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Friday, March 30, 2007

Through The Fly's Eyes: A Quick Look Ahead

from Eric Buscemi of Theflyonthewall.com












Highlights For Next Week

Just because it is a four day week does not mean nothing of interest is happening. Here's a peek at some interesting goings-on:

Monday April 2

* Kraft (KFT) CEO to ring the NYSE opening bell at 9:30am

Tuesday April 3

* Ford (F) and General Motors (GM) to report monthly sales for March.

Wednesday April 4

* Big box electronics retailers Best Buy (BBY) and Circuit City (CC) to report earnings. Best Buy's conference call is at 10am, Circuit City's is at 11:30am.

Thursday April 5

* PDUFA date for Wyeth's (WYE) Torisel for Advanced Renal Cell Carcinoma.
* Adobe (ADBE) is holding a shareholder meeting at 6pm in San Jose, CA.

Friday April 6

* Markets closed for Good Friday holiday.

Through The Fly's Eyes: American Express and Citigroup

from Joseph Lazzaro of Theflyonthewall.com



















Two Investor Words For the Future: Financial Services

From the international news that could very well be pertinent to your financial future department, Sweden has announced that it plans to abolish its decades-old wealth tax.

Does that sound moot? At first glance, perhaps.

However, a more critical look reveals that Sweden's move underscores an ongoing, secular (or global) trend toward privatization, markets, and investment and away from policies that the restrict capital inflows, investment, and more generally, commerce.

U.S. readers are familiar with investment conditions in the U.S. in the last two decades, during which federal income taxes have been reduced, and the nation has pursued a more business-friendly regulatory policy.

But what some readers may not be readily aware of is that the lower-tax / encourage commerce trend has also been a feature of economic policy in Europe and Asia. To be sure, Europe's income tax rates, in general, remain higher than the U.S.'s, and many states in those regions have more-extensive social welfare states than the U.S., but the move toward investment, commerce and markets is clear, and Sweden's wealth tax abolishment is further evidence.

And equally significant for investors, where there's a secular trend, there's often a stock investment opportunity: the pro-commerce trend bodes well for financial services companies with a global footprint - i.e. who have the network and resources to recruit new individual investors in these more-commerce/capital friendly markets. Those companies include: American Express (AXP), Citigroup (C) JP Morgan Chase (JPM), Deutsche Bank (DB), and the Bank of America (BAC), among others.

All of the above are well-positioned to benefit from what's likely to be a growing pool of "new investors" around the world in the decade ahead.

In the days ahead, The Fly will evaluate the strengths and weaknesses of each company.

For now, it's just important to know that the trend toward more investors around the world is an investment opportunity for current investors.


Through The Fly's Eyes: Rumor Mill

from Tedd Cohen of Theflyonthewall.com











Rumor Round-up

From the absurd (that’s how the Starbucks rumor reads to me) to the overexposed (have we heard enough about the sale of the struggling unit of an automaker yet?), and in between, here is this week’s rumor round-up.


STARBUCKS CORP (SBUX), THE COCA-COLA COMPANY (KO)

Envision this: “Yes, I’d like a super-sized cherry vanilla Coca-Cola with a Starbucks mocha grande latte, please. Is that possible? Well, we hear a lot of things, and now it has surfaced that the colas might make a play for the coffees. How much fizz is there to it? Anybody’s guess.



DAIMLERCHRYSLER AG (DCX)

What began six weeks ago now looks like it has entered its final lap. Mercedes can begin to plan for a future without Chrysler. Here we go: Blackstone Group, Cerberus Capital Management, and Canadian auto supplier Magna International (MGA) are now expected to make their play for the company founded by Walter P. Chrysler. Once again, no one’s talking, but bids are apparently to be received by J.P. Morgan Chase (JPM) for DaimlerChrysler before the company’s annual meeting next Wednesday in Berlin. Gentleman, start your engines.


BCE INC (BCE)

If you were BCE, Canada’s largest telecoms company (Bell Canada), would you loudly say you were not talking to any private equity investors about going private or some such thing? For goodness sakes, you’re in the telephone business. Who’s going to believe that? “Rumors and speculation” is all they’ll say. Well, that’s why we’re here: r-u-m-o-r-s. Kohlberg Kravis Roberts has been mentioned. One Canadian paper even said BCE hired Goldman Sachs (GS) for advice. They don’t lower their fees just for rumors, do they? Bet everyone’s working the phones, with call waiting on. The latest says the company is looking to make “radical changes” which may include a merger with Telus (TU).

Through The Fly's Eyes: Nifty Fifty

from Theflyonthewall.com


















What is Old is New Again

Dell (DELL) reported another mess up last night, saying it will miss the April 18th deadline to file its annual 10K with the SEC. Whatever Dell, Home Depot (HD) or Wal-Mart (WMT) do, these big three powerhouse growth stocks simply cannot get out of their own way.

This is very similar to what happened to IBM (IBM), Eastman Kodak (EK) and Avon Products (AVP) following the burst of the Nifty Fifty bubble in 1972. It took almost twenty years for IBM and Avon to earn decent returns for shareholders again, while Eastman Kodak has never recovered.

There is money to be made in trading Dell, Home Depot and Wal-Mart on these dips in prices on bad news. But these are not stocks to blindly hold for the long-term. It looks like they are going to suffer the same fate of the 1970s Nifty Fifty stocks.

Through The Fly's Eyes: Infosys Technologies

from contributing editor Jay Somaney at GlobalTechStocks.com

Bad News Baked In for Infosys?

Infosys Technologies (INFY) has gone from $61.25/share as of mid-Feb to $49.25 this morning, a $12/share or a 20% decline in little under 6 weeks due to concerns about rupee appreciation adversely impacting margins.


My contrarian take is that all the bad news is baked in somewhere in here.


The stock is priced for Armageddon here.


Not happening despite what the bears are saying.


The rupee is up strongly but all the major Indian and quasi-Indian IT companies have good hedging programs and even more importantly are also seeing price increases which should go a long way in maintaining and even expanding margins going forward.


At least that is how I am looking at it.


Irrational and panic-stricken selling in those names is putting it very mildly.

Through The Fly's Eyes: Chattem Inc.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.














OTC drugs a specialty

Very often, folks have no idea what companies own and produce their favorite brand name products. When it comes to OTC drugs, there is Chattanooga, Tennessee firm responsible for a whole stack of the best-known names.

Chattem Inc. (CHTT) provides over-the-counter drugs, personal care products and dietary supplements. Offerings include such pain treatments as dental analgesic Benzodent, topical analgesic Aspercreme, muscle pain reliever Flexall, menstrual symptom reliever Pamprin and analgesic Icy Hot. The company also makes sleep aid Melatonex, medicated powder Gold Bond and Mudd facial masks. In 2006, the firm acquired the Balmex, Kaopectate, Unisom, Cortizone, and Act brands from Johnson & Johnson. Chattem sells its products through mass merchandisers, drug stores, drug wholesalers and food stores, in about 80 countries worldwide.

The company surprised investors last week, when it reported Q1 EPS of 71 cents and revenues of $100.8 million. Analysts had been expecting 61 cents and $101 million. Management also raised FY07 EPS guidance from $2.66-$2.91 to $2.71-$2.96 ($2.77 consensus), citing the strength of its base business and the smooth integration of acquired brands for the favorable outlook. The stock popped through 30-day and 50-day moving average resistance on the news and has since been consolidating the gain in a bullish "pennant" pattern. Prices frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the shares with three "strong buys," one "buy," six "holds" and two "sells." Analysts expect a 22% growth rate, through the next year. The CHTT Sales Growth rate (20.00%), EPS Growth rate (20.34%), Operating Margin (25.91%), Net Profit Margin (13.86%) and Revenue per Employee ($755.61k) compare favorably with sector and S&P 500 averages.

Institutions own about 87% of the outstanding shares. Over the past 12 months, the stock has traded between $27.99 and $60.89. A stop-loss of $51.40 looks good here.

Through The Fly's Eyes: Corn

from Theflyonthewall.com















Corn + Ethanol = Big Profits?

A big crop report released this morning is once again bringing a lot of attention to corn and the global demand for ethanol. It all makes sense. With democracy and capitalism flourishing around the world, the demand for energy will boom and ethanol is a viable way to provide lower emissions fuel.

Even President Bush in his State of the Union address called for the United States to become less dependent on foreign oil. His solution: corn-based Ethanol?

However, as a reminder, investing is about "skating where the puck is going to be" as the Great Gretsky used to say. Or as legendary John Templeton would say look for points of "maximum pessimism."

There is little that is pessimistic about the outlook for corn today. Farmers throughout the US are going to be planting it this season. Why? Because corn prices are approaching 10-year highs and the wide-spread belief is there is money to be made.

Conversely,the argument to invest in cotton might be more compelling. Art Samberg of Pequot Capital in a Barron's January interview said while cotton consumption in the US has been in decline, China's consumption which has been growing nicely, is picking up more steam. Cotton consumption in the US has fallen from 12 million to 5 million bales a year due to the growth of polyester and other materials. However, Textile spending is on a big upswing in China - up 27% in '06, after jumping 36% in '05. Chinese consumption which had been growing 4% to 6% per year is now growing 15% per year.

Samberg said go long the December '07 cotton contract. Strong corn and soybean prices means US farmers are going to remove acreage from cotton to earn better profits in corn and soybeans.

Supposedly, there have only been four times since 1913 when cotton was this cheap relative to grains like corn and wheat. The last time being 1974. From 1974 to 1976, cotton tripled in price.

Thursday, March 29, 2007

Through The Fly's Eyes: Paychex

from Joseph Lazzaro of Theflyonthewall.com










Steady-As-She-Goes For Paychex, And The U.S. Economy

On Wall Street, there are earnings reports, and then there are earnings reports that also serve as "data points of significance."

The "of significance" being, of course, the broader economy, and Paychex's (NYSE: PAYX) Q3 earnings report Wednesday is an example of the latter.

Paychex reported Q3 EPS of 35c, which was in-line with the Reuters consensus estimate of 35c. PAYX also reported Q3 revenue of $485.3 million, which was slightly below the Reuters estimate of $488.3M.

In general, Wall Street responded favorably to the report, with Citigroup saying it still expects Paychex to generate 15%-16% revenue growth in 2007; Citi also maintained its Buy rating and $49 target.

Wall Street follows Paychex's reports closely because its primary revenue stream -- payroll processing -- is levered to hiring and corporate staffing plans. Hence, Paychex serves as a "rough data point" for business hiring and business confidence. A substantial increase in demand for payroll services, particularly over quarters, points to economic expansion and robust economic activity. Conversely, a sharp decrease in Paychex's revenue suggests sluggish economic conditions may be up ahead.

In other words, Paychex, like UPS's (NYSE: UPS) deliveries, and those proverbial corrugated box orders, serve as canaries in a coal mine for analysts, economists, and traders.

Further, with an economic, money flow, and trade environment that is dynamic and becoming more global in scope daily, Wall Street will take all of the relevanat data points it can get to help gauge the economy's strength.

Through The Fly's Eyes: VOIP

from Theflyonthewall.com





















Update on VoIP

Om Malik, of GigaOM blogging fame, provided a good update on voice-over-Internet-protocol (VOIP) usage in a blog yesterday.

According to In-Stat, 9% of US households were using VoIP at the end of 2006, up by one percent from September 2006. In-Stat estimates there were some 10.6 million households with at least one member using a form of VoIP-service at the end of 2006.

Malik breaks down users as follows: if you add up 5 million-plus cable subscribers, 2 million Vonage subscribers and a few of the other independents, you are still left with a few million households that he guesses are Skypers and a few hundred thousand Gizmo Project users.

Ways to profit from VOIP -- cable companies; eBay (EBAY), which owns Skype); the Baby Bells, which are reacting to the VOIP threat; Level 3 (LVLT), which provides the network to VOIP providers; and Sprint Nextel (S), which provides long-haul VOIP infrastructure to the cable companies. Pure tech companies providing VOIP technology are tough to find, as there are too many players attempting to profit in this space.

Through The Fly's Eyes: BCE Inc.

from Theflyonthewall.com













KKR Going After Canada's Largest Telco

BCE Inc. (BCE), or better known as Bell Canada, supposedly has held discussions to be taken private by KKR during the past few weeks. The report said KKR might pay a 20% premium, in Canadian dollars, to current market trading.

This could prove to be a political hot potato for the US-based buyout firm, as the telecom giant is one of Canada's largest companies. BCE has been working hard to appease shareholders by getting rid of non-core assets to gain investor interest, but the stock has remained in a tight trading range between $25 and $30.

Expect KKR to come in with a nice offer to get regulators and Canadian shareholders to approve this deal.

Update: BCE issued a statement addressing the speculation, saying there have been no ongoing discussions with any private equity investor to privatize the company. The company added that it has no intention to pursue such talks.

Wednesday, March 28, 2007

Through The Fly's Eyes: Stage Stores

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.













Stage Stores: Retail Chain Apparel For Small Town America

From Tommy Hilfiger and Elizabeth Arden to Levi's and Jockey, there is a Houston, Texas firm that specializes in bringing brand name apparel to small towns and communities throughout the U.S.

Stage Stores (NYSE:SSI) is a specialty department store retailer, offering moderately priced brand name and private label apparel, accessories, cosmetics, and footwear in small town and mid-sized markets. Altogether, the chain has 655 stores in 33 states. It operates under the Bealls, Palais Royal and Stage names, throughout the South Central part of the country. In Midwestern, Southeastern, Mid-Atlantic and New England states, the stores fly the Peebles banner.

The firm surprised the Street earlier in the month, when it announced Q4 EPS of 88 cents and revenues of $491.2 million. Analysts had been looking for 87 cents and $488.1 million. Management also guided Q1 EPS to 31-35 cents (26 cent consensus), Q1 revenues to $372-$380 million ($373.97M consensus), FY08 EPS to $1.45-$1.55 ($1.53 consensus) and FY08 revenues to $1.61-$1.66 billion ($1.64B consensus). The stock broke through 90-day, 50-day and 30-day moving average resistance on the news and has since been defining a bullish "flag" consolidation pattern. Stocks frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the issue with two "strong buys" and three "buys." The SSI P/E ratio (19.03), PEG ratio (1.27), Price to Sales ratio (0.67), Price to Book ratio (1.80), Price to Cash Flow ratio (10.23), Sales Growth rate (17.34%) and EPS Growth rate (95.56%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $16.67 and $23.99. A stop-loss of $20.35 looks good here.

Through The Fly's Eyes: U.S. Federal Reserve

from Joseph Lazzaro of Theflyonthewall.com
















U.S. Federal Reserve Chair Bernanke: We're Watching Everything

U.S. Federal Reserve Chairman Ben Bernanke delivered a conventional Fed report in decidedly unconventional times during his testimony Wednesday before the U.S. Congress' Joint Economic Committee.

Bernanke underscored that the Fed is still oriented toward the control of inflation, which the Fed at this time considers to be the greater risk. Nevertheless, Bernanke also made it clear that the Fed is concerned about the correction in the U.S. housing market, which is acting as the primary drag on the slowing U.S. economy.

In short, Bernanke's at times "appropriately opaque" testimony struck the right balance between concern about prices and concern about the economy -- i.e. it was conventional.

Nevertheless, investors also know that the current economic/geopolitical landscape is anything but conventional: the sub-prime mortgage sector, stung by rising defaults from deeply problematic loan originations, threatens to further dampen U.S. economic growth in the quarters ahead. Meanwhile, the price of oil, already at elevated price levels at about $64 per barrel, could move substantially higher, if disputes between Iran and the West can not be resolved through diplomatic efforts. Moreover, oil represents a two-edged destructive sword in that it can both increase inflation, and simultaneously slow the economy.

Fly Analysis: Bernanke's testimony Wednesday struck the right tone with its balance and comprehensiveness: it convinced Congressional questioners and the markets that the Fed is monitoring everything -- risks with respect to inflation, risks with respect to recession, risks around the world -- during this extraordinary time.

Through The Fly's Eyes: ICF International Inc.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.













Consultants to Governments and Corporations

From its administration of the New Orleans Road Home Housing Program to its central involvement in the military's Focused Logistics Wargame effort, there is a firm in Fairfax, Virginia that government agencies and corporations turn to for help with the big problems.

ICF International Inc. (ICFI) provides consulting and technology services to government and commercial clients in matters pertaining to energy, the environment, transportation, social programs, defense and homeland security. Offerings include economic and policy analyses, regulatory studies, market assessments, Web application development, geospatial information systems, data warehousing and e-government services. The firm serves clients worldwide, but it gets more than 70% of its revenue from U.S. government agencies.

The company surprised Wall Street last week, when it reported Q4 EPS of 65 cents and revenues of $113.9 million. Analysts had been expecting 30 cents and $99.97 million. Management also guided Q1 revenues to $125-$135 million ($96.94M consensus) and FY07 revenues to $480-$520 million ($398.99M consensus). The firm cited a high backlog level in support of the favorable outlook. Jefferies subsequently reiterated its "buy" rating on the stock and boosted its price target to $23.

hares popped on the news and have since been defining a bullish "flag" consolidation pattern. Stocks frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the issue with two "strong buys" and two "buys". The ICFI P/E ratio (21.02), Price to Sales ratio (0.79), Price to Book ratio (2.29), Price to Free Cash Flow ratio (16.61), Sales Growth rate (119.93%) and EPS Growth rate (679.86%) compare favorably with industry, sector and S&P 500 averages. About 32% of the outstanding shares are held by institutional investors. Over the past fifty-two weeks, the stock has traded between $11.66 and $20.25. A stop-loss of $15.90 looks good here.

Through The Fly's Eyes: The Rich

from Theflyonthewall.com










The Backlash Momentum Builds: David Stockman Gets Indicted

On Sunday, 60 Minutes profiled Dennis Kozlowski, former Tyco (TYC) head who built Tyco from nothing into one of the largest conglomerates in the US. That is not an option, that is pure fact. Now he is in jail. There is little if any evidence that Kozlowski commited any crime, but a trial held by his peers concluded to put him away. He may have gotten paid a lot of money and had a nice expense account; but illegal? NOT!

Yesterday, David Stockman, Reganomics wunderkind was indicted for allegedly defrauding investors while being an investor and chairman of Collins & Aikman (CKCRQ), the auto-parts maker. The unions are going after him.

In January, Home Depot (HD) canned CEO Robert Nardelli. While there were serious questions about the strategic direction of the company, supposedly the final straw came down to his compensation. He would not scale back his compensation package so he was gone. New CEO Blake has suggested the political backlash of Nardelli's pay package was too much to handle.

No matter how much you read and analyze the history of business, it always comes back to two forces: capital and labor. The 1980s and 90s were periods for capital to earn its due. With labor markets getting tighter and tighter, it is time for workers to earn their due.

This is not a coincidence that Kozlowski, Stockman and Nardelli are all in the headlines. Labor is saying it is time we run things for a while. This shift tends to go in 20 year cycles, so this is just the beginning. Portfolios need to be adjusted for labor spending and saving more money. Instead of owning Wal-mart (WMT), start looking at Tiffany's (TIF).

Through The Fly's Eyes: Beazer Homes

from Theflyonthewall.com












How Bad Can The Political Backlash Be?

Beazer (BZH), following in the footsteps of other home builders, has been reporting awful results. However, to add more fuel to the fire, a report by the Charlotte Observer wrote the FBI and the U.S. attorney's office in Charlotte, N.C., along with the Internal Revenue Service and the U.S. Department of Housing and Urban Development, launched an investigation of Beazer Homes last week. OUCH!!!

Everyone is going after this homebuilder. This is as bad as the political backlash following the tech bubble imploding which led to Sarbox.

Look for other district attorneys around the country to start going after other homebuilders and their relationships with mortgage brokers and lenders. Do you think homebuilders reduced lending standards in order to get rid of excess inventory? Why not when you can dump the loan in the secondary market.

The housing industry is getting uglier and uglier, as we have been blogging about for a long time. No need to bottom fish yet. Wait for the political backlash to crescendo before looking at this group again.

Tuesday, March 27, 2007

Through The Fly's Eyes: Komag

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.













Komag: Drive Disks For the Mass Electronics Market

If you are old enough, you can remember when PCs did not have disk drive storage. Those were hard days. They are over though and we are much indebted to the companies that make the disks. One such firm has repeatedly set records, with the highest performing thin-film disks in the market. It's headquartered in San Jose, California.

Komag Inc. (NASDAQ:KOMG) is a leading independent supplier of the thin-film disks used in hard disk drives. The firm combines U.S. research and development with Asian manufacturing operations to produce high-volume disks at competitive costs. Komag sells most of its products to drive makers Hitachi Global Storage Technologies, Seagate Technology (NYSE:STX) and Western Digital (NYSE:WDC). They are ultimately used in computers, enterprise storage systems, digital video recorders, game boxes and consumer electronic storage systems.

The firm pleased investors last week, when it said it expects Q1 revenues to be "slightly above" the $255.9 million posted in the fourth quarter. That was better than the two to three percent decline it previously anticipated and topped the consensus Wall Street view of $250.1 million. Also, the Komag board approved a plan to buy back up to $200 million of the company's shares. The stock broke through 30-day and 50-day moving average resistance on the news and has since been defining a bullish "flag" consolidation pattern. Stocks frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the issue with four "strong buys," six "buys," seven "holds" and two "sells." The KOMG P/E ratio (7.22), PEG ratio (0.60), Price to Sales ratio (1.14), Price to Book ratio (1.71), Price to Cash Flow ratio (4.50), Sales Growth rate (32.66%), Net Profit Margin (16.80%), Return on Assets (18.43%), Return on Investment (26.53%) and Return on Equity (30.86%) compare favorably with industry, sector and S&P 500 averages.

The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $30.18 and $50.29. A stop-loss of $29.25 looks good here. Note that the firm is expected to report Q1 results in late April.

Through The Fly's Eyes: Sapient Corporation

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.














Expanding the Business/Client Relationship

With the evolution of new marketing and information technologies come fresh opportunities for firms to expand and serve their customer bases. There is a company in Cambridge, Massachusetts that helps businesses take full advantage of those opportunities.

Sapient Corporation (SAPE) provides business, marketing and technology consulting services. The firm's design and implementation expertise are used by information-based businesses and government agencies with needs in e-commerce, customer relationship management, high volume transaction processing, online supply chain development and knowledge management. Clients include BP Plc (BP), Janus Capital Group (JNS), the National Institutes of Health, Sony Corporation (SNE), the U.S. Marine Corps and Verizon Communications (VZ).

The firm pleased investors earlier in the month, when it reported Q4 EPS of three cents and revenues of $113.7 million. Analysts had been looking for two cents and $111.1 million. Management also guided Q1 revenues to $116 million ($115.13M consensus) and FY07 revenues to $500 million ($494.82M consensus). Then, last week, Bear Stearns upgraded the shares from "peer perform" to "outperform".


The stock popped into a bullish "pennant" formation on the earnings/guidance story and then jumped into a bullish "flag" on the upgrade news. Stocks frequently exit both formations moving in the same direction they were traveling when they entered them. That happened the first time and is now expected again.

Brokers recommend the issue with two "strong buys", two "buys", five "holds" and two "sells". Analysts see a 72 percent growth rate, through the next year. The stock's Price to Sales ratio (2.00), Price to Book ratio (3.87) and Sales Growth rate (37.60%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 59% of the outstanding shares. Over the past 52-weeks, SAPE has traded between $4.35 and $8.37. A stop-loss of $5.90 looks good here.

Through The Fly's Eyes: AMR Corp.

from Joseph Lazzaro of Theflyonthewall.com















AMR Hopes For A Summer Tailwind, Not A Headwind

Record a positive data point for AMR Corp (NYSE: AMR), parent of American Airlines.

Moody's Tuesday raised it debt ratings for AMR, including raising the corporate family rating to B2. Moody's called AMR's outlook "stable."

However, that action was tempered somewhat by Goldman Sachs' action to lower its target for AMR to $32 from $40. Goldman also reiterated its Neutral rating. AMR's shares traded down about 30c to $31.33 Tuesday afternoon on the news.

AMR in is the midst of a difficult turnaround attempt, hampered by commodity and macroeconomic factors. The company has effectively implemented the initial phase of its restructuring - cutting non-fuel costs by $300 million in 2007, while eliminating less-profit routes and holding on to a solid 14% of the massive U.S. air travel market. Nevertheless, increasing fuel costs, stemming from the rising price of crude oil, combined with a slowing U.S. economy, could combine to create a bigger operational hurdle for AMR and the entire airline sector in the quarters ahead.

Further, if the consumer pulls-back this summer, AMR's Q2 and Q3 revenue results for this year may have trouble exceeding 2006's respective $6.0 billion and $5.5 billion performance totals.

Conversely, if fuel costs moderate -- those are famous last words for airlines and consumers alike -- and if consumers don't cut back too much and retain their penchant for domestic and international during the warmer months -- AMR's turnaround picture brightens.

Investment Category: AMR is a high-risk stock not suitable for low-risk and moderate-risk investors. Further, AMR's business model remains highly vulnerable to factors largely beyond its control: fuel costs and consumer travel demand/preferences, which puts the stock in the decidely "not for the squeamish" category.

Through The Fly's Eyes: Ethan Allen

from Theflyonthewall.com





Another Reliable Data Point Points To Economic Slowdown

Following our blog on the continued deterioration in the leading indicators for the economy, Ethan Allen (ETH), a very good indicator of economic activity, last night reduced its EPS estimate for this current quarter to 53c-56c, well below the expected 59c consensus.

Ethan Allen is one of the few companies that have positioned themselves to survive and possibly thrive when the Fed decides to fuel up the economy again. Management honesty in the way they evaluate their own performance translates into honestly on how they communicate to investors. Therefore, a good source for what is going on in the economy.

The furniture maker began warning of a slowdown very close to when the housing industry rolled over. It appeared the economy was moving along fine, but once again Ethan proved to be a good and correct data point on housing and subsequently the economy.

It is time to start using Ethan Allen as the indicator as to when the economy will bottom. If the stock does little to the downside today, it is most likely a sign the selling is done and the Fed will move to lower rates.

Through The Fly's Eyes: Economy

from Theflyonthewall.com















Economic Leading Indicators Point To A Slowdown

It is no coincidence the Fed changed its language last week from concerns about inflation picking up to a neutral stance on prices. From looking at the chart above, when the downward slope of the economic leading indicators has been this steep, it has meant a meaningful slowdown is on the horizon.

Mr. Bernanke is very aware of this chart. The question is how proactive he wants to be. Greenspan never would have stopped raising rates when Bernanke did -- a very bold move for the relatively new Fed Chairman. A bolder move would be to lower rates at the next meeting and forgo a recession.

Monday, March 26, 2007

Through The Fly's Eyes: IPO & Syndicate Preview

from Joseph Lazzaro of Theflyonthewall.com














Wall Street's equity market offers another solid schedule this week, with 12 deals on the docket, including 7 IPOs and 5 Secondaries.


Those deals tentatively scheduled to price include:

IPOs:

Monday

Aruba Networks (ARUN), an 8M-share IPO for secure wireless systems company. JP Morgan Chase and Lehman Brothers are the lead managers. Filing range: $8.00-$10.00.

Wednesday

eTelecare Global Solutions (ETEL), a 5.5M-share IPO for this call center company. Deutsche Bank is the lead manager. Filing range:
$12.50-$14.50.

Thursday

GSI Technology (GSIT), an 8M-share IPO for this semiconductor company. Needham and W.R. Hambrecht are the lead managers. Filing range: $6.50-$8.00.

Senorx (SENO), a 5.5M-share IPO for this medical devices company. Bank of America and Citigroup are the lead managers. Filing range: $11.00-$13.00.

Super Micro Computer (SMCI), an 8M-share IPO of this network servers company. Merrill Lynch is the lead manager. Filing range $9.50-$11.50.

Friday

Flagstone Reinsurance (FSR), a 13M-share IPO for this reinsurance company. Lehman Brothers and Citigroup are the lead managers. Filing range: $12.50-$14.50.

Western United Financial (WNF), a 6.4M-share IPO for this business financing company. Sandler O'Neill is the lead manager. Filing price: $8.00.


Secondaries:

Wednesday

Houston Wire & Cable (HWCC), a 5.5M-share Secondary for this specialty electronics company. William Blair and Robert W. Baird are the lead managers.

Thursday

Diana Shipping (DSX),
a 10.5M-share Secondary for this freight services company. JP Morgan Chase and Wachovia are the lead managers.

Friday

La Jolla Pharmaceutical (LJPC), a 5M-share Secondary for this gene-based therapies company. Needham is the lead manager.

NTELOS Holdings (NTLS), an 11M-share Secondary for this telecom equipment company. Bear Stearns and Lehman Brothers are the lead managers.

TeleTech (TTEC), a 5M-share Secondary for this customer services company. Citigroup and Morgan Stanley are the lead managers.


- -


For the latest market intelligence on IPOs, Syndicate, and after-market trades, check out The FLY Syndicate at
www.theflyonthewall.com. [Subscription required.]

Through The Fly's Eyes: Intel Corp

from Theflyonthewall.com











The Large Semiconductor Company Is Bottoming Out

Intel (INTC), the huge microprocessor company, has held up pretty well in the most recent stock market correction. Despite a good drop in all the major stock indices, Intel budged little -- a sign all the sellers could be done dumping this stock.

From Intel's most recent quarterly conference call, what shocked this Fly was the growth in the demand for microprocessors. The presumption on Wall Street is with AMD doing an outstanding job coming up with new products the past few years and PC growth moderating considerably, it was hard to see how the chip giant would grow again.

However, the move to notebooks and the use of dual-core processors has created a big uptick in demand. While the per-unit pricing on dual-core processors is considerably less than the traditional single-core processor, the new fabs that Intel has constructed to manufacture these chips allows Intel to produce these chips for considerably less.

While this Fly has been cautious on semiconductors, with Intel apparently a washed out stock, with all the sellers gone, it is a good time to jump into the chip giant. I cannot remember the last time someone mentioned buying Intel's stock. This could be a good contrarian indicator.

Start buying Intel's stock and ride the seasonal up tick in demand.

Through The Fly's Eyes: B/E Aerospace

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.












Interior Airplane Designs

If you want to get your car seats reupholstered, there are lots of places to go, but where do you take your plane? Whether it's new seats, or a complete cabin reconfiguration, there is a company headquartered in Wellington, Florida that's got you covered.

BE Aerospace Inc. (BEAV) is a leading provider of aircraft cabin interior products for both commercial aircraft and business jets. Offerings include aircraft cabin seating, lighting, emergency oxygen systems, refrigeration equipment, galley structures, storage equipment and aerospace fasteners. The company also provides cabin interior design, reconfiguration and passenger-to-freighter conversion services. B/E sells its products to most major airlines and to manufacturers of aviation equipment.

The firm had good news for investors last week, when it said it expected first quarter EPS to come in above the Street consensus estimate. As a result, management raised full year EPS guidance to $1.45-$1.47. Analysts had been looking for $1.44. The CEO cited recent awards and a continued strong order environment for the favorable outlook.


The BEAV share price popped through 50-day and 30-day moving average resistance on the news and has since begun to define a bullish "flag" consolidation pattern. Stocks frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the shares with seven "strong buys", six "buys" and one "sell". Recent price targets are in the $37-$40 range. Analysts expect a 38 percent growth rate, through the next year. The BEAV PEG ratio (1.21), Price to Book ratio (3.72) and Sales Growth rate (44.28%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 95% of the outstanding shares. Over the past 52 weeks, the stock has traded between $17.64 and $33.80. A stop-loss of $28.30 looks good here. Note that the firm announced today it would price a public offering of 10.5 million shares of its common stock at $32 per share. The company plans to use the funds to pay down existing debt.

Through The Fly's Eyes: CommScope Inc.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.












Linking Communication Networks

We usually don't notice communication infrastructure equipment, until it fails to work. An outfit known for making such equipment good enough to ignore is headquartered in Hickory, North Carolina.

CommScope Inc. (CTV) is a leader in the design and manufacture of cable and connectivity solutions for communication network links to the customer. Products include electronic, coaxial and fiber-optic cables for data networking, Internet access, wireless communications, telephony and other broadband applications. CommScope cables are also used in local area networks, residential video wiring and antennae to transmitter linking. Further, the firm is a leading provider of coaxial cable for satellite television providers.

The company surprised the Street last week, when it raised Q1 revenue guidance to $415-$425 million from prior guidance of $390-$410 million. Analysts had been looking for $404.8 million. Stifel Nicolaus, Oppenheimer and Friedman Billings subsequently declared the stock a "buy." The CTV price popped on the news and then moved into a bullish "pennant" consolidation pattern. It is expected to exit that pattern with another upside move.

Brokers recommend the issue with four "strong buys," three "buys" and four "holds." Analysts expect a fifteen percent average annual growth rate, through the next five years. The CTV Price to Sales ratio (1.62), Price to Book ratio (3.51), Price to Cash Flow ratio (15.77), Price to Free Cash Flow ratio (30.19), EPS Growth rate (33.33%) and Return on Equity (20.64%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $25.74 and $43.67. A stop-loss of $37.95 looks good here. Note that the firm is expected to report Q1 results in late April.

Through The Fly's Eyes: Internet Capital Group

from Theflyonthewall.com






The Internet Incubator Is Coming To Life

CMGI (CMGI), one of the purest Internet plays from the 1990s, was mentioned in Barron's this weekend as a stock worth looking at again.

The other pure-play Internet incubator has also come back to life--Internet Capital Group (ICGE). This stock was also a must-own incubator stock during the 1990s that followed CMGI's path and fell on hard times.

Internet Capital has a bunch of successful businesses, having sold or taken public a few for big profits, believe it or not.

Currently, Internet Capital has a number of businesses that might be ripe for being taking public. StarCite, an on-demand global meetings management company, recently merged with OnVantage, which should allow it to improve revenue growth and profitability.

Internet Capital also owns a majority interest in ICG Commerce, a procurement services business, which has had some big wins getting Kimberly-Clark as a customer along with contract wins with Microsoft, Alcan and other multinational companies.

Therefore, do not only look at CMGI, also give Internet Capital Group a look.

Through The Fly's Eyes: Subprime Part II

from Theflyonthewall.com









More Data Points on the Subprime Mortgage Business

Barron's published an interview with Sy Jacobs, a fund manager who has spent a good amount of time looking at the mortgage sector.

Jacobs remains bearish on the subprime market, saying although the subprime market makes up only 12% of the total mortgage market, it made up 20% of 2006's mortgage market volume, therefore growing rapidly as a percentage of the entire market. Jacobs also said nearly $700 billion in mortgages reset this year, half of which are subprime.

Also, many of resets this year are for the most fancy of the teaser-rate subprime mortgages issued. One of the most popular loan products at the time being a 3/1 adjustable-rate mortgage, the first three years fixed and adjustable each year thereafter. These products begin resetting this year after 17 interest rate increases by the Fed, according to Jacobs.

Another popular product sold in 2005 was a two-year fixed and 28-year floating rate mortgage. The adjustable component for this subprime mortgage also kicks in 2007. Jacobs makes the point with Freddie Mac halting it purchases of subprime mortgages, already widening spreads could widen even more as few buyers are in the market for these mortgages.

Jacobs has three interesting shorts that will be affected by the collateral damage. Bankrate (RATE), which seems to be an Internet traffic play, Moody's and McGraw Hill, which owns Standard & Poor's.

Jacobs says much of Moody's and S&P's growth has come from the structured finance business such as CDOs and RMBS (residential mortgaged backed securities). Subprime, CDOs and RMBSs, the faster growth business for the two rating agencies, now make up 20% of Moody's and S&P's volume.

With Moody's trading at 25x earnings and S&P at 22x, these stocks are vulnerable to market and earnings contractions as the full impact of the subprime market hits home.

Last week, it appeared Wall Street's trading desks began making markets for subprime mortgages again. The next step, according to Jacabs, is to see what level of bankruptcy occurs as these adjustable-rate products reset. As we said last week, the subprime business is still a Big Boys market, continue to stay on the sidelines.

Friday, March 23, 2007

Through The Fly's Eyes: A Quick Look Ahead

from Eric Buscemi of Theflyonthewall.com












Highlights For Next Week


Monday March 26

* Tiffany's (TIF) to report Q4 earnings; conference call at 8:30am. Analysts will evaluate Tiffany's holiday performance, new products and note management's comments on global diamond and jewelry trends.
* Boston Scientific (BSX) to hold analyst meeting at 8:30am.
* Canon (CAJ) to hold shareholder meeting at 10pm.

Tuesday March 27

* Goldman Sachs (GS) to hold shareholder meeting at 9:30am.
* McCormick (MKC) to report Q1 earnings; conference call at 10am. Analysts will focus on McCormick's consumer segment [largest business], but will also note industrial business line performance, new spices/ingredients and commodity costs.

Wednesday March 28

* Teco Energy (TE) to provide 2007 outlook; webcast at 8am.
* Media Telecommunications & Entertainment Conference 3/28-3/29

Thursday March 29

* PDUFA date for Nastech Pharmaceuticals' (NSTK) Calcitonin-Salmon Nasal Spray for Osteoporosis.

Friday March 30

* Finish Line (FINL) to report Q4 earnings; conference call at 8:30am. Note that the company issued disappointing guidance earlier this month.
* CKE Restaurants (CKR), the owner of Carl's Jr. and Hardee's restaurants, to report Q4 earnings; conference call at 9am. Analysts will review the company’s same store sales by restaurant chain, average lunch/dinner checks, menu changes and margins. Analysts will also evaluate management’s the performance of breakfast offerings, and the company’s chain expansion plan.

Through The Fly's Eyes: AnnTaylor Stores

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.












Outfitting the Professional Woman

The landscape is filled with stores catering to ephemeral teen fashion tastes, but where does the busy professional woman go for help in building a reliable, coordinated wardrobe? There's a company based on Times Square that knows what to do.

AnnTaylor Stores Corp. (ANN) is a national specialty apparel retailer for the professional woman. The firm operates 869 stores across the United States, targeting fashion conscious customers with clothes designed exclusively for its own outlets. Most signature Ann Taylor stores are located in malls and upscale retail centers. The chain's Ann Taylor Loft stores offer their own label of mid-priced apparel and Ann Taylor Factory stores offer clearance merchandise. The company also operates a pair of Web sites.

The firm pleased investors last week, when it announced Q4 EPS of 31 cents and revenues of $610.5 million. Analysts had been expecting 29 cents and $605.6 million. Further, management guided FY08 EPS to $2.15-$2.25 ($2.11 consensus) and the Board of Directors authorized a $300 million share repurchase program.


The ANN share price popped through its 200-day moving average on the news and has since been defining a bullish "pennant" consolidation pattern. Stocks frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the issue with three "strong buys", three "buys", nine "holds" and two "sells". Analysts expect a fifteen percent average annual growth rate, through the next five years. The ANN P/E ratio (19.18), PEG ratio (1.27), Price to Sales ratio (1.22), Price to Book ratio (2.53), Price to Cash Flow ratio (11.30) and Price to Free Cash Flow ratio (14.88) compare favorably with industry, sector and S&P 500 averages.

Institutional Investors hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, ANN has traded between $32.25 and $45.15. A stop-loss of $34.00 looks good here.

Through The Fly's Eyes: Rumor Mill

from Tedd Cohen of Theflyonthewall.com











Rumor Round-up

There are at least three busy bees this week: Donald, Carl, and Andy. Andy?
Who’s Andy? Read on…


TRUMP ENTERTAINMENT RESORTS (TRMP)

Can you image Trump being in demand? Gosh, he always says that, but now, there’s something to it. If “The Donald” decides to sell his casino company, his timing is right because there’s strong interest in gaming assets, and not too much competition in Atlantic City, where his casino properties are located. Last week Donald’s company hired Merrill Lynch to help with “strategic options”, which, of course, means it’s for sale. And if everyone gets this one right, Donald won’t have
to fire anyone.

MOTOROLA (MOT)


There’s no satisfying Carl. Carl Icahn, that is, who wants a seat on Motorola’s board and keeps upping his stake in the company, now at 2.7%. The company buys back its shares; Carl wants them to buy more. Over the last five months, thanks to cheaper phones and tough competition, the company has lost about a third of its market value, or $22B. Then they issue another profit warning. Carl still wants in, but the company doesn’t want Carl. Motorola sure hopes those shareholders will stand with them. Not Carl.


PALM (PALM)

“As you can imagine, there’s a lot of rumors and speculation out there and we’re not going to comment on that stuff,” says Palm CFO Andy Brown. Oh, come on Andy, what’s up? Really. You have a 60%-plus profit decline, and gee, Wall Street doesn’t have the hots for your stock. Earnings projections are in the tank. And what’s Morgan Stanley doing to earn their keep and help you sort this all out, anyway? Sale, sale, sale? Will it be DelI (DELL)? Hewlett-Packard (HPQ)? Microsoft (MSFT)? Motorola? Come on Andy! Would you call us first? We’re listed.

Through The Fly's Eyes: Palm

from Theflyonthewall.com










Guidance Weak; Cash Generation Nice

Palm (PALM) reported better EPS numbers last night, but the smartphone maker is still having a tough time getting its groove thing back, meaning no revenue growth.

Is Palm a valuation trap or not? Palm has over $500 million in cash, no debt and has a market capitalization of $1.7 billion. That is a pretty cheap company. However, will it be able to grow revenue?

From listening to both Motorola and Palm's conference calls, some interesting comments were made by the respective management teams that point to the need for both companies to do some merging and acquiring.

It became apparent that Motorola is having a lot of difficulty getting a market presence with it's Q product. Weak product acceptance led to Motorola dropping prices for its smartphone offering. Also, it appeared a non-CDMA Q smartphone is not ready to come to market.

Treo, conversely, is a high-priced, high-end product which could generate some nice margins. In addition, for much of the past year, Palm has been working out the kinks for its Treo devices so that it works on wireless networks around the world. Also, Treo showed some good unit volume growth, selling 738,000 units, up 30% year over year. Those are some serious numbers.

Palm is worth a trade. Smartphones are the future and Treo is a good product. A $2.0 billion price tag, or net of cash is $1.5 billion, brings you to about $20 a share. That's doable.

Thursday, March 22, 2007

Through The Fly's Eyes: Boeing & Airbus

from Joseph Lazzaro of Theflyonthewall.com













Boeing & Airbus: The Subsidy Spat Continues

The European Union Thursday fired the latest shot in the Airbus (FR:EADS) vs. Boeing (NYSE:BA) joust by accusing the United States of giving Boeing $24 billion in state aid.

The claim was included as part of written evidence to a World Trade Organization panel probing the EU's complaint against the U.S., the BBC News reported.

Boeing's shares were down 40 cents to $90.40 in Thursday afternoon trading. EADS shares closed Thursday up about 41 cents to Eur22.19.

Airbus is publicly subsidized, but the company is also attempting to transition to a more-private, for-profit corporate structure: the company has often been criticized by the U.S. as not conforming with WTO bylaws. Among other points, the U.S. lists "launch aid" to Airbus since its birth in 1970 as a $16.7 billion European subsidy.

The EU has countered that Boeing benefits from U.S. Department of Defense contracts [which some view as a de-facto subsidy], and hidden state subsidies, including $4 billion in tax breaks and exclusive infrastructure work from the State of Washington.

Still, many aerospace analysts argue that the complex EADS / Boeing case before the WTO is less about fact discovery and violation of WTO rules, as it is about what international production framework represents a level playing field for both sides.

Further, while no one denies the impact of a WTO ruling, the market undoubtedly will play a large -- or larger role -- in each company's ultimate success. Boeing has captured air carriers' imagination with its fuel-efficient, modern 787 Dreamliner, while Airbus expects its new superjumbo A380 widebody to displace Boeing's 747.

Moreover, even with a one-side or split WTO decision, it's hard to envision that decision displacing the ultimate 'judge' in the Airbus / Boeing battle: the marketplace, in the form of plane orders.

Through The Fly's Eyes: Motorola Inc.

from Theflyonthewall.com











Holy Blow-up; Holy Holes in Management

Motorola (MOT) missed the high-end 3-G product cycle in Europe and does not have the cost structure to compete in the higher growth, lower priced emerging markets. This double whammy led to a massive earnings and revenue miss and a serious management shake up.

In addition, although Motorola said its CDMA and US business was fine, one has to question the maturity of the US handset market and whether this business is also ready to role over.

Further, investors need to question the impact of the handset business shifting to smart phones. Motorola has a smart phone for the US CDMA market, called Q, but it appears Motorola might be behind others in the UMTS markets around the world.

Also, Internet access and expensive email programs that service providers like Verizon and Sprint are charging for--along with the difficulty of getting email from multiple sources--is another reason that the uptake of smart phones might not be smooth.

The simple fact of the matter is that the transition from the handset to the smart phone is going to be a sloppy one. What we want from a smart phone is still expensive and does not work the way we would like. This sloppiness will continue spilling over into Motorola’s stock as the transition from the handset to the smart phone continues.

No need to jump into this stock yet. Wait for Motorola to provide clarity on smart phones acceptance and this will be the signal that Motorola finally has a grip on the transition process.

Through The Fly's Eyes: Cambrex Corporation

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.












Developing Drugs for the Branded and Generic Markets

When it comes to making those "active pharmaceutical ingredients" listed on the back of your bottle of pills, there is a company headquartered in East Rutherford, New Jersey that really knows the ropes.

Cambrex Corporation (CBM) provides products and services to accelerate the development and commercialization of branded and generic small molecule therapeutics. The firm is experienced in developing drug substances from early stages through clinical development, launch and commercial supply. Also, Cambrex supplies generic drug concerns with some seventy active pharmaceutical ingredients for pain management, cardiovascular, gastrointestinal, central nervous system, endocrine, and respiratory indications. The company supports customers worldwide with manufacturing and R&D facilities in the United States and Europe.

Cambrex officials surprised the Street last week, when they announced Q4 earnings per share (EPS) of 25 cents and revenues of $124.4 million. Analysts had been looking for 18 cents and $123 million. Management also guided FY07 revenues to approximately $472.8-$495.3 million, above the Street consensus view of $467.60 million. According to the CEO, current focal points include the implementation of investments to increase manufacturing capacity and a restructuring of the corporate office. The CBM price popped on the news and has since begun to define a bullish "pennant" consolidation pattern. Stocks frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the shares with one "strong buy", one "buy" and two "holds". Analysts see a 19% growth rate, through the next year. The CBM Price to Sales ratio (1.60), Price to Book ratio (2.95) and EPS Growth rate (78.57%) compare favorably with industry, sector and S&P 500 averages.

Institutions hold about 88% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $18.65 and $25.17. A stop-loss of $21.80 looks good if one was to consider investing in this stock.

Through The Fly's Eyes: Web Portals

Andrew Corn is a contributing editor for Theflyonthewall.com and the CEO of Clear Asset Management.











A Four Horse Race. Or More Data to Ponder or Crunch.

According to data aggregator eMarketer US ad revenues at Google (GOOG), Yahoo (YHOO), AOL (TWX) and MSN (MSFT) represented 57.4% of all US Internet ad spending in 2006. Further they estimate that the big will only get bigger reaching 66.6% in 2007. Below is eMarket’s chart in percent and then a second chart represented in dollars.

US Online Advertising Revenues* at Top Four Portals As a Percent of Total Online Advertising Spending, 2004-2007


2004
2005
2006
2007
Google
13.1%
19.2%
25.0%
32.1%
Yahoo!
18.4%
19.4%
18.3%
18.7%
AOL
6.8%
7.2%
7.5%
9.1%
MSN
9.4%
7.8%
6.7%
6.8%
Total for top four portals
47.8%
53.7%
57.4%
66.6%

Note: Numbers may not add up to total due to rounding; *net of traffic acquisition costs (TAC)
Source: company reports, 2004-2007; eMarketer calculations, February 2007

081313
www.eMarketer.com

"As traditional marketers move more money online, they look for safety in established, mass-market brands, and portals are that," says David Hallerman, eMarketer senior analyst and the author of the new Portal Marketing: The Big Four report. "Other than Google, the large portals are at least 10 years old, and all four average 100 million or more unique visitors monthly."

US Online Advertising Revenues* at Top Four Portals As a Percent of Total Four Portals, 2004-2007 (Millions)


2004
2005
2006
2007
Google
$1,264
$2,410
$4,095
$6,265
Yahoo!
$1,776
$2,439
$2,996
$3,641
AOL
$655
$905
$1,235
$1,772
MSN
$906
$979
$1,092
$1,318
Total for top four portals
$4,601
$6,733
$9,418
$12,996

Note: *net of traffic acquisition costs (TAC)
Source: company reports, 2004-2007; eMarketer calculations, February 2007

081311
www.eMarketer.com

All four firms have spectacular growth especially when compared to traditional media which is considered mature or deflating. Google’s year over year growth is decelerating. As investors in Google, we are not concerned. When examining the data in terms of total dollars the growth rate is still increasing. Further much of the “this company must plateau” is well priced into the stock.

My disclosure and continued conclusion: Long Google (GOOG).

Disclosure: Google Inc. (GOOG) is held in the Clear Large Cap Growth portfolio which is managed on a separate account platform. Mr. Corn is the founder and CEO of Clear Asset Management LLC and owns (GOOG) directly through his investment in the Clear Large Cap Growth portfolio.

Through The Fly's Eyes: Tiffany & Co

from Joseph Lazzaro of Theflyonthewall.com









Diamonds are Wall Street's Best Friend, Too

Investors, traders and other readers may want to keep an eye on Tiffany & Co. (TIF) when it reports Q4 earnings Monday March 26, before the market opens.

Tiffany is expected to post solid Q4 revenue/EPS results, and Wall Street will pay close attention to TIF's numbers, because, like those proverbial corrugated boxes -- a surge/decline provides a rough barometer of future economy activity -- i.e. Tiffany's product line provides a rough gauge of a segment of consumer confidence, and near-term disposable income trends. [The Reuters Q4 consensus estimate for TIF is EPS $1.05 and revenue $977.9M.]

And as one NYSE floor specialist once remarked to yours truly during the Roaring 90s, "As disposable income goes, so goes the U.S. economy."

And Tiffany's product, you ask, that generates so much attention in the Concrete Canyon? Diamonds - big ticket diamonds. Tiffany sells an array of items/gifts, but the Street watches diamond and upscale jewelry demand.

The reason? Wall Street gets a comprehensive read on general consumer demand from numerous retail sales and sector reports, and as traders/investors know, a sustained dip in sales, combined with an inventory rise, suggests an economic slowdown, or worse, may be underway.Further, big ticket diamonds and other upscale jewelry provide a read on upper-income spending and, to a degree, on upper-income consumer confidence.

A serious pull-back in big ticket diamond sales would suggest a lessening of consumer confidence in the the upper-brackets.

As noted, a slump in consumer spending suggests an economic slowdown. However, if both general consumer and higher-end consumer spending slumps, that would point to likely economic sluggishness up ahead.

Or as my NYSE floor specialist friend once said, "If the little guys run out of dough, that's a concern. But if the big guys stop spending, that's a problem."

So keep an eye on Tiffany Monday to see if its diamond / jewelry results sparkle.

Through The Fly's Eyes: CNBC

from Theflyonthewall.com








Jim Goldman Sauced By His Source?

Jim Goldman, CNBC's Silicon Valley Bureau Chief, apparently laid a big egg.

Palm Inc (PALM), according to his shareholder source, was going to be acquired by Motorola (MOT) for $25 per share, Goldman reported in a CNBC exclusive yesterday.

Ed Zander, Motorola's CEO, backed out of a speaking engagement for the CTIA Wireless conference and rumors had been floating around for weeks that Palm was soon to be sold. More and more information pointed to Motorola as the likely acquirer.

However, Zander said last night during Motorola's conference call that he backed out of the speaking engagement for family reasons (it did come across as legit). Also, the naysayers for a Motorola deal came out screaming that there was little strategic fit.

Goldman's source said a Palm deal would be announced by Friday. Another Internet site, Unstrung.com reported a Palm deal was to be announced by today. We will have to see if Unstrung.com is also being strung along.

Stay tuned to CNBC to see how Goldman covers his tracks. One could imagine Goldman had a serious conversation with the source before going on the air today.

Wednesday, March 21, 2007

Through The Fly's Eyes: Manitowoc Company

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.












Making Cranes, Fixing Ships and Serving Up your Soft Drink

Most capital goods makers appreciate the good business sense of diversification. Application of that principal has led a Manitowoc, Wisconsin firm to manufacturing leadership in three rather divergent arenas.

The Manitowoc Company (MTW) provides cranes, shipyard services and foodservice equipment. The company sells its boom cranes, tower cranes, telescopic cranes and related equipment to firms in the construction and mining industries. Its marine segment shipyards build, service and repair commercial and military vessels. Its ice-making and beverage-dispensing machines serve the restaurant, hospitality and convenience store markets. The company has operations in over twenty countries.

Manitowoc surprised the Street last week, when it raised its 2007 EPS guidance to $4.20-$4.30 from $3.85-$4. On average, analysts were looking for $4.02. Management also said it expected Q1 EPS to exceed the 79 cent consensus view by about 10%. The CEO attributed the favorable outlook to a strong performance by the crane segment. MTW shares popped through 90-day, 50-day and 30-day moving average resistance on the news and then began defining a bullish "pennant" consolidation pattern. Stocks frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the issue with one "strong buy," three "buys," three "holds" and three "sells." Analysts see a 19% average annual growth rate, through the next five years. The issue's PEG ratio (1.22), Price to Sales ratio (1.30), Price to Free Cash Flow ratio (17.53), Sales Growth rate (31.55%), EPS Growth rate (200.00%), Return on Assets (7.96%), Return on Investment (13.03%) and Return on Equity (25.27%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 80% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Over the past 52 weeks, it has traded between $34 and $66. A stop-loss of $53.75 looks good here. Note that the firm will report Q1 results on May 2nd.

Through The Fly's Eyes: Oracle Corporation

from Theflyonthewall.com




Becoming Stronger and Stronger

Oracle (ORCL) reported blow-out results once again. If you own Oracle, stay with it; if you do not own Oracle, buy it.

We have been blogging for most of 2006 that Oracle's acquisition strategy is working and would be proven out by reporting great results--which has come true. We first blogged about buying the stock at $14, it is now at $18, up close to 30%.

Ellison said during last night's conference call that Oracle is growing six times faster than SAP's new licenses. Ellison also began pounding the drum on how it is beating BEA in the middleware market.

Ellison's strategy of providing ERP, CRM and industry specific software is working big time.

Oracle is selling for 18x for FY2007 earnings and 15.4X FY2008 earnings, so Oracle is still a cheap stock. Stay with this stock, there is much more upside coming from earnings growth and potential for P/E expansion.

Tuesday, March 20, 2007

Through The Fly's Eyes: Zumiez

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.












Zumiez: Outfitting The X-Game Generation

Should the enticements of raiment by Billabong and transport by Sector Nine longboard be too much for you to resist, there is a company in Everett, Washington that has your basics and all your accessories, too.

Zumiez Inc. (NASDAQ:ZUMZ) is a mall-based specialty retailer of sports-related apparel and equipment. Apparel offerings carry such brand names as Alpine, Burton, Hurley and Quiksilver, as well as private labels. The equipment includes skateboards, snowboards, boots, bindings, and miscellaneous novelties. Stores cater to young people, between the ages of 12 and 24. The firm operates nearly 250 outlets, in 22 states.

Zumiez pleased investors early in the month, when it announced that February same-store sales had jumped 12.4% (yr/yr). That topped the Street estimate of 7.4%. Then, last week, management announced Q4 EPS of 39 cents (36 cent consensus) and Q4 revenues of $112.4 million ($111.1 million consensus). It also guided FY08 EPS to 94-96 cents (92 cent consensus). The stock popped into a bullish "flag" formation on the same-store sales news and then jumped into another one on the earnings story. Stocks frequently exit flags moving in the same direction they were traveling when they entered them. That happened the first time and is now expected again.

Brokers recommend the shares with five "strong buys," four "buys" and three "holds." Analysts see a 30% average annual growth rate, through the next five years. The ZUMZ Sales Growth rate (49.07%), EPS Growth rate (69.57%), Return on Assets (14.81%), Return on Investment (20.80%) and Return on Equity (23.37%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 78% of the outstanding shares. Over the past 52 weeks, the stock has traded between $20 and $40.25. A stop-loss of $34.65 looks good here.