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From Briefing.com
Periodicals Wrap-Up for Tuesday, November 11th
WALL STREET JOURNAL: The Federal Reserve will delay its rescue plan for money-market funds until later this month, the Wall Street Journal reported. The WSJ said the delay appears to be caused by the Fed’s preoccupation with other bailouts and disputes over how the program will be set up… BARRON’S: The oil-services leader Schlumberger (SLB) is now being thought of as a relative safe harbor in the oil-services field, thanks to greater foreign diversification and customers that mainly rank among the cash-rich major integrated and national oil companies, Barron’s reported. Also, Schlumberger generates three-fourths of its revenues from overseas. Continued or accelerated share repurchases, with $7B left out of the $8B authorization, could also lift earnings…IBD: Last month F5 Networks (FFIV) beat Wall Street estimates for its fourth quarter and analysts see double digit annual earnings growth through 2010. The software for application delivery networking company overcame its $210M 2007 purchase of Acopia Networks, whose customers are mostly in the financial sector. The deal came just before the subprime crisis hit and before the banking sector’s demise. Now the company is relying on the tried and true product line: application delivery controls that received an update last summer and is a hot seller, according to Investor’s Business Daily’s “The New America”…NEW YORK TIMES: The New York Times reported that this week President-elect Barack Obama urged President Bush to support immediate emergency aid for the struggling auto industry. Sources familiar with the matter said President Bush indicated he could support this, and also an economic stimulus package, if Congressional Democrats agreed to drop opposition to a free-trade agreement with Colombia…
Asian Markets Wrap-up for Tuesday, November 11
Stocks dropped in a majority of Asian countries as investors worried that companies’ earnings would fall further. JAPAN: The Nikkei 225 fell 3% to 8,809.30. Canon (CAJ) declined 8.4%, while Citizen Holdings, which makes watches, slumped 9.5% after slashing its profit outlook. Seiko, another watch maker, also lowered its earnings guidance and its shares tumbled 10%. JTEKT (JTEKF), which manufactures power steering systems, also declined 10%. Agricultural machinery maker Iseki (ISKIF) jumped 11% after reporting higher than expected 1H08 earnings. AUSTRALIA: The S&P/ASX 200 Index declined 3.58% to 3,960.90. Commonwealth Bank sank 6.3% and National Australia Bank (NABZY) fell 9%. Babcock & Brown, an asset manager, tumbled 20% and Rio Tinto (RTP) lost 1.9%. Foster’s Group (FBRWY) dropped 3%, after it reportedly backed out of plans to sell its wine making unit. AROUND ASIA: China’s CSI 300 dipped 1.13%, while South Korea’s KRX 100 fell 2.24% and Taiwan’s Taiex slipped 2.15%…. China’s exports rose 19.2% year-over-year in October.
Obama reportedly presses Bush to help the auto companies-NY Times
President-elect Barack Obama reportedly urged President Bush to immediately aid U.S. automakers, inside sources said. Bush said he would support some government assistance for the automakers if Obama and Congressional Democrats agreed to back a free trade deal with Columbia which they had previously opposed, the sources added.
Tale of woe: DryShips exemplifies shipping industry’s decline-WSJ
DryShips (DRYS) is one of the most actively traded shipping stocks. Its stock has fallen 84% this year, and there are questions about its ability to pay debt. The company says it may sell 25M additional shares, which will dilute current holders. For the shipping sector the Baltic Dry Index recently was 820, off 93% from 11793 in May, and most shippers are down 60% or more, reports the Wall Street Journal. “For shipping, the spot-market rates have plummeted so much that it takes a lot of air out of their balloon,” says Bruce Gulliver of Jefferson Research. China’s $586B stimulus package might help but it might not as shipments are booked a year or two in advance.
U.S. equity futures continue to point to a lower open
Stock futures continue to point to a lower open. The overseas markets are lower on the heels of yesterday’s losses in the U.S., and today is starting off down once again. Because it’s Veterans Day trading may be lighter than normal. Meanwhile, the economy continues to wear on corporate America. The auto makers are running out of cash and have asked the government for bailout funds. The financial sector remains a mess with Citigroup (C) shares hitting a multi-year low yesterday and electronics giant Circuit City (CC) filing for Chapter 11 bankruptcy. The lone economic number due out today is an optimism reading and it will be surprising if the report can match analysts predictions of 42.0, which would be higher than last month’s 41.1
Hedge Fund industry could shrink by 50%-FINalternatives
Peter Carey, Senior Investment Officer at the $153B New York State Common Retirement Fund, said the industry could shrink as much as 50% in front of an audience at the Asset Allocation Forum yesterday. He also predicted that fees will decrease and more blue-chip shops will open their funds to outside capital and partnership opportunities.
Super Bowl ad prices give pause to potential buyers-WSJ
These days is it worth spending up to $3M on advertising during the Super Bowl? FedEx (FDX) is on the fence, waiting for a bargain as are others, reports the Wall Street Journal. “With this much money on the line it can be a negative reflection on a company, especially if they are cutting back staff or getting a government bailout,” says Steve Lanzano, COO of MPG North America, a media buyer.
Goldman lays off 10% bankers in Japan-Reuters
Goldman Sachs (GS) has cut 10% of its bankers in Tokyo, including Naomi Matsuoka, one of the top female bankers in Japan and leader of the equity capital markets team. A spokeswoman for the bank declined to comment.
Goldman bet against bonds it helped sell- LA Times
The Los Angeles Times reports that Goldman Sachs (GS) told clients to invest against California bonds even though the investment bank collected millions in fees to help the state sell some of the bonds. Paul Rosenstiel, head of the public finance division of the treasurer’s office said it could exaggerate worries about California’s credit and raise the interest rate at which the state would have to pay to borrow money. Although Goldman’s actions are not illegal, the conflict of interest may be inappropriate for business.
A stronger dollar affects some defensive stocks-WSJ
Currency swings on international companies is affecting their profits, reports the Wall Street Journal’s “Heard on the Street”, and investors need to refocus their understanding of the impact on these companies when the dollar strengthens against the euro. Now it’s up 25% from July.
Radical changes needed at GE Capital-WSJ
Even with government backing, GE’s (GE) GE Capital needs to make severe changes to show investors that it’s $680B business is on solid footing, according to the Wall Street Journal’s “Heard on the Street”. Specifically, its business model is based more on the use of commercial paper than a more stable funding source such as bank deposits.
Analysts Initiation Summary for Tuesday, November 11th
MOST NOTEWORTHY: VMware (VMW), Infosys (INFY) and United Therapeutics (UTHR) were today’s noteworthy initiations: Oppenheimer initiated VMware with a Perform rating. The firm prefers to wait on the sidelines given the worsening macro environment, difficult near term comps, and increasing competition from Microsoft (MSFT). Infosys was initiated with an Outperform rating at William Blair. The firm believes Infosys has the strongest brand in offshore IT services. Deutsche Bank initiated United Therapeutics with a Buy rating and $105 target. The firm believes oral Remodulin will grow the company’s Remodulin franchise and sees a near-term catalyst from Freedom-C expected mid-November…OTHER INITIATIONS: Cowen resumed coverage of Urban Outfitters (URBN) with a Neutral rating. Dick’s Sporting Goods (DKS) was started with an Underweight rating at Morgan Stanley. Roth Capital initiated HQ Sustainable Maritime (HQS) with a Buy rating and $12 target. :
Analysts Downgrade Summary for Tuesday, November 11th
MOST NOTEWORTHY: Sangamo BioSciences (SGMO), GLG PArtners (GLG) and KKR Financial (KFN) were today’s noteworthy downgrades: Merriman downgraded shares of Sangamo BioSciences to Neutral from Buy after the company announced Phase II SB-509 results which missed its endpoints on several measures of efficacy. Keefe Bruyette downgraded GLG Partners to Market Perform from Outperform to reflect lower net AUM and the negative market environment quarter-to-date. Citigroup cut KKR Financial to Sell from Hold to reflect the company’s “weak” Q3 results and the continued dislocation in the credit markets. The company’s target was lowered to $2 from $10. Friedman Billings downgraded KKR Financial to Market Perform from Outperform as they believe the company’s CLOs will “trap” cash for an indeterminate period of time…OTHER DOWNGRADES: Avis Budget Group (CAR) was downgraded to Underweight from Equal Weight at Barclays. DISH Network (DISH) was lowered to Equal Weight from Overweight at Morgan Stanley. Tyson Foods (TSN) was downgraded at JP Morgan to Underweight from Overweight.
Analysts Upgrade Summary for Tuesday, November 11th
MOST NOTEWORTHY: Optimer Pharm (OPTR), Quest Diagnostics (DGX) and Jacobs Engineering (JEC) were today’s noteworthy upgrades: Baird upgraded Optimer Pharm to Outperform from Neutral and raised its target to $13 from $8 citing the decidedly positive data from the OPT-80 trial. Banc of America upgraded Quest Diagnostics to Buy from Neutral on valuation and believes management has set expectations well. Credit Suisse views Jacobs Engineering as a high quality name given the quality of management, execution track record, and relationship business model. Shares were upgraded to Outperform from Neutral…OTHER UPGRADES: Horizon Lines (HRZ) was upgraded to Overweight from Equal Weight at Stephens. Bancolombia SA (CIB) was raised to Buy from Neutral. Great Lakes Dredge (GLDD) was upgraded to Buy from Hold at Morgan Joseph.
Jim Cramer’s “Mad Money”
Cramer said that if there is any any hope for a sustainable rally in the stock market, General Motors (GM) “must be saved.” Cramer said the markets cannot rally until the federal government offers a bailout not only to GM but also Ford (F) and Chrysler (DCI). “It’s all one piece,” he said. Cramer said this is a time in the market where traders need stocks with high dividend yields –anything over 4%. More importantly, he noted, it’s key to look for “accidental high-yielders.” These are solid companies that are offering a high yield because of an overdone stock decline. Such a stock is PPG Industries (PPG), which is down 50% from its 52-week high. But Cramer believes the stock, which is now offering a 4.65% yield, has been unfairly punished, as the company has raised its dividend every year since 1972. Cramer reiterated his idea that traders reinvest the dividend in the stock so that they can capture the power of the compounding dividend even if the stock does nothing for a while. Cramer also likes that the company because it has $600M in cash, which could mean a stock buyback program. He also likes the fact that one-third of the company’s business is in Asia, making it a good Chinese infrastructure play. MAD MAIL: Cramer ahead of the Obama presidency, offered Tenet (THC) as a healthcare play, but said any Energy or Solar names just aren’t working right now. LIGHTNING ROUND: (Bullish) none; (Bearish) ZOLT; LCC; FSLR; SNDK.
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