Filed under: Deals, Hewlett-Packard (HPQ), Options, Technical Analysis

Hewlett-Packard Co. (NYSE: HPQ) are down today after the company announced plans to purchase Atos Origin Middle East, or AOME, a Bahrain-based systems integrator. If you think this stock won’t be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on HPQ.

The stock has been climbing steadily over the past several months, hitting a 52-week high of $53.00 last week. This morning, HPQ opened at $50.83. So far today the stock has hit a low of $50.25 and a high of $51.00. As of 11:25, HPQ is trading at $50.80, down $0.60 (-1.2%). The chart for HPQ looks bullish and steady, 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 November 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 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 4 weeks as long as HPQ is below $55 at November expiration. HP would have to rise by more than 8% before we would start to lose money. Learn more about this type of trade here.

Continue reading Hewlett-Packard: How to play the AOME purchase

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Filed under: Earnings reports, Intel (INTC), Texas Instruments (TXN), Technical Analysis, Stocks to Buy

Believe it or not, one of the oldest semiconductor companies in the world is now in its 50th year of operations. Even more interesting is the fact that it’s not in the Silicon Valley. To find these folks, you have to go to South Portland, Maine.

Fairchild Semiconductor (NYSE: FCS) offers a broad portfolio of components for electronic applications in the computing, communications, consumer, industrial and automotive markets. Products include logic chips, power and signal components, optoelectronics, non-volatile memory chips and diverse categories of analog and mixed-signal chips. The company also provides contract manufacturing services to other semiconductor makers. Competitors include Texas Instruments (NYSE: TXN) and Intel (NASDAQ: INTC).

The Street was surprised last week, when the firm reported Q3 EPS of 27 cents and revenues of $426.8 million. Analysts had been looking for 20 cents and $420.9 million. The CEO attributed the solid quarter to robust computing and handset demand and to operating expense controls. Management also issued in-line guidance for Q4 revenues and estimated that gross margin would be about 50-150 basis points higher (quarter to quarter). FCS shares popped on the news and have now begun to define a bullish “flag” consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Continue reading Fairchild Semiconductor enters bullish pattern

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Filed under: Deals, Hewlett-Packard (HPQ)

Hewlett-Packard Corp. (NYSE: HPQ) has announced that it will acquire systems integrator Atos Origin Middle East (AOME) so that it can serve the growing consulting and integration needs in that part of the world. Headquartered in the small Arab state of Bahrain, AOME employs more than 450 people in the Middle East and handles the area’s largest SAP integrations. (SAP is a leading software development company based in Germany.)

According to HP vice president Ken Willett, “the Middle East is one of our fastest-growing markets and this acquisition expands our ability to better service the needs of our customers.” Nothing wrong with an acquisition in a fast-growing market, right? This move will multiply HP’s business services in that Middle East region, including the region’s extensive oil and gas segments.

In general, HP has made very wise moves in the acquisitions field in the last 24 months, and this one appears to be no different. Although financial terms were not disclosed, the deal is set to close in November pending approval by regulatory agencies in the area. HP is again proving itself wise here in the business software market as it ups the ante with leading business services integrator IBM Corp. (NYSE: IBM) and puts it quite a bit ahead of PC competitor Dell, Inc. (NASDAQ: DELL).

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Filed under: Industry, Nokia Corp. (NOK), QUALCOMM Inc (QCOM), Broadcom Corp’A’ (BRCM), Options, Technical Analysis

Broadcom Corp. (NASDAQ: BRCM) shares are trading higher after Friday evening saw a statement from an International Trade Commission judge that recommended the end of an investigation into a Qualcomm (NASDAQ: QCOM) - Nokia (NYSE: NOK) dispute. Broadcom has a similar dispute and while some phones were banned in the US because of this issue, BRCM received a stay while appeals are heard. If you think that the company won’t fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on BRCM.

The stock has climbed sharply over the past two months, hitting a one-year high of $43.07 last week. BRCM opened this morning at $40.32. So far today the stock has hit a low of $40.30 and a high of $41.52. As of 11:15, BRCM is trading at $41.08, up $0.53 (1.3%). The chart for BRCM looks bullish but deteriorating 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 January bull-put credit spread below the $32.50 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 an 11.1% return in just 3 months as long as BRCM is above $32.50 at January expiration. Broadcom would have to fall by more than 20% before we would start to lose money. Learn more about this type of trade here.

Continue reading Broadcom higher after ITC rulings

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Filed under: Monster Worldwide (MNST)

Lately, Monster Worldwide Inc. (NASDAQ: MNST) has scared away investors. This is despite a bull run for mega internet franchises like Google Inc. (NASDAQ: GOOG) and Amazon.com (NASDAQ: AMZN). Yet Barron’s thinks that Monster can roar again.

No doubt, the company has some serious issues. For one thing, the economy appears to be slowing down. Also, competition in the sector is fierce, with players like Indeed.com and Dice (NYSE: DHX) fighting for every dollar.

But it looks like the bad news is baked into the stock already. Keep in mind that Monster trades about 20 times the projected profits for 2008. Additionally, Monster has been building out its global footprint, such as in Europe and Asia. And there are no shortage of buyout suitors, like Google, News Corp. (NYSE: NWS), and Microsoft Corp. (NASDAQ: MSFT).

What’s more, Monster owns 44.4% of ChinaHR.com, which is the #2 jobs site in China. In light of the crazy valuations of Chinese IPOs, this could be a highly valued asset.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

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Filed under: Commodities, Oil

Among oil companies Sunoco Inc. (NYSE: SUN) represents a riskier play because SUN meets its crude oil requirement via purchases from third parties, as opposed to company owned operations.

A major strength is Sunoco’s strong presence in the U.S.’s East Coast and Midwest markets, which provides considerable earnings stability. However, analysts’ 2007-2008 projections for Sunoco’s gasoline and petrochemical production are not outstanding. Further, look for refinery maintenance and repairs to hurt refinery production somewhat in 2007, but full refinery production should return in 2008. Sunoco has also been hindered by an emphasis on light sweet crude, which has restricted its ability to take advantage of larger refining margins for sour crude.

The big question is, why is Sunoco worth an investor’s attention? Answer: Analysts could be a tad low regarding revenue growth for 2008, particularly given crude oil’s persistently high price. Oil, which closed Friday around $89 per barrel, is likely to remain above $70 per barrel for the foreseeable future, and if $100 per barrel is in oil’s near future, those 2008 revenue estimates for SUN will prove to be conservative. Further, SUN, which closed Friday at $71.10, has a PE ratio of about 8 — which makes it a very cheap stock.

Continue reading Sunoco (SUN): A riskier oil play

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Filed under: Options, Freep’t McMoRan Copper (FCX), Commodities

Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) is stumbling today as copper and gold futures are down sharply this morning. The US dollar is bouncing back slightly this morning and commodities prices are relaxing somewhat. If you think this stock won’t be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on FCX.

The stock has been climbing steadily over the last seven months, hitting a 52-week high of $120.20 earlier this month. This morning, FCX opened at $106.50. So far today the stock has hit a low of $103.35 and a high of $108.19. As of 11:55, FCX is trading at $104.96, down $4.78 (-4.4%). The chart for FCX looks bullish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bearish hedged play on this stock, I would consider a November bear-call credit spread above the $130 range. A bear-call credit spread is an options position that combines the purchase and sale of call 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 4.8% return in just 4 weeks as long as FCX is below $130 at November expiration. Freeport McMoRan would have to rise by more than 23% before we would start to lose money. Learn more about this type of trade here.

Continue reading Freeport-McMoRan falls as copper and gold settle

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Filed under: Earnings reports, Halliburton (HAL)

Halliburton Company (NYSE: HAL) saw shares initially trade down with the broad market this morning, although shares have recovered and are now up over 1% at $39.87 in early trading. The oilfield services giant posted above-expectation earnings over the weekend. Now that Halliburton is beginning to be thought of more of an overseas-based operator, the company posted its actual earnings on Sunday.

Its net income for the quarter was $727 million, or $0.79 per diluted share. This compares to net income of $611 million, or $0.58 per diluted share, in the third quarter of 2006. First Call estimates were $0.64 EPS. Included was a $0.15 per share favorable income tax impact from the ability to recognize United States foreign tax credits that were previously assumed would not be fully utilizable and $0.02 per share after-tax charges for additional reserves related to environmental matters. This would put the comparable number at $0.66 EPS versus the $0.64 estimate. Halliburton’s consolidated revenues were $3.9 billion, compared to estimates of $3.87 billion. As a result of Halliburton’s organizational restructuring during the third quarter of 2007, the company is now reporting two operating segments: the Completion and Production (C&P) segment and the Drilling and Evaluation (D&E) segment.

Continue reading Halliburton squeezes more black gold profits

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Filed under: Analyst reports, Darden Restaurants (DRI), Analyst initiations

MOST NOTEWORTHY: Obagi Medical, Medical, Microsemi, Marathon Oil and Encore Energy were today’s noteworthy initiations:

• Obagi Medical Products (NASDAQ: OMPI) was initiated with a Positive rating at Susquehanna, as they like Obagi’s growth opportunity in the aesthetics-dermatology market and views the company as an interesting take-out target for a larger specialty pharmaceutical company.
• Montgomery believes Microsemi Corporation’s (NASDAQ: MSCC) core business is on track and gaining momentum based on leverage in both high-reliability and high-performance analog. The firm started shares with a Buy rating and $34 target.
• Goldman initiated Marathon Oil Corporation (NYSE: MRO) with a Buy rating and $72 target, as they view Marathon as most favorably leveraged refining company and would use seasonal weakness in refining margins as a buying opportunity.
• RBC Capital sees a large opportunity for Encore Energy Parners (NYSE: ENP) to grow its reserves from internal negotiated transactions from its parent, Encore Acquisition Companies (NYSE: EAC), starting shares off with an Outperform rating and $26 target.

OTHER INITIATIONS:

• BMO Capital initiated DCT Industrial Trust (NYSE: DCT) with a Market Perform rating.
• Lehman started shares of Darden Restaurants (NYSE: DRI) with an Overweight rating and $52 target.
• The firm also reinstated Radian Group (NYSE: RDN) and MGIC Investment Corporation (NYSE: MTG) with Underweight ratings.

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Filed under: Exxon Mobil (XOM), Commodities, Oil

If you’re a low-risk investor looking a for modest growth stock with a high degree of safety, Exxon Mobil Corp. (NYSE: XOM) is worth a review.

With the markets in a choppy consolidation mode (or perhaps worse), the integrated oil sector has appeal as a defensive strategy.

Integrated oil and gas giant Exxon Mobil fits the bill, by virtue of its sheer exploration capability, assets, diversification, and managerial prowess. Each year, Wall Street analysts generate at least one research report on the ‘fat’ that must be cut from ‘bloated’ Exxon Mobil. Here’s the incisive point that doesn’t take an MBA from Harvard to discern: in a multinational corporation of that size, there’s always going to be an amount of fat (unnecessary positions or operations) — or at least an interpretation by someone in analytical circles that asserts that fat exists. Meanwhile, XOM, year-after-year, continues to be one of the best-managed companies in the integrated oil sector: upstream is solid, downstream is solid, and in 2007-2008 look for expanding margins in chemical operations.

Continue reading ExxonMobil (XOM): A conservative oil play

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