Filed under: Deals, International Business Machines (IBM), Technology, Israel

Today’s headlines that IBM (NYSE: IBM) Is looking at beefing up its security offerings raises the question if management would acquire Israel-based Check Point Software (NASDAQ: CHKP). Val Rahmani, IBM’s general manager of infrastructure management for global technology services, sees security as a key to growth. Val said, “We’re looking at a lot of different companies right now, as we always do in a number of different spaces within security.”

Until now, the thought on the Street was that Check Point was going to continue as a stand-alone company, but with IBM on the prowl, it may be too much for CEO Gil Schwed to resist. Check Point currently trades at a market cap of $5.53 billion, and an acquisition would certainly come with a much higher price tag. Based on valuation, it would take between $7-8 billion to buy the company. For deep-pocketed IBM, that’s not too high a price. For Schwed, a takeover at that price would tough to reject, and it would break all records for M&A of an Israeli company.

Based on IBM’s track record, I would doubt that it is going to try to grow its own security business organically; rather, it will most probably purchase a serious player. Stay tuned to see if that player will be Check Point.

Disclosure: Writer holds a position in CHKP. He has no other position in any stock mentioned as of 11/2/07.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com.

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Filed under: PepsiCo (PEP), Newsletters, International Business Machines (IBM), Bargain stocks, Stocks to Buy

“In volatile times, keep it simple,” instructs Richard Moroney. “For us, simple is stocks with strong fundamentals and solid growth prospects that trade at attractive valuations.”

In his Dow Theory Forecasts, the advisor profiles IBM (NYSE: IBM) and PepsiCo (NYSE: PEP), each of which is involved in large share buybacks.

Moroney explains, “IBM competes in mature industries but continues to drive double-digit profit growth, developing software products and targeting fast-growing niches in the services business.” In addition, he adds, IBM is expanding in such emerging markets as Brazil, China, India, and Russia.

Moroney states, “Reflecting the strength of its software and services businesses, IBM recorded 16% growth in per-share earnings for the first nine months of 2007. Services contract signings, a key indicator of IBM’s future growth, jumped to $11.8 billion in the September quarter, up 12% from year-ago levels.

“Cost-cutting efforts have boosted profitability in recent quarters, a trend likely to continue. Share repurchases are also boosting results. IBM completed a $12.5 billion accelerated share-repurchase agreement in May, reducing the share count by 8%.

Continue reading IBM & PepsiCo: ‘Simple stocks’ for volatile times

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Filed under: Google (GOOG), Apple Inc (AAPL), Cisco Systems (CSCO), Time Warner (TWX), Home Depot (HD), Berkshire Hathaway (BRK.A), China, Halliburton (HAL), Altria Group (MO), NYSE Euronext (NYX), Goldman Sachs Group (GS), Duke Energy (DUK), Dow Chemical (DOW), Top Picks 2007, Valero Energy (VLO), PetroChina Co Ltd ADR (PTR), Huaneng Power Intl ADS (HNP), Level 3 Communications (LVLT), Kraft Foods’A’ (KFT), Chasing Value, Oil, S and P 500, DJIA, Stocks to Buy, Rite Aid Corp (RAD), Savient Pharmaceuticals (SVNT)

This year has been a stock picker’s market extraordinaire! This month’s review provides ample evidence of this, as you’ll note that Google (NASDAQ: GOOG), which I included for fun because of its popularity, beat all else as a portfolio of one. The average of my seven picks came in second, beating James Cramer’s average based on his nine picks. Both Cramer and I beat each of the three indices I am tracking, and therefore beat the average as well, with the largest and most stable, the Standard & Poor’s 500 coming in last.

Of course, this could easily change given recent market volatility. A sharp downturn in the market could reverse our fortunes. A lot can happen in the remaining two months — I take nothing for granted.

While Google shined brightly this year, Cramer and I have each made one pick that shined brighter. Cramer’s best, Apple (NASDAQ: AAPL) has gone into orbit this year on the wings of the iPhone, iPod, and growing Mac sales. Benefiting from rising oil prices, shortages in China and the Chinese government allowing a 10% price hike, my PetroChina ADR (NYSE: PTR) has rocketed, becoming the second-largest capitalized company in the world. PTR has done this even in the shadow of Berkshire Hathaway (NYSE: BRK.A) selling its shares and Warren Buffett questioning the huge appreciation of the Chinese stock market and stocks overall.

Continue reading Chasing down 007 picks: AAPL +135%, PTR +85%, GOOG +53%, & VLO +36%

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Filed under: Earnings reports, Hewlett-Packard (HPQ), AT and T (T), Penney (J.C.) (JCP), Technical Analysis, Stocks to Buy

That brochure, catalog, magazine, annual report, directory or retail insert you read this morning was almost certainly prepared by a commercial printer. One of the most highly respected practitioners of the art is headquartered in Chicago.

R.R. Donnelley & Sons Company (NYSE: RRD) provides printing and print-related services to companies in the advertising, financial services, health care, retail and technology industries. Products include magazines, catalogs, books, advertising materials, business forms, financial reports and telephone directories. The firm also offers pre-press graphics and post-printing distribution services. Clients include AT&T (NYSE: T), Hewlett-Packard (NYSE: HPQ) and J C Penney (NYSE: JCP).

Continue reading R.R. Donnelley (RRD): Printing just about everything but money

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Filed under: Rumors, Scandals, Bear Stearns Cos (BSC)

Bear Stearns (NYSE: BSC) James Cayne has been forced to defend his reputation, and respond to unusual allegations for the CEO of one of the world’s top investment banks:

Yesterday’s Wall Street Journal discussed (subscription required) rumors of Mr. Cayne’s use or marijuana as a coping mechanism in the wake of the subprime debacle and the high-profile collapse of two Bear Stearns hedge funds. Now, Cayne is denying that he smoked weed at a 2004 bridge tournament, and denied that he engaged in any “inappropriate conduct”.

Of course, there’s an argument to be made that presiding over the implosion of two hedge funds due to huge overexposure to subprime is “inappropriate conduct”. It’s probably something investors should worry about more than whether Cayne did or didn’t smoke pot. But Cayne’s denial may not be completely categorical:

Asked more generally whether he smoked pot during bridge tournaments or on other occasions, Mr. Cayne said in the article that he would respond only “to a specific allegation,” not to general questions.

if the allegations are wholly without merit, and Mr. Cayne doesn’t smoke pot at all, why wouldn’t he just say that? Paradoxically, some analysts see this as good news, as it could expedite a sale — Mr. Cayne would probably rather sell the company than be pushed out in a drug scandal.

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Filed under: International markets, Products and services, Consumer experience, Middle East, Economic data, Politics, Oil

After a brief selloff yesterday, oil prices have been moving higher in today’s action. Buyers have come back into the market today and pushed prices up as high as $95.00 earlier in the session, Prices nd are now up $1.20 to $94.69.

The main reason why prices have turned higher today is optimism about the economy created by this morning’s better than expected October payroll report. According to the U.S. Labor Department, October saw a 166,000 increase in payrolls, which was more than twice the 80,000 increase that analysts expected.

The better-than-expected payroll report was enough to create some optimism of the overall economy, and put some recession fears to rest. According to Michael Lynch, who is president of Strategic Energy and Economic Research Inc., “It suggests that concerns about the economy … are overblown a little bit.”

Continue reading Oil prices move back higher today

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Filed under: Ford Motor (F), General Motors (GM), Next big thing, Oil, Technology

In this week’s issue of The New Yorker magazine, writer Elizabeth Kolbert outlines why the car of the future has not arrived. (“Running On Fumes” - Does the car of the future have a future?”)

Kolbert documents what many have feared: that two commissions (”projects”) between the U.S. Government’s Executive Branch, one in the Clinton Administration and one in the current Bush Administration, and automakers General Motors (NYSE: GM), Ford (NYSE: F), and Chrysler, that were supposed to design a high-mileage, next-generation car have, in fact, done very little.

Continue reading Why the car of the future hasn’t arrived

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Filed under: Earnings reports, Archer-Daniels-Midland (ADM), Options, Technical Analysis

Archer-Daniels-Midland Co. (NYSE: ADM) is set to report their Q1 2008 earnings on Tuesday before the market opens. Analysts are expecting $0.51 EPS. For the past 2 years, ADM has beaten estimates 5 times, met once, and missed twice, but one of those misses was this period, Q1, in 2006. 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 ADM due to inflated options prices ahead of earnings.

After hitting a one-year high of $39.65 in April, the stock has fallen a bit but gained ground over the past month. ADM opened this morning at $35.00. So far today the stock has hit a low of $34.20 and a high of $35.14. As of 11:25, ADM is trading at $34.33, down $0.34 (-1.9%). The chart for ADM looks bullish and steady, while S&P gives the stock a 4 STARS (out of 5) buy rating.

Continue reading Archer-Daniels-Midland (ADM): Trade idea ahead of earnings

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Filed under: Earnings reports, Sprint Nextel Corp (S)

Sprint Nextel Corp. (NYSE: S) saw Q3 net income decline 77% to $64 million in its most recent earnings release Thursday. To put that into perspective, the company scored $279 million in net income in the year-ago quarter, but for the Q3 period in 2007, lower wireless revenue just couldn’t prop the company’s numbers up.

Sprint, in the midst of firing CEO Gary Forsee in October, is a great company with leading technology implementation, admirable customer numbers and huge potential in the future. Too bad all that has been plagued by a completely mis-managed merger with Nextel, customer service issues and mounds of defecting customers. It will get back on track, but investors want to now when.

Sprint’s operating revenue for the Q3 period dropped 4.2% to $10 billion from $10.5 billion a year ago, with analyst estimates coming in at $10.2 billion. The company’s wireless revenue — probably the most watched revenue component in the company — declined 4% to $8.7 billion for the quarter, while wireline revenue fell 1% to $1.6 billion. Shares closed at $16.58 yesterday, down from over $20 just three months ago.

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Filed under: Analyst reports, Wal-Mart (WMT), PepsiCo (PEP), Penney (J.C.) (JCP), Coca-Cola Enterprises (CCE), Analyst initiations, Nordstrom, Inc (JWN)

MOST NOTEWORTHY: The broadline retail sector, Coca-Cola Enterprises, PepsiCo, Pepsi Bottling and Discovery Holdings were today’s noteworthy initiations:

• BMO Capital believes the broadline retail sector will be pressured until valuations reflect a potential recession in 2008, or the housing market begins to stabilize. The firm initiated the sector with an Underperform rating, and started shares of Wal-Mart (NYSE: WMT) and JC Penney (NYSE: JCP) with Outperform ratings and a $52 target and $68 target, Macy’s (NYSE: M) with a Market Perform rating and $35 target, and Nordstrom (NYSE: JWN) with an Underperform rating and $38 target.
• Bear Stearns started shares of Coca-Cola Enterprises (NYSE: CCE), PepsiCo (NYSE: PEP) and Pepsi Bottling Group (NYSE: PBG) with Peer Perform ratings on valuation.
• Wachovia initiated Discovery Holding (NASDAQ: DISCA) with a Market Perform rating on valuation.

OTHER INITIATIONS:

• Genzyme (NASDAQ: GENZ) was initiated with a Sector Performer rating at CIBC.
• UBS resumed coverage of Capital Trust (NYSE: CT) and CapitalSource (NYSE: CSE) with Neutral ratings and targets of $35 and $18, respectively.

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