Filed under: Earnings reports, Microsoft (MSFT), Red Hat Inc (RHT), Technical Analysis, Delta Air Lines (DAL), Stocks to Buy

Red Hat (NYSE: RHT) provides customers with the Linux open source computer operating system. It also provides a variety of compatible technical programs, software development tools, support services and training programs. Microsoft (NASDAQ: MSFT), with its Windows operating system, is Red Hat’s chief competitor. The firm operates strategic alliances with Intel (NASDAQ: INTC) and Advanced Micro Devices (NASDAQ: AMD).

Red Hat pleased investors earlier in the month, when it reported fiscal Q3 EPS of 19 cents and revenues of $135.4 million. Analysts had been expecting 18 cents and $132.4 million. A sharp jump in subscriptions more than offset increased operating expenses. Management also provided strong guidance for Q4/FY08 and announced that former Delta Airlines (NYSE: DAL) COO James Whitehurst would take over as CEO on January 1. RHT shares popped on the news and then moved into a bullish “flag” consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend the shares with one “strong buy”, six “buys,” fourteen “holds” and one “sell.” Analysts see a 23% average annual growth rate, through the next five years. The RHT Price to Book ratio (4.27), Price to Free Cash Flow ratio (26.28), Sales Growth rate (27.98%) and EPS Growth rate (171.43%) compare favorably with industry, sector and S&P 500 averages. Institutions own about 95% of the outstanding shares. The stock is one of those used to calculate the AMEX Internet Index. Over the past 52 weeks, it has traded between $18.04 and $25.25. A stop-loss of $18.15 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.

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Filed under: International markets, India, Newsletters, Mutual funds, Stocks to Buy, Best Stocks for 2008

For 25 years, Steven Halpern, editor of TheStockAdvisors.com, has surveyed the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is one of 100+ ideas in the Best Stocks for 2008 report.

“The India Fund (NYSE: IFN) is our top speculative idea for 2008,” says Carla Pasternak, editor of High Yield Investing. “As investors fret that a downturn in the US housing sector could cool global growth, the world’s second-fastest growing major economy after China is forging ahead.

“India’s economy is expanding at a rapid +9% clip, nearly double the latest growth rate put in by the US economy. It’s no wonder India’s benchmark Bombay Sensex Index is up 44% this year.

“And the future looks equally strong. Thanks in part to US firms outsourcing their customer service and data-processing jobs, India is seeing the rise of a new middle class. Estimated at some 300 million of the billion-plus population, India’s middle class is mushrooming at a rate of about 20% a year.

“A growing consumer class with an insatiable appetite for everything from houses to TV sets, and the money to buy them — the world’s fastest-growing democracy appears to be in the early stages of a major bull market.

Continue reading Best Stocks for 2008: High yield and growth at India Fund (IFN)

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Filed under: Scandals, NovaStar Financial (NFI)

You would think that with its stock in the toilet, lawsuits alleging securities fraud pending, and a history of SEC inquiries, Novastar Financial (NYSE: NFI) would find it wise to start being honest with investors.

You would think. But on December 20, I wrote about the departure of Novastar’s CEO, CFO, and general counsel. In the press release dated December 19 announcing their “retirements,” Novastar wrote that Chairman and CEO Scott Hartman would “leave the Company and retire from its Board of Directors.”

In the 8-K announcing the moves, filed with the SEC on the 21, Novastar said that “On December 18, 2007, Scott Hartman was terminated as the Chief Executive . . . On December 18, 2007, Gregory Metz was terminated as the Chief Financial Officer of the Company, effective as of January 3, 2008.”

Why did Novastar change its language so dramatically? “Leaving the company” became “terminated” in a wonderful case of differential disclosure: ‘Let’s put out a broadly disseminated PR saying one thing and then file an 8-K with the SEC a few days before a holiday saying something completely different and hope no one will notice’.

Given that Novastar has already handed its shareholders massive losses, the least they could do is be honest and forthcoming in their press releases. But apparently, that’s too much to ask.

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Filed under: Industry

With the heavy and growing use of credit and debit cards on the web, 2007 was a banner year for conducting transactions electronically. But there is a negative side to this growth — the number of data breaches that left personally-identifiable information vulnerable to theft set a record this year.

The theft of credit card numbers, Social Security numbers and other sensitive personal information that lives in cyberspace soared in 2007, with companies, government agencies, schools and other institutions scrambling to make all that digital information highly secure in the ongoing cat-and-mouse game with hackers and digital information thieves. Yes, even organized crime has heeded the call to steal information with through the internet these days. Surprised? Shouldn’t be.

All these entities entrusted with the care of billions of dollars worth of customer information just aren’t giving the attention to the problem like they should. Four words: be proactive, not reactive.

Either information thieves are far smarter than “security professionals” who try to keep this information safe from prying eyes, or there is massive incompetence when it comes to information security. With the estimate for stolen customer records sitting at 79 million this year (and even 162 million from another estimate), do you feel safe about your bank account, credit card and investment account information?

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Filed under: International markets, Scandals, Politics

Celebrating New Year’s Eve, South Korea granted amnesty to 75 politicians and businessmen, including the former chairman of Daewoo Group, Kim Woo-choong.

Kim Woo-choong was sentenced by a Seoul appeals court on Friday November 3, 2006 to eight and a half years in prison. The founder and former chairman of collapsed conglomerate Daewoo, who was sentenced for embezzlement, accounting fraud, illegal financing and diverting funds out of the country, was pardoned under the presidential amnesty. For the others, South Korea reduced sentences or had suspended rights restored.

The end of Daewoo Group was the 1997-98 Asian financial crisis which came with massive debt for the company. During that crisis, South Korea’s government was forced to accept a $58 billion International Monetary Fund bailout.
Back during that period, Detroit-based General Motors Corp. (NYSE: GM) didn’t miss the opportunity to buy a major stake in Daewoo Motor to create GM Daewoo in 2002.

Continue reading Ex-Daewoo chief gets amnesty

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Filed under: Analyst upgrades and downgrades, Analyst initiations

MOST NOTEWORTHY UPGRADES:

• Tortoise Capital (NYSE: TTO) was upgraded to Buy from Neutral at Merrill Lynch.
• Brean Murray upgraded shares of California Water Service (NYSE: CWT) and SJW Corp. (NYSE: SJW) to Buy from Hold on valuation following the recent weakness.

MOST NOTEWORTHY DOWNGRADES:

• Broadpoint downgraded shares of Cache Inc. (NYSE: CACH) to Neutral from Buy and lowered their estimates after the company reduced its Q4 guidance. The broker also removed its $21 target.
• Piper downgraded shares of Salix Pharmaceuticals (NASDAQ: SLXP) to Sell from Neutral to reflect concerns over the company’s IBD franchise and potential Xifaxan patent concerns.

MOST NOTEWORTHY INITIATIONS:

• Pacific Crest initiated shares of SuccessFactors (NASDAQ: SFSF) with an Outperform rating and $18 target, and believes the company has better visibility than its On-Demand peers with 2.5 year deals.

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Filed under: Newsletters, Stocks to Buy, Best Stocks for 2008

For 25 years, Steven Halpern, editor of TheStockAdvisors.com, has surveyed the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is one of 100+ ideas in the Best Stocks for 2008 report.

“Our favorite speculative play for 2008 is Isis Pharmaceuticals (NASDAQ: ISIS),” says biotech expert John McCamant, editor of The Medical Technology Stock Letter.

“The main reason to own ISIS is the strong potential for an extremely attractive partnership for their exciting anti-cholesterol drug candidate, mipomersen, or an outright acquisition of the company itself at a substantial premium.

“We have seen recent evidence of acceleration in deal activity as the Sanofi-Aventis/Regeneron deal was the richest we have ever seen for drug candidates only in Phase 1 testing. In turn, this has most likely upped the ante for doing a deal with ISIS for mipomersen, which is now in Phase 3.

“We believe that ISIS has the most attractive late-stage anti-cholesterol drug candidate in development and expect the stock to be much higher on a partnership or an acquisition.

“The strong data for mipomersen that was presented at the recent American Heart Association meeting — which showed it had the stunning ability to reduce LDL (bad cholesterol) levels an additional 48% on top of statin therapy — has cemented mipomersen as the one of the most valuable drug candidates in development.

Continue reading Best Stocks for 2008: Partnerships and takeover appeal at Isis (ISIS)

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Filed under: Politics, Housing

The Wall Street Journal [subscription required] adds a new wrinkle to the story of efforts by subprime mortgage lender Ameriquest to use campaign cash to curry favor with the government. Ameriquest’s parent, ACC Capital Holdings, has paid $325 million to settle regulators’ claims that it charged excessively high mortgage rates and didn’t adequately disclose loan risks. The Journal’s story today highlights the $20.5 million Ameriquest spent at the state and federal government levels to block legislation that would have limited its predatory lending practices.

But as I posted in August, Ameriquest’s cash helped boost the fortunes of president Bush. Bush, who used home ownership politics to get re-elected, received $7.8 million from Ameriquest for his 2004 reelection campaign, his inauguration and for Laura Bush’s library foundation.

Ameriquest’s most interesting pay-to-play technique was to give Rolling Stones tickets and cash to state legislators. For instance, according to the Journal, “Arnold Schwarzenegger’s campaigns received at least $1.4 million, along with stacks of tickets to a Rolling Stones concert that were used to lure big donors.” And Ameriquest also handed out Rolling Stones tickets to state legislators in Georgia, Maryland, Nevada, Oregon, Utah, Washington and California.

What did Ameriquest get for all its giving?

Continue reading Does Ameriquest’s campaign cash tie Bush to the subprime mortgage meltdown?

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Filed under: Newspapers, Politics, Presidential elections

Ron Paul may be a second-tier candidate in the polls, but his fund raising acumen perches him at the top of his party. By raising $19 million in the fourth quarter [subscription required], the Texas Congressman known for his calls to abolish the IRS established the second best quarter of any Republican in this election cycle. Only Mitt Romney, who raised $20.8 million in the first quarter, has reported better numbers.

What will come of Paul’s strong fund raising and weak poll numbers? Here’s where it could get interesting: According to the Washington Post, “Ron Paul, the Texas congressman stirring up the Republican presidential contest with his libertarian-leaning views and online fund raising prowess, left the door open Sunday to running as an independent, should he not win the Republican nomination.”

Part of Paul’s problem in the primaries could be that his views aren’t in line with the party line: He has always been a strong opponent of the war in Iraq, he supports leaving most social issues up to the states, and he’s skeptical of the FBI and CIA.

But his fund raising and YouTube celebrity (and great performance on Jim Cramer’s Mad Money) show that he strikes a chord with a lot of Americans.

Ron Paul is big on college campuses and he appeals to a lot of people the other Republican candidates don’t. I’m a registered Democrat, but I’d give serious thought to voting for Ron Paul if he somehow gets the nomination or runs as an independent.

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Filed under: Deals

Add Kirk Kerkorian to the list of legendary investors making big bets on energy. Kerkorian’s trading vehicle Tracinda has purchased a 35% stake in Delta Petroleum (NASDAQ: DPTR) for $684 million, sending shares of Delta up more than 20%.

The deal will give Delta a direct capital infusion, since Kerkorian is acquiring the stake from the company, rather than buying shares on the open market as most investors. Delta will use the cash to invest in its drilling activities in the Piceance and Paradox Basins.

Delta also got a fair price from Kerkorian, extracting $19 per share from the investor. That Delta got a premium of more than 20% in the private placement indicates that there was strong interest in the company; often private placements are at substantial discounts to the market price, as was the case with Countrywide Financial (NYSE: CFC) which received a cash infusion from Bank of America (NYSE: BAC).

Kerkorian will be able to control one-third of the company’s board of directors as part of the agreement.

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