CEOWORLD Magazine

Analyst Upgrades and Downgrades AMZN, DIS, XOM, AET, ARAY, HK, CYBS, AWC

Amarendra Bhushan — Mon, 08 Feb 2010 15:18:12 +0000

Accuray (ARAY, news: 7.12 0.00 0.00%, cap: 408.8M, 1yr target: 6.40) upgraded to Buy from Hold at Jefferies…
Aetna (AET, news: 29.20 0.00 0.00%, cap: 12.658B, 1yr target: 34.90) upgraded to Hold from Sell at Collins Stewart…
Airgas (ARG, news: 60.55 0.00 0.00%, cap: 4.973B, 1yr target: 54.91) downgraded to Neutral from Outperform at RW Baird…
Alumina Limited (AWC, news: 5.42 0.00 0.00%, cap: 3.306B, 1yr target: 4.42) upgraded to Outperform at Macquarie…
Amazon.com (AMZN, news: 116.83 0.00 0.00%, cap: 51.936B, 1yr target: 159.88) upgraded to Buy, $150 target, at Collins Stewart…
AutoZone (AZO, news: 156.94 0.00 0.00%, cap: 7.768B, 1yr target: 169.15) upgraded to Buy from Hold, $188 target, at Citigroup…
Broadcom (BRCM, news: 28.80 0.00 0.00%, cap: 14.259B, 1yr target: 34.04) initiated as Buy at Citigroup…
CME Group (CME, news: 280.28 0.00 0.00%, cap: 18.645B, 1yr target: 338.12) upgraded to Buy from Hold at Jefferies…
CyberSource (CYBS, news: 16.82 0.00 0.00%, cap: 1.181B, 1yr target: 21.63) initiated as Sell at Goldman…
Disney (DIS, news: 29.48 0.00 0.00%, cap: 54.980B, 1yr target: 32.72) upgraded to Neutral, $30 target, at JP Morgan…
Dun & Bradstreet (DNB, news: 71.35 0.00 0.00%, cap: 3.708B, 1yr target: 88.00) downgraded to Neutral, $80 target, at JP Morgan…
Essex Property Trust (ESS, news: 77.87 0.00 0.00%, cap: 2.267B, 1yr target: 82.87) upgraded to Buy, $87 target, at Janney Montgomery Scott…
Exxon Mobil (XOM, news: 64.35 0.00 0.00%, cap: 304.2B, 1yr target: 79.15) upgraded to Buy from Hold, $80 target, at Collins Stewart…
Home Depot (HD, news: 28.59 0.00 0.00%, cap: 48.615B, 1yr target: 31.27) upgraded to Overweight at Morgan Stanley…
Home Depot (HD, news: 28.59 0.00 0.00%, cap: 48.615B, 1yr target: 31.27) upgraded to Overweight from Equal Weight, $35 target, at Morgan Stanley…
IDACORP (IDA, news: 31.04 0.00 0.00%, cap: 1.479B, 1yr target: 34.00) upgraded to Buy, $33 target, at KeyBanc…
Intercontinental Exchange (ICE, news: 97.04 0.00 0.00%, cap: 7.109B, 1yr target: 118.06) upgraded to Positive, $114 target, at Susquehanna…
K12 (LRN, news: 18.98 0.00 0.00%, cap: 560.4M, 1yr target: 22.38) downgraded to Neutral from Outperform at Credit Suisse…
Metro Bancorp (METR, news: 11.30 0.00 0.00%, cap: 151.7M, 1yr target: 15.50) downgraded to Neutral from Buy, $14 target, at Janney Montgomery…
Newell Rubbermaid (NWL, news: 13.58 0.00 0.00%, cap: 3.815B, 1yr target: 17.64) upgraded to Overweight at Morgan Stanley…
Nordstrom (JWN, news: 34.00 0.00 0.00%, cap: 7.395B, 1yr target: 40.94) upgraded to Market Perform from Underperform at BMO Capital…
Petrohawk Energy (HK, news: 21.66 0.00 0.00%, cap: 6.516B, 1yr target: 34.14) upgraded to Market Perform at Bernstein…
Priceline.com (PCLN, news: 200.62 0.00 0.00%, cap: 8.817B, 1yr target: 235.00) upgraded to Positive from Neutral, $230 target, at Susquehanna…
Retail Properties (NNN, news: 19.45 0.00 0.00%, cap: 1.603B, 1yr target: 20.63) upgraded to Hold, $21 target, at Citi…
RightNow Tech (RNOW, news: 14.91 0.00 0.00%, cap: 474.4M, 1yr target: 18.50) upgraded to Outperform from Neutral at RW Baird…
St. Jude Medical (STJ, news: 37.40 0.00 0.00%, cap: 12.443B, 1yr target: 41.74) downgraded to Conviction Sell from Sell, $35 target, at Goldman…
Southern Copper (PCU, news: 27.35 0.00 0.00%, cap: 23.248B, 1yr target: 33.51) upgraded to Positive at Susquehanna…
Torchmark (TMK, news: 44.04 0.00 0.00%, cap: 3.646B, 1yr target: 49.46) upgraded to Overweight, $53 target, at JP Morgan…
Total System (TSS, news: 14.41 0.00 0.00%, cap: 2.822B, 1yr target: 14.94) initiated as Sell at Goldman…
Washington Federal (WSFL, news: 0.00 N/A N/A, cap: N/A, 1yr target: 0.00) upgraded to Outperform, $22 target, at FBR…
Weyerhaeuser (WY, news: 39.25 0.00 0.00%, cap: 8.296B, 1yr target: 48.93) upgraded to Neutral, $42 target, at Credit Suisse…
Winnebago (WGO, news: 12.00 0.00 0.00%, cap: 348.9M, 1yr target: 11.50) upgraded to Neutral from Underperform at RW Baird…

Swedish streaming video startup Voddler gets $3.5m in funding by Eqvitec Partners

Thomas Frommherz — Mon, 08 Feb 2010 14:34:08 +0000

Swedish streaming video startup, Voddler, still in beta, has picked up a further $3.5 million in funding by Eqvitec Partners. Eqvitec Partners is one of the largest technology oriented private equity firms in Northern Europe. The company was founded in 1997 and employs 10 investment professionals in Helsinki and Stockholm. Eqvitec Partners currently advises three funds with a total capital base of over 300 million euros. The funds invest in technology companies in the expansion stage.

Voddler provides unlimited video content distributed to any number of users by streaming. No limitation of content will enable you to have instant access to your old favorite movies as well as the newest blockbusters. Instant access, a user friendly video application and a complete network focused on film makes Voddler the obvious choice for a movie night.

Voddler currently distributes films from 15 studios, including Disney (NYSE: DIS), Paramount, Miramax, Columbia, Dreamworks, Touchstone, MGM and Sony…

Press release

Voddler, the unique Swedish home entertainment service via the Internet, announced today the completion of private placement by Eqvitec Technology Fund III regarding SEK 26 million. A new Voddler board member is also introduced, Hadar Cars, partner of Eqvitec.

Voddler has completed a new share issue providing the company with SEK 26 million in new capital.

- We are pleased with the investment of Eqvitec Fund in Voddler. Eqvitec has well known skills in tech ventures such as Voddler and has a good track record as a leading Scandinavian VC firm. We are well prepared for the company’s continued development and expansion, “says Marcus Bäcklund, CEO and director of Voddler.

Hadar Cars, partner of Eqvitec Partners enters the board of Voddler:

- We are happy to have the opportunity to invest in Voddler, one of Scandinavia’s most interesting and popular ventures right now. We are looking forward to assist Marcus and the directors of Voddler in the continuing development.

With more than 400 000 Swedish members Voddler showed more than 1 million movies in January alone. International expansion has begun, in which Voddler will launch in Norway, Denmark and Finland during Q1 of 2010.

How Macmillan and Amazon.com settle their week-long dispute?

Amarendra Bhushan — Mon, 08 Feb 2010 12:49:12 +0000

Macmillan and Amazon.com (AMZN, news: 116.83 0.00 0.00%, cap: 51.936B, 1yr target: 159.88) have resolved their dispute over over ebook pricing between the publisher and the retailer. Macmillan and Amazon were in a dispute about what the online retailer would charge for e-book editions of the publisher’s titles. Amazon’s retail price for many e-books from Macmillan was $9.99, and Macmillan would like the right to raise those prices to between $12.99 and $14.99 for most of its titles.

“I am delighted to be back in business with Amazon,” John Sargent, Chief Executive of Macmillan, said in an e-mail message, according to New York Times. The e-book mart has now a strong rival for Amazon in the form of the Apple device. The agreement terms are sure to have comprised higher prices for e-books, it is believed. So, as soon as the iPad goes on sale this March, Amazon is expected to usher in the new pricing strategy.

Paul Carr explains at TechCrunch. In the UK, way back in 1900, publishers corralled retailers into the Net Book Agreement (NBA); an agreement between British publishers and booksellers that books would be sold at the price specified on the cover. If a bookseller offered so much as a penny discount, then the publisher would simply withdraw all of their books from that bookseller and encourage other publishers to do the same. The arrangement suited everyone; book shops were the only place to buy new books and the NBA meant they didn’t have to worry about rivals undercutting them; this particularly benefited independent bookshops. For their part, publishers knew exactly how much they’d be getting for each title and authors knew how much of that would form their royalty.

Hachette Book Group and News Corp’s HarperCollins have also said they will try to renegotiate terms with Seattle-based Amazon. Apple’s (AAPL, news: 194.12 0.00 0.00%, cap: 176.0B, 1yr target: 247.15) introduction of its iPad tablet on January 27 provided publishers with another channel for the sale of e-books.

Under the agreement, Macmillan will set the price of e-books, with most new titles costing 12,99 to 14,99. That compares with the 9,99 Amazon had been charging for most bestsellers. Macmillan will also get a 70% cut of sales, the publisher said. Amazon had typically given authors half the list price and set the retail price, according to the Authors Guild, a group that advocates for writers.

Microsoft Facebook marriage- search and advertising relationship alter

Amarendra Bhushan — Sun, 07 Feb 2010 15:37:34 +0000

Microsoft (MSFT, news: 27.72 0.00 0.00%, cap: 243.1B, 1yr target: 33.58) and Facebook announced a big change in their search and advertising partnership: that Microsoft will no longer handle display ads on Facebook. Microsoft Bing general manager Jon Tinter says we made the mutual decision that Facebook would take over responsibility for selling display advertisements on its own site…we are extending our cooperation outside the US, bringing the Bing-Facebook search integration to the more than 400 million people using Facebook around the world…

Microsoft will continue to provide search technology on Facebook, including search ads. In October 2007, Microsoft invested $240m in Facebook for a 1.6 per cent stake in the company. Facebook said it stopped displaying Microsoft banner ads in some international markets recently, and following additional talks with Microsoft, has agreed to stop running the banner ads across all of Facebook. The change will take place over the next 30 days.

Facebook, which lets users connect and share information with friends online, has emerged as one of the Internet’s most popular destinations and is increasingly challenging the Web’s established powerhouses like Yahoo Inc (YHOO, news: 14.99 0.00 0.00%, cap: 21.240B, 1yr target: 19.44) and Google Inc (GOOG, news: 533.47 0.00 0.00%, cap: 169.2B, 1yr target: 674.52).

Bravo- Scrapblog Inc. online multimedia scrapbooking service raises $2.5M

Amarendra Bhushan — Sun, 07 Feb 2010 14:21:55 +0000

Scrapblog Inc., an online service, has raised $2.5 million in a funding round led by Steamboat Ventures, the venture capital affiliate of The Walt Disney Co. Founded in 2006, San Francisco-based Scrapblog now counts over 2 million registered users, who have created more than 4.4 million Scrapblogs. Scrapblog has now raised a total of $10 million. The company’s competitors include travel-focused Everlater and Panraven, as well as Toufee.

What is Scrapblog?

@Twitter http://twitter.com/scrapblog

A multimedia website allows users to mix their photos, videos, audio and text into what they have dubbed the scrapblog. Once scrapblogs are created they can be shared with whomever the creator chooses, whether that’s a few close friends, or the entire world. Currently, scrapblog allows users to directly publish their creations to Blogger, Typepad, Wordpress, Flick, Myspace and Facebook, along with other social networking websites.

Easily create beautiful multimedia slideshows from your Facebook photos and post them to your profile with drag-and-drop ease!

Get your photos directly from Facebook
Using your Facebook photos is as easy and dragging and dropping them into the page. No uploading required!

Post your scrapblog as a photo album
Want to display your scrapblog along side of your other photos in Facebook? You can post your scrapblog as a Facebook photo album directly from the Scrapblog Builder.

Post your scrapblog directly into your profile
For the full multimedia experience, you can drop your newly created scrapblog right into your profile with just a few simple steps.

Google Eric Schmidt’s Super Bowl Commercial, hell is freezing over, Parisian Love

Amarendra Bhushan — Sun, 07 Feb 2010 13:48:03 +0000

Eric Schmidt, the CEO of Google (GOOG, news: 533.47 0.00 0.00%, cap: 169.2B, 1yr target: 674.52), recently tweeted, Can’t wait to watch the Superbowl tomorrow. Be sure to watch the ads in the 3rd quarter (someone said “Hell has indeed frozen over.”) .John Battelle says Google plans to hit the branded advertising big leagues this Sunday – the source says Google’s “Parisian Love” ad (below) will air during the third quarter of the Super Bowl.

YouTube announced the launch tonight of its Super Bowl ad channel at youtube.com/adblitz , which will allow viewers to vote on the commercials immediately after they air on TV.

TechCrunch editors believe it could either be about Google Search, which will take on Microsoft Bing, or about the Nexus One smartphone. The Nexus One commercial could bring serious attention to the device that hasn’t done well for Google in terms of sales. Either way, we’ll be looking for Google’s first ever Super Bowl commercial to see what they are up to.

Analyst Upgrades and Downgrades MOT, MET, MA, HOT, CIEN, BBY, GPS, ALKS…

Amarendra Bhushan — Fri, 05 Feb 2010 14:46:38 +0000

Alkermes (ALKS, news: 11.37 0.00 0.00%, cap: 1.077B, 1yr target: 12.36) upgraded to Buy, target raised to $13.50 from $11.50, at Jefferies…
Archer-Daniels-Midland (ADM, news: 29.89 0.00 0.00%, cap: 19.200B, 1yr target: 36.82) upgraded to Buy, $35 target, at Deutsche Bank…
Argon ST (STST, news: 24.15 0.00 0.00%, cap: 525.2M, 1yr target: 26.50) downgraded to Perform from Outperform at Oppenheimer…
Bebe Stores (BEBE, news: 7.23 0.00 0.00%, cap: 627.4M, 1yr target: 7.09) upgraded to Buy, target raised to $10 from $6.50, at Roth Capital…
Best Buy (BBY, news: 35.47 0.00 0.00%, cap: 14.828B, 1yr target: 46.34) upgraded to Buy from Neutral, $44 target, at Janney Montgomery…
Choice Hotels (CHH, news: 31.45 0.00 0.00%, cap: 1.872B, 1yr target: 32.69) upgraded to Outperform from Neutral at RW Baird…
Cimarex Energy (XEC, news: 52.29 0.00 0.00%, cap: 4.367B, 1yr target: 55.67) initiated as Buy at KeyBanc…
Ciena (CIEN, news: 12.76 0.00 0.00%, cap: 1.174B, 1yr target: 13.92) downgraded to Equal Weight from Overweight, $14 target, at Barclays….
Cogo Group (COGO, news: 6.58 0.00 0.00%, cap: 237.8M, 1yr target: 9.05) maintained Outperform, target raised to $9.50 from $8.50, at Piper Jaffray…
Coach (COH, news: 34.19 0.00 0.00%, cap: 10.854B, 1yr target: 40.06) downgraded to Neutral from Buy at Goldman…
Dollar Tree (DLTR, news: 47.12 0.00 0.00%, cap: 4.159B, 1yr target: 58.19) downgraded to Neutral from Overweight, $53 target, at JP Morgan…
Eastman Kodak (EK, news: 5.84 0.00 0.00%, cap: 1.569B, 1yr target: 4.42) upgraded to Hold at Brean Murray…
Gap (GPS, news: 19.67 0.00 0.00%, cap: 13.572B, 1yr target: 24.68) upgraded to Buy from Hold at Citigroup…
hhgregg (HGG, news: 18.67 0.00 0.00%, cap: 716.5M, 1yr target: 24.00) upgraded to Buy from Neutral, target raised to $23 from $20, at Janney Montgomery…
Intercontinental Hotels (IHG, news: 13.84 0.00 0.00%, cap: 3.958B, 1yr target: 13.67) upgraded to Outperform from Neutral at RW Baird…
Interpublic Group (IPG, news: 6.35 0.00 0.00%, cap: 3.087B, 1yr target: 8.54) upgraded to Neutral at Credit Suisse…
Kforce.com (KFRC, news: 14.37 0.00 0.00%, cap: 558.8M, 1yr target: 15.64) initiated as Buy at Ladenburg…
Leap Wireless (LEAP, news: 13.95 0.00 0.00%, cap: 1.080B, 1yr target: 18.60) downgraded to Underweight, target lowered to $10 from $12, at JP Morgan…
LDK Solar (LDK, news: 6.11 0.00 0.00%, cap: 793.0M, 1yr target: 7.59) upgraded to Neutral at Underweight, target raised to $6.90 from $6.30, at HSBC…
MasterCard (MA, news: 226.40 0.00 0.00%, cap: 29.376B, 1yr target: 284.34) upgraded to Outperform, $270-280 target, at Wells Fargo…
MEMC Electronic (WFR, news: 12.13 0.00 0.00%, cap: 2.712B, 1yr target: 16.25) upgraded to Outperform from Neutral at Credit Suisse…
Meritage Homes (MTH, news: 21.59 0.00 0.00%, cap: 686.7M, 1yr target: 21.13) downgraded to Hold from Buy, $22 target, at Citigroup…
Metlife (MET, news: 33.64 0.00 0.00%, cap: 27.854B, 1yr target: 43.77) upgraded to Outperform, target raised to $46 from $43, at FBR…
Monolithic Power (MPWR, news: 19.52 0.00 0.00%, cap: 681.3M, 1yr target: 25.86) reiterated Overweight, target raised to $28 from $26, at Piper Jaffray…
Motorola (MOT, news: 6.57 0.00 0.00%, cap: 15.186B, 1yr target: 8.61) upgraded to Overweight from Equalweight, $9 target, at Barclays…
Murphy Oil (MUR, news: 50.13 0.00 0.00%, cap: 9.571B, 1yr target: 62.38) upgraded to Hold, $45 target, at Collins Stewart…
NCR Corporation (NCR, news: 12.69 0.00 0.00%, cap: 2.020B, 1yr target: 15.33) upgraded to Outperform, target raised to $17 from $12, at Baird…
New Oriental Education & Technology Group (EDU, news: 67.30 0.00 0.00%, cap: 2.535B, 1yr target: 77.10) upgraded to Buy, $80 target, at Brean Murray…
Nordstrom (JWN, news: 34.00 0.00 0.00%, cap: 7.395B, 1yr target: 40.94) downgraded to Neutral from Buy at Goldman…
PerkinElmer (PKI, news: 20.95 0.00 0.00%, cap: 2.446B, 1yr target: 23.83) upgraded to Outperform, target raised to $25 from $20, at Baird…
Power Integrations (POWI, news: 32.86 0.00 0.00%, cap: 887.9M, 1yr target: 40.75) upgraded to Neutral, target raised to $37 from $30, at Piper Jaffray…
ResMed (RMD, news: 54.84 0.00 0.00%, cap: 4.111B, 1yr target: 58.00) upgraded to Market Perform, $53-58 target, at Wells Fargo…
Shutterfly (SFLY, news: 17.96 0.00 0.00%, cap: 465.3M, 1yr target: 20.00) maintained Buy, target raised to $23 from $21, at Janney Montgomery Scott…
Spectra Energy (SE, news: 20.76 0.00 0.00%, cap: 13.427B, 1yr target: 23.21) upgraded to Hold, $21.50 target, at Citi…
Starwood Hotels & Resorts (HOT, news: 36.43 0.00 0.00%, cap: 6.813B, 1yr target: 37.53) upgraded to Neutral, target raised to $31 from $25, at Baird…
Suntech Power (STP, news: 12.60 0.00 0.00%, cap: 2.254B, 1yr target: 15.29) upgraded to Overweight, target raised to $17.20 from $15.30, at HSBC…
Tenneco (TEN, news: 18.16 0.00 0.00%, cap: 860.7M, 1yr target: 21.67) reiterated Buy, target raised to $27 from $19, at KeyBanc…
Texas Roadhouse (TXRH, news: 12.11 0.00 0.00%, cap: 851.4M, 1yr target: 12.35) upgraded to Outperform from Neutral at Credit Suisse…
Trina Solar (TSL, news: 23.11 0.00 0.00%, cap: 1.310B, 1yr target: 30.70) maintained Overweight, target raised to $31 from $14.50, at HSBC…
Valeant Pharm (VRX, news: 34.49 0.00 0.00%, cap: 2.805B, 1yr target: 31.80) initiated as Buy at Jefferies…
WABCO Holdings (WBC, news: 25.56 0.00 0.00%, cap: 1.638B, 1yr target: 30.80) upgraded to Outperform, target raised to $30 from $18, at Baird…

Best Buy’s Recent Pullback Provides an Outstanding Opportunity

Dr. Paul Price — Fri, 05 Feb 2010 07:53:28 +0000

Best Buy (BBY, news: 35.47 0.00 0.00%, cap: 14.828B, 1yr target: 46.34) is the largest consumer electronics retailer in the U.S., with about 20% of the $170 billion market. With its 2009 acquisitions, the firm increased its share of the $700 billion global consumer electronics market to roughly 6%. Best Buy also operates under the Future Shop and Five Star trade names in Canada and China. They operate over 2400 Best Buy Europe stores as well as Magnolia Home Theater, Pacific Sales Kitchen and Bath, and Geek Squad here in the U.S.

The bankruptcy of rival Circuit City has allowed Best buy to increase its already market- leading share of the US space. FY 2010 [ends Feb. 28, 2010] will show the highest revenues ever at an estimated $49 billion. December 2009 sales were up 13% year-over-year.

Here are BBY’s impressive (split-adjusted) per share numbers from continuing operations as reported by Value Line:

FY	Sales	C/F	EPS	Div.	B/V	Avg. P/E	52-wk. Range

2001	32.73	1.20	0.83	Nil	3.89	31.0x	9.30 – 39.50
2002	40.94	1.79	1.18	Nil	5.27	22.6x	12.40 – 33.40
2003	43.37	1.93	1.27	Nil	5.65	17.1x	11.30 – 35.80
2004	50.41	2.43	1.63	0.27	7.03	18.8x	15.80 – 41.80
2005	55.70	2.82	1.91	0.27	9.03	18.6x	29.20 – 41.50
2006	63.59	3.29	2.27	0.31	10.84	19.2x	31.90 – 53.20
2007	74.76	3.92	2.79	0.36	12.90	18.6x	43.30 – 59.50
2008	97.48	4.84	3.12	0.46	10.92	15.1x	41.80 – 53.90
2009	108.82	4.84	2.88	0.53	11.22	12.4x	16.40 – 53.00
2010*	115.30	5.15	3.10	0.56	14.38	12.1x	23.97 – 45.55

* FY 2010 includes consensus estimates for Q4

Zacks now sees FY 2011 coming in at $3.33 /share making BBY’s multiple about 11.5x trailing and 10.7x forward earnings estimates. That’s the lowest valuation for BBY since the lows of 2000 and 2002. Buyers of Best Buy at those times saw the shares rebound from $9.30 to $35.80 (from December 2000 to March 2002) and from $11.30 to $59.50 (from November 2002 to April of 2006).

Just a quick glance at the chart above will show that both sales and earnings have surged over the past decade while the P/E has compressed. BBY’s valuation has rarely been this compelling despite the fact that fundamentals are expected to be at all-time highs in the fiscal year starting March 1st.

Dividends were initiated in calendar year 2003 and have been steadily increased to today’s $0.14 quarterly rate. At today’s close that provides a well-covered current yield of 1.57%.

Best Buy receives an ‘A’ for financial strength from Value Line and also scores high with 80th and 90th percentile ranking in ‘stock price growth persistence’ and ‘earnings predictability’ (with 100th being best).

I see no reason that these shares can’t command at least a 14 multiple again at some point over the next two years. That leads me to a 12 – 15 month target price of about $45 – $50. Is that an attainable goal? I think so. BBY shares actually changed hands above $45 in calendar years 2005-2006-2007-2008 and 2009. Standard and Poors calls ‘fair value’ as $46 while Morningstar comes in at a $45 /share fair value estimate.

A rebound to even $45 would bring a total return of about 28% from today’s closing quote while not even nearing the old highs set when sales, dividends and earnings were far lower than they are now.

*******************************************************************************************

If you’re option savvy you can play Best Buy as a buy/write combination to achieve outstanding potential gains while giving yourself a reasonable margin of safety from today’s price.

Consider this not quite two –year play…

	Cash Outlay	Cash Inflow

Buy 1000 BBY @ $35.59/share	$35,590
Sell 10 Jan. 2012 $40 calls @ $4.40 /share		$4,400
Sell 10 Jan. 2012 $40 puts @ $9.10 /share		$9,100
Net Cash Out-of-Pocket	$22,090

If BBY shares rise to at least $40 (+ 12.4% or better) by the Jan. 2012 expiration date:

* The $40 calls will be exercised.
* You will sell your shares for $40,000.
* The $40 puts will expire worthless.
* You will have collected at least $1,120 in dividends.
* You will have no further option obligations.
* You will end up with no shares and $41,120 in cash.

This best-case scenario result would be a net profit of $19,030/$22,090 = + 86% cash-on-cash, achieved in less than 23.5 months on shares that only needed to move up by 12.4% from the trade’s inception price.

What’s the risk?

If BBY shares remain < $40 on the Jan. 2012 expiration date:

* The $40 calls will expire worthless.
* The $40 puts will be exercised.
* You will be forced to buy an additional 1000 BBY shares.
* You will need to lay out another $40,000 in cash.
* You will have collected at least $1,120 in dividends.
* You will have no further option obligations.
* You will end up with 2000 BBY shares and $1,120 in cash.

What’s the break-even on the whole trade?

On the original 1000 shares it’s their $35.59 /share purchase price less the $4.40 /share call premium = $31.19 /share (excluding dividends).

On the ‘put’ shares it’s the $40 strike price less the $9.10 put premium = $30.90 /share.

Your overall break-even would be $31.05 /share excluding yield and $30.77 adjusted for dividends. BBY shares could drop as much as 13.5% without causing a loss on this trade.

Summary:

Best Buy appears to be a high-quality, medium yielding stock that offers at least 25% – 30% total returns over the next year or so. Buying BBY shares while simultaneously selling $40 strike-price LEAP puts and calls for 2012 would allow for any gains of more than 12.5% to translate into 86% cash-on-cash returns.

Disclosure: Author is long BBY shares and short BBY options.

Analyst Upgrades and Downgrades RHHBY, RTP, BP, AKAM, AOL, V, MET, AFX, RIMM, DWA…

Amarendra Bhushan — Thu, 04 Feb 2010 14:23:53 +0000

Acorda Therapeutics (ACOR, news: 29.92 0.00 0.00%, cap: 1.141B, 1yr target: 33.63) downgraded to Neutral from Outperform, $32 target, at RW Baird…
Affymetrix (AFFX, news: 7.35 0.00 0.00%, cap: 505.8M, 1yr target: 8.17) upgraded to Neutral from Underweight, $8 target, at JP Morgan…
Aixtron (AIXG, news: 27.63 0.00 0.00%, cap: N/A, 1yr target: 22.22) downgraded to Neutral from Buy at Merriman…
Akamai Technologies (AKAM, news: 25.04 0.00 0.00%, cap: 4.287B, 1yr target: 28.36) upgraded to Neutral, target raised to $27.50 from $21.50, at Goldman…
AOL (AOL, news: 23.60 0.00 0.00%, cap: 2.497B, 1yr target: 26.44) upgraded to Neutral from Sell at Merriman…
Arena Pharma (ARNA, news: 3.09 0.00 0.00%, cap: 286.5M, 1yr target: 6.32) upgraded to Market Perform from Underperform at Rodman & Renshaw…
Aviat Networks (AVNW, news: 5.96 0.00 0.00%, cap: 351.1M, 1yr target: 8.50) downgraded to Hold at Needham…
BP plc (BP, news: 52.43 0.00 0.00%, cap: 163.9B, 1yr target: 55.51) upgraded to Overweight at HSBC…
Broadcom (BRCM, news: 28.80 0.00 0.00%, cap: 14.259B, 1yr target: 34.04) upgraded to Buy from Hold at Brigantine…
Corinthian Colleges (COCO, news: 13.06 0.00 0.00%, cap: 1.144B, 1yr target: 20.31) downgraded to Neutral from Buy at BofA/Merrill…
Cree (CREE, news: 56.11 0.00 0.00%, cap: 5.957B, 1yr target: 64.77) downgraded to Neutral from Buy at Merriman…
Cyclacel Pharmaceuticals (CYCC, news: 2.10 0.00 0.00%, cap: 51.3M, 1yr target: 7.00) initiated as Buy at Roth Capital…
Diebold (DBD, news: 27.56 0.00 0.00%, cap: 1.827B, 1yr target: 33.00) upgraded to Outperform from Neutral, $34 target, at RW Baird…
DreamWorks (DWA, news: 38.73 0.00 0.00%, cap: 3.360B, 1yr target: 41.54) downgraded to Neutral, $41 target, at Piper Jaffray…
Doral Financial (DRL, news: 3.49 0.00 0.00%, cap: 216.6M, 1yr target: 2.50) downgraded to Neutral, $4 target, at B. Riley…
Double-Take (DBTK, news: 8.46 0.00 0.00%, cap: 189.5M, 1yr target: 10.40) downgraded to Market Weight from Overweight, $9 target, at Thomas Weisel…
Emergency Medical Services (EMS, news: 51.99 0.00 0.00%, cap: 2.231B, 1yr target: 59.50) initiated as Buy at Kaufman Bros…
Equity Residential (EQR, news: 32.44 0.00 0.00%, cap: 8.958B, 1yr target: 33.64) upgraded to Buy, $38 target, at Benchmark…
Franklin Resources (BEN, news: 96.30 0.00 0.00%, cap: 21.976B, 1yr target: 126.13) added to Conviction Buy List, target $130, at Goldman…
Investment Technology Group (ITG, news: 16.86 0.00 0.00%, cap: 737.0M, 1yr target: 19.44) downgraded to Market Perform, $19 target, at KBW…
ITT Educational (ESI, news: 93.39 0.00 0.00%, cap: 3.310B, 1yr target: 131.69) downgraded to Neutral from Buy at BofA/Merrill…
Janus (JNS, news: 11.67 0.00 0.00%, cap: 2.120B, 1yr target: 15.27) upgraded to Buy from Neutral, $16.50 target, at Goldman…
KBW, Inc. (KBW, news: 26.11 0.00 0.00%, cap: 791.3M, 1yr target: 31.43) initiated as Buy at Cantor…
MetLife (MET, news: 33.64 0.00 0.00%, cap: 27.854B, 1yr target: 43.77) upgraded to Outperform from Market Perform, $44 target, at Keefe Bruyette…
Micromet (MITI, news: 8.12 0.00 0.00%, cap: 560.2M, 1yr target: 10.21) upgraded to Buy, $12 target, at Roth Capital…
Monster Worldwide (MWW, news: 14.18 0.00 0.00%, cap: 1.782B, 1yr target: 17.75) downgraded to Sell from Hold at Deutsche Bank…
Och-Ziff (OZM, news: 13.24 0.00 0.00%, cap: 1.057B, 1yr target: 16.25) downgraded to Neutral from Buy at Goldman…
Open Text (OTEX, news: 46.51 0.00 0.00%, cap: 2.622B, 1yr target: 48.30) upgraded to Buy, $48 target, at Benchmark…
Panera Bread (PNRA, news: 70.96 0.00 0.00%, cap: 2.236B, 1yr target: 75.62) downgraded to Neutral at SunTrust…
Pioneer Southwest Energy Partners (PSE, news: 21.88 0.00 0.00%, cap: 690.4M, 1yr target: 23.30) downgraded to Neutral, $22 target, at UBS…
POSCO (PKX, news: 108.23 0.00 0.00%, cap: 33.149B, 1yr target: 153.00) upgraded to Overweight at HSBC…
Provident Financial (PFS, news: 10.17 0.00 0.00%, cap: 608.4M, 1yr target: 12.33) upgraded to Buy from Neutral at Janney Montgomery…
Quest Software (QSFT, news: 15.74 0.00 0.00%, cap: 1.418B, 1yr target: 19.56) upgraded to Overweight from Market Weight at Thomas Weisel…
Research In Motion (RIMM, news: 66.67 0.00 0.00%, cap: N/A, 1yr target: 83.63) added to Focus List, $95 target, at Credit Suisse…
Rio Tinto (RTP, news: 187.58 0.00 0.00%, cap: 73.695B, 1yr target: 229.11) upgraded to Neutral at Credit Suisse…
Roche (RHHBY, news: 0.00 N/A N/A, cap: N/A, 1yr target: 0.00) downgraded to Neutral at UBS…
Safe Bulkers (SB, news: 8.24 0.00 0.00%, cap: 449.2M, 1yr target: 10.80) initiated as Buy at Cantor…
Synaptics (SYNA, news: 25.92 0.00 0.00%, cap: 863.0M, 1yr target: 30.73) downgraded to Neutral, $33 target, at JP Morgan…
Visa (V, news: 83.05 0.00 0.00%, cap: 64.613B, 1yr target: 103.89) upgraded to Overweight from Equal Weight, $97 target, at Barclays…
Western Union (WU, news: 16.16 0.00 0.00%, cap: 11.094B, 1yr target: 20.43) downgraded to Neutral, target lowered to $19 from $23, at Goldman…

Calamos Asset Management – Rebounding Strongly

Dr. Paul Price — Thu, 04 Feb 2010 13:46:27 +0000

Calamos Asset Management Inc. (CLMS, news: 12.95 0.00 0.00%, cap: 254.1M, 1yr target: 14.65) is a publicly owned investment manager. The firm provides investment advisory services to individuals, institutions and private foundations. They manage separate client-focused open-end and closed-end for its clients. CLMS also offers separately managed accounts to its clients. Their investment strategies cover equity, global/international, balanced, high yield, convertible, and alternative investment classes. The firm employs qualitative and fundamental analysis with both top-down and bottom-up stock picking approaches. Calamos Asset Management was founded in 1977 and is based in Naperville, Illinois.

CLMS came public in late 2004 and attracted a lot of investor interest. Their shares rose from a 2004 low of $19.40 to an April 2006 high of $44.10 as EPS grew at a nice rate while the markets were booming. Earnings dipped a bit in 2007 before falling off a cliff in 2008 when the market melted down.

CLMS was caught in a forced liquidation mode in late 2008 when the credit markets froze. They de-levered, cut the dividend and regrouped by reducing head count. While painful, these actions set the stage for a big rebound in 2009. All four quarters showed huge improvements in year-over-year earnings and Q4 came in well above estimates.

Assets under management climbed from $25.276 billion as of year-end 2008 to $32.714 billion on December 31, 2009. Their investment performances has been stellar allowing for both organic asset growth and net new money flows into their funds. The closed-end Calamos Convertible Opportunities and Income Fund announced a secondary share offering this January when the shares were at a premium to NAV. This will immediately add a nice chunk of new AUM to their permanent fund base (as closed-end funds do not make direct redemptions when public investors sell their shares).

Here are their per share numbers from continuing operations as reported by Value Line:

Year	Sales	EPS	Div.	B/V	Avg. P/E	52-wk Range

2004	13.57	1.09	0.07	6.89	22.6x	19.40 – 28.35
2005	18.16	1.26	0.30	8.09	21.1x	20.55 – 32.81
2006	20.95	1.45	0.38	9.26	21.6x	24.23 – 44.10
2007	22.68	1.22	0.44	10.24	21.5x	20.08 – 34.61
2008	20.08	d. 0.01	0.39	7.73	NMF	2.55 – 29.67
2009	14.33	0.62	0.22	7.67	15.5x	2.74 – 15.47

Current estimates for 2010 and 2011 EPS have been raised to $0.92 and $1.09 respectively putting the multiple at about 14.2x this year’s and < 12x next year’s expectations. That’s quite low by historical standards for CLMS shares as can be seen in the chart above.

Another measure of how undervalued these shares remain is to look at their present price/book value relationship compared with their historical ranges. Here is a chart showing their annual highs and lows versus book value.

Year	P/BV at High	P/BV at Low	Current P/BV

2004	4.1x	2.8x
2005	4.2x	2.5x
2006	4.8x	2.6x
2007	3.4x	1.9x
2008	2.9x	0.33x
2009	2.0x	0.36x	1.7x

Excepting the period from late 2008 through early 2009 the price/book value for CLMS never went below 1.9x and it ranged from 2.0x – 4.8x book value at some point during each calendar year since their 2004 IPO. By year-end 2010 book value should be about $8.25 /share. A return to even two times book value would lead me to a $16.50 target price – 26.4% above yesterday’s closing price of $13.05.

Is that a reasonable 12-month goal? It would be about 17.9x projected earnings versus the better than 21x average P/Es of the 2004 – 2007 period. It would also be well below all peak price/book value relationships during ‘normal’ market conditions.

The dividend was recently increased from $0.055 to $0.075 quarterly making the current yield a decent 2.3%. That yield could easily be raised again in the future as it represents a payout ratio of only 32.6% of projected 2010 EPS.

Calamos stock is virtually unknown among individual investors. As of September, 2009 about 91% of its shares were held by institutions and mutual funds. Here are some of its largest holders as of 9/30/09:

Morgan Stanley (MS, news: 26.60 0.00 0.00%, cap: 36.192B, 1yr target: 37.05)	21.46%
J P Morgan Chase (JPM, news: 37.70 0.00 0.00%, cap: 148.8B, 1yr target: 52.90)	8.50%
Barclays Global	5.63%
Vanguard Group	5.08%
Fidelity Funds (FMR)	4.62%

My conservative target price offers over 28% total returns over the next 12-months if things play out as expected. That is hardly an upper limit though, as CLMS shares actually traded above $20 in each of the five years 2004 – 2008 and fundamentals are definitely on the upswing.

Calamos offers options opportunities but the market is very thinly traded. Use limits and show patience if you chose to play CLMS in this way.

Disclosure: Author is long CLMS shares and short CLMS options.

Bank of England paused quantitative easing programme and Interest Rate On Hold

Caroline Mittermair — Thu, 04 Feb 2010 13:01:39 +0000

The Bank of England’s Monetary Policy Committee paused its quantitative easing programme (QE) and leaving interest rates at a record low of 0.5 percent. The Bank has so far pumped £200 billion in newly-created money into the economy.

The policy of QE has seen the Bank of England buy billions and billions of pounds of UK Government debt, or gilts, from banks and financial institutions in the hope they will then use the money to buy other assets in the economy. Exiting QE, means that a huge buyer of gilts has now left the market.

Statement: The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at 200 billion.

After a substantial fall in output, the United Kingdom economy recorded sluggish growth in the final quarter of 2009.

Spending by households appears to have picked up a little, though that may partly reflect temporary factors. The rate of decline in businesses’ investment spending appears to have eased. And the world economy continued to recover, raising the demand for UK exports.

CPI inflation has risen sharply to well above the 2% target, reaching 2.9% in December. That rise was largely accounted for by higher petrol price inflation and the reduction in the main VAT rate a year earlier dropping out of the calculation.

Inflation is likely to have risen further in January, reflecting the restoration of the VAT rate to 17.5%. Pay growth has remained subdued.

The considerable stimulus from the easing in monetary policy, the lower level of sterling and the recovery in UK export markets should together support domestic activity. But credit conditions are likely to remain restrictive, while the need to strengthen public and private sector finances will also weigh on spending. On balance, the Committee believes that the prospect is for a gradual recovery in the level of activity.

The recession has probably impaired the supply capacity of the economy, but the scale and persistence of the fall in output means that a substantial margin of under-utilised resources is likely to remain for some time to come. That is likely to mean that inflation will fall below the target for a period.

In the light of the Committee’s latest Inflation Report projections and in order to keep inflation on track to meet the 2% inflation target over the medium term, the Committee judged that it was appropriate to maintain Bank Rate at 0.5% and its stock of purchases of government and corporate debt financed by the issuance of central bank reserves at 200 billion. The Committee noted that this stock of past purchases, together with the low level of Bank Rate, would continue to impart a substantial monetary stimulus to the economy for some time to come. The Committee will continue to monitor the appropriate scale of the asset purchase programme and further purchases would be made should the outlook warrant them.

The Committee’s latest inflation and output projections will appear in the Inflation Report to be published at 10.30am on Wednesday 10 February.

The minutes of the meeting will be published at 9.30am on Wednesday 17 February.”

What is Samsung Electronics, Allied Materials and Hynix Semiconductor Chip Espionage Case?

Bettina Padurano — Thu, 04 Feb 2010 12:22:28 +0000

Prosecutors said those involved — including employees of U.S. company Allied Materials and its South Korean unit — are suspected of leaking semiconductor technology belonging to South Korea’s Samsung Electronics Co. (SSNHY) to its domestic rival Hynix Semiconductor Inc. (HXSCF) Former Samsung employee has been accused of stealing the company’s side-by-side refrigerator designs and marketing information from an incumbent Samsung employee and selling it to a Chinese home appliance company for a promised KRW240 million.

Applied Materials Korea (AMAT, news: 12.07 0.00 0.00%, cap: 16.189B, 1yr target: 16.39) is the Seoul branch of a firm that provides semiconductor equipment to both Samsung and Hynix, respectively the world’s largest and second largest manufacturer of computer memory chips.

AMK staff had free access to Samsung plants as they installed and managed the chipmaker’s production facilities. In the process, they either carried confidential material from meetings out of the company or simply asked Samsung staff for information. The AMK staff even copied information from laptop computers of Samsung employees on business trips overseas. Prosecutors believe AMK tried to boost sales of its chip production equipment by handing over the stolen information.

Samsung and Hynix are the world’s top two producers of dynamic random access memory, or DRAM, chips, used mostly in personal computers. Suwon, South Korea-based Samsung is also the world’s biggest manufacturer of NAND flash chips, used in digital devices such as cameras, music players and smartphones. Hynix ranks No. 3 in NAND, behind Samsung and Japan’s Toshiba Corp.

Jonathan Schwartz CEO Sun Microsystems, first Fortune 200 boss to tweet his resignation

Amarendra Bhushan — Thu, 04 Feb 2010 10:13:39 +0000

Jonathan Schwartz, chief executive officer of Sun Microsystems Inc. (JAVA, news: 0.00 N/A N/A, cap: N/A, 1yr target: 0.00), A Wholly Owned Subsidiary of Oracle Corporation. (ORCL, news: 23.12 0.00 0.00%, cap: 115.9B, 1yr target: 28.74), has become the first Fortune 200 boss to tweet his resignation. He wrote, “Today’s my last day at Sun. I’ll miss it. Seems only fitting to end on a #haiku. Financial crisis/Stalled too many customers/CEO no more”. Oracle CEO Larry Ellison said in an interview last week he expects Schwartz to resign. ”

In his last blog post , Having had nine months to accelerate down the runway, there’s not a doubt in my mind Oracle’s takeoff and ascent will be fast and dramatic. I wish the combined entity the best of luck, and have enormous confidence in the opportunity.

Greg Papadopoulos, one of the brightest people I’ve ever known, once made a very interesting statement – all technology ultimately becomes a fashion item. It was true for timekeeping, and it’s definitely true of computing and telecommunications. To that law, I’d like to add a simple corollary: the technology industry only gets more interesting. It’s been true my entire life.

As for where life takes me next, you should follow me via Twitter at openjonathan to find out. I’ll also be rehosting this blog (and again, stay tuned to Twitter by following me here). I expect to do my part to keep things interesting.

Thank you for your support and commitment. I wish you all the best of luck building, taking advantage of (and likely wearing) the future!”

Analyst Upgrades and Downgrades UBS, UPS, NWSA, WMT, KFT, MCD, CS, SCHW…

Amarendra Bhushan — Wed, 03 Feb 2010 16:13:58 +0000

Acme Packet (APKT, news: 13.69 0.00 0.00%, cap: 799.8M, 1yr target: 14.56) upgraded to Neutral from Underweight at Piper Jaffray…
Advanced Semi (ASX, news: 4.05 0.00 0.00%, cap: 4.172B, 1yr target: 4.15) upgraded to Hold, $26 target, at Citi…
Anglo American (AAUKY, news: 0.00 N/A N/A, cap: N/A, 1yr target: 0.00) upgraded to Buy at UBS…
Animal Health (AHII, news: 1.86 0.00 0.00%, cap: 45.3M, 1yr target: 2.50) upgraded to Overweight from Neutral, $3 target, at Piper Jaffray…
ArvinMeritor (ARM, news: 9.33 0.00 0.00%, cap: 678.3M, 1yr target: 14.21) upgraded to Outperform, $15 target, at Baird…
Ameren Corporation (AEE, news: 24.42 0.00 0.00%, cap: 5.786B, 1yr target: 22.00) added to Conviction Sell List at Goldman…
ARM Holdings (ARMH, news: 9.35 0.00 0.00%, cap: N/A, 1yr target: 7.50) downgraded to Neutral at GC Research…
Baidu Inc. (BIDU, news: 443.23 0.00 0.00%, cap: 15.374B, 1yr target: 466.16) reiterated Buy, target raised to $550, at Goldman Sachs…
Bancolombia (CIB, news: 41.26 0.00 0.00%, cap: 32.506B, 1yr target: 46.51) downgraded to Neural, $51 target, at JP Morgan…
Barrick Gold (ABX, news: 34.57 0.00 0.00%, cap: 33.981B, 1yr target: 49.62) initiated as Hold at Deutsche Bank…
Canadian Natural Resources (CNQ, news: 64.09 0.00 0.00%, cap: 34.756B, 1yr target: 87.04) added to Conviction Buy List at Goldman…
Charles Schwab (SCHW, news: 17.72 0.00 0.00%, cap: 20.593B, 1yr target: 19.97) upgraded to Buy at BofA/Merrill Lynch…
CH Robinson (CHRW, news: 52.08 0.00 0.00%, cap: 8.659B, 1yr target: 62.40) downgraded to Market Perform from Outperform, $57-58 target, at Wells Fargo…
Coca-Cola Hellenic Bottling Co. (CCH, news: 21.94 0.00 0.00%, cap: 7.993B, 1yr target: 28.00) initiated as Buy at RBS…
Colonial Properties Trust (CLP, news: 10.65 0.00 0.00%, cap: 706.8M, 1yr target: 11.04) upgraded to Market Perform, $10.50-12.50 target, at Wells Fargo…
COMSYS IT Partners (CITP, news: 17.45 0.00 0.00%, cap: 368.6M, 1yr target: 18.00) downgraded to Market Perform, $18 target, at BMO Capital…
Corn Products (CPO, news: 30.81 0.00 0.00%, cap: 2.292B, 1yr target: 31.60) downgraded to Hold at BB&T…
Credit Suisse (CS, news: 40.29 0.00 0.00%, cap: 47.154B, 1yr target: 72.87) added to Top Picks list at JP Morgan…
CVS Caremark (CVS, news: 32.72 0.00 0.00%, cap: 46.153B, 1yr target: 37.06) downgraded to Buy from Conviction Buy at Goldman…
Dick’s (DKS, news: 22.78 0.00 0.00%, cap: 2.611B, 1yr target: 27.61) upgraded to Buy, $27 target, at Goldman…
Genzyme (GENZ, news: 54.49 0.00 0.00%, cap: 14.461B, 1yr target: 56.44) upgraded to Buy from Neutral at UBS…
Goldcorp (GG, news: 34.41 0.00 0.00%, cap: 25.212B, 1yr target: 47.96) initiated as Hold at Deutsche Bank…
Harte-Hanks (HHS, news: 11.60 0.00 0.00%, cap: 737.4M, 1yr target: 12.75) upgraded to Overweight from Neutral at JP Morgan…
Hospitality Trust (HT, news: 3.72 0.00 0.00%, cap: 210.1M, 1yr target: 4.40) upgraded to Outperform, $5.50 target, at KBW…
International Rectifier (IRF, news: 18.97 0.00 0.00%, cap: 1.352B, 1yr target: 24.20) maintained Outperform, target raised a dollar to $26, at FBR…
KAR Auction (KAR, news: 14.24 0.00 0.00%, cap: 1.878B, 1yr target: 18.45) initiated as Equal Weight at Barclays…
Kenexa (KNXA, news: 10.40 0.00 0.00%, cap: 234.6M, 1yr target: 13.50) downgraded to Neutral from Buy, $11 target, at Janney Montgomery…
Kinross Gold (KGC, news: 16.65 0.00 0.00%, cap: 11.585B, 1yr target: 22.66) initiated as Buy at Deutsche Bank…
Kraft Foods (KFT, news: 28.36 0.00 0.00%, cap: 41.855B, 1yr target: 32.33) coverage resumed with a Buy from Neutral at UBS…
Lexmark Int’l (LXK, news: 32.09 0.00 0.00%, cap: 2.506B, 1yr target: 32.95) upgraded to Buy, $40 target, at Brean Murray…
Lowe’s (LOW, news: 21.76 0.00 0.00%, cap: 32.031B, 1yr target: 25.11) downgraded to Neutral from Buy, $25 target, at Goldman…
Massey Energy (MEE, news: 38.26 0.00 0.00%, cap: 3.264B, 1yr target: 53.06) upgraded to Hold, target raised to $42 from $35, at Citi…
McDonald’s (MCD, news: 62.92 0.00 0.00%, cap: 67.902B, 1yr target: 69.71) added to Conviction Buy List, target raised to $75 from $73, at Goldman…
Mylan (MYL, news: 17.76 0.00 0.00%, cap: 5.427B, 1yr target: 21.00) initiated as Outperform at Oppenheimer…
NASDAQ OMX Group (NDAQ, news: 18.05 0.00 0.00%, cap: 3.810B, 1yr target: 24.53) upgraded to Conviction Buy at Goldman Sachs…
NetLogic Microsystems (NETL, news: 47.67 0.00 0.00%, cap: 1.308B, 1yr target: 53.68) reiterated Overweight, target raised to $62 from $47, at Piper Jaffray…
NewMarket Corporation (NEU, news: 81.94 0.00 0.00%, cap: 1.246B, 1yr target: 110.00) upgraded Buy, $110 target, at KeyBanc…
Newmont Mining (NEM, news: 44.41 0.00 0.00%, cap: 21.768B, 1yr target: 58.04) initiated as Buy at Deutsche Bank…
News Corp (NWSA, news: 12.64 0.00 0.00%, cap: 33.117B, 1yr target: 16.08) reiterates Buy, raises target to $16.50, at Soleil Securities…
Owens & Minor (OMI, news: 42.89 0.00 0.00%, cap: 1.796B, 1yr target: 45.00) upgraded to Outperform from Neutral, $49 target, at RW Baird…
Raymond James (RJF, news: 25.26 0.00 0.00%, cap: 3.115B, 1yr target: 28.67) upgraded to Outperform, target raised to $32 from $27, at FBR Research…
SVB Financial (SIVB, news: 41.48 0.00 0.00%, cap: 1.715B, 1yr target: 51.08) upgraded to Overweight from Neutral at JP Morgan…
Techne (TECH, news: 61.19 0.00 0.00%, cap: 2.279B, 1yr target: 68.00) downgraded to Market Perform from Outperform at Leerink…
Quest Software (QSFT, news: 15.74 0.00 0.00%, cap: 1.418B, 1yr target: 19.56) downgraded to Sell from Buy at Goldman…
UBS (UBS, news: 12.84 0.00 0.00%, cap: 45.209B, 1yr target: 17.59) upgraded to Overweight from Neutral at JP Morgan…
United Parcel Service (UPS, news: 56.62 0.00 0.00%, cap: 56.213B, 1yr target: 67.13) upgraded to Buy from Hold, $70 target, at Deutsche Bank…
Universal Technical Institue (UTI, news: 20.95 0.00 0.00%, cap: 499.4M, 1yr target: 21.67) upgraded to Neutral, target raised to $20 from $15, at Piper Jaffray…
Vail Resorts (MTN, news: 32.92 0.00 0.00%, cap: 1.193B, 1yr target: 43.00) upgraded to Outperform, $36-39 target, at Wells Fargo…
Vale S.A. (VALE, news: 25.18 0.00 0.00%, cap: 131.3B, 1yr target: 33.82) upgraded to Buy at UBS…
Verisign (VRSN, news: 22.98 0.00 0.00%, cap: 4.212B, 1yr target: 26.60) downgraded to Hold from Buy, $24 target, at Deutsche Bank…
W.R. Grace (GRA, news: 25.88 0.00 0.00%, cap: 1.871B, 1yr target: 34.00) upgraded to Buy from Hold, $33 target, at Jefferies…
Wal-Mart (WMT, news: 52.93 0.00 0.00%, cap: 201.7B, 1yr target: 60.10) upgraded to Buy at Stifel Nicolaus…
Warner Chilcott (WCRX, news: 25.21 0.00 0.00%, cap: 6.339B, 1yr target: 32.50) initiated as Outperform at Oppenheimer…

DST Systems – Using the Dip to Buy Quality at a Bargain Price

Dr. Paul Price — Wed, 03 Feb 2010 15:38:33 +0000

DST Systems, Inc. (DST, news: 37.96 0.00 0.00%, cap: 1.887B, 1yr target: 47.50) is a global provider of information processing and computer software services to the financial services industry (predominantly mutual funds and investment managers), telecommunications industry, the healthcare industry and other service industries. They operate through two segments: Financial Services and Output Solutions. The Financial Services Segment’s revenues come from remote or full-service transfer agency or third-party administration product offerings that utilize the Company’s software applications. Output Solutions’ revenues are derived from presentation, delivery and archival of customer documents.

Yesterday’s slightly disappointing Q4 report sent DST shares down to $39.45 putting in on the day’s worst percentage performers list. Was this justified? I don’t think so. After netting out both positive and negative one-time items the fourth quarter and 2009 EPS came in at $0.92 and $3.59 respectively.

That was the second best earnings performance in the company’s history trailing only the all-time record results of $3.77 /share from 2008. That puts the P/E at just 11x last year’s earnings. After hearing the Q4 announcement Standard and Poors lowered their 2010 and 2011 estimates to $3.97 and $4.20. That puts the forward multiple at an even lower 9.94x.

Here are DST’s per share numbers from continuing operations as reported by Value Line:

Year	Sales	C/F	EPS	Avg. P/E	52-Wk. Range

2000	10.92	2.49	1.40	28.4x	25.80 – 74.90
2001	13.79	3.00	1.60	31.7x	36.30 – 69.90
2002	19.93	3.01	1.77	22.7x	24.10 – 51.20
2003	28.83	4.40	1.88	18.6x	24.00 – 51.20
2004	29.26	4.50	2.50	18.3x	41.00 – 52.50
2005	35.08	5.17	2.70	18.9x	44.20 – 62.30
2006	34.03	5.30	3.02	19.7x	54.80 – 64.00
2007	37.87	6.22	3.50	22.5x	62.50 – 88.70
2008	45.98	6.82	3.77	15.2x	31.00 – 82.40
2009	44.83	6.70	3.59	10.3x	25.70 – 47.50

Clearly, the company has shown outstanding growth over the past decade in revenues, cash flow and earnings. Despite that long-term record of success the share price is now at its cheapest P/E ever (excluding the late 2008-2009 market melt-down period). At yesterday’s close of $39.45 these shares are now available at lower than the absolute lows during calendar years 2004-2005-2006 and 2007. In those years EPS went from $2.50 to $3.50 compared with 2009’s ‘disappointing’ $3.59. Peak prices in 2004 – 2007 ranged from $52.50 – $88.70.

Value Line rates DST ‘above average’ for safety and assigns them an ‘A’ for financial strength. They also note their ‘earnings predictability’ as being in the top 1% of all 1700 stocks in their research universe. DST’s ‘share price stability’ falls into Value Line’s top 10% despite the near-term volatility.

It certainly would not be a stretch to believe that DST’s valuation can revert back to a still lower-than-typical 14x forward earnings. If the S&P estimate is near the mark, that would lead to a $59.55 12-month target price. That somewhat conservative target would bring a better than 50% gain from the current quote. Standard and Poors now lists their estimate of DST’s ‘fair value’ as $52.30 /share. Morningstar is a bit lower in their ‘fair value’ estimate at $50 /share. Even that is 26.7% above yesterday’s closing price. Value Line is using a 15x multiple in calculating their 3 – 5 year goal range of $70 – $95 /share.

DST holds a large portfolio of investments in real estate, private equity funds, and publicly traded shares. They have large holdings of State Street Bank (STT), Euronet Worldwide (EEFT) and other companies in business that they understand due to their own field of expertise.

Management has announced a major downsizing of their worldwide workforce to cut personnel costs and improve profit margins. They will take a non-recurring charge to account for the severance costs but expect to see a large benefit from the move.

I see the temporary weakness in good-quality DST shares as a great entry point for investors with a 12 – 24 month horizon.

If you’re interested but think there’s no near-term catalyst you might consider writing (selling) some August $40 or $45 puts to lock in below-market prices without actually buying shares right now. Here are reasonable put premiums based on yesterday’s closing bid-ask spreads…

August 20, 2010 $40 Puts ……………… $3.70 /share ………. Net break-even = $36.30 /share

August 20, 2010 $45 Puts ………………$6.60 /share …….…. Net break-even = $38.40 /share

In a worst case you’d end up owning DST below the current price and at best you’ll make $3.70 – $6.60 per share without ever buying the stock.

Disclosure: Author is long DST shares and short DST options.

Auto sales review- Ford’s Sales Rose nd Toyota Reports Decline

Amarendra Bhushan — Tue, 02 Feb 2010 20:15:58 +0000

Ford Motor (F, news: 10.97 0.00 0.00%, cap: 36.279B, 1yr target: 11.96), General Motors (GRM, news: 0.00 0.00 0.00%, cap: N/A, 1yr target: 0.00) and Nissan (NSANF, news: 0.00 N/A N/A, cap: N/A, 1yr target: 0.00) all reported improved January sales compared to a year ago. Honda Motor (HMC, news: 33.81 0.00 0.00%, cap: 122.7B, 1yr target: 38.00) and Chrysler both said January sales fell from the same period last year. Retail sales at GM’s four remaining brands — Chevrolet, Buick, GMC and Cadillac — edged up 3%. GM dealers reported 146,825 total sales, a 14 percent increase.

Toyota Motor Corp.’s (TM, news: 72.85 0.00 0.00%, cap: 114.2B, 1yr target: 85.00) January sales slumped 15.8% to 98,796 vehicles following the suspension of eight models involved in the accelerator pedal recall.

Chrysler was down 8 percent while Honda Motor Co. sales fell 5 percent. Korean automaker Kia said its January U.S. sales were essentially flat.

Ford Motor (F, news: 10.97 0.00 0.00%, cap: 36.279B, 1yr target: 11.96) posted a 24% rise in sales compared to a year ago. Honda Motor Co. reported its sales fell 5% to 67,479, as car sales grew 2.7% but truck sales dropped 15%. Ford’s sales increase also was boosted by a 154% increase in fleet sales to commercial customers.

Nissan Motor Co., meanwhile, reported sales grew 16% to 62,572 vehicles amid surging increases from Armada, Maxima and Sentra.

How D.R. Horton Posts Profit for Q1 for the first time since 2007?

Mike Martinez — Tue, 02 Feb 2010 15:30:33 +0000

Home builder, D.R. Horton, Inc. (DHI), said Tuesday that it swung to a first quarter profit for the first time since 2007, helped by higher sales and a one-time tax benefit. The nation’s second-largest homebuilder, D.R. Horton Inc., reported fiscal first quarter net income of $192 million, or 56 cents per share, compared with a net loss of $62.6 million, or 20 cents per share, in the year-ago period. The latest quarter’s results included a one-time tax benefit of $149.2 million. Revenue rose 23% from last year, to $1.1 billion.

D.R. Horton earned 56 cents a share in the three months ended in December, thanks largely to a hefty tax gain. That compares with a loss of $62.6 million, or 20 cents a share, in the prior-year period.

Excluding the one-time tax benefit of $149.2 million, the company earned $42.8 million. Revenue rose 23 percent to $1.1 billion from $900.3 million. The number of homes sold increased 36 percent to 5,529, while orders increased 45 percent to 4,037.

“Market conditions in the homebuilding industry are still challenging,” Chairman Donald R. Horton said in the statement. “However, new home inventory remains low, interest rates are favorable and housing affordability is near record highs.”

Other homebuilders are scheduled to report quarterly results this week, including Standard Pacific Corp. (SPF, news: 3.80 0.00 0.00%, cap: 399.5M, 1yr target: 4.42), Beazer Homes USA Inc. (BZH, news: 4.32 0.00 0.00%, cap: 171.8M, 1yr target: 4.75) and and M.D.C. Holdings Inc. (MDC, news: 34.59 0.00 0.00%, cap: 1.625B, 1yr target: 39.69).

Nomura Holdings announces quarterly profits below forecasts due to reduced investor activity

Robert J. Steiner — Tue, 02 Feb 2010 15:02:45 +0000

Japan’s largest broker, Nomura Holdings, Inc. has released its financial results for the third quarter of the fiscal year, ending 31 March 2010. During the three-month period, the group reduced both its interest expenses and non-interest expenses to 47.05 billion yen and 256.58 billion yen, from 52.45 billion yen and 349.86 billion yen, respectively.

Nomura’s investment banking operations turned a profit for the first time in six quarters as it managed a string of public share offerings by firms taking advantage of a recovery in the stock market to replenish their capital.

Japanese firms raised $33.5 billion in share offerings in the quarter, five times the year earlier level. Nomura managed two-fifths of that total, while Morgan Stanley (MS, news: 26.60 0.00 0.00%, cap: 36.192B, 1yr target: 37.05) ranked a distant second with a market share of 7 percent.

Nomura President and CEO Kenichi Watanabe noted that, “Our Retail division focused on providing customers with consulting services and capitalized on a rise in public offerings, while also achieving growth in purchases of investment trusts. Although revenues in Global Markets were sluggish due to reduced investor activity, Investment Banking returned to profit for the first time in six quarters on the back of the rise in public offerings. Overall, our wholesale platform continued to build momentum during the third quarter. Asset Management also continued to deliver steady returns.”

Citigroup set to expand Retail Banking in Japan

Steve Gavriliuc — Tue, 02 Feb 2010 14:40:37 +0000

Citigroup Inc. (C, news: 3.15 0.00 0.00%, cap: 89.722B, 1yr target: 4.62) says it will begin expanding again in Japan with four new retail banking branches this year. The first two locations will open in the second quarter in the cental Tokyo districts of Marunouchi and Nihonbashi, Citibank Japan Ltd. After a devastating year in 2008, Citigroup has had a much better year in 2009, reducing its debt and significantly increasing its brand value by 46% to US$14,362.

Citi has been bailed out on two consecutive occasions in the crisis, receiving a total of US$45 billion from the US government. Citigroup executives, including CEO Vikram Pandit, have made it clear that Citigroup will focus on retail banking operations and will continue a growth oriented strategy in Asia. As part of that initiative, the company has announced a plan to open four retail branches in Japan in 2010.

In October, it completed an $8.7 billion sale of Nikko Cordial Securities Inc. and parts of its investment banking unit to Sumitomo Mitsui Banking Corp. It also sold its entire stake in Nikko Asset Management to Sumitomo Trust & Banking Co. Nomura Trust & Banking Co., a unit of Japanese brokerage giant Nomura Holdings Inc., bought NikkoCiti Trust and Banking Corp.

Analyst Upgrades and Downgrades VCLK, AMD, MOT, XOM, MA, AXP, V, COF, TRI, DFS…

Steve Gavriliuc — Tue, 02 Feb 2010 14:10:16 +0000

Acorda Therapeutics (ACOR, news: 29.92 0.00 0.00%, cap: 1.141B, 1yr target: 33.63) added to Focus List, target raised to $40 from $37, at JP Morgan…
Advanced Micro (AMD, news: 7.42 0.00 0.00%, cap: 5.231B, 1yr target: 9.75) downgraded to Conviction Sell from Sell at Goldman…
Akamai Technologies (AKAM, news: 25.04 0.00 0.00%, cap: 4.287B, 1yr target: 28.36) upgraded to Neutral from Sell at Merriman Curham Ford…
Alcoa (AA, news: 13.06 0.00 0.00%, cap: 12.725B, 1yr target: 18.33) upgraded to Buy from Hold, $17 target, at Citigroup…
American Express (AXP, news: 36.79 0.00 0.00%, cap: 43.854B, 1yr target: 45.16) upgraded to Buy from Neutral, $44 target, at BofA/Merrill…
Anadarko Petroleum (APC, news: 62.33 0.00 0.00%, cap: 30.636B, 1yr target: 78.93) upgraded to Buy, $85 target, at Lazard…
Anglo American (AAUKY, news: 0.00 N/A N/A, cap: N/A, 1yr target: 0.00) upgraded to Buy at Societe Generale…
Banco Bradesco SA (BBD, news: 16.03 0.00 0.00%, cap: 54.831B, 1yr target: 22.75) upgraded to Equalweight, $20 target, at Morgan Stanley…
Capital One (COF, news: 34.63 0.00 0.00%, cap: 15.597B, 1yr target: 46.05) upgraded to Buy from Neutral, $45 target, at BofA/Merrill…
China Unicom (CHU, news: 10.63 0.00 0.00%, cap: 25.265B, 1yr target: 16.67) upgraded to Neutral at Macquarie…
Colonial Properties Trust (CLP, news: 10.65 0.00 0.00%, cap: 706.8M, 1yr target: 11.04) downgraded to Sector Perform at RBC Capital…
Discover (DFS, news: 12.76 0.00 0.00%, cap: 6.936B, 1yr target: 16.15) upgraded to Buy from Neutral, $17 target, at BofA/Merrill…
Exact Sciences (EXAS, news: 3.96 0.00 0.00%, cap: 141.0M, 1yr target: 5.50) initiated with an Outperform at Rodman & Renshaw…
Exxon Mobil (XOM, news: 64.35 0.00 0.00%, cap: 304.2B, 1yr target: 79.15) upgraded to Buy from Neutral, $82 target, at BofA/Merrill…
Freeport McMoRan (FCX, news: 69.20 0.00 0.00%, cap: 29.756B, 1yr target: 103.69) upgraded to Buy from Hold, $95 target, at Citigroup…
Great Atlantic & Pacific Tea (GAP, news: 7.41 0.00 0.00%, cap: 413.9M, 1yr target: 8.70) upgraded to Market Perform at BMO Capital…
Hologic (HOLX, news: 16.00 0.00 0.00%, cap: 4.127B, 1yr target: 17.13) upgraded to Hold, $16 target, at Soleil Securities…
Huaneng Power Int’l (HNP, news: 23.01 0.00 0.00%, cap: 6.925B, 1yr target: 28.33) upgraded to Neutral at Bank of America…
Jacobs Engineering (JEC, news: 36.23 0.00 0.00%, cap: 4.514B, 1yr target: 43.33) downgraded to Sell from Neutral at Goldman…
K-Sea Transportation (KSP, news: 8.75 0.00 0.00%, cap: 167.9M, 1yr target: 9.63) downgraded to Equal Weight from Overweight, $10 target, at Barclays…
MasterCard (MA, news: 226.40 0.00 0.00%, cap: 29.376B, 1yr target: 284.34) initiated as Outperform at Bernstein…
Motorola (MOT, news: 6.57 0.00 0.00%, cap: 15.186B, 1yr target: 8.61) upgraded to Hold at Societe Generale…
Orbital Sciences (ORB, news: 16.11 0.00 0.00%, cap: 915.7M, 1yr target: 21.57) upgraded to Outperform from Market Perform, $20-22 target, at Wells Fargo…
Orexigen (OREX, news: 6.25 0.00 0.00%, cap: 294.0M, 1yr target: 13.50) initiated as Buy at Jefferies…
Qwest (Q, news: 4.29 0.00 0.00%, cap: 7.407B, 1yr target: 4.86) upgraded to Overweight from Neutral at Piper Jaffray…
Rogers Communications (RCI, news: 30.90 0.00 0.00%, cap: 18.717B, 1yr target: 31.73) downgraded to Conviction Sell from Sell at Goldman…
Rudolph Tech (RTEC, news: 7.76 0.00 0.00%, cap: 240.5M, 1yr target: 9.50) upgraded to Overweight from Neutral, $12 target, at Piper Jaffray…
Schnitzer Steel (SCHN, news: 42.77 0.00 0.00%, cap: 1.188B, 1yr target: 54.83) upgraded to Buy from Neutral at UBS…
Southern Copper (PCU, news: 27.35 0.00 0.00%, cap: 23.248B, 1yr target: 33.51) upgraded to Buy from Hold at Citigroup…
Syngenta (SYT, news: 51.06 0.00 0.00%, cap: 23.789B, 1yr target: 55.42) downgraded to Neutral at Exane…
TeleCommunication Systems (TSYS, news: 8.17 0.00 0.00%, cap: 397.6M, 1yr target: 11.56) initiated as Overweight at JP Morgan…
Thomson Reuters (TRI, news: 32.96 0.00 0.00%, cap: 27.348B, 1yr target: 50.00) upgraded to Top Pick at RBC Capital…
ValueClick (VCLK, news: 9.26 0.00 0.00%, cap: 793.3M, 1yr target: 11.78) downgraded to Hold at Collins Stewart…
Visa (V, news: 83.05 0.00 0.00%, cap: 64.613B, 1yr target: 103.89) initiated as Outperform at Bernstein…
WESCO Int’l (WCC, news: 27.76 0.00 0.00%, cap: 1.191B, 1yr target: 32.11) upgraded to Outperform at William Blair…

CEOWORLD Magazine

Analyst Upgrades and Downgrades AMZN, DIS, XOM, AET, ARAY, HK, CYBS, AWC

Related Reading:

Swedish streaming video startup Voddler gets $3.5m in funding by Eqvitec Partners

Related Reading:

How Macmillan and Amazon.com settle their week-long dispute?

Related Reading:

Microsoft Facebook marriage- search and advertising relationship alter

Related Reading:

Bravo- Scrapblog Inc. online multimedia scrapbooking service raises $2.5M

Related Reading:

Google Eric Schmidt’s Super Bowl Commercial, hell is freezing over, Parisian Love

Related Reading:

Analyst Upgrades and Downgrades MOT, MET, MA, HOT, CIEN, BBY, GPS, ALKS…

Related Reading:

Best Buy’s Recent Pullback Provides an Outstanding Opportunity

Related Reading:

Analyst Upgrades and Downgrades RHHBY, RTP, BP, AKAM, AOL, V, MET, AFX, RIMM, DWA…

Related Reading:

Calamos Asset Management – Rebounding Strongly

Related Reading:

Bank of England paused quantitative easing programme and Interest Rate On Hold

Related Reading:

What is Samsung Electronics, Allied Materials and Hynix Semiconductor Chip Espionage Case?

Related Reading:

Jonathan Schwartz CEO Sun Microsystems, first Fortune 200 boss to tweet his resignation

Related Reading:

Analyst Upgrades and Downgrades UBS, UPS, NWSA, WMT, KFT, MCD, CS, SCHW…

Related Reading:

DST Systems – Using the Dip to Buy Quality at a Bargain Price

Related Reading:

Auto sales review- Ford’s Sales Rose nd Toyota Reports Decline

Related Reading:

How D.R. Horton Posts Profit for Q1 for the first time since 2007?

Related Reading:

Nomura Holdings announces quarterly profits below forecasts due to reduced investor activity

Related Reading:

Citigroup set to expand Retail Banking in Japan

Related Reading:

Analyst Upgrades and Downgrades VCLK, AMD, MOT, XOM, MA, AXP, V, COF, TRI, DFS…

Related Reading: