten his Treasury Secretary, Henry Paulson and Fed Chair Ben Bernanke to repeat the talking point that the subprime collapse is “contained” and won’t affect the rest of the economy. I think Bush is responsible for the housing collapse for three reasons:
This sounds good until you realize that it has helped contribute to two million likely home foreclosures since it created a money making opportunity for many businesses while encouraging low income households to take on mortgages they could not afford. As these low income households go back to renting, those lost rental assistance vouchers will be sorely missed. As I posted yesterday, politicians’ natural instinct is to take credit for the good news and evade responsibility for the bad. As DealBreaker reports, this bad is continuing as BNP Paribas announced that it would not redeem investors’ money in three of its subprime hedge funds — prompting this comment from an anonymous money manager: “Remember those pictures from the Great Depression? The ones where the banks had to lock their doors because depositors were rioting to withdraw their savings. That’s what we’ve got right now” . So when all the damage has been tallied — which could be years from now — I believe that policymakers should propose rules that will prevent future presidents from using loose lending to boost their reelection prospects. We owe it to our children to keep the mistakes of one president from damaging our country’s future. Peter Cohan is president of Peter S. Cohan & Associates He also teaches management at Babson College and edits The Cohan Letter.
Filed under: Bad news, Merck and Co (MRK), Options, Technical Analysis
After hitting a one-year high of 55.14 in May, the stock has been trading within a $5 range over the past three months. The company and its private partner Neuromed announced yesterday evening that they have abandoned development of chronic pain drug MK-6721 because the drug candidate “did not demonstrate characteristics necessary to advance the compound further in development.” Technical indicators for MRK are bearish with minor improvement, while S&P gives the stock a positive 4 STARS (out of 5) buy rating. For a bearish hedged play on this stock, I would consider a September bear-call credit spread above the $55 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk and leverage returns. For this particular trade, we will make a 19.0% return in just 6 weeks as long as MRK is below $55 at September expiration. MRK would have to rise by 6% before we would start to lose money. Learn more about trades like this one here. MRK has never been above $55 for more than a day in the last twelve months, and the stock has shown some resistance around $53 recently. This trade could be risky if the stock breaks through the $55 level where it topped out in June, but the series of lower highs since then suggests a slightly bearish trend. Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in MRK.
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I wouldn’t actually call this shocking news, but automakers are now officially acknowledging that the weak housing market, combined with high gasoline costs, are going to 
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In a move to divest itself of products inconsistent with their goal of “centering on convenience, wellness and quality,” 
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