Category: Articles

Welcome to the October 15, 2007 edition of festival of stocks. Thank you to all those who contributed.

Stock Analysis:
James Cullen presents Why Apple (AAPL) Is Not a Good Value posted at College Analysts, saying, “A DCF Valuation of AAPL

Valulicious presents VesTopia – Ken Fisher Likes This Brazilian Company posted at Valulicious.

The Dividend Guy presents Dividend Stock Wednesday: 3M Inc. (MMM) posted at The Dividend Guy Blog.

Mark presents Tech Deep Values Part I: Sycamore Networks (SCMR) posted at Investment Quest, saying, “A look at Sycamore Networks (SCMR) and how this cash rich company is undervalued”

Trends and Ideas:
Steve Faber presents – An Investing Trend to Investigate – and Long Term Investing Success Means Profiting From Trends posted at DebtBlog.

Matthew Paulson presents Diversify Your Investments to Minimize Risk in a Volatile Economy posted at Getting Green.

Moneywise presents Pictures of Mania: Nasdaq and Homebuilders posted at The Real Returns, saying, “Pictures of Manias”

ETF’s
Four Pillars presents Indexing My RRSP posted at Quest For Four Pillars, saying, “A detailed description of ETF purchases from a newbie.”

vld2czech presents Stockweb – Eastern Europe emerging stock markets posted at StockWeb, saying, “Specialities among ETF offer to invest into economy segments like agribusiness, nuclear or alternative energy.”

This concludes this edition. Submit your blog article to the next edition of
Festival of Stocks using our carnival submission form.

Past posts and future hosts can be found on our blog carnival index page.

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UPGRADES

VMware VMW Caris & Company Above Average » Buy
NII Holdings NIHD UBS Neutral » Buy
EMC Corp EMC Caris & Company Above Average » Buy
Safeway SWY CIBC Wrld Mkts Sector Perform » Sector Outperform
IAMGOLD IAG CIBC Wrld Mkts Sector Underperform » Sector Perform
Telefonica S.A. TEF Citigroup Hold » Buy
Centene CNC Lehman Brothers Equal-weight » Overweight
Annaly Mortgage NLY RBC Capital Mkts Sector Perform » Outperform
PharmaNet Devlpmt PDGI Jefferies & Co Hold » Buy
Millennium Pharm MLNM Robert W. Baird Neutral » Outperform
Sprint Nextel S Wachovia Mkt Perform » Outperform

DOWNGRADES

Chordiant Sftwr CHRD JMP Securities Mkt Outperform » Mkt Perform
ACCO Brands ABD Sun Trust Rbsn Humphrey Buy » Neutral
SanDisk SNDK Needham & Co Buy » Hold
NPS Pharm NPSP Oppenheimer Buy » Neutral
Commvault Systems CVLT Morgan Keegan Outperform » Mkt Perform
NPS Pharm NPSP Jefferies & Co Buy » Hold
Jetblue Airways JBLU Bear Stearns Peer Perform » Underperform
Southwest Air LUV Bear Stearns Outperform » Peer Perform
Alaska Air ALK Bear Stearns Outperform » Peer Perform
Business Objects BOBJ Roth Capital Buy » Hold
Citigroup C Deutsche Securities Buy » Sell
Coldwater Creek CWTR Lehman Brothers Overweight » Equal-weight
Massey Energy MEE Friedman Billings Mkt Perform » Underperform
Alpha Natural Resources ANR Friedman Billings Outperform » Mkt Perform
Qiao Xing Mobile QXM CIBC Wrld Mkts Sector Outperform » Sector Perform
Blue Nile NILE Citigroup Hold » Sell
Costco COST UBS Buy » Neutral
Lincare LNCR Citigroup Buy » Hold
Shaw Group SGR Citigroup Buy » Hold
United Micro UMC UBS Buy » Neutral
Pepsi Bottling PBG Banc of America Sec Buy » Neutral
Bankrate RATE RBC Capital Mkts Top Pick » Outperform
Momenta Pharma MNTA Bear Stearns Peer Perform » Underperform
UQM Technologies UQM Merriman Curhan Ford Buy » Neutral
Borg Warner BWA Robert W. Baird Neutral » Underperform
ValueClick VCLK Jefferies & Co Buy » Hold

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I heard a story last week that summed up the whole mess

Wilbur Ross, a self made billionaire and his son were playing golf a few weeks ago. As the finished up, their caddy approached them and wondered if he could ask them a personal finance question.

“Sure” Ross replied

“I bought 5 condo’s in Scottsdale, Arizona,” said the caddy “I was able to flip the first 3 but I am stuck with the last two. Should I keep making the payments on them or just walk away”?

Ross thought about it for a minute and asked “Well, were are they? Is the area nice? What else is around the complex that may be of eventual value”?

“I do not know” the caddy replied, “I’ve never been to Arizona”

That, is a nice neat summation of what a “bubble” in a market looks like. When your caddy thinks he is Donald Trump, it is time to take a close look at what is going on.

I remember back at the turn of the century even your barber or your wife’s hairdresser were day trading tech stocks and talking about what they were going to do with the 100% they would make that year. Folks who could not tell you what a PE ratio was were spouting off facts and figures about the latest startup that was going to make them millions. Of course it didn’t and they, well, are still the barber and hairdresser and not even thinking about buying stocks today. Now before the barbers and hairdressers who do successfully invest email me, relax. I think we all know what I mean.

I guess if you had to try and define a bubble you could say that it is “the absence of the thought of the probability of loss”. When there is a bubble like environment, the thought that an investment decision will not be profitable escapes those investing in it.

Fortunately, for those investing today in US equities, that lack of doubt is not only there, it seems to be prevalent. This acts a constant check on the enthusiasm of the markets participants and help prevent the events of 2000-2001 in stocks and the current situation in housing. In fact, one could argue that there is too much doubt in equities today and that is probably due to the myopic focus we have on our own economy.

Over 50% of the total earnings of the S&P 500 come from international operations. That provides a great buffer against a US slowdown. Will it prevent losses? Surely not. But, it will dramatically lessen the chances of another late 1970’s type bear market. It also means that if conditions do deteriorate to the point that we may enter that type of market, it will have been due to a global recession and if that is the case, all investments of all types will suffer.

What does it all mean? Even though we are at near record levels on the Dow and the S&P, we are by no means in another bubble or soon due for a dramatic fall. Currently the S&P trades at a discount to its historical PE, GDP growth, while slowing is still strong, earnings growth is still good and unemployment is still almost non existent. In fact, I would have to argue that one would need to become rather creative to come to the conclusion that a recession or worse is on the horizon.

What to do? Invest. There are bargains to be had out there, just look close and be patient.

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MONDAY’S PICKS

Pete Najarian liked McDonald’s (MCD). Open $57.02

Karen Finerman preferred Kraft (KFT). Open $33.85

Guy Adami said buy Tesoro (TSO). Open $54.06

FRIDAY’S RESULTS

Jeff Macke recommended buying UltraShort QQQ ProShares (QID). Open $37.08 Close $35.87 LOSS

Guy Adami preferred Short Dow30 ProShares (DOG). Open $56.40 Close $54.16 LOSS

Karen Finerman told the panel to short Baidu.com (BIDU). Open $308.78 Close $322.97 LOSS

Pete Najarian thought EMC Corp. (EMC) is a buy. Open $22.75 Close $22.81 GAIN

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks). The percentage is the percentage of successful picks

Guy Adami= 29-20 = 57%
Eric Bolling= 10-11 = 48%
John Najarian= 13-4 = 76%
Jeff Macke= 36-28 = 52%
Pete Najarian= 24-21 = 53%
Tim Seymore= 4-3 = 57%
Karen Finerman= 14-10 = 58%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%

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Increase in Short Interest (number of shares):
QQQ (QQQ)= +8,969,000
BEA Systems (BEAS)= +8,475,000
Level 3 (LVLT)= +5,993,000
Dell (DELL)= +3,919,000
Amgen (AMGN)= +3,599,000

Decrease in Short Interest (number of shares):
Comcast (CMCSA)= -52,020,000
Take-Two (TTWO)= -8,124,000
Sun Micro (JAVA)= -4,591,000
Charter (CHTR)= -4,385,000
Network Appliance (NTAP)= -4,413,000

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INSIDER BUYS:
Imergent (IIG)= $7,120,000
Flanders Corp (FLDR)= $7,065,000
Energy Transfer Partners (ETP)= $4,505,000
Aircastle (AYR)= $3,948,000
Imax Corp. (IMAX)= $2,570,000

DIVIDEND INCREASES:
Teekay (TK)= 15%
Shore Financial (SHBK)= 14%
Apogee (APOG)= 10%
Gladstone Investment(GAIN)= 7%

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Time is running out to submit your entries..

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WSOB Watsco 44.00
WNC Wabash National Corpo … 10.86
VRX Valeant Pharmaceutica … 14.99
TXRH Texas Roadhouse Inc 11.20
TUES Tuesday Morning Corp 7.98
SPF Standard Pacific Corp 5.14
SMRT Stein Mart Inc 7.45
SMMF Summit Financial Grou … 17.31
SCSS Select Comfort Corp 13.28
RUTH Ruths Chris Steak Hse Inc 13.40
RT Ruby Tuesday, Inc. (G … 15.76
QI Qimonda Ag 10.61
GPRE Green Plains Renewabl … 9.50
GPIC Gaming Partners Intl Corp 8.82
FUN Cedar Fair, L.P. 23.25
CWTR Coldwater Creek Inc 7.88
CRFT Craftmade Internation … 10.57
COLM Columbia Sportswear Co 51.09
CNTY Century Casinos Inc 5.42
CMRG Casual Male Retail Gr … 8.29
BGG Briggs & Stratton Cor … 24.26
BGFV Big 5 Sporting Goods Corp 18.01

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How Does Your State Rank?, Discourse, Baseball and Investing

– Here are the top ten states for doing business

– I have noticed this myself. Why are the majority of those who disagree with you only able to do it with insults?

– Find out what baseball can teach you about investing.

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CNBC is outdoing itself today in the hypocrisy department.

Apparently Ann Coulter was on “The Big Idea” with Donnie Deutsch Monday and made some pretty offensive remarks, and folks there are shocked. First off, how they could be either shocked or surprised Ann said something incendiary is just not believable and if they really are, that kind of ignorance of your guest is inexcusable. That being said, here is where the hypocrisy comes in.

Donnie has been all over the CNBC airwaves today lamenting his dismay at Coulter’s comments and saying that he “initially did not want to run the show because that is not what the show is about”. Donnie is apparently so upset that he now feels the need to RUN IT AGAIN TONIGHT. Why? Probably because it will now be his top rated show of the year and the only one more than 50 people and his mom will actually watch.

Erin Burnett was “so disgusted” she declared Coulter “should be banned from the airwaves”. This comes just a month or so after she argued on air that Hugo Chavez and Mahmoud Ahmadinejad “have a right to free speech, even if we do not like it” in response to their rants about the Bush administration, Israel, and America at the UN. So, which is it Erin?

Donnie then said “America is over her act, it is wearing thin and we are moving on” and all of CNBC is just so despondent of what Ann said that it is all they can talk about all day today and oh yeah…”You can see it again tonight on “The Big Idea” with Donnie Deutche” ………. Looks like ratings trumps all huh kids?

Joe Kernan seems to be the only one who actually gets it. “Coulter is just an author, she is selling books” he said this morning and then he continued “why do we care”? She is not a teacher, business owner, CEO, politician… just an author who says outrageous things to sell books. If these folks who are now giddy over their ratings are so outraged, stop putting her on the air!!!! Alas, they won’t because their own greed will win in the end. Want more proof? Ann will be on CNBC this afternoon with Larry Kudlow.. CNBC just cannot get enough of her! It is all Ann all the time.

I do not know what Ann said on the show and really do not care. I am sure it was whatever adjective you want to call it and you know what? It worked because it is all people are talking about, she is getting ratings and selling her book.

Coulter and CNBC are both winners here so CNBC can just stop feigning outrage, it is so pathetically transparent. I’ll bet Ann is already booked there for her next show..

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It appears Citigroup (C) CEO Charles Prince wants to give people something to talk about other than this quarters results Monday when results are released.

Late Thursday Citi announced a new corporate structure in which its investment banking operations and its alternative investments businesses will be merged. The new division will be run by Vikram Pandit, a former Morgan Stanley (MS) executive who joined Citigroup earlier this year when the bank bought his Old Lane hedge fund for $800 million. Mr. Pandit has been long considered a potential replacement for Prince and now appears one step closer to that office. Before joining Citigroup, Pandit ran Morgan Stanley’s institutional securities business and was considered the top candidate to replace CEO Philip Purcell but he left in 2005, opting to set up his own hedge fund, Old Lane Partners.

Thomas Maheras, now former co-head of investment banking with responsibility for capital markets and trading, is leaving Citigroup. Mr. Maheras also had been considered a potential successor to Mr. Prince. It appears it is now a one horse race.

Investor have been clamoring for a shakeup at Citi for almost a year now and have finally got it. I believe this is the first of several move which will lead to the weary Prince’s unforced departure early next year. When Prince took over Citi was a mess and it heaps of trouble both here and abroad. Prince solved those issues and got Citi back on solid footing but he has taken the banking giant as far as he can.

This is a good move and the start of what investors have been clamoring for… new leadership

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Full disclosure, I have DirecTV (DTV) but do not own the stock.

If you want you HDTV, your best choice is DirecTV. With Cable providers like Comcast (CMCSA), Time Warner Cable (TWC) and Verizon (VZ) all offering about 20-30 HD channels, they have a long way to go to reach the 55 current channels and 100 total channels DirecTV plans on offering by year end.

Rural America is most affected by this. Currently cable operators do not deliver HDTV to this part of the population which is roughly 20% of the total. Currently the only option they have is DirecTV and they are choosing it in droves.

NFL fans already are switching en mass to DirecTV and its “Sunday Ticket” service that offer viewers all that day’s NFL games. The company almost scored another coup when it nearly accomplished the same thing with Major League Baseball this year. While it did not get the exclusive package for the 2007 season, do not rule it out next year. Sports fans of all ilk can get their favorites on DirecTV’s services and the company is luring international viewers with it foreign language stations.

DirecTV has dramatically dropped the price of its Sat-Go portable device, reducing it by $500 to $999, the Web site Gizmodo.com reported recently. The product, introduced in May, is the first-ever portable satellite TV unit. In the shape of a briefcase, the device allows DirecTV users to take their service on the road with them, and is pitched to both business travelers and sports tailgaters.

Customer service is a strength of the company currently after a rough go in the late 90’s and the turn of the century. They have more professional installers and wait (on hold) times fixing issues are seldom more than a few minutes and are virtually always solved on that call.

DirectTV’s stock, after languishing from 2004 and 2005 was up 71% last year and almost 10% in 2007. In February they announced a $1 billion share repurchase which will total about 3% of all shares, modest. Shares currently trade at 15 times 2008 earnings projections and 21 times current years.

DirecTV’s real profit center may be their latest deal to sell internet access and VIOP over existing power lines. DIRECTV customers will be able to access the Internet by plugging a BPL modem into virtually any outlet in their home. This easy-to-use symmetrical service can send data faster than the typical cable modem service in use today. Initially only available in the Dallas area, look for this to take off.

Are shares a buy? DirectTV is in a category of one here even though they operate against cable operators. The breadth of services they can offer and the market they can reach (the whole thing) are unparalleled. Are they a value? In October of last year at $18 a share they were but at today’s $26 they are fairly valued. But, if the price should dip to around $20 again, I think you have a great buying opportunity.

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