Filed under: Products and services, Competitive strategy, Toyota Motor Corp. (TM)

Toyota Motor Corp. (NYSE: TM) seemingly can do no wrong. The world’s largest automaker continues to sell passenger cars at a record clip and is a leader in the hybrid vehicle space, with many gasoline-electric SUVs and cars at dealer lots. Can Toyota hold on to the top-sales crown moving forward? It’s one thing to take the top spot away from General Motors Corp. (NYSE: GM), but it’s another to hold on to the top spot consistently, year after year.

The well-publicized meltdown dealing with subprime mortgages (and belly-up mortgage companies) has hit American automakers GM and Ford Motor Co. (NYSE: F) particularly hard. Or, it’s a great excuse by both automakers to explain dropping U.S. sales and inconsistent performance. The word “subprime” comes up at least a dozen times every month when I cover the monthly U.S. sales calls for both automakers. Shh — just don’t tell Toyota.

Although subprime mortgage woes are very real and have affected many areas of the consumer economy in the U.S., Toyota is not using it as an explanation to lower sales forecast. On the contrary - the automaker said yesterday that it was keeping its sales target for U.S. sales this year completely intact. Its reasoning? Well, Toyota believes that the housing sector mess currently in progress is a temporary setback for consumers, not something to drag the country down into recession sometime in the next two months. Add that to Toyota’s fuel-efficient vehicle lineup, and the automaker will most likely continue to sit pretty.

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Filed under: Good news, JPMorgan Chase (JPM), Options, Technical Analysis, Economic data, Politics

JPMorgan Chase & Co (NYSE: JPM) is higher this morning as most financial stocks and other stocks affected by the mortgage problems are rising this morning after news that President Bush will unveil a proposal to expand the role of the federal government to stem a wave of mortgage defaults. Fed Chairman Bernanke is also set to make a speech where investors hope he will mention or hint at upcoming rate cuts. If you think this action will help to buoy the troubled lending industry, then now could be a good time to look at a bullish hedged trade on JPM.

After hitting a one-year high of $53.25 in May, JPM shares fell sharply in July and August to hit a one-year low of $42.16 earlier this month. JPM opened this morning at $45.00. So far today the stock has hit a low of $44.28 and a high of $45.13. As of 10:40, JPM is trading at $44.62, up $0.65 (1.5%). The chart for JPM looks bearish but improving slightly, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $40 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in just three weeks as long as JPM is above $40 at September expiration. JPMorgan would have to fall by more than 10% before we would start to lose money.

JPM hasn’t been below $40 at all in the past year and has shown support around $43 recently. This trade could be risky if the Fed decision discourages investors, but even if that happens, this position could be protected by strong support around $43, a price where investors have been buying JPM up to this point.

Brent Archer is an options analyst and writer at Investors Observer.

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Filed under: Rumors, Microsoft (MSFT), Research in Motion (RIMM)

For the last 24 hours or so, rumors in the air that Microsoft Corp. (NASDAQ: MSFT) may be looking to place a bid for Research In Motion, Ltd. (NASDAQ: RIMM) has been floating to the top of the M&A bowl. It’s easy to note that rumors about RIM happen every week, but what makes this one so different? Many, many things. Microsoft’s recent attention to making its Windows Mobile platform entrenched into the market for handheld Smartphones continues to indicate how highly the company places mobile technology in its future growth strategy.

By now, it’s pretty obvious that companies like Motorola, Inc. (NYSE: MOT), Microsoft and Google, Inc. (NASDAQ: GOOG) all believe that the future of the internet is in the mobile customer’s hands. Yes, we’ll always have wireless-enabled laptop computers, but for those growing masses who want the office in their pocket, small Smartphones and like devices are just now beginning to see widespread popularity. It will blossom into a huge market from here.

Unless the price is just too high, Microsoft’s acquisition of the best-known name in mobile computing would allow it to gain a very loyal customer base almost instantly, but the company could not just dump RIM’s exclusive software and email “push” capability in favor of its own. Both RIM and Microsoft now have systems to automatically push received email to customers in the mobile field in real-time. They are direct competitors.

By buying its largest competitor in this space, Microsoft would own the market for Smartphone-based applications and push email, ahead of European-based Symbian. Microsoft’s only problem : RIM’s market cap is nearly $47 billion. But with rumors fueling Google’s entry into the wireless space in full force soon, Microsoft may again be forced to act in the endless arm wrestling with the internet search giant.

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Filed under: Other issues, Economic data, Politics, S and P 500, DJIA, Housing

In what was billed as the speech of his career, Fed Chairman Ben Bernanke told investors that he will continue to keep a steady hand on the nation’s economy and that he wants the markets to sort out their problems with a minimum of government involvement. Any rate cut may not come as quickly or be as dramatic as some on Wall Street expect.

‘It’s not the responsibility of the Federal Reserve–nor would it be appropriate–to protect lenders and investors from the consequences of their financial decisions,” the text of his speech given today says. “But developments in financial markets can have broad economic effects felt by many outside the markets, and the Federal Reserve must take those effects into account when determining policy.”

The stock market, which had risen this morning ahead of the speech, pared back some of its gains. Last I checked, the Dow Jones industrial average rose 62.19 points to 13,300.92 and the Nasdaq Composite Index was up 16.75 to 2,582.85.

Continue reading Fed not going to protect investors from bad decisions, Bernanke says

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Filed under: Analyst reports, Analyst initiations

MOST NOTEWORTHY: Suntech Power (STP), MetroPCS (PCS), Micron Tech (MU) and Charles River Labs (CRL) were today’s noteworthy initiations:

• JP Morgan initiated shares of Suntech Power Holdings (NYSE: STP) with a Neutral rating, citing valuation. The firm prefers the stock to peers given the company’s larger scale, solid supplier relationships and exposure to new technologies.
• JP Morgan also started shares of MetroPCS Communications (NYSE: PCS) with a Neutral rating, as it likes the company’s model, but sees greater upside in peers like Clearwire Corporation (NASDAQ: CLWR), Sprint Nextel Corporation (NYSE: S), Leap Wireless (NASDAQ: LEAP) and Rogers Communications (NYSE: RCI).
• William Blair believes Charles River Labs (NYSE: CRL) is the best pure-play investment in preclinical development given its dominant franchise in animal disease models, and started shares with an Outperform rating.

OTHER INITIATIONS:

• Gabelli initiated shares of Tenaris SA (NYSE: TS) with a Buy rating and $68 target.
• RBC Capital started shares of Time Warner Cable (NYSE: TWC) with a Sector Perform rating and $39 target.
• CDC Corporation (NASDAQ: CHINA) was started at ThinkEquity with a Buy rating and $11 target.
• Suntrust started shares of Owens Corning (NYSE: OC) with a Neutral rating.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

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Filed under: Analyst reports, Analyst upgrades and downgrades, Sears Holdings (SHLD)

MOST NOTEWORTHY: Cadbury Schweppes (CSG), Parker Hannifin (PH), Christopher & Banks (CBK), Benihana (BNHNA) and Sears Holdings (SHLD) were today’s noteworthy downgrades:

• Cadbury Schweppes PLC (NYSE: CSG) was downgraded to Equal-Weight from Overweight at Lehman Brothers to reflect lower-than-expected value from Cadbury’s American Beverages sale or demerger.
• Friedman Billings removed Parker Hannifin Corporation (NYSE: PH) from its Top Picks List, citing valuation.
• Christopher & Banks Corporation (NYSE: CBK) was downgraded to Sector Performer from Outperformer at CIBC World Markets following the unexpected departure of CEO Matthew Dillon. Suntrust downgraded shares of the stock to Neutral from Buy citing pressure in the retail sector.
• KeyBanc lowered shares of Benihana Inc (NASDAQ: BNHNA) to Buy from Aggressive Buy following the company’s Q2 results.
• Sears Holdings Corporation (NASDAQ: SHLD) was downgraded to Peer Perform from Outperform at Bear Stearns citing a continued deterioration in fundamentals and challenging outlook…

OTHER DOWNGRADES:

• Brocade Communications Systems Inc (NASDAQ: BRCD) was removed from JP Morgan’s Focus List; the firm maintained its Outperform rating.
• Goldman Sachs downgraded Renovis Inc (NASDAQ: RNVS) to Sell from Neutral.
• Raymond James downgraded shares of Amedisys Inc (NASDAQ: AMED) to Outperform from Strong Buy and shares of Restoration Hardware Inc (NASDAQ: RSTO) to Underperform from Market Perform.
• Biogen Idec Incorporated (NASDAQ: BIIB) was downgraded to Hold from Buy at BWS Financial.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

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Filed under: International markets, India, China, Newsletters, Bargain stocks, Stocks to Buy

From his ChangeWave Investing newsletter and regular appearances on Fox TV’s Bulls & Bears, Toby Smith is one of the most widely followed newsletter advisors. AS growth investors, he seeks stocks poised to benefit from enduring trends, which he calls “Changewaves”.

To help isolate these trends, he turns to his ChangeWave Alliance, a group of thousands of business leaders in a wide range of fields who respond to ongoing surveys regarding developing industry trends.

Three such trends, which he considers among his favorite macroeconomic ChangeWaves are Clean Energy, Carbon Credits, and Chindia (China-India) Infrastructure. And one of his latest stock recommendations — Fuel Tech (NASDAQ: FTEK) — plays into all three of these waves.

Continue reading Fuel Tech (FTEK): Clean coal, carbon credit, and ‘Chindia’

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Filed under: Analyst reports, Analyst upgrades and downgrades

MOST NOTEWORTHY: PSS World Medical (PSSI), Rockwell (ROK), Open Text (OTEX), Sanderson Farms (SAFM) and Mentor (MNT) were today’s noteworthy upgrades:

• PSS World Medical (NASDAQ: PSSI) was upgraded to Outperform from Neutral at Robert W. Baird. Baird said the quarter was impacted by one-time items and that core operations remain strong while private label, home care and HCIT initiatives may contribute to substantial margin improvement.
• Friedman Billings added Rockwell Automation (NYSE: ROK) to its Top Picks list based on valuation and growth drivers.
• Merrill Lynch upped shares of Open Text Corporation (NASDAQ: OTEX) to Neutral from Sell. Kaufman Brothers upgraded shares of the stock to Buy from Hold with a $27 target to reflect the company’s better-than-expected Q4 results.
• Sanderson Farms Inc (NASDAQ: SAFM) was upgraded to Strong Buy from Strong Sell on valuation and accelerating sales of the company’s poultry products.
• The firm upgraded shares of Mentor Corporation (NYSE: MNT) to Buy from Sell given the company’s good performance and low risk.

OTHER UPGRADES:

• Cache Inc (NASDAQ: CACH) was upgraded to Buy from Neutral with a $19 target at First Albany and to Outperform from Market Perform at Piper Jaffray.
• Gabelli upgraded shares of Diageo (NYSE: DEO) to Buy from Hold.
• RBC Capital Markets raised shares of Knology Inc (NASDAQ: KNOL) to Outperform from Sector Perform.
• Goldman Sachs upgraded shares of Maxygen Inc (NASDAQ: MAXY) to Neutral from Sell.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

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Filed under: Earnings reports, Bad news, Products and services, Middle East, Japan

Hillenbrand Industries Inc. (NYSE: HB) recently announced that it will split into two independent publicly traded companies. While this move will most likely be beneficial for investors, it is too bad for those favoring comic irony. How can one not like a company that markets itself as both a health care company through its Hill-Rom unit as well as a death-care company through its Batesville Casket unit? The company will get you coming and going. But the numbers for Hillenbrand haven’t been good for the past few quarters, so management had to make some move to stop the flow of red ink.

The 3Q 2007 numbers released earlier this month paint a distressing picture overall. Revenues were up 5% to $494 million, but net income declined by 31% to $35.7 million. Hillenbrand missed Wall Street’s guesstimated EPS of $0.68 by $0.02, not a big deal, but the stock has been out of favor for a while. There are few growth prospects in the U.S. for Hillenbrand’s living or dead customers. Hill-Rom Health Care posted a sales increase of 12.8% for the quarter, but only 1.7% of that growth was in the U.S. Hill-Rom continues to lose money on its medical bed product lines in the U.S, due to decreasing reimbursements from Medicare and private insurers. On the positive side, Hill-Rom recently entered into an agreement to supply medical bed frames and other movable medical equipment to hospitals in Japan, the world’s second-largest medical goods market after the U.S. Hill-Rom is also aggressively moving into medical equipment markets in the Middle East and Latin America.

Hillenbrand’s dead customers are not enough to keep Batesville Casket Company alive in its current form. Casket sales were flat as more people opted for cremation or more ecologically-sensitive burials. Batesville Casket has introduced a new line of lower-priced caskets, but the company’s profit margins continue to be squeezed by rising steel prices. CEO Peter Soderberg expects 4Q revenues to decline even further, and operating expenses to increase, beyond the planned February 2008 separation of the two companies. The stock has done absolutely nothing for months, opening the year trading at $56.70, and closing Thursday at $56.95.

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Filed under: Citigroup Inc. (C), Economic data

That loud thud you heard yesterday morning at 8:30 a.m. was Chuck Prince, Citigroup Inc’s (NYSE: C) CEO, hitting the floor following the much stronger than expected GDP report.

Citigroup, which has committed tens of billions of dollars to finance many of the larger private equity deals, will be stuck holding these loans on its books for much longer than it anticipated due to this report. The simple fact of the matter is the Fed will not be able to lower short-term rates with GDP growth of 4%.

Leaving short-terms rates unchanged means the yield curve will not change for the better and could actually change for the worse. If rates start heading higher, this means the loans the money-center banks are holding will drop even more in value.

Yesterday’s GDP report means this post-PE bubble environment will be difficult to work through. Any easy fix of a slowing economy leading to the Fed dropping rates and a downward shift in the yield curve is not going to happen. Actually, it looks like the longer end of the bond curve was wrong in forecasting an economic slowdown, with the possibly of rates having to head higher. This means it is too early to get back into the money-center banks.

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