ValuePlays

UPGRADES

Ventas VTR Stifel Nicolaus Hold » Buy
Apollo Group APOL Stifel Nicolaus Hold » Buy
Healthcare Realty HR Stifel Nicolaus Hold » Buy
LTC Properties LTC Stifel Nicolaus Hold » Buy
Cache CACH Brean Murray Hold » Buy
Greenfield Online SRVY Lehman Brothers Equal-weight » Overweight
RSC Holdings RRR Lehman Brothers Equal-weight » Overweight
ON Semiconductor ONNN Wachovia Mkt Perform » Outperform
Enbridge ENB CIBC Wrld Mkts Sector Perform » Sector Outperform

DOWNGRADES

EDO Corp EDO BB&T Capital Mkts Buy » Hold
FMC Tech FTI Wachovia Mkt Perform » Underperform
Veeco Instruments VECO Am Tech/JSA Research Buy » Neutral
Health Care Ppty HCP Stifel Nicolaus Buy » Hold
Conns CONN Morgan Joseph Buy » Hold
Medical Properties Trust MPW Stifel Nicolaus Buy » Hold
Getty Images GYI Kaufman Bros Hold » Sell
Advanced Analogic Tech AATI Needham & Co Strong Buy » Buy $11
Kellwood KWD Broadpoint Capital Buy » Neutral
Cameron CAM Wachovia Outperform » Mkt Perform
Wimm-Bill-Dann Foods WBD Credit Suisse Outperform » Neutral

A near 300 point up day and there even some new lows…

RT Ruby Tuesday, Inc. (G … 19.20
LABL Multi-Color Corporation 22.84
KWD Kellwood Company 15.23
GYI Getty Images Inc 27.49
GPIC Gaming Partners Intl Corp 9.65
AVR Aventine Renewable Energy 10.91

Bernanke wasted little effort today in cutting the funds rate & the discount rate 50 basis points. The statement said:

“Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.

Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.

Developments in financial markets since the Committee’s last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.”

Big deal? Not so much. Remember the effective Fed Funds Rate has been below 5% for some time now and this action simply brings the stated rate in line with what is happening out there in the market. Stocks surged on the news but what else is new. The odd thing here is we are at a state where bad news is good. If the economy was not slowing down, no need for a rate cut. Since it is (that is not real good), we are cutting rates. Odd..

Too be honest, this concerns me. To me, it implies that things are weaker out there than we believe, either that or Bernanke isn’t playing games and the threat of weakness is just going to be stamped out. I hope the later is the case. It would mean that Bernanke accomplished what he wanted with the credit issue and now sees the possibility of this turning. Rather than pull off the band-aid slowly to see what happens down the road, he is just jumping ahead to be in front of any weakness and head it off.

Bernanke indicated as much in the statement when he said, “forestall some of the adverse effects on the broader economy that might otherwise arise”. This tells me he is heading off what “might” happen now that inflation has moderated and somewhat under control.

I like this guy, no games or teaser cuts. Just action.

– While I am not a fan of Greenspan, for Paul Krugman to question to moral honesty of any human being is laughable. Krugman is quite possibly the most dishonest person who has every walked the earth (the Clinton’s aside obviously).

– An economist gives empirical evidence that the Bush administrations troop surge is indeed working. It should be noted that this is an MIT professor so the chance of a “political bias” in favor of the administration is indeed remote..

– Still more on Greenspan

– You reap what you sow

Lehman Brothers (LEH) release earnings this morning and their results, and especially the configuration of them bolstered my confidence and expectations for Goldman’s (GS)on Thursday.

First the details. Lehman beat expectation by seven cents a share coming in at $1.54 vs the $1.47 estimates. Fixed income took the expected write-downs (revenues were off 47%) due to the current mortgage market “instability” but several other areas bolstered the firm and they are the very reasons I was so optimistic yesterday about Goldman.

Strong investment banking and retail brokerage fees pushed revenue up 3.1 percent to $4.31 billion and offset the $700 million hit from “substantial valuation reductions” in mortgage-backed bonds and other investments. In addition, the firm now gets 53% of it revenues from overseas operation, further insulating it from US housing.

The configuration of these results were the very ones I gave yesterday for my opinion that the current estimates for Goldman were too low, trading and overseas. There does seem to be an inability or refusal to see many of our international firms for what they are, international. Companies are seeing the prices of their shares decimated due to the US housing situation and in many cases, the effects of the housing market are not a significant determinant of earnings for them. When more than 1/2 of your revenues come from overseas, the conversation regarding earnings ought to be what is happening there, not in Peoria. This is also is true for the S&P that now gets over 50% of it’s earning from overseas.

Why is this important? Even though we may (that is a big may but for arguments sake let’s assume) be slowing down it the US, overseas is still booming. That means that 51% of earnings will be increasing and offsetting any potential decrease here. It is also important to note that this 51% is increasing so the international economy will begin to take on more importance. This is the reason the last few quarters estimates have been below reality. Folks are not quantifying international operations properly, or giving them enough weight..

This is ok though, it gives us more time to accumulate under-priced shares..

UPGRADES

Logitech Intl SA LOGI Avondale Partners Mkt Perform » Mkt Outperform
Fresh Del Monte FDP BB&T Capital Mkts Hold » Buy
Lexington LXP Stifel Nicolaus Hold » Buy
Equinix EQIX Needham & Co Hold » Buy
China Mobile CHL HSBC Securities Neutral » Overweight
Nokia NOK HSBC Securities Neutral » Overweight
Brocade BRCD Citigroup Hold » Buy
Tween Brands TWB Susquehanna Financial Neutral » Positive
Ford Motor F Bear Stearns Peer Perform » Outperform
Temple-Inland TIN UBS Neutral » Buy

DOWNGRADES

Maguire Properties MPG Stifel Nicolaus Hold » Sell
Ryanair Hldgs RYAAY UBS Buy » Neutral
Applebee’s APPB Oppenheimer Neutral » Sell
Aventine Renewable Energy AVR Soleil Buy » Hold
Alcatel-Lucent ALU UBS Buy » Neutral
British Amrcn Tobacco BTI Lehman Brothers Equal-weight » Underweight
Marsh McLennan MMC Citigroup Buy » Hold

More ethanol producers make the list. Will there be an industry consolidation coming?

VSE Verasun Energy Corp 11.21
VAR Varian Med Sys Inc 38.07
THC Tenet Healthcare Corp … 3.17
SPA Sparton Corporation 5.10
SIG Signet Group Plc 16.82
SCVL Shoe Carnival Inc 15.53
RAIL Freightcar Amer Inc 39.72
PGR The Progressive Corpo … 18.91
PEIX Pacific Ethanol Inc 10.43
PBH Prestige Brands Hldgs Inc 10.09
MNI McClatchy Newspapers, Inc 21.23
MMC Marsh & McLennan Comp … 24.67
MGPI Mgp Ingredients Inc 12.23
MGLN Magellan Health Svcs Inc 38.07
MCO Moodys Corp 43.05
CRUS Cirrus Logic Inc 6.30
CRAY Cray Inc 6.10
COT Cott Corp Que 9.76
CNTY Century Casinos Inc 6.41
CLDN Celadon Group Inc 13.52
CHUX O’Charley’s Inc 14.56
AVR Aventine Renewable Energy 11.27

Goldman (GS) reports on Thursday and for a stock trading at only 8 times earnings, a blowout number could cause the stock to vault upward.

Fortunately for shareholders (I am one) the recent market turmoil that has dragged Goldman down with it, will be the very thing that enables them to exceed expectations. Financial’s have been hit hard due the “subprime meltdown” (have you heard anything about it?) and rather that search for those companies that are most exposed to this market, the whole group, including Lehman (LEH), Bear Sterns (BSC) and Morgan Stanley (MS) got whacked.

Why not Goldman? Let’s start with 51% of Goldman’s earnings and get them out of the way. They come from overseas (and that percentage may actually be increasing) and will not be affected at all by the US mortgage market. These earnings will increase as activity abroad is surging.

The majority of Goldman’s US revenues are derived from trading activities, for which the current volatility in the markets is advantageous. Consider this: Much had been made of Goldman’s decision to invest $2 billion in one of it’s funds in August as there was a run on hedge funds. Word is that to date that investment has seen a 30% return for Goldman. Current earnings estimates are for $4.30 to $4.50 a share.

I am looking at much closer to $5 a share ($4.80 and above). People have placed way too much emphasis on the mortgage market and it’s relation to Goldman. In all reality, Goldman is a play on the global economy, not a segment of the US economy. There is good news though. Let’s say they only hit the $4.30 estimate. Trading at only 8 times earnings, where is the stock going? It is practically being given away now. We recently picked up more at $176 and any additional fall from here would be anther buying opportunity. Alas, I doubt it will happen.

What is much more likely is that several months from now a whole lot of people are going to be cursing themselves wishing the had bought shares in this company at these ludicrously low prices..

– Hysterical

– Here is a great post that compares Greenspan to Bernanke. I agree with it totally.

– If you follow commodity markets, here is a great joke

– Greenspan admits his “missed” subprime situation

When I first was alerted to this I thought the person was pulling my leg. Sadly for Rhode Island Attorney General Patrick Lynch, common sense and the image of Rhode Island, it is true.

Lynch is proposing that the three paint companies (Sherwin Williams (SHW), Millenium Holdings and NL Industries (NL)) who lost the public nuisance trial last year (it is now under appeal to the RI Supreme Court)spend $2.4 billion removing lead paint from more than half the houses and apartments in Rhode Island. It is important to note that of the dozen similar cases out there, this is the only loss to date and essentially happened because the Judge, Micheal Silverstein directed a verdict for the plaintiffs with jury instruction so biased against the defense jurors later said “there was no other way but to find but for the plaintiffs”. there are also the trivial little matters of evidence being withheld by the state and the basic rules of law being pushed to the side. This verdict will not only be over turned on appeal, but I would expect public admonishments of both the judge and prosecutors when all is said and done.

The 132 page sophomoric abatement plan (here), if approved, would lead to the single biggest construction job in the history of the state. Perhaps Lynch is trying to one up the success of Boston’s “Big Dig”? Please tell me you understand that is dripping with sarcasm?!?

Lynch’s office wants the three paint companies to clean up paint in 240,000 houses and apartments, 12,969 seasonal housing units, 419 child care centers and 339 elementary schools over a four-year period. It should be noted that at least in the 339 schools, the State of Rhode Island requested lead paint be used “for it’s durability”. No matter to Lynch.

Why is he doing this? PR for jobs in a sagging Rhodie Island economy. He is proposing 10,000 workers be hired to complete the work in an “expeditious” manner. The job of replacing over half the windows and doors in the state would require a “substantial training and outreach effort . . . to attract the needed workforce,” Lynch said.

So there we are. Let’s not forget that DuPont (DD) was left off the hook here. Why? They made a nice contribution to Brown, Lynch’s alma mater via their “settlement”. Oh yeah, they also made another contribution to a charity they control. I blogged on how much this DuPont thing reeks before, please read it.

Now we can move on to the lunacy of the plan. When it lead paint dangerous? When it is sitting on a windowsill or door? No. It is dangerous when it is release into the air and digested. What Lynch wants to do is essentially cause the most massive release of lead into the air in history. There is no “100% effective” way to remove lead paint without releasing particles into the air. Every remediation expert will tell you the safest way is to “encapsulate it” (paint over) but that will not cost $2.4 billion, create 10,000 jobs or any headlines, so, screw it. Lynch now wants to ramp up hiring those folks who are unemployed to do the job? Will they at least be given a videotape to watch first on how to do it?

Says the report “numerous studies have shown that the monetary benefits of controlling lead far outweigh the costs”. Really? does this mean Sherwin Williams will sell more paint there? I am sure it does outweigh them Patrick, especially when you consider they are not your “costs”. Is this guy serious? The plan will also create some cushy $75,000 a year “supervisory” positions for some folks, maybe some friends of Lynch need more work?

The best view of it? Scott Smith, an attorney for Millennium Holdings said, “We believe the state plan is, in a word ridiculous. It is completely unprecedented, it’s unworkable and it will, indeed, be harmful to the state.” You mean releasing unprecedented amounts of lead into the air over Rhode Island may be harmful? Who could Lynch sue then? The workers?

For more up to date info, visit Jane Genova’s Law and More

Jeff Macke recommended eBay (EBAY). Open $37.81

Guy Adami said he wanted own the Short Dow30 ETF (DOG). Open $59.31

Karen Finerman still wanted to hang on to American Standard (ASD). Open $34.83

Pete Najarian liked Rambus (RMBS). Open $17.92

FRIDAY’S RESULTS

Jeff Macke recommended shorting General Motors (GM). Open $33.29 CLOSE $34.22 Gain $.93

Guy Adami said buy the Short Dow30 ETF (DOG). Open $59.46 CLOSE $59.31 Loss $.15

Karen Finerman said buy ConocoPhillips (COP). Open $85.11 CLOSE $85.27 Gain $.16

Pete Najarian liked Sun Microsystems (JAVA) Open $5.80 CLOSE $5.73 Loss $.07

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks)

Guy Adami= 22-16 Gain $39.86
Eric Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Jeff Macke= 27-20 Gain $8.71
Pete Najarian= 15-14 Gain $22.39
Tim Seymore= 3-2 Loss $.49
Karen Finerman= 9-3 Gain $4.69
Stacey Briere-Gilbert= 2-0 Gain $1.61