Filed under: Analyst upgrades and downgrades, Recession

Rather than stick your money under the mattress, invest in mattress companies. This seems to be the conclusion from Moody’s credit rating agency, which rated mattress companies as the consumer-durables sector least vulnerable to a reduction in consumer spending due to a recession. Not surprisingly, recreational vehicle and products companies are the most vulnerable to a sustained slowdown in consumer spending.

How much will consumer spending decline over the next few months? That is the trillion-dollar question. Moody’s recently downgraded several large home builder companies. Given the slowdown in the housing construction sector and the tightening of credit for home mortgages, such a downgrade was hardly surprising. Now Moody’s is examining the debt maturies of consumer-durables companies in comparison to their revolving credit facilities for 2008-2009. Whirlpool Corporation (NYSE: WHR), Brunswick Corporation (NYSE: BC) and Dixie Group (NASDAQ: DXYN) all have substantial debt maturities in the near future, but Moody’s did not downgrade those companies, as they have enough in their credit facilities to weather a slowdown. Other consumer-durables companies will not be so fortunate.

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Filed under: Deals, Middle East, Citigroup Inc. (C), Politics

Some senators from the South still wear linen suits and believe that foreign interests should not own land or a part of any business in the U.S. They also probably still smoke and eat fatty foods.

But the serious side of congressional concern about overseas investments in big U.S. companies and financial firms is that sovereign funds could find a more and more hostile reception to their investments in companies like Citigroup (NYSE: C).

According to the FT, “The Treasury, which considers the discussions with the funds a priority, hopes it can pursue its agenda through the International Monetary Fund, which is drawing up a code for SWF investments, expected in draft form in April.” The document is probably no more than a “feel good” piece of paper that Treasury can wave around in the offices of Congress and regulators.

The fact of the matter is that the government here would like sovereign funds to have different rules than those that govern people like Carl Icahn. If a raider can take over an entire company and break it into pieces, why can’t the same be done by rich interests from Kuwait, if they have the money? Any “state secrets” at a firm like Citi can be burned before the process starts, in the name of keeping important government data confidential.

The bonfire from the documents can warm the management as they leave the building.

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

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Filed under: Options

Herbalife (NYSE: HLF) closed at $38.27 Wednesday. HLF is scheduled to report EPS on February 26. HLF March option implied volatility of 55 is above February volatility of 43 and its 26-week average of 39 according to Track Data, suggesting price fluctuations in March.

OmniVision Tech (NASDAQ: OVTI), a designer of semiconductor image sensors, is scheduled to report Q3 EPS on February 28. OVTI March implied volatility of 62 is above its 26-week average of 52 according to Track Data, suggesting larger price risks.

Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

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Filed under: Citigroup Inc. (C), Merrill Lynch (MER), Goldman Sachs Group (GS)

Yesterday, the market rebounded from down 300 to up 300 points on the strength of rumors of a bailout for bond insurance companies like MBIA Inc. (NYSE: MBI). But today’s article in the New York Times suggests to me that there may be less there than meets the eye. That’s because the report says that insurance regulators are trying to raise $15 billion from Citigroup (NYSE: C), Merrill Lynch (NYSE: MER) and Goldman Sachs Group (NYSE: GS).

Is anybody home? In case anyone forgot, Citigroup and Merrill bot announced huge losses and are scrambling to raise capital. Citi lost $1.99 a share and Merrill lost a cool $12.01. Fortunately, they’ve recently raised $18.7 billion and $12.8 billion respectively from Sovereign Wealth Funds (SWFs). But as a Citi investor, I don’t want it turning around and investing that capital in yet another subprime-related house of cards.

Continue reading Can shaky Citi and Merrill bail out bond insurance?

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Filed under: Newsletters, Technical Analysis, Stocks to Buy, Housing

Larry McMillan, options expert and editor of The Daily Strategist, offers a technical out look on the market’s “oversold rally” as well as a new trading long position in Ryland Group (NYSE: RYL).

“The massive oversold condition finally asserted itself and buyers gained confidence. The appears to be completely due to the massive oversold condition that existed. Does this mean ‘the’ bottom is in? I don’t think so, but it certainly means ‘a’ bottom is in - and should last for a while.

“Volatility indices ($VIX and $VXO) rallied during the latest selling, and as the rally unfolded, both of these indices fell, confirming the buy signals they registered yesterday. Moreover, the $VIX futures continue to trade at a heavy discount, which is another bullish factor.

“The confluence of buy signals from the oversold condition should be able to keep this rally going for at least a few
weeks. However, the larger picture is not so positive. There was major damage done, and most stocks are
going to need time to build bases.

Continue reading Technical expert buys Ryland (RYL) for ‘oversold rally’

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Filed under: Analyst reports, ConocoPhillips (COP), Options, Oil

ConocoPhillips (NYSE: COP) closed at $88.25 Wednesday.

Crude oil futures are up 1.79% to $88.55 according to Bloomberg.

Smith Barney has a Hold/Medium risk (2M) rating on COP. Oppenheimer & Co says, “We expect COP shares to perform in line with their peers of major integrated oils.”

COP over all option implied volatility of 35 is above its 26-week average of 31 according to Track Data, suggesting larger movement.

Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

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Filed under: Earnings reports, Bad news, Hershey Co (HSY)

Candy-making behemoth Hershey (NYSE: HSY) moved under the earnings spotlight this morning to report a (gulp) 65% decline in fourth-quarter profit. The company banked $54 million, or 24 cents per share, compared to a year-ago profit of $153.6 million (65 cents per share). Excluding items related to changes in the firm’s global supply chain, the firm would have earned $124.1 million, or 54 cents per share, a penny shy of analysts’ consensus estimate of 55 cents.

Sales for the reporting period were virtually flat, at $1.34 billion, narrowly edging past the Street’s expectations of $1.31 billion. For all of 2007, HSY sales came in at $4.95 billion, a modest $2.5 million advance from 2006 sales.

Continue reading High dairy costs, other pressures, crimp Hershey’s (HSY) earnings

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Filed under: Hewlett-Packard (HPQ), Caterpillar (CAT), Options

Caterpillar (NYSE: CAT) closed at $65.08 Wednesday.

CAT is expected to report Q4 EPS of $1.50 on January 25 according to Thomson First calls.

CAT February option implied volatility of 45 is above its 26-week average of 31 according to Track Data, suggesting larger risk.

Hewlett-Packard (NYSE: HPQ) closed at $43.19 Wednesday.

HPQ is expected to report Q1 EPS on February 19.

HPQ March option implied volatility of 35 is above its 26-week average of 29 according to Track Data, suggesting larger risk.

Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

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Filed under: Earnings reports, Forecasts, Good news, Xerox Corp (XRX)

The market looks to be poised for a positive opening this morning, continuing yesterday afternoon’s rally, and so does Xerox Corp. (NYSE: XRX). The company’s shares have traded up over 6% following a strong increase in its quarterly earnings.

Xerox, the leading provider of digital printers and document management services, reported this morning that its fourth quarter profit jumped 79%, helped by strong sales of high-end printing machines and services.

The office equipment maker posted a quarterly net income of $382 million, or 41 cents per share. The strong numbers were driven by solid gains from higher-margin color systems sales. Xerox earnings figures show an improved performance compared with last year’s, when the company reported a profit of $214 million, or 22 cents a share. Analysts expected Xerox to show earnings of 40 cents a share in the quarter.

Continue reading Xerox (XRX) fourth quarter profit surges 79%

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Filed under: Competitive strategy, Google (GOOG), Japan

Japan’s largest wireless operator, NTT DoCoMo, Inc. (NYSE: DCM), will be joining with the world’s leading internet search company to provide advanced services to its customers. Google Inc. (NASDAQ: GOOG) will help NTT customers find what they want on the web through a promotional effort that aims to boost mobile search as well as generate revenue with search-related advertising.

In a country where much of the mobile subscriber population regularly accesses the internet through millions of cellphone handsets, this is a significant development. But it’s not just because Google has partnered with a global wireless carrier — it’s because the partnership referred to search-related advertising explicitly.

One area that Google must treat carefully with new wireless partnerships is its ability to monetize its search service within the confines of a smaller screen. The company made its fortune supplying relevant but relatively simple text ads to web surfers, so it already knows how to reach customers successfully in another medium: supply relevancy and quality without taking away from the search experience.

If Google can demonstrate this ability on the mobile phone battlefront with a huge partner like NTT, then the future for its mobile monetization efforts will look very bright. The company will be able to confirm its mission of “organizing the world’s information and mak[ing] it universally accessible and useful” — at the same time that it generates handsome profits.

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