Archive for December, 2007
Filed under: Apple Inc (AAPL), Berkshire Hathaway (BRK.A), Citigroup Inc. (C), Best Buy (BBY), Circuit City Stores (CC), Sears Holdings (SHLD), Goldman Sachs Group (GS), Wachovia Corp (WB)
 Is it better to invest in a company whose CEO is a star or a company that breeds generations of outstanding CEOs? If you think a star CEO is better, I have two stocks to consider — but also one to avoid. And if you think a CEO breeding ground is better, one stock comes to mind.
Today, I appeared on CNBC’s Squawk Box this morning with Yale’s Jeff Sonnenfeld to give my picks for the three best and worst CEOs of 2007. Here are the three best CEOs along with the name of the company, the stock price performance over the last year, and my reasons:
- Steve Jobs of Apple Inc. (NASDAQ: AAPL) +144%. Successful iPhone introduction with a million units sold in its first 74 days (some estimate Apple will announce it’s sold five million in mid-January) plus outstanding performance of Apple retail stores — they account for 20% of Apple revenue and those revenues have grown 42% in the last year while the stores earn $4,000 per square foot — much more than competitors. At a Price/Earnings to Growth (PEG) of 1.8 it remains to be seen whether Apple can grow enough to justify its P/E of 50.
- Warren Buffett of Berkshire Hathaway Inc. (NYSE: BRK.A) +28%. Berkshire’s stock had a great year — it has not done as well since 1998 when it rose 52%. Berkshire’s return on equity is up from 11% in 2006 to almost 16% as of September. Berkshire is a safe haven stock and Buffett continues to find places to invest his $47 billion in cash. One caution — Barron’s thinks that Berkshire stock is 10% overvalued.
- Lloyd Blankfein of Goldman Sachs Group (NYSE: GS) +6%. Only firm to make money while peers lost billions — its short position of the ABX index–which represents a basket of credit default swaps on mortgage-backed securities- yielded $4 billion in profit — offsetting a $2 billion loss in its $10 billion CDO portfolios. I was impressed by the way Blankfein carried Goldman’s culture of encouraging intellectual debate between lower-level traders and top executives to arrive at the best decisions. Goldman trades at a P/E of 8.6 and its earnings are expected to grow 4% next year. But that forecast is a real toss up so if you buy the stock, take a long term view.
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Continue reading 2007’s three best and worst CEOs
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Filed under: Cisco Systems (CSCO), Newsletters, Stocks to Buy, Technology, 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.
“We have chosen Cisco Systems (NASDAQ: CSCO) as our favorite for 2008,” says Jim Farrish, editor of Sector Exchange.
“Looking into 2008, one area we like is technology, and one of the stronger sub sectors has been the internet. It is important to note the build-out of the internet is not done. Content is still being created at a rate no one can fathom and technological advances continue to explode.
“This brave new world comes with the ability to provide internet video downloading at a rate that will excite and attract users like never before. Why? First, the ability to increasingly compress data and more effectively use bandwidth and second, the expanding infrastructure of the internet.
“While the sector has struggled since the negative Cisco earnings announcement in November, we see opportunity in this downward move. If we consider the reason for the decline, we find it wasn’t fundamental; it was judgmental.
Continue reading Best Stocks for 2008: Sector expert sticks with Cisco (CSCO)
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Filed under: Newspapers, Magazines, Apple Inc (AAPL), eBay (EBAY), International Business Machines (IBM), Advanced Micro Dev (AMD), Merrill Lynch (MER)
.gif) PAPERS:
- With shares of eBay Inc (NASDAQ: EBAY) down 17% from their highs in 2007, CEO Meg Whitman is more than likely on her way out, TheDeal Blogs speculated.
- According to sources, International Business Machines Corporation (NYSE: IBM) is in advanced talks to acquire the Israeli start-up XIV for 4300M-$350M, Globes reported.
- According to sources in London and New York, Merrill Lynch and Co Inc’s (NYSE: MER) CEO, John Thain, is in talks with Chinese and Middle Eastern sovereign wealth funds this weekend, which could lead to the sale of another big stake in the U.S. bank, the Observer reported.
WEB SITES:
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Filed under: Forecasts, Consumer experience, Apple Inc (AAPL), Stocks to Buy
 I wrote last week that I have moved my price target on Apple Inc. (NASDAQ: AAPL) for the umpteenth time and it now is set for $300 within 12 months. The company has so much momentum in all of its products, and margins are holding up and in fact could be expanding.
The December quarter will be announced in late January, and expectations are set for $9.32 billion in revenues and earnings per share of $1.52. I believe Apple will exceed these expectations — again — and of course forward numbers will be raised once again.
Besides the iPod, the iPhone, and the new Mac with the new Leopard operating system, the other variable in the story is difficult to quantify. That variable is Apple’s retail stores and the feeling a consumer gets while visiting one. I went to one over the weekend and was in the store for over an hour, just observing the customers and the sales staff. Man, it was unreal.
Yes, the malls were busy this weekend before New Year’s Day, but the Apple store was busier than most of its neighboring stores. The one I visited in the Ridgedale Mall in Minnetonka, Minnesota. is a small store in comparison to the flagship Minneapolis Great Mall of America store, yet it was comfortable and there was a buzz. The amazing part of the Apple stores is nothing is “on sale.” No need for sales, the stuff just sells like hotcakes.
Continue reading Why Apple will go to $300
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Filed under: International markets, Indices, Japan, Economic data, Technology
Markets in Europe will be down for the first time since 2002. According to Bloomberg, The Stoxx 50 and the Euro Stoxx 50, both measures of markets in the region, will fall this year. The markets in Japan will also be down.
Part of the fall-off is clearly due to large banks in Europe as they have been hit by subprime concerns. But a number of other sectors have been hurt as well. European car companies suffer from the same malaise as their U.S. counterparts and have the same competition from Japan. Big European drug companies are up against generic manufacturers, which is pushing that sector down.
The real lesson of the European and Japanese markets is that their tech sectors are very small. To some extent it is tech stocks that have kept the U.S. market in modestly good shape, but Europe does not have the equivalent of an Intel (NASDAQ: INTC), a Google (NASDAQ: GOOG), or a Microsoft (NASDAQ: MSFT). Neither does Japan.
Much of this points to the fact that markets like Europe may not recover any time soon. They lack the key industries that continue to do well and have nothing to offset the “old world” businesses like banking and manufacturing. That makes the long-term view look pretty poor.
Douglas A. McIntyre is an editor at 247wallst.com.
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Filed under: Wal-Mart (WMT), Target Corp. (TGT), Money and Finance Today, Costco Wholesale (COST), UAL Corp (UAUA)
In the News:
Most Memorable Ads of 2007
According to both armchair critics and advertising pros, 2007 ranked with the best of times for TV and online video commercials — or it was a disaster. Standouts in 10 categories include a Frito-Lay Doritos ad which was named best ad of the year.
The ads of 2007: From ad-mirable to ad-dlebrained - USATODAY.com
Introducing the Fraud Museum
Baseball has a hall of fame, as does rock ‘n’ roll. So why not one of the world’s oldest professions? The Fraud Museum, a traveling exhibit based in Austin, houses memorabilia from some of the most infamous scam artists, con men and snake-oil salesmen in the history of Western commerce.
Museum gives fraud its sordid place in history - USATODAY.com
Retirement Communities No Longer Resemble Old Folks’ Homes
New developments aimed at the boomer generation are boasting lush grounds with fitness facilities and Olympic-size pools, luxury homes and amenities galore. Need dinner reservations? Call the staff concierge. Feeling some cubital fossa discomfort after climbing the on-site rock wall? Your personal trainer will be right over, and the nutritionist won’t be far behind with a vitamin cocktail to help you heal. These communities are sprouting up everywhere, from traditional retirement towns in Arizona and Florida to northern cities such as Chicago, Denver and Philadelphia.
Retirement: Trade shuffleboard for scuba diving - CNNmoney
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Filed under: eBay (EBAY), Options
 eBay (NASDAQ: EBAY) closed at $33.78 Friday.
Deutsche Banc has a Sell rating on EBAY. According to Deutsche Banc says, the declining US listings, deteriorating demand trends and potential increased investments in 2008, could place significant pressure on profits in 2008.
Thedeal.com says: “One way or another, it appears CEO Meg Whitman is on the way out.” Whitman joined EBAY in 1998. Years ago Whitman’s said she would leave EBAY after eight to ten years.
EBAY is expected to report EPS on January 23rd.
EBAY January option implied volatility is at 33, February is at 44. EBAY average volatility over the last 26-weeks is 37 according to Track Data, suggesting larger EPS risk.
Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
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Filed under: Forecasts, China, Middle East, Venezuela, Economic data, Oil
 Oil has made several runs at $100, but usually it retreats fairly quickly. Not this time. According to The New York Times,” oil held firm above $96 a barrel on Monday, heading for its biggest annual gain this decade as growing geopolitical concerns and dwindling consumer nation stockpiles outweighed the risk of a softening U.S. economy.”
What is surprising is that events in Pakistan and Turkey are not likely to effect oil supplies by much, if at all. The news from these regions is having more of a “psychological” impact on trading much as a break in a Canadian pipeline did two months ago.
The failure of oil to retreat may be based on the fact that one important interruption in supply from Nigeria, Venezuela, Saudi Arabia, or any other country subject to instability, could push oil higher than $100 coupled with rising demand from countries like the US and China.
That is what is odd about the current situation in the price of oil. Usually when the price of a commodity rises 30% to 40% in a short period, demand falls quickly. But, for the time being, there is little that the large oil-consuming nations can do about cutting their need for crude. It is one of the major ingredients for GDP growth.
So, world oil prices now face the most dangerous of combinations. There could be a really large supply interruption at any time, but demand rises every year.
Douglas A. McIntyre is an editor at 247wallst.com.
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Filed under: International markets, 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.
“My favorite speculation for 2008 is Australia-based Starpharma (OTC: SPHRY), a ‘home run’ pick,” says Gregg Early in The Real Nanotech Investor.
“The drug delivery sector has been revolutionized by the application of nanotechnologies. And one of the fastest up-and-coming countries in this sector is Australia.
“Starpharma has landed a few significant co-development and assessment deals with some major firms in recent months as it awaits FDA approval for its VivaGel, dendrimer-based topical cream that can prevent the spread of sexually transmitted diseases, specifically Herpes and HIV.
“VivaGel also has spermicidal qualities that are so compelling, one of Starpharma’s recent co-development deals was with Durex, one of the world’s top condom manufacturers. Durex is considering replacing the near-ubiquitous Non-oxynol 9 spermicidal coating with VivaGel, which is proving to be safe and more effective than N-9.
Continue reading Best Stocks for 2008: Starpharma (SPHRY) ties biotech to nanotech
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Filed under: Industry, Consumer experience, Competitive strategy, Microsoft (MSFT), Sony Corp ADR (SNE)
 Nintendo has done extraordinarily well with its Wii game console. The Wii regularly outsells Sony (NYSE: SNE)’s PlayStation 3 and Microsoft (NASDAQ: MSFT)’s Xbox 360. But, the most successful Nintendo product is the older DS which, according to The New York Times, outsold the Wii, 1.53 million units to 981,000, in November, based on sales figures compiled by NPD Group.
What makes the figure more interesting is that the Nintendo DS is three years old. The DS is compatible with older Nintendo games, but does not have the “hot” new features of current devices like HD TV playback.
The success of the DS may point to a “rotation” in the video game sector, and that is a movement away from expensive and complex machines that have multiple functions, high prices, and harder to understand features. Keep it simple, stupid.
It would make some sense that the market for large, complicated machines would be limited. Playing video games appears to be of interest to a broad section of the population, but reading 300-page instruction manuals probably is not.
Douglas A. McIntyre is an editor at 247wallst.com.
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