Filed under: Industry, Consumer experience, Technology

In light of the upcoming and lower-priced xbox 360 arcade gaming package from Microsoft Corp. (NASDAQ: MSFT), competitor Nintendo Ltd. (OTC: NTDOY) said today that there will be no price cuts on its ultra-popular Wii gaming console, and that the Wii will go on sale in China sometime in 2008. Microsoft’s new offering is possibly set to challenge the $250 price of the Wii, as it takes its own package price down to $280 and intros several new family-friendly gaming titles as well. That’s a great move, but I have a hard time believing that the Wii will face a serious challenge due to the move.

In addition to seeing a huge growth in profits for its latest quarter, Nintendo President Satoru Iwata said that a new “give a gift” feature is coming to the Wii, where games can be sent from one Wii to another over the net. Somehow, the Japanese gaming giant has found a way to make its gaming console the hit is needed, as competitive gaming consoles came in at much higher prices and with too much capability. Nintendo went for the mass public with the Wii, and it got it (and then some).

Iwata continued on to say that the demand for the Wii was still outstripping supply, which is a precarious position for any consumer goods manufacturer. As expected, he also announced no price cut for the holiday selling season. With the Wii being so hot still, of course it makes sense to not lower prices. Although the company is whipping out 1.8 million consoles per month, it may indeed face a holiday crunch in November moving into December if those numbers don’t satiate global demand.

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Filed under: Private equity, Merrill Lynch (MER), Entrepreneurs

Merrill Lynch (NYSE: MER) Chief Executive Stan O’Neal, who is holding onto his job by a thread, likely will sell the Wall Street firm’s 20% stake in my old employer, Bloomberg LP, to shore up his company’s bottom line. Heck, O’Neal’s successor probably will sell it as well.

If I was a betting man, I would bet that company founder and current New York Mayor Mike Bloomberg will probably buy out Merrill. Maybe a private equity player would buy the Merrill interest, reportedly valued at $20 billion, but I’m not sure Bloomberg would be willing to cede any management control to an outside investor. The same goes for a huge media company such as News Corp (NYSE: NWS) or Time Warner (NYSE: TWX).

What was obvious to even the lowliest peons at Bloomberg — including me — is that the company really likes being private. Management was always willing to try almost anything to keep people glued to their Bloomberg terminals even if it didn’t earn an immediate profit. Legend has it, one time Mike Bloomberg noticed that people were away from their Bloombergs and learned that a major sporting event was going on — he decided on the spot that the company would provide sports news. I have no idea whether this story is true, but knowing the company’s corporate culture, it sure seems to be on the mark.

Continue reading Media World: Merrill likely to sell Bloomberg stake to Mayor Mike

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Filed under: Campbell Soup (CPB)

Most mergers are driven by the notion, sometimes wildly mistaken, that the combination will bring both a competitive advantage. Some pairs of companies, however, seem so intuitively right for one another, no bottom-line considerations should be allowed to interfere with their matrimony. Like a box of Oreos and a glass of milk, these two were meant for one another.

One aspect of American life that has been keeping up with the Dow Jones average is our waistlines. Since 1994, the percentage of adults considered overweight or obese has shot up from 55.8% to 65.9%, a bullish market (covered in barbecue sauce) indeed. In looking for partners that feed in this trough, I found two that, if merged, could make dough in both expanding and contracting economies.

The first, the obvious, is Weight Watchers International (NYSE: WTW). One of the oldest, and arguably the most successful weight loss company, Weight Watchers leverages peer- to-peer support to sell a full line of diet foods, books about weight loss and endorsed products. While its diet plan finished higher than those of other companies such as Jenny Craig in a Consumer Reports study, the fact is most customers don’t succeed in maintaining their weight loss.

Continue reading Mergers I’d like to see — Weight Watchers (WTW) and Godiva (CPB)

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Filed under: Earnings reports, Good news, Industry, Corning Inc (GLW), Dow Chemical (DOW), Options, Technical Analysis

Dow Chemical Co. (NYSE: DOW) shares are trading higher today after Dow Corning Corp, the joint venture between Dow Chemical and Corning (NYSE: GLW), reported Q3 earnings of $162.7 million, 4% higher than the year-ago figure, with sales coming in 9% higher year-over-year. 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 DOW.

After hitting a one-year high of $47.96 in July, the stock quickly fell to a one-year low of $38.89 a month later. DOW opened this morning at $43.50. So far today the stock has hit a low of $43.44 and a high of $44.24. As of 10:55, DOW is trading at $43.90, up 24 cents (0.5%). The chart for DOW looks bullish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bullish hedged play on this stock, I would consider a December 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 7.5% return in just 2 months as long as DOW is above $40 at December expiration. Dow would have to fall by more than 8% before we would start to lose money. Learn more about this type of trade here.

DOW hasn’t been below $40 by more than a few cents since January and has shown support around $44 recently. This trade could be risky if the economy continues to grow weaker and slow demand for industrial goods, but even if it happens, this position could be protected by strong support the stock found around $40 where it bounced back in August

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 DOW or GLW.

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Filed under: Major movement, Earnings reports, Good news, Industry, Options, Technical Analysis, Crocs Inc (CROX)

CROCS Inc. (NASDAQ: CROX) is getting a boost today from competitor Deckers Outdoor Corp (NASDAQ: DECK), which is up over 20% this morning after smashing Q3 earnings estimates and upping their Q4 outlook. Where CROX makes ugly, trendy rubber footwear, DECK makes alternative, ugly, trendy UGG boots, so their fortunes may be similar, which is a good thing looking at this DECK quarter. 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 CROX.

CROCS stock has been strong all year, reaching a high of $72.40 last week. CROX opened this morning at $66.98. So far today the stock has hit a low of $65.47 and a high of $67.33. As of 10:45, CROX is trading at $66.93, up $2.42 (3.8%). The chart for CROX looks bullish but deteriorating slightly.

For a bullish hedged play on this stock, I would consider a January 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 5.3% return in just 3 months as long as CROX is above $40 at January expiration. CROCS would have to fall by more than 40% before we would start to lose money. Learn more about this type of trade here.

CROX hasn’t been below $40 since May and has shown support around $63 recently. This trade could be risky if the market for novelty shoes slows down, but that shows no signs yet and even if it happens, this position could be protected by strong support the stock found when it bounced off its 50-day moving average four times in the past 5 months.

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 CROX or DECK.

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Filed under: Internet, Berkshire Hathaway (BRK.A), China, Stocks to Sell

As Peter Cohan recently wrote, Warren Buffett believes that the Chinese stock market has overheated.

So how can investors profit, with possibly more upside than shorting the index? First, an analogy:

If you were in California during the late 1850s, and received a tip from the foremost gold expert in the world that the California Gold Rush was about to end, how might you seek to profit from it? If possible, I would try to find companies to short: the cottage industry of shops selling shovels and picks to would-be miners would be a prime target, if I could find such a publicly traded company.

This brings me to China Finance Online (NASDAQ: JRJC), a high-flyer trading at about 662 times trailing-twelve months’ earnings. The company markets stock-tip newsletters to Chinese retail investors, through a really (not) innovative distribution system: telemarketing. Why that business is worth $700 million is beyond me.

The catalyst for the company/stock’s decline could be a softening of the market. Everyone’s excited about stocks because the market is up big. But if people start losing money, how many are going to want to cancel their subscription and find a new hobby? A lot.

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Filed under: Deals, Industry, Competitive strategy, AT and T (T), Sprint Nextel Corp (S), Verizon Communications (VZ), Vonage Holdings (VG)

Vonage (NYSE:VG) settled its big patent dispute with Verizon (NYSE:VZ). After hours yesterday, shares in the VoIP pioneer were up over 70% to $2.61.

According to The Wall Street Journal, “Vonage agreed to pay Verizon either $80 million or $117.5 million, depending on the outcome of a decision by the U.S. Court of Appeals for the Federal Circuit.” The company has settled a suit with Sprint (NYSE:S) and has another legal fit pending over patent matters with AT&T (NYSE:T).

The rally in the stock misses the point the Vonage is still losing a lot of money and its cash balance drops with each settlement. At the end of the June quarter, the company had $275 million. But, operational deficits and settlements have probably cut that considerably. Vonage had an operating loss of $33 million during that quarter.

The market is also moving away from Vonage. Fiber products from the large telecom companies are encouraging customers to stick with them by offering the “triple play” of TV, voice,and broadband. Cable stock prices have been pulled down sharply by the ability of old line phone companies to offer competing service. So, Vonage may no longer have an easy leg up in taking customers for traditional land line users.

Vonage is facing the classic problem of the small innovator. The market has been able to copy its services and bleed off its cash. The company may note be around in a year.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Analyst reports, Best Buy (BBY), Circuit City Stores (CC), Analyst initiations, VeriFone Holdings (PAY)

MOST NOTEWORTHY: Circuit City, Best Buy, COTT Corp and o2 Micro were today’s noteworthy initiations:

• Wachovia started shares of Circuit City Stores Inc (NYSE: CC) with a Market Perform rating, citing low visibility into near-term fundamentals and low conviction in EPS.
• The firm also started shares of Best Buy Incorporated (NYSE: BBY) with a Market Perform rating, citing low visibility into holiday sales and product margin trends and valuation.
• Gabelli started COTT Corporation (NYSE: COT) with a Hold rating, as they believe the company’s Q3 was disappointing. The firm thinks COTT lacks pricing power, and would look for margin improvement and successful non-carbonated soft drink penetration from the company before recommending the stock
• Thomas Weisel started shares of o2 Micro International Limited (NASDAQ: OIIM) with an Overweight rating and $24 target. The firm believes the company is in good position to compete in the high growth markets of power management, advanced lighting and security and surveillance

OTHER INITIATIONS:

• Goldman started shares of Heartland Payment Systems (NYSE: HPY) with a Buy rating and VeriFone Holdings, Inc (NYSE: PAY) and Total System Services Inc (NYSE: TSS) with Neutral ratings.
• Gasco Energy Inc (AMEX: GSX) was initiated with an Outperform rating at Morgan Keegan.
• Morgan Joseph resumed coverage of Stage Stores Inc (NYSE: SSI) with a Hold rating.

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Filed under: Earnings reports, Good news, Industry, Merrill Lynch (MER), Countrywide Financial (CFC), Goldman Sachs Group (GS), Options, Technical Analysis

Goldman Sachs Group Inc. (NYSE: GS) is getting a boost today from other stocks in the industry, like Countrywide (NYSE: CFC), which reported a big Q3 loss this morning, but also said it expects its earnings per share in the fourth quarter to range between 25 cents and 75 cents. It also anticipates its return on equity for 2008 to range between 10 percent and 15 percent. This outlook is lifting the stock nearly 15%. Furthermore, Merrill Lynch (NYSE: MER) is reported to be considering replacing its troubled CEO and maybe even a takeover offer, which is pulling that stock and other financial interests higher as well. 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 GS.

Goldman has powered back from its 52-week low of $157.38 in August to a new high of $239.70 earlier this month. GS opened this morning at $232.86. So far today the stock has hit a low of $229.36 and a high of $233.50. As of 11:05, GS is trading at 231.45, up 4.79 (2.1%). The chart for GS looks bullish and steady, while S&P gives the stock a very positive 5 STARS (out of 5) strong buy rating.

For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $180 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 5.3% return in just 2 months as long as GS is above $180 at December expiration. Goldman would have to fall by more than 21% before we would start to lose money. Learn more about this type of trade here.

Continue reading Goldman Sachs (GS) higher on good news from competitors

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Filed under: Earnings reports, Newsletters, Genentech Inc (DNA), Bargain stocks, Stocks to Buy

“Genentech (NYSE: DNA), the world leader in cancer treatment, has been weak following its third quarter earnings report,” notes biotech sector expert John McCamant.

In his The Medical Technology Stock Letter, he explains, “What we are seeing with DNA’s stock represents an irrational overreaction by Wall Street, and one that should be taken advantage of by investors.”

The advisor notes, “Starting with their earnings, DNA reported non-GAAP operating revenues of $2.91 billion, and U.S. product sales of $2.2 billion, for the third quarter. These figures represent an increase of 22% and 18%, respectively, over the same figures reported during last year’s third quarter.

“As such, we are pleased with the growth that DNA has continued to produce. However, because revenue came in a little shy of analysts’ consensus expectation, the stock has sold off. We would note one glaring positive which DNA just isn’t getting much credit for anymore. That is, even at its already huge size, the company still expects to produce impressive growth for the full year (and in the years to come).”

Continue reading Genentech (DNA): ‘Irrational’ selling creates opportunity

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