Filed under: Best Buy (BBY), Circuit City Stores (CC), Analyst initiations

MOST NOTEWORTHY: Best Buy, Circuit City and FTI Consulting were today’s noteworthy initiations:

• Best Buy (NYSE:BBY) and Circuit City (NYSE:CC) were initiated with Hold ratings and a $45-$47 and $3.50-$4.50 target, respectively, at Jefferies. The firm expects shares to be range bound as the company struggles with its turnaround and investor concerns about pressure on big ticket consumer purchases persists.
• FTI Consulting (NYSE:FCN) was initiated with an Outperform at William Blair. The firm believes the company is well-positioned in the high-growth derivatives market and has attractive financial characteristics.

OTHER INITIATIONS:

• Thomas Weisel started Micrel (NASDAQ:MCRL) with an Overweight rating and $9 target.
• Ceva (NASDAQ:CEVA) was started with an Outperform rating and $13 target at RBC Capital.
• Verisign (NASDAQ:VRSN) was initiated with a Hold rating and $35 target at Stifel.

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Filed under: Private equity, Entrepreneurs

Bloomberg News reports on rumors that Wilbur Ross, a private equity investor who’s made billions investing in industries like steel when they were down on their luck, will take over Ambac Financial Group (NYSE: ABK). Ambac’s market capitalization has fallen $8 billion in the past year, and Fitch Ratings last week stripped it of the AAA credit rating it depends on to guarantee $556 billion of debt.

Why does bond insurance matter? Bond insurers lend their AAA rating to $2.4 trillion of municipal and structured finance debt. Downgrades would throw into doubt rankings on the debt the companies guarantee, including thousands of schools and hospitals as well as collateralized debt obligations (CDOs) owned by banks. CDOs account for $133 billion in write-downs and credit losses since the beginning of 2007 at more than 20 of the world’s largest banks and securities firms.

If Ross buys into Ambac, it could be a far more effective solution than the one being discussed a few days ago involving a $15 billion bailout from weakened banks that was being pushed by the New York Insurance Department. I’ve been hoping that hedge funds or private equity would step into the breech. And if Ross is serious, this could be great news for the market.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Ambac.

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Filed under: Private equity, Entrepreneurs

Bloomberg News reports on rumors that Wilbur Ross, a private equity investor who’s made billions investing in industries like steel when they were down on their luck, will take over Ambac Financial Group (NYSE: ABK). Ambac’s market capitalization has fallen $8 billion in the past year, and Fitch Ratings last week stripped it of the AAA credit rating it depends on to guarantee $556 billion of debt.

Why does bond insurance matter? Bond insurers lend their AAA rating to $2.4 trillion of municipal and structured finance debt. Downgrades would throw into doubt rankings on the debt the companies guarantee, including thousands of schools and hospitals as well as collateralized debt obligations (CDOs) owned by banks. CDOs account for $133 billion in write-downs and credit losses since the beginning of 2007 at more than 20 of the world’s largest banks and securities firms.

If Ross buys into Ambac, it could be a far more effective solution than the one being discussed a few days ago involving a $15 billion bailout from weakened banks that was being pushed by the New York Insurance Department. I’ve been hoping that hedge funds or private equity would step into the breech. And if Ross is serious, this could be great news for the market.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Ambac.

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Filed under: Analyst upgrades and downgrades, AT and T (T)

MOST NOTEWORTHY: Royal Dutch Shell, Sonic Foundry and AT&T were today’s noteworthy downgrades:

• JP Morgan downgraded shares of Royal Dutch Shell (NYSE:RDS.A) to Underweight from Neutral as they expect investors to remain cautious on the company’s long-term prospects and a lack of growth catalysts.
• Merriman lowered Sonic Foundry (NASDAQ:SOFO) to Neutral from Buy following the weak Q1 results, to reflect the weak Enterprise segment.
• AT&T (NYSE:T) was downgraded to Hold from Buy at Citigroup following the company’s mixed Q4 results, as they expect wireline softness to weigh on 2008 expectations and see no near-term catalysts.

OTHER DOWNGRADES:

• Bronco Drilling (NASDAQ:BRNC) was downgraded to Hold from Buy at Jefferies.
• Piper lowered Celera Genomics (NYSE:CRA) to Neutral from Buy.
• Bear Stearns downgraded City National (NYSE:CYN) to Peer Perform from Outperform.

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Filed under: Analyst upgrades and downgrades, AT and T (T)

MOST NOTEWORTHY: Royal Dutch Shell, Sonic Foundry and AT&T were today’s noteworthy downgrades:

• JP Morgan downgraded shares of Royal Dutch Shell (NYSE:RDS.A) to Underweight from Neutral as they expect investors to remain cautious on the company’s long-term prospects and a lack of growth catalysts.
• Merriman lowered Sonic Foundry (NASDAQ:SOFO) to Neutral from Buy following the weak Q1 results, to reflect the weak Enterprise segment.
• AT&T (NYSE:T) was downgraded to Hold from Buy at Citigroup following the company’s mixed Q4 results, as they expect wireline softness to weigh on 2008 expectations and see no near-term catalysts.

OTHER DOWNGRADES:

• Bronco Drilling (NASDAQ:BRNC) was downgraded to Hold from Buy at Jefferies.
• Piper lowered Celera Genomics (NYSE:CRA) to Neutral from Buy.
• Bear Stearns downgraded City National (NYSE:CYN) to Peer Perform from Outperform.

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Filed under: Analyst upgrades and downgrades

MOST NOTEWORTHY: Arcelor Mittal, OmniVision and ABB were today’s noteworthy upgrades:

• Citigroup upgraded shares of Arcelor Mittal (NYSE:MT) to Buy from Hold, as they believe the company’s supplies of iron ore are likely to give it a comparative advantage over competitors.
• OmniVision (NASDAQ:OVTI) was upgraded to Outperform from Neutral at Baird. The firm said valuation already reflects a slowdown in the China mobile phone market and April quarter seasonality.
• ABB (NYSE:ABB) was raised to Overweight from Neutral at HSBC after good earnings from Siemens (NYSE:SI).

OTHER UPGRADES:

• Merrill upgraded Lukoil (LUKOY) to Buy from Neutral.
• JP Morgan raised Assured Guaranty (NYSE:AGO) to buy from Overweight.
• Piper upgraded Sunpower (NASDAQ:SPWR) and Compuware (NASDAQ:CPWR) to Buy from Neutral.

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Filed under: Analyst upgrades and downgrades

MOST NOTEWORTHY: Arcelor Mittal, OmniVision and ABB were today’s noteworthy upgrades:

• Citigroup upgraded shares of Arcelor Mittal (NYSE:MT) to Buy from Hold, as they believe the company’s supplies of iron ore are likely to give it a comparative advantage over competitors.
• OmniVision (NASDAQ:OVTI) was upgraded to Outperform from Neutral at Baird. The firm said valuation already reflects a slowdown in the China mobile phone market and April quarter seasonality.
• ABB (NYSE:ABB) was raised to Overweight from Neutral at HSBC after good earnings from Siemens (NYSE:SI).

OTHER UPGRADES:

• Merrill upgraded Lukoil (LUKOY) to Buy from Neutral.
• JP Morgan raised Assured Guaranty (NYSE:AGO) to buy from Overweight.
• Piper upgraded Sunpower (NASDAQ:SPWR) and Compuware (NASDAQ:CPWR) to Buy from Neutral.

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Filed under: Earnings reports, Forecasts, Microsoft (MSFT), JPMorgan Chase (JPM), Broadcom Corp’A’ (BRCM), Technology

Technology shares have been battered over the last three months, but I expect the group will lead the broader market to new highs later in the year. While everyone is worried about the economy, the earnings numbers and forecasts that tech companies are providing should make investors very bullish for ‘08.

The likes of Microsoft (NASDAQ: MSFT), Juniper Networks (NASDAQ: JNPR) and Broadcom (NASDAQ: BRCM) all beat the Street’s estimates and raised guidance. What makes this even more interesting is that each company operates in different technology sectors, so it appears that corporate spending is still strong, and that should have a big impact on earnings going forward.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer has no positions in any stock mentioned as of 1/25/08

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Filed under: Earnings reports, Forecasts, Microsoft (MSFT), JPMorgan Chase (JPM), Broadcom Corp’A’ (BRCM), Technology

Technology shares have been battered over the last three months, but I expect the group will lead the broader market to new highs later in the year. While everyone is worried about the economy, the earnings numbers and forecasts that tech companies are providing should make investors very bullish for ‘08.

The likes of Microsoft (NASDAQ: MSFT), Juniper Networks (NASDAQ: JNPR) and Broadcom (NASDAQ: BRCM) all beat the Street’s estimates and raised guidance. What makes this even more interesting is that each company operates in different technology sectors, so it appears that corporate spending is still strong, and that should have a big impact on earnings going forward.

Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. DISCLOSURE: Writer has no positions in any stock mentioned as of 1/25/08

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Filed under: Major movement, Earnings reports, Amgen Inc (AMGN), Options, Technical Analysis

Amgen Inc. (NASDAQ: AMGN) shares are trading higher this morning after the company reported a fourth-quarter profit of $835 million, or 76 cents per share, yesterday after market close. Excluding a mix of one-time buyout and restructuring charges, it earned $1 per share, beating analysts’ expectations of 97 cents per share. However, 2008 forecasts were a little light, with the company expecting a slight dip in revenue due to FDA scrutiny over its erythropoiesis-stimulating agents, include Aranesp and Epogen, which depressed sales slightly in the fourth 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 AMGN.

After hitting a one-year high of $75.01 last January, the stock hit a one-year low of $43.93 on Tuesday. AMGN opened this morning at $47.52. So far today the stock has hit a low of $47.49 and a high of $48.26. As of 10:20, AMGN is trading at $48.00, up $1.88 (4.1%). The chart for AMGN looks bearish but improving slightly, 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 March 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 an 8.7% return in just two months as long as AMGN is above $40 at March expiration. Amgen would have to fall by more than 16% before we would start to lose money.

AMGN hasn’t been below $43 at all in the past year and has shown support around $45 recently. This trade could be risky if the one of the company’s drugs gets in trouble with the FDA or something of that nature, but even if that happens, this position could be protected by the support the stock has recently found right at $45, where it has bounced twice in the past month.

Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent neither owns nor controls positions in AMGN.

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